All Posts from February 22, 2019

New WOTUS Rule Published in Federal Register; 60-Day Public Comment Period Now in Effect

The U.S. Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers on Feb. 14 published their revised definition of the Waters of the United States (WOTUS) rule in the Federal Register, kicking off a 60-day public comment period that extends through April 15, 2019.

The agencies first unveiled the rule on Dec. 11 (GM Dec. 14, 2018), but the public comment period was delayed due to the 35-day government shutdown that began on Dec. 22. The proposed redefinition significantly narrows the types of water bodies that fall under Clean Water Act (CWA) jurisdiction, and would replace the contentious 2015 WOTUS rule developed by the Obama-era EPA.

The new definition is opposed by a number of environmental groups, but supported by agriculture and industry trade groups, including the National Corn Growers Association (NCGA), The Fertilizer Institute (TFI), and the Agricultural Retailers Association (ARA).

The new WOTUS definition would limit regulated waters to traditional navigable waterways; tributaries that contribute perennial or intermittent flow to traditional navigable waterways; certain ditches, provided they function like traditional navigable waterways; certain lakes and ponds, which, like regulated tributaries, contribute flow to a traditional navigable waterway in a typical year; impoundments of otherwise jurisdictional waters, such as check dams and perennial rivers that form lakes and ponds behind them; and wetlands that are adjacent to and have a direct hydrological surface connection to jurisdictional waters.

It also details what water bodies do not fall under WOTUS, including features that flow only in response to precipitation; groundwater, including groundwater drained through subsurface drainage systems; certain ditches; prior converted cropland; artificially irrigated areas that would revert to upland if artificial irrigation ceases; certain artificial lakes and ponds constructed in upland; water-filled depressions created in upland incidental to mining or construction activity; stormwater control features excavated or constructed in upland to convey, treat, infiltrate, or store stormwater run-off; wastewater recycling structures constructed in upland; and waste treatment systems.

The key changes from the 2015 rule, according to EPA, are in the new rule’s treatment of ephemeral streams, and in its narrower interpretation of jurisdictional ditches, lakes, ponds, and wetlands. The new rule also eliminates “interstate waters” as an independent jurisdictional category.

EPA and the Corps said the proposed redefinition is in response to an executive order signed by President Trump on Feb. 28, 2017 (GM March 3, 2017), and is intended to “increase CWA program predictability and consistency” by providing clarity on which waters are federally regulated, and to “clearly implement the overall objective of the CWA to restore and maintain the quality of the nation’s waters while respecting state and tribal authority over their own land and water resources.”

Both the original 2015 WOTUS rule and the Trump administration’s attempts to derail it have triggered a wave of lawsuits. The 2015 rule was challenged by 31 states and numerous stakeholders in multiple lawsuits, prompting the Sixth Circuit in October 2015 to issue a nationwide stay of the rule (GM Oct. 19, 2015). The stay was lifted in January 2017 when the U.S. Supreme Court determined that review of the rule falls within the jurisdiction of the district courts.

The Trump administration then tried to delay the 2015 rule’s compliance deadline while it worked on a new version (GM June 30, 2018), but those delays were challenged last summer in court (GM Aug. 24, 2018). Subsequent decisions by a number of U.S. District Courts have left a patchwork of enforcement, with the 2015 rule currently enjoined in 28 states and in effect for the remaining 22 states.

Earlier this month, the Natural Resources Defense Council (NRDC) filed a lawsuit in Federal District Court in Washington D.C. against EPA, the Corps, and U.S. Justice Department alleging that the federal agencies failed to provide records regarding their WOTUS redefinition, and failed to show that the 2015 rule was flawed and needed to be rewritten.

EPA and the Corps will hold a public hearing on the proposed new WOTUS definition in Kansas City, Kan., on Feb. 27-28. Originally scheduled for Jan. 23, the hearing was postponed due to the government shutdown.

USDA Sees 92 Million Acres of Corn, 85 Million Acres of Soybeans; Trade Could Shift Acreage

U.S. growers will plant 92 million acres of corn in 2019, the largest crop since 2016 and a 3.3 percent increase over last year’s 89.1 million acres, according to USDA Chief Economist Robert Johansson.

Speaking at the USDA Outlook Conference in Arlington, Va., on Feb. 21, Johansson said the corn increase will come at the expense of soybeans, which will fall to 85 million acres in 2019, down 4.7 percent from last year’s 89.2 million acres.

Johansson said while U.S. soybean prices have been slightly buoyed amid recent signs of progress in trade negotiations with China, the export outlook for the 2019 soybean crop remains challenging. “Currently, the U.S. has exported 24 million metric tons of soybean, down 13.5 million metric tons from this time last year,” he said. “Under the trade dispute, exports to China alone have plummeted by 22 million metric tons, or over 90 percent.”

All wheat acres in the U.S. will also fall in 2019, dropping to 47 million acres, down 1.7 percent from last year’s 47.8 million acres and representing a five-year low. After a dismal fall planting season, Johansson said winter wheat plantings are estimated to be at the lowest level in 110 years, with major acreage reductions reported in Kansas, Oklahoma, and Nebraska. He said this “strong contraction in area” should support wheat prices, however, and result in more spring wheat acreage planted in the Northern Plains.

“Any change in the current status of trade with China could have significant impacts on prices, both relative and absolute, and could shift acreage allocation in the coming year,” he added.

As for other crops, USDA projected cotton plantings at 14.3 million acres in 2019, up 1.1 percent from 2018 and hitting a five-year high for the commodity, while rice acreage is projected at 2.7 million acres, down 9.8 percent from 2018.

“The large growth in production is expected to push cotton prices sharply lower, falling 7 percent, or $0.05 per pound,” Johansson said. “Global economic conditions and trade barriers with China will be significant uncertainties for the cotton market in the coming year.”

Under expectations of continued Chinese tariffs, Johansson said the season-average soybean price should rise modestly to $8.80/bushel in 2019, up $0.20/bushel from 2018 “as the market begins the multi-year process of working down large stocks.”

Johansson pegged the season-average corn price at $3.65/bushel, up $0.05/bushel from 2018 and reflecting the second year of price increases “as carry out stocks are expected to continue their multi-year tightening.” Season-average wheat prices are projected to firm slightly to $5.20 per bushel, which Johansson noted is a “significant” increase from a near-term bottom of below $4/bushel in 2016/17.

“The current expectation of farm income at $66 billion in 2018 is a long way from the heights we saw when real net farm income peaked at $134 billion in 2013,” Johansson said. “Relative to the 10-year average, real net farm income is down 28 percent. Looking forward, net farm income is expected to rise slightly, remaining below $80 billion annually over the next 10 years.”

A Bloomberg survey of analysts conducted from Feb. 13-19 pegged 2019 corn plantings at an average of 91.7 million acres, soybeans at 86.1 million acres, and wheat at 47.2 million acres. Jason Miner, chemicals analyst with Bloomberg Intelligence, said on Feb. 21 that USDA’s projections are “curtailing high hopes for global agricultural chemicals suppliers,” referring to the numbers as a “mediocre” outlook for the industry.

“While U.S. farmers are widely expected by the industry to increase purchases this year, farm incomes are down, land is propping up equity, and corn planting may miss some targets,” Miner said, noting that both CF Industries Holdings Inc. and Nutrien Ltd. have recently suggested that 93 million acres of corn are possible in 2019.

Wisconsin Co-op Merger Vote Delayed

The member vote on a proposed merger between ProVision Partners Cooperative, Marshfield, Wisc., and Premier Cooperative, Mt Horeb, Wisc., has been delayed for up to a year, Premier Co-op management told members in February.

The two regional co-ops announced last fall (GM Sept. 21, 2018) that they had signed a letter of intent (LOI) to explore a merger, with both boards voting unanimously to pursue a unification. A merger vote was originally scheduled for early February 2019, with the merger slated to take effect on Oct. 1, 2019, if members voted their approval.

Premier Co-op CEO Andy Fiene, however, told members in the company’s February newsletter that the ProVision board has asked to delay the membership vote while continuing “the discussions and planning process” related to the proposed merger.

“When laying out a timeline of future discussions and actions last summer, the boards of each company anticipated presenting a plan of merger to the ProVision membership as early as this winter,” Fiene said. “During recent discussions, the ProVision board asked to continue the discussions and planning process, but to delay the membership vote by up to a year. The two companies have identified many benefits a partnership can bring to the members of each cooperative. We’ll continue to discuss these and more as we continue exploring this partnership, and I’ll keep you posted on the progress.”

Both co-ops have large agronomy businesses in central and southern Wisconsin, in addition to operating grain, feed, energy, convenience store, and automotive divisions. A memo distributed to members last fall noted “similar cultures and core divisions” between the two businesses, and said the “increased size and scale caused by the merger would make the co-op a preferred partner with major manufacturers.”

ProVision was formed in 2015 with the merger of Harmony Country Cooperative in Colby, Wisc., and Central Wisconsin Cooperative in Stratford, Wisc. The member-owned company has agronomy locations in Auburndale, Stratford, and Unity, and employs about 220 individuals in the communities it serves. ProVision has annual sales of about $110 million.

Premier was formed in 1893 and is recognized as the oldest farm and consumer supply cooperative in the U.S. The company has 19 locations and some 380 staff members, and posted 2018 sales of about $190 million and after-tax earnings of $9.5 million. The co-op in 2018 returned a record $3.7 million in cash to its members in patronage and equity retirements.