(Bloomberg) -- Even as Donald Trump tweets his support for U.S. agriculture, farmer loyalty for the president looks like it’s starting to waver over moves that may undermine corn-based ethanol and escalate trade disputes with countries that import American crops.
A long-anticipated White House announcement expected to lower costs for oil refiners at the expense of ethanol may show that the Environmental Protection Agency is breaking promises to protect the biofuel, according to the National Biodiesel Board. Meanwhile, trade actions also are raising concerns among farmers, said Jon Doggett, executive vice president of the National Corn Growers Association.
"There was strong support for the president,” Doggett said. “There continues to be strong support for the president. However, some of that support is wavering because of the trade issue and ethanol."
Farmers nationwide rallied behind Trump during his 2016 presidential campaign, forming part of the rural-voter bedrock that put him in the White House. Still, administration actions including renegotiating the North American Free Trade Agreement and protecting the U.S. steel industry have shown an emphasis on Rust Belt versus Farm Belt voters, exposing potential fissures in his small-town base.
Trump on Monday tweeted his support for agriculture, saying farmers "have not been doing well for 15 years," and vowing "massive trade deficits no longer." The industry is one of the few sectors of the U.S. economy that maintains a trade surplus, and while the government forecasts a 5.1 percent drop in farmer profits this year, the past decade saw several years of record incomes.
Agriculture groups have repeatedly urged caution on trade disputes, citing the importance of the Mexican and Canadian export markets under Nafta. They’ve also pointed to China’s willingness to retaliate against U.S. measures by targeting major commodities including soybeans, the second-most-valuable American crop.
Biofuels policy, meanwhile, has become a flashpoint in a long-simmering refiners-versus-farmers standoff.
Farm-state lawmakers including Iowa Republican Senator Chuck Grassley have been in a series of negotiations with Texas Republican Senator Ted Cruz, industry stakeholders and the White House as refiners have sought waivers of biofuels rules. Some waivers have been granted by the EPA. Grassley, who represents the top ethanol-producing state, has threatened to seek EPA Administrator Scott Pruitt’s resignation if the agency undermines renewable fuel requirements.
On a conference call with reporters on Tuesday, Grassley said that Pruitt has “betrayed” the president on the Renewable Fuel Standard and that he will wait until he sees the details of the White House announcement before deciding if he will call for his resignation. He said the prospect of allowing biofuel credits for exports, if included in the administration’s plan, would undermine Trump’s pledges to support the mandate.
Separately, at the Platts Energy Podium on Tuesday in Washington, Senator Joni Ernst, an Iowa Republican, said the administrator is “breaking our president’s promises to farmers.”
“I would like to see the president’s administration upholding his commitment to our American farmers, and right now, support is wavering in Iowa, people are really worried,” Ernst said at the Platts Energy Podium. “We have some young and beginning farmers that just don’t have the types of savings built up they would need to sustain a long period of loss.”
While most farmers still support the president, frustration with his administration has come more into the open.
More than 80 percent of voters in Iowa, Minnesota and Missouri said it was important that Trump maintain his promise to defend federal biofuel mandates, according to a survey by the National Biodiesel Board. A "substantial majority" of respondents say the EPA’s Pruitt isn’t reflecting the president’s promises, the Jefferson City, Missouri-based group said.
The controversy is reverberating in politically important agricultural states, several of which host Senate races that may determine which party controls the chamber this year. Two incumbent Democrats in Minnesota and one in Missouri, both states covered by the survey, are up for re-election. Incumbent Democrats are also facing tough battles in North Dakota and Indiana, which also produce biofuels.
The likelihood of a massive exodus of farmers from the Trump coalition is low, said Harwood Schaffer, an agricultural economist and farm-policy expert at the University of Tennessee at Knoxville. Without a truly dramatic reshaping of the Renewable Fuels Standard, one which would radically lower corn demand and crop prices across the board, farmers are likely to stick with Trump for cultural reasons, he said.
But even weakening support, combined with skepticism from voters who may not be farmers but still care about agricultural issues, may be enough to tilt outcomes in several close races this year, Schaffer said. The farm bloc may be pro-Trump, but also may be less in the president’s pocket than was earlier assumed, he said.
"If you see some changes on the margins, you might see some softening along the edges," in terms of support, Schaffer said. "If you see changes that make the price of corn go from $4 to $2, then you’ll have a rebellion," he said, citing the price per bushel.
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