Carbon – An Agricultural Commodity?

Much of America’s farm community is opposed to proposed cap-and-trade legislation that could have severe repercussions for the agriculture sector.

The American Clean Energy and Security Act (HR 2454), aimed to address global warming, was recently approved by the U.S. House of Representatives and is currently being considered by the Senate. It places greenhouse-gas (GHG) emissions limits on and offers a cap-and-trade system for affected businesses.

“This is not a vision for American agriculture, it's a death sentence,” said U.S. Sen. Mike Johanns, R – Neb.

The agriculture industry, responsible for 8 percent of the nation’s GHG emissions, is feeling pressure to be on-board with Congress’ attempts to limit industries’ carbon footprint.

Increased energy prices will result from the legislation’s potential passage as industries raise prices to maintain production costs, in turn, elevating farm-production costs at all levels.
In a Corn & Soybean Digest article, Johanns states:

“USDA testified that the costs of fuel, oil and electricity will increase by about 22 percent. And here's a staggering estimate: The bill drives 59 million acres of cropland and pasture out of production by 2050. With millions of acres coming out of production and energy prices going through the roof, it’s not surprising that USDA also predicts significant declines in farm production. USDA’s testimony shows that corn production will decrease by 22 percent, soybean production will drop by 29 percent, beef production will decline by 10 percent and pork production will sink by 23 percent. This decline in production will threaten our nation’s food supply and is estimated to drive up food prices by as much as 5 percent.”

A blog posted at The Heritage Foundation’s Center for Data Analysis calls farmers “victims” of the proposed legislation. Foundation analysts found that it would adversely affect farmers:

• Farm income is expected to drop $8 billion in 2012, $25 billion in 2024, and more than $50 billion in 2035.
• The average net income lost throughout the 2010-2035 timeline is $23 billion – a 57-percent decrease from the baseline.
• Construction costs of farm buildings will increase 5.5 percent in 2025 and increase 10 percent by 2034 (from the baseline).
• By 2035, gasoline and diesel costs are expected to be 58 percent more and electric rates 90 percent more.

But not everyone in agriculture is aggressively opposed to cap-and-trade legislation. For example, some groups have remained neutral about the issue, claiming it’s better to have a spot at the table when negotiating legislation rather than to be outright opposed.

USDA Sec. Tom Vilsack believes farmers should view the legislation as an opportunity rather than as economically damaging. Farmers would receive credits (payment) for using farming techniques that don’t emit carbon dioxide.

Production agriculture is not included in the current legislation as one of the industries that is required to cap their GHG emissions, but it can provide emission-reduction offsets to companies in industries that are required to cap their emissions.

According to ecomii, an environment resource, “The government issues credits, which allow companies to pollute a certain amount, as long as the aggregate pollution equals less than the set cap.” Regulated industries, such as fuel refineries and energy suppliers, either take it upon themselves to develop cleaner facilities to maintain compliance, or they can purchase emissions credits from other businesses that have credits available when they need to exceed their allotted emissions.

Farmers can limit their carbon footprint by practicing no-till and reduced-till techniques and can also convert cropland to grass.

In a Rapid City Journal article, Vilsack is reported as saying that conservation measures such as carbon credits contain the potential for billions of dollars in income for farm families. He said he is convinced that climate change is a fact and that changes in farming practices can help.

But with legislation stalled in Congress, “there's an almost-complete collapse of the market for carbon credits,” states Sarah McCammon of Iowa Public Radio. “That means profits are drying up for people who are paid to create those carbon credits — like farmers who manage their land in ways that capture carbon dioxide in the soil.”

In a segment titled, “Farmers Hurt By Collapse Of Carbon Credits Market” available at WBUR Radio online, the reporter talks about the economics of carbon offsets bought and sold via contracts, a scenario of paying someone to reduce emissions for you. For example, farmers that engage in no-till farming receive monetary payback for their “green” efforts. The reporter states that the global carbon market is valued at $125 million.

“It is important to set up an offset system to reward American farmers for doing the right thing, whether they’re raising crops or raising livestock,” Vilsack said. “Various studies show it’s (cap and trade) a net plus for agriculture.”

The failure to pass climate-change legislation could lead to regulation of emissions by the Environmental Protection Agency (EPA). If legislation dies in the Senate, the EPA has publicly declared its intentions to regulate carbon. Many believe that the EPA would include more industries for regulation and impose stricter policies.

Several ag-industry figureheads have voiced their discontent for EPA oversight.

“We believe the EPA’s greenhouse gas requirements will lead to costly and ineffective regulations on America’s farmers and ranchers,” said American Farm Bureau Federation President Bob Stallman. “We vehemently oppose regulating carbon dioxide and other greenhouse gases under the Clean Air Act because we believe it will require livestock producers and other agricultural operations to obtain costly and time-consuming permits as conditions to continue farming.”

Do you feel farmers are unfairly regulated or not regulated enough? In what other ways can farmers contribute to an improved environment? Are other industry sectors being ignored that should be mandated?

*Photo from The Journal of the American Enterprise Institute

Program supports development of U.S. producers

Earlier this month, the United States Department of Agriculture (USDA) implemented a new support program to help America’s farmers hurt by the recent economic crisis. USDA Sec. Tom Vilsack introduced the Trade Adjustment Assistance for Farmers Program, also known as the TAA for Farmers Program.

"As we work to help rural America recover from the worst economic crisis since the Great Depression, the Trade Adjustment Assistance for Farmers Program will create new opportunities for producers hurt by import competition," said Vilsack. "Eligible producers will receive much-needed technical assistance and cash benefits to help them adjust to the current economic environment."

Farmers receive financial assistance after meeting eligibility requirements and upon completion of stringent training and education courses that can last up to three years.

According to USDA, the TAA for Farmers Program helps producers of raw agricultural commodities and fishermen adjust to a changing economic environment associated with import competition by means of technical assistance and cash benefits.

It’s not another subsidy, said Kevin Klair, extension economist at the Center for Farm Financial Management at the University of Minnesota.

“Congress was very intentional when structuring this program. Important management and competition issues were considered to make it most effective,” said Klair.

The American Recovery and Reinvestment Act of 2009 (ARRA) reauthorized and modified the TAA. The Act includes measures to modernize the nation's infrastructure, enhance energy independence, expand educational opportunities, preserve and improve affordable health care, provide tax relief and protect those in greatest need, according to the Obama administration.

Eligibility

• The commodity on which the farmer claims losses must qualify for the program as determined by the USDA (notifications issued in Federal Register notices).
• Farmers must have experienced a greater than 15-percent decrease in the national average price, the quantity of production, value of production or cash receipts of the commodity compared to the average of the three preceding marketing years, and imports contributed importantly to this decline.
• Applicants must complete a series of workshops/education sessions.
• Farmers can apply until April 14.

The public had the opportunity to weigh-in about program procedures and eligibility criteria in August. Most public commentary centered on payment limitations with consideration to adjusted gross income and specialty crops, a well as consideration to the length of intensive training about how to use the program. There is an additional 30-day period for public comment commencing March 1.

Farmers may receive $4,000 in assistance after an initial series of free technical-training classes. Klair said farmers are eligible to receive an additional $8,000 after writing an approved long-term business-adjustment plan to aid them in their future operations.

“It teaches farmers how to be more-efficient U.S. producers,” said Klair, who said the program has received numerous inquiry calls.

Klair said the “downside” to the program is its strict qualification requirements.

“It would be great if everyone could qualify,” said Klair.

Farmers can appeal a denied application.

To learn more about the intricacies of the program, visit http://www.fas.usda.gov/ITP/TAA/taa.asp or http://www.taaforfarmers.org/.

Should the federal government take more or less of a role in financially assisting farmers? How can farmers relay the significance of this program to media/the public if criticized?

Cap-and-Trade Reforms – Climate Change Cure?

Secretary of Agriculture Tom Vilsack advocates the passage of proposed cap-and-trade legislation with Congress to combat the divisive issue of climate change.

Climate change, or global warming, refers to the variation of modern climate patterns and is said to be the result of natural geographic forces and human outputs on the environment. Such human outputs include land use, deforestation, animal agriculture and carbon discharges.

Vilsack is confident in the reality of global warming and has referenced fisheries in Alaska and forestry in Colorado as examples of its destructive effects.

The Obama administration is promoting the establishment of a revised domestic cap-and-trade system aimed to reduce energy emissions. Vilsack testified to the House Appropriations Subcommittee on Agriculture in March, outlining the administration’s goals to decrease emissions 20 percent by 2020 and 80 percent by 2050.

Legislation details can be located at http://thinkcarbon.wordpress.com/2009/06/24/the-waxman-markey-bill-at-a-glance/.

“USDA believes that the agriculture and forestry sectors hold the potential to deliver substantial emissions reductions, including carbon sequestration, under a national climate change policy,” said Vilsack.

Many farmers oppose the legislation because they either don’t believe in global warming or consider the cap-and-trade system to be a financial burden, or both. Vilsack is aware of the apprehension many in the industry are experiencing, but is confident that the potential reforms “will likely outweigh the costs” and will actually bolster the national farm community.

"Over the long haul, it is potentially tens of billions of dollars of net income opportunity for farmers," Vilsack said.

Some agriculturalists are leery of prospective increased energy costs and increased input (fertilizers, pesticides, chemicals) costs. Georgia Congressman Jack Kingston has publicly declared his opposition.

“Agriculture is inherently an energy-intensive industry and this bill does nothing to mitigate that fact. From tractor fuel to fertilizer to livestock feed, farmers across America are especially vulnerable to this proposed national energy tax. Our farmers are already struggling with the high cost of fertilizer and feed and gas prices are going up. Now, in this time of economic downturn, is not the time to further drive up the cost of farming and the cost of food. American farmers can’t afford it and neither can American families.”

Vilsack has countered with this example:

“A Northern Plains wheat producer, for example, might see an increase of 80 cents per acre in costs of production by 2020 because of higher fuel prices. Based on a soil carbon sequestration rate of 0.4 tons per acre and a carbon price of $16 per ton, a producer could mitigate those expenses by adopting no-till practices and earn $6.40 per acre. So, this wheat farmer does better under the House-passed climate legislation than without it. And, it's quite possible that this wheat farmer could do even better if technologies and markets progress in such a way that allows for the sale of wheat straw to make cellulosic ethanol.”

Vilsack says the government will aid agriculturalists by assisting them in adopting new technology use and conservation practices.

“Well you know farmers, I know farmers. There's no question that they are going to be looking for alternatives. They are going to be looking for technology changes, for renewable energy sources, for biofuels, all of which could potentially benefit them in terms of lower costs," said Vilsack.

Judging from his experience with the 17 stops completed in the Rural Farm Tour, Vilsack told ag broadcasters he believes the cap-and-trade legislation should pass through Congress without resistance.

Should other industries be targeted for inclusion in cap-and-trade regulations? Are farmers being treated unfairly? Should the agriculture sector try to amend proposed legislation?