August 21, 2019

Climate Change Issues; ACRE-SURE- Weather Concerns; Food Safety; and Opportunity Costs and Farm Policy

Climate Change Issues- Background

Juliet Eilperin and Mary Beth Sheridan reported in today’s Washington Post that, “The Arctic sea ice cover continues to shrink and become thinner, according to satellite measurements and other data released yesterday, providing further evidence that the region is warming more rapidly than scientists had expected.

“The data on this winter’s ice buildup came on the day that international ministers gathered in Washington to address issues facing Earth’s polar regions, which have been disproportionately affected by global warming. At the State Department, Secretary of State Hillary Rodham Clinton told the Antarctic Treaty Consultative Meeting and the Arctic Council that the Obama administration will press for greater action on climate change and for passage of the Law of the Sea Treaty in order to help regulate expanded human activity in a warmer Arctic, including shipping, fishing and oil exploration.

“Clinton said scientists are still struggling to understand the implications of the changes, ‘but the research made possible within the framework of the Antarctic Treaty has shown us that catastrophic consequences await if we don’t take action soon.’”

Meanwhile, the AP reported yesterday that, “Negotiators at U.N. climate talks, buoyed by U.S. promises to lead the fight against global warming, are demanding that industrial countries pledge deeper cuts in greenhouse gases over the next decade.

“Environmental activists said Monday the talks in Bonn, Germany, have made little progress on two key issues: the carbon emissions targets to be adopted by the rich countries and how to raise an estimated $100 billion a year needed to help poor countries adapt to climate change.”

Climate Change Issues-Agriculture

In a related item, Chris Clayton noted yesterday at the DTN Ag Policy Blog that, “The Food and Agriculture Organization of the United Nations issued a news release last week stating that agriculture and farmers should be involved in any new talks for a global climate-change initiative to replace the failed Kyoto Protocol.”

The FAO release indicated that, “Crop production and livestock release greenhouse gas emissions into the air such as methane from cattle and wetlands, especially rice paddies, nitrous oxide from fertilizer use and carbon from deforestation and soil degradation. Changes in land use such as deforestation and soil degradation – two devastating effects of unsustainable farming practices – emit large amounts of carbon into the atmosphere, contributing to global warming.

Annual greenhouse gas emissions from agriculture are expected to increase in coming decades due to increased demand for food and shifts in diet.

“‘But millions of farmers around the globe could also become agents of change helping to reduce greenhouse gas emissions,’ [Alexander Mueller, FAO Assistant Director-General] said. By keeping higher levels of carbon in the soil – a process known as ‘carbon sequestration’ – farmers can help reduce carbon dioxide levels in the air, enhance the soil’s resilience and boost crop yields.”

The FAO release added that, “Carbon markets that provide strong incentives for public and private carbon funds in developed countries to buy agriculture-related emission reductions from developing countries could provide important investments to spur rural development and sustainable agriculture in developing countries. Product standards and labels could be developed to certify the mitigation impact of agricultural goods.”

In a related article regarding carbon markets, Dow Jones News reported yesterday (via DTN, link requires subscription) that, “A boom in U.S. carbon markets remains elusive, even though prices are low and new rules requiring participation look nearly certain in the not-too-distant future.

Participants expect the carbon markets to gain steam later this year when federal climate-change policy is closer to passage. In the meantime, the markets have stalled amid uncertainty over the legislation, as well as the recession and credit crisis. In addition, bad experiences in an earlier government-established environmental market have kept many potentially interested companies on the sidelines.”

The article noted that, “The price of carbon credits, or ‘offsets,’ in the U.S. voluntary market has fallen almost 30 percent since December, recently selling for an average of $5.20 a ton of carbon dioxide, according to research firm New Carbon Finance in New York.

“In the U.S. voluntary market a company can buy a credit that equates to a reduction in emissions from projects such as installing equipment to capture methane gas from landfills and livestock farms.”

And on the issue of emission from livestock farms, Rod Smith reported last week at Feedstuffs Online that, “Contrary to what some people say, agriculture’s carbon footprint actually is one of the smallest of the sources of carbon emissions, or greenhouse gas (GHG) emissions, in the U.S.

“Dr. Barry Popkin, a nutritionist at North Carolina University who ranted against consuming red meat and processed meat in an editorial in a medical journal two weeks ago, also blamed livestock and meat production for contributing significantly to climate change and global warming.”

Mr. Smith explained that, “The source for his opinion was a 2006 climate change report by an international organization that lumped all agricultural nations together and suggested that livestock production is responsible for 18% of all GHG emissions in the world — more than from transportation.

“However, the authors of that report did not take into consideration that U.S. livestock production is far more efficient and environmentally sustainable than livestock production in many other countries, noted David Martosko, director of research at the Center for Consumer Freedom (CCF).

“Martosko said his source is an April 2008 report by the U.S. Environmental Protection Agency that found that U.S. agriculture — including fruit, vegetable, grain, meat and fiber production — accounts for just 8% of GHG emissions, far less than other sources (Figure).”

Leading U.S. lawmakers are also expressing perspective on potential climate change legislation in the current Congress.

The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “Faced with anxiety about proposed climate change legislation among Republicans as well as increasingly within her own party, House Speaker Nancy Pelosi, D-Calif., has pledged that any energy measure the House passes this year won’t overly burden utility ratepayers or businesses. ‘I will work to see that whatever we do does not increase the burden on our ratepayers and also has mitigation for business so we can be competitive,’ Pelosi said.

Pelosi also said she will not push climate change legislation until Democrats reach a consensus on their approach, and that could take some time. Pelosi said she wanted to be sure that whatever the House passes does not place the U.S. economy at a competitive disadvantage in the global economy. ‘It isn’t fair to say we have to live by a certain standard, other countries don’t. [If] their cost of production is less; we’re less competitive,’ she said.”

ACRE-SURE- Weather Concerns

A recent news article, which was republished at a Kansas State University Extension webpage, indicated that, “For ag producers, deciphering the 2008 Farm Bill and choosing the best programs to fit their individual farming situation may not be as easy as some are leading them to believe.

“Art Barnaby, K-State agricultural economist, says choosing ACRE [Average Crop Revenue Election] over a 20% reduction in direct payments, elimination of any counter cyclical payment and a 30% reduction in the loan rate is not a ‘no-brainer’ as some of the experts are saying.”

The article noted that, “‘My understanding is that FSA is in disagreement as to whether producers can use crop insurance records to report their yields,’ said Barnaby, a 30-year veteran in the KSU ag economics department. ‘Many, if not most farmers, will have no other records but their crop insurance records.’

“Other provisions of ACRE are that producers will not receive the counter-cyclical payments from USDA and they will have a 30-percent reduction in the marketing assistance loan rates for all commodities produced on each farm.”

In addition, the article pointed out that, “Another new program in the 2008 Farm Bill is SURE or Supplemental Revenue Assistance. It’s also a revenue-based program and uses a formula to compare the expected revenue to actual revenue for the entire farming operation. Barnaby said producers in counties that have received a disaster designation by the USDA Secretary or are contiguous to a county with a disaster designation are eligible if the calculated expected revenue is less than the estimated revenue.

Barnaby emphasized that to be eligible for a payment under SURE, you are required to purchase insurance on all crops produced each year. For crops that are not insurable such as alfalfa, brome or prairie hay, a producer can pay the noninsured crop disaster assistance program or NAP fees to qualify for SURE assistance. Many of these forage crops, he said, have an alternative fully subsidized pilot vegetative insurance contract available that can substitute for the NAP coverage in Kansas and a few other states.”

The article noted that, “The sign-up date for SURE has not even been set yet. Barnaby predicted it may be mid-summer. So, Barnaby said, farmers have time between now and then to do their homework. Prepare now, Barnaby stressed, and compare the numbers between possible payments on ACRE vs. a reduced direct payments to determine which is the best option for your farm. Most Kansas farmers will want to participate in SURE because they insure all of their crops anyway and that is the only cost for SURE participation, added Barnaby.

“Barnaby also reminded producers to have patience with the FSA and USDA staff when it comes time for the sign-up. Barnaby reiterated that the ACRE and SURE programs are very complicated and that important details have been slow to be defined or left to the USDA Secretary to define.”

A related article (“Updated MYA Prices for Setting ACRE Guarantees”) was also posted recently at Kansas State Extension Online. In part, this article pointed out that, “The 2008/09 MYA price is used to set the 2009 ACRE guarantee and to settle 2008 SURE claims. A higher 2008/09 MYA price will increase the ACRE guarantee but reduce payments under SURE for 2008 revenue losses. Farmers may participate in both ACRE and SURE.”

This article added that, “There is no reason to signup for ACRE until mid to late July so there is still time to do more analysis. The market could change and Kansas could lose the wheat crop to freeze by that date. Therefore there is little reason to signup until ones winter wheat is harvested and spring crops are well in their grain filling stage.”

With respect to current weather conditions and related impacts on production agriculture in the U.S., Reuters news reported yesterday (via DTN, link requires subscription) that, “Freezing temperatures moving across the U.S. Plains winter wheat belt could do significant damage to this year’s crop in key growing areas, some wheat experts said on Monday.”

The article stated that, “Oklahoma State University agronomist Jeff Edwards said the slide in temperatures Monday and forecast into Tuesday could be ‘devastating’ for wheat in critical growing areas.”

Yesterday, the USDA’s National Agricultural Statistics Service (NASS) released its first Crop Progress report of 2009, and an audio item from yesterday’s USDA Daily Radio Newsline noted that, “Conditions for winter wheat in places like Texas and Oklahoma are impacting crop condition, placing 2009’s crop below the five year average at this point.”

For a complete breakout of the winter wheat conditions contained in yesterday’s NASS report, just click here.

The Associated Press reported on Friday that, “Parts of deep South Texas, which hasn’t seen ample rains for about six months, slipped from moderate to severe in the Brownsville area since last week.

In the Panhandle, even a snowstorm that dropped nearly a foot of snow this past weekend didn’t improve conditions.”

The AP article reported that, “In mid-March state agriculture officials estimated ranchers in the nation’s largest cattle-producing state had already lost nearly $1 billion because of Texas’ ongoing drought.”

Meanwhile, a separate AP article from yesterday reported that, “Spring floods are receding for now, but farmers and ranchers in North Dakota and northwestern Minnesota are worried that they’re on track for a repeat of the dismal year of 1997.

“That was the year spring blizzards and record flooding devastated cattle herds, threw crop plans into turmoil and helped send farm income plummeting 85 percent.

“This time around, producers already have two strikes against them: the wet fall and the severe winter, said Andy Swenson, a farm management specialist with the North Dakota State University Extension Service.”

And an update posted on Sunday at the Commodity Corner Blog (Reuters News) noted that, “Mother Nature is making her seasonal appearance in Chicago Board of Trade markets and will be one of the big price drivers this week for grains.

Planting time for corn is approaching in the Midwest and winter wheat, dormant since autumn, is reviving for a sprint to early summer maturity.”

With this background in mind, Jeff Caldwell reported yesterday at AgricultureOnline that, “Agricultural bank Rabobank released the results of its ‘Farm and Ranch Survey’ for Spring ’09 this week, and the results are basically as expected: Just like in the macroeconomy, the ag sector’s anxiety about the unstable economy are growing.

“‘Twice as many farms than last year join those impacted by worsened year-over-year income levels,’ according to the study released Monday. ‘While there is some optimism that things will get better next year, [the] future outlook is similar to that measured in 2008 with half of the farms expecting continued income deterioration. As such, confidence remains less optimistic.’”

On page three, the Rabobank report stated that, “Close to half of the farmers also mention reduced demand and/or weather conditions as factors responsible for the current challenges. More farms in the North Central region versus the South attribute challenges to demand and global contraction. Weather issues, on the other hand, are cited a major challenging factor among more farms in the South than in the North Central region.”

Food Safety

Gardiner Harris and Andrew Martin reported in today’s New York Times that, “As the nation’s second-largest processor of pistachios agreed Monday to recall its entire 2008 crop despite no confirmed illnesses, the Obama administration issued a tough warning to all food makers that sloppy manufacturing practices would no longer be tolerated.

With the warning, the administration signaled that it was substantially changing the way the government oversees food safety. Food-handling practices that in the past would have resulted in mild warnings may now lead to wide-ranging and expensive recalls, even before anyone becomes ill from contaminated food.”

The Times article noted that, “‘The food industry needs to be on notice that F.D.A. is going to be much more proactive and move things far faster,’ said Dr. David Acheson, associate commissioner for foods at the Food and Drug Administration. ‘We’re going to try to stop people from getting sick in the first place, as opposed to waiting until we have illness and death before we take action.’

“Last week, the agency told consumers to avoid eating pistachios — the first time it had issued such a blanket warning in the absence of reports that anyone had been sickened.”

Opportunity Costs and Farm Policy

An article posted yesterday at the Southwest Farm Press Online (“Wither opportunity cost for agriculture?”) explored issues associated with federal budgetary expenditures and noted in part that, “We have to compare these real and potential costs, though, with what we get in return. In the 1940s, as much as 50 percent of U.S. household disposable income was spent on food. Today it’s less than 10 percent. Driven primarily by research and development that increase productivity, this relative decline means we have had more money to spend on DVD players and cars, thereby fueling economic growth (Research by Corey Miller and Keith Coble of Mississippi State calls into question whether direct farm support has led to lower prices; they conclude that productivity gains explain most of this result.). We have arguably maintained or improved the standard of living in many rural areas and promoted a sector that is the only industry that consistently maintains a positive trade balance. Finally, we have operated a food and fiber business that has consistently fed the U.S. population uninterrupted through two world wars and countless other conflicts and economic crises.”

Keith Good

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