FarmPolicy

December 19, 2014

Climate Legislation; Doha; Pork Sector; Food Safety; and Crop Insurance

Climate Legislation

A news release issued yesterday by Senate Agriculture Committee Ranking Member Saxby Chambliss (R-Georgia) stated that, “[Sen. Chambliss] today reiterated his call for additional hearings on comprehensive global warming legislation upon release of a new study conducted by The Agriculture & Food Policy Center (AFPC) at Texas A&M University. The study, which was performed at the request of Sen. Chambliss, examined 98 representative farms in the AFPC database to understand the farm gate implications of the House-passed American Clean Energy and Security Act and discovered that 71 of the operations would be worse off under the bill.

“‘Clearly the data outlined in the Texas A&M University study is troubling,’ said Sen. Chambliss. ‘I have said before this bill, particularly the cap and trade program, will undoubtedly raise production costs for farmers and ranchers. Perhaps most troubling is that the Waxman-Markey bill will result in more than 7 million acres shifting out of production in the first 5 years, with nearly 50 million acres by 2050. It does not make sense to rush action on a policy of this scope when we are now just beginning to understand the tremendous costs associated with the bill.’”

Yesterday’s release added that, “According to the AFPC study, nearly all of the 27 farming operations that realize benefits under the Waxman-Markey bill are located in the Midwest Corn Belt. The study indicated the benefits are predominantly the result of increase revenue from higher prices, a result of fewer acres planted to these crops, not from payments under an offset program. In other words, geographic disparities would exist as a result of the Waxman-Markey bill. Virtually all cotton and dairy operations would be worse off and no rice farms or cattle ranches would experience any benefit under the bill. This is in direct contrast to what U.S. Department of Agriculture Secretary Vilsack said while testifying before the Senate Agriculture Committee hearing in July, at which he stated that all agriculture would benefit from this plan.

“‘The study makes the point that despite what Secretary Vilsack says, the Waxman-Markey bill does not benefit U.S. agriculture, and in fact, will make it harder for farmers and ranchers across the country to make a living under cap and trade,’ said Sen. Chambliss.”

DTN AG Policy Editor Chris Clayton pointed out yesterday (“Study by Texas A&M Shows Net Losses for Southern Crops, Livestock”) that, “The Center for Agricultural and Rural Development at Iowa State University and FAPRI [Food and Agricultural Policy Research Institute] each released reports in July examining higher costs for farmers from the climate bill.

“The FAPRI report projects a typical Missouri farm would see a 3.2 percent increase in production costs by 2020. The CARD projection forecasts a 1.49 percent increase in production costs for Iowa corn and soybean growers by 2020.

“A USDA study released in July showed net farm income would decline less than 1 percent between 2012 and 2018 under the bill. Total farm expenses from 2012 to 2018 would increase $700 million annually.”

Meanwhile, Elizabeth Williams reported yesterday at DTN (link requires subscription) that, “The verdict is still out on how row-crop farmers will benefit from the cap-and-trade bill winding through Congress. One major unknown is whether to grandfather early adopters who took the initiative to store carbon by continuous no-tilling, some more than 20 years ago.

“Doug Gronau, a no-till corn and soybean farmer in west central Iowa, has already enrolled in a program to sell his carbon credits through AgraGate Climate Credits Corporation, a division of the Iowa Farm Bureau Federation. AgraGate combines carbon credits from farm and ranch offset projects to sell on the Chicago Climate Exchange. The problem is that carbon prices under the voluntary system have been so discounted, his payments have run only $1.25 to $2 dollars per acre in the best years.

“Going forward, ‘it would make a big difference to me if I could get an extra $10 an acre for carbon credits worth $20 per ton,’ said Gronau. No-till in his area is credited with sequestering about a half ton of carbon per acre, vs. conventional tillage. ‘However, the bill needs to reward no-till farming and other production practices that sequester carbon by offering the same incentives to early adopters,’ he said.”

Ms. Williams pointed out that, “Another area of concern is the House bill is unclear on how soil offsets will be categorized, said Dave Miller, AgraGate’s chief science officer. ‘If they are considered ‘term’ credits, good for five years or less, rather than ‘permanent’ credits, no one will buy them. Term carbon credits have been available on the international market and no one buys them because they would have to purchase the credit again in five years when prices most likely will be higher,’ explained Miller.”

Christopher Joyce also looked at issues associated with offset payments and carbon sequestration in a report that aired yesterday on the NPR Morning Edition Program (“Can Dirt Really Save Us From Global Warming?”).

In part, Mr. Joyce noted that, “Offsets are like ‘get out of jail free’ cards in Monopoly. If you do something that reduces carbon in the atmosphere, you earn an offset that you can sell to a company that would have to limit its carbon emissions if the bill becomes law. Each offset a company buys allows that company to emit more carbon at its own facilities.

But no-till only stores carbon as long as it isn’t tilled. ‘If you till it, you can lose almost all the carbon you gained in the previous five years say with one tillage, even,’ says [Soil scientist Michel Cavigelli of the U.S. Department of Agriculture]. ‘So one of the challenges is to maintain your no-till fields forever in essence to really gain the benefits of carbon sequestration.’”

The NPR item added that, “Farm interests are eager to win offsets. They say the energy bill will raise their fuel costs across the board. The final list of what will be allowed in the bill could help swing votes when the Senate votes on the measure.”

Separate from legislative branch activity on climate legislation, opinion and news items have also recently focused on executive branch regulatory issues associated with climate change.

The Wall Street Journal editorial board indicated yesterday that, “The White House is currently reviewing the Environmental Protection Agency’s April ‘endangerment finding’ that as a matter of law CO2 is a pollutant that threatens the public’s health and must therefore be subject to regulation under the Clean Air Act. Such a rulemaking would let the EPA impose the ossified command-and-control regulatory approach of the 1970s across the entire economy, even if Democrats never get around to passing a cap-and-tax bill.

“Yet a curious twist is buried in the EPA’s draft rule. The trade press is reporting that the agency thinks it enjoys the discretion to target the new rules only to major industrial sources of carbon emissions, such as power plants, refineries, factories and the like. This so-called ‘tailoring rule’ essentially rewrites clear statutory language of the Clean Air Act by bureaucratic decree.”

The Journal item stated that, “Because the act was never written to apply to today’s climate neuroses, clean-air regulation is based on an extremely low threshold for CO2 emissions that will automatically transfer hundreds of thousands of businesses into the EPA’s ambit. The agency is required to regulate sources that emit more than 250 tons of a given air pollutant annually, which may be reasonable for conventional pollutants like NOX or SOX.

“But this is a very low limit for ubiquitous CO2, and so would capture schools, hospitals, farms, malls, restaurants, large office buildings and many others. To exempt these sources, the tailoring rule unilaterally boosts the rule for greenhouse gases from 250 tons to 25,000 tons, an increase of two orders of magnitude.”

The opinion item also explained that, “The endangerment finding was prompted by the 5-4 2006 Supreme Court Mass. v. EPA decision, which relied on an extremely literal interpretation of the Clean Air Act to crowbar CO2 into the law. That decision has been a political windfall for cap-and-tax advocates because it has driven utilities and other businesses to the bargaining table as they’ve concluded that some carbon limits are inevitable.

Yet the Supreme Court said nothing that would let the EPA simply decide on its own to apply the law to some unfavored business while giving others a pass. And the Clean Air Act is explicit about the 250-ton threshold. Team Obama’s real motive in ‘tailoring’ this rule is to limit the immediate economic impact of carbon limits to head off a political backlash.

“But even businesses that do get a pass shouldn’t rest too easily. The green lobby will quickly sue to force the EPA to enforce fully its own rules and go after all carbon sources.”

Robin Bravender, in an article posted earlier this week at Scientific American Online, reported that, “U.S. EPA has sent a draft rule to the White House that could limit regulations on greenhouse gas emissions to cover only very large industrial sources.

“The agency yesterday submitted a rule to the White House Office of Management and Budget that experts say will likely limit strict permitting requirements to industrial sources of more than 25,000 tons a year of carbon dioxide equivalent.

The rule is aimed at shielding smaller sources of emissions from being subject to any new regulatory regime. The Clean Air Act now requires new and modified industrial sources to install ‘best available control technologies’ when they emit 250 tons or more of a pollutant per year.”

The article explained that, “EPA and the Transportation Department last week sent draft rules to the White House for review that would boost automobile and light truck efficiency standards for model years 2012 to 2016, and impose first-ever federal tailpipe standards for greenhouse gases. Those rules hinge on the finalization of EPA’s proposed ‘endangerment finding,’ which would establish greenhouse gases as pollutants under the Clean Air Act.

Once it begins to regulate greenhouse gases from cars and trucks, EPA will be legally required to regulate all new or modified facilities that emit more than 250 tons per year of carbon dioxide. By moving that threshold to 25,000 tons per year, the permitting rule would cover roughly 13,000 facilities from all sectors of the economy that account for 85 to 90 percent of U.S. emissions, the agency said.

“‘What they’re trying to do is protect the innocent bystanders from being impacted by the finalization of the car rule,’ said Roger Martella, who was EPA general counsel under President George W. Bush.”

A newsline item posted yesterday at the American Farm Bureau Federation (AFBF) Online quoted AFBF Regulatory Specialist Rick Krause as saying, “What EPA is proposing to do is remove the requirements for most livestock producers by only requiring those entities that emit over 25,000 tons of greenhouse gas per year to be subject to the rule and that would be a good thing for livestock producers. But the way the current law is done they really can’t do it. The law trumps regulation and whatever is set forth in the law is what’s going to ultimately govern. So EPA cannot really administratively change what the law says.”

EPA Administrator Lisa Jackson appeared yesterday on the Diane Rehm Show- yesterday’s program was guest hosted by Susan Page of USA Today. According to a summary of the interview, “As head of the Environmental Protection Agency, Lisa Jackson has said she will put science before politics. The E.P.A. administrator on fuel economy rules, green jobs and the U.N.’s upcoming Copenhagen summit on climate change.” To listen to yesterday’s interview with Administrator Jackson, just click here.

In items covering other climate change legislative variables, The New York Times editorial board noted today that, “It was probably only a matter of time, but the oil lobby has taken a page from the anti-health-care-reform manual in an effort to drum up opposition to climate change legislation in Congress. Behind the overall effort — billed, naturally, as a grass-roots citizen movement — lie the string-pullers at the American Petroleum Institute, the industry’s main trade organization and a wily, well-funded veteran of the legislative wars.”

And Kate Sheppard reported yesterday at The Vine Blog (The New Republic) that Van Jones, President Obama’s “green-jobs guru,” could be in jeopardy of losing his job.

From an international perspective, Reuters news reported today that, “The United States and China are likely to sign a new bilateral agreement to combat climate change during President Barack Obama’s visit to Beijing in November, Washington senator Maria Cantwell said on Friday.

“Cantwell, who is in Beijing to discuss clean energy and intellectual property issues with Chinese officials, said a deal between the world’s two biggest CO2 polluters would also help build global confidence in the efforts to curb global warming.”

The article stated that, “‘I’d place higher odds on the ability of the United States and China to reach an agreement than I would on us passing legislation or on having Copenhagen agreed,’ [Sen. Cantwell] told reporters in a briefing.

She also said there was a ‘50-50 chance’ that the U.S. Clean Energy and Security Act, also known as the Waxman-Markey bill, would be passed by the end of the year, but said the legislation needed to be ‘streamlined’ and simplified.”

Doha

Reuters writer Jonathan Lynn reported yesterday that, “The World Trade Organization must remain vigilant about protectionism as job losses continue to mount in the wake of the global crisis, Director-General Pascal Lamy said on Thursday…Lamy said completing the Doha round would be an effective measure to tackle the crisis and prevent protectionism, adding that the talks, now in their eighth year, had entered the ‘beginning of the end-game.’”

James Lamont reported earlier this week at the Financial Times Online that, “India and the US have the political will to conclude the long-delayed World Trade Organisation’s Doha round, Simon Crean, Australia’s trade minister, said on Wednesday.

“Speaking on the eve of a meeting of 39 trade ministers in New Delhi, Mr Crean said the talks were in their final stage and called for an intensification of negotiations. ‘So far as the round is concerned, we are very close to its conclusion,’ he said. ‘We are now in the end-game of the Doha negotiations.’”

The FT article noted that, “The Australian minister’s emphasis on the political will of the newly elected government of Manmohan Singh and the administration of Barack Obama is important. India’s agricultural sector, a key concern of its negotiators, is facing one of its worst monsoons for 30 years, while the US economy is reeling from the global financial crisis. These adversities have led some experts to believe that a deal is out of reach.”

With respect to India’s ag sector and the Doha talks, Ben Arnoldy reported yesterday at the Christian Science Monitor Online that, “More than 10,000 Indian farmers Thursday protested the opening day of international trade talks in Delhi, fearful that on top of their burdens of a crippling drought and deep debts, they will face an influx of cheap foreign crops from countries like the United States.”

In perspective from the EU, Reuters news reported yesterday that, “Calls by political leaders to complete the World Trade Organisation’s Doha round talks next year are realistic and a deal can be done, European Union Agriculture Commissioner Mariann Fischer Boel said on Thursday.

“But speaking ahead of a meeting of ministers to advance the Doha round, she ruled out reopening the agriculture package put together in ultimately abortive talks in July last year.

“‘I think that would be a very, very risky business if someone should be tempted to try and reopen… I can guarantee that from the European Union there’s no more juice to get out of this lemon,’ she told Reuters in an interview.”

And, a separate Reuters article from yesterday reported that, “President Barack Obama intends to nominate Michael Punke to be U.S. ambassador to the World Trade Organization, the White House said on Thursday.

“The nomination, which must be approved by the Senate, fills a key slot on Obama’s trade team as long-running world trade talks are showing renewed signs of life.”

Pork Sector

In other trade related developments, a news release issued yesterday by the National Pork Producers Council stated that, “An ad hoc coalition, which includes the National Pork Producers Council and 33 other food and agricultural organizations, today sent a letter to U.S. Trade Representative Ron Kirk urging him to consider the consequences of actions he might recommend be taken against China over tires imported into the United States.

“President Obama is expected to make by Sept. 17 a decision on the findings of a U.S. International Trade Commission investigation of imports of certain car tires from China. The United Steelworkers filed a complaint with the ITC, claiming that a surge of Chinese tire imports had cost the union thousands of jobs. The ITC recommended a ‘safeguard action’ of a 55 percent tariff on Chinese tires.

If the president accepts the ITC recommendation, the food and agricultural coalition is concerned that China will retaliate against U.S. products. Pork and soybeans, for example, have been mentioned as candidates for retaliation.”

Meanwhile, the U.S. Department of Agriculture announced yesterday that, “Agriculture Secretary Tom Vilsack today announced USDA’s intention to purchase an additional $30 million in pork products in FY 2009 for federal food and nutrition assistance programs. USDA will survey potential suppliers to seek the lowest overall cost by publicly inviting bids and awarding contracts to responsible bidders. Altogether, USDA will purchase approximately $151 million in pork products for food and nutrition assistance programs this fiscal year through annual appropriation and Recovery Act funding.

“‘These purchases will assist pork producers who are currently struggling due to depressed market conditions and reflects the Obama Administration’s ongoing work to support struggling producers,’ said Vilsack. ‘This action will help mitigate further downward prices, stabilize market conditions, stimulate the economy, and provide high quality, nutritious food to recipients of USDA’s nutrition programs.’”

Yesterday’s move by the USDA was applauded by Nebraska GOP Senator Mike Johanns (related release), Senate Ag Committee Chairman Tom Harkin (related release), and by the National Pork Producers Council (related release).

Nonetheless, Reuters writer Christopher Doering reported yesterday that, “The U.S. government plans to buy another $30 million in pork products in fiscal 2009 for federal food assistance programs to help the flailing hog industry, U.S. Agriculture Secretary Tom Vilsack said on Thursday.

But pork futures prices fell on the news, as traders at the Chicago Mercantile Exchange had expected a bigger aid package, and said $30 million will do little to help the beleaguered sector because of a glut of pork in storage.

“‘Quantity-wise, that’s a drop in the bucket,’ said John Kleist, broker-analyst with Allendale Inc. ‘We have enough in the freezer that they (USDA) could take and not even put a dent in the freezer for $30 million.’”

Food Safety

Dan Piller reported yesterday at the Des Moines Register Online that, “U.S. Sen. Tom Harkin, D-Ia., said Wednesday in Des Moines that the nation needs updated food safety standards and enforcement, particularly for fruits and vegetables that are sold without inspection.

“‘This is becoming a real problem, particularly as people are incorporating more fresh fruits and vegetables into their diets,’ Harkin said at a panel discussion at Drake University that was sponsored by the Make Our Food Safe Coalition of consumer groups.”

The Register article added that, “Harkin said fruits and vegetables are at the heart of a weakness in the inspection system – that food imported from countries with standards less stringent than those of the United States can get into the food chain here without inspection.

Harkin, chairman of the Senate Agriculture Committee, is trying to pass a food safety inspection and standards bill that the House passed in July. ‘Remember that the Senate still has to deal with the health care issue,’ he told about 100 people at the event.”

Crop Insurance

A news release issued yesterday by CUNA Mutual Group and Producers Ag Insurance Group stated that, “CUNA Mutual Group has reached agreement with Producers Ag Insurance Group (ProAg) to become sole owner of the multi-peril crop insurer, serving farmers and agricultural producers nationwide.

“ProAg will operate as a standalone subsidiary of CUNA Mutual. The acquisition supports CUNA Mutual’s need to identify new growth opportunities and diversify the risks it insures. The agreement with the Amarillo, Texas based insurer will also enhance CUNA Mutual’s flexibility and financial strength while enabling ProAg to continue to expand its business.

“‘This acquisition builds on the initial investment we made in ProAg in 2007,’ said Jeff Post, President & CEO, CUNA Mutual. ‘It in no way affects our commitment to credit unions. For us to continue to strengthen and diversify our financial position, we need to identify new avenues for growth.’”

The release added that, “Crop insurance protects farmers from financial losses that result from natural causes such as drought, excessive moisture, hail, wind, frost, insects and disease. Multi-Peril Crop Insurance (MPCI) is an $8 billion industry in the U.S.”

Keith Good

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