FarmPolicy

Climate Legislation; Food Security; and CFTC Issues

Climate Legislation

Reuters writer Richard Cowan reported yesterday that, “The Obama administration will press ahead with climate control legislation, despite difficult odds of passage before December’s international summit on global warming.

“U.S. Energy Secretary Steven Chu told the Reuters Washington Summit that he was putting in long hours on climate issues and believes there was ‘a reasonably good possibility’ that the U.S. Congress could deliver legislation reducing carbon dioxide emissions in time for the Copenhagen meeting.

“‘Look, I’m still going to be optimistic and say there is a chance that there will be a bill that the Senate and House have agreed upon that goes before the president before Copenhagen,’ Chu said.”

The article added that, “But Senator John McCain, who wants to rejuvenate nuclear power in the United States to help reduce carbon pollution, said there’s been no progress and he accused Democrats of being ‘beholden’ to environmentalists who oppose an expansion of the industry.”

Darren Samuelsohn of ClimateWire reported yesterday at The New York Times Online that, “President Obama will try to push the Senate climate bill forward Friday with an energy-themed speech at the Massachusetts Institute of Technology, just days before the start of a marathon series of hearings featuring testimony from top administration officials.

“The White House said Obama’s remarks covering ‘American leadership in clean energy’ will dovetail with the Senate’s effort to place a first-ever economywide cap on greenhouse gas emissions.

“Obama largely stayed out of the spotlight during the House debate earlier this year, but many Democrats and environmentalists say the president must be more active in lobbying the Senate if leaders are to find the 60 votes necessary for the measure’s passage.”

In other news regarding climate issues and the president, an AFP article from yesterday reported that, “US President Barack Obama and China’s President Hu Jintao vowed in a phone call to work together to assure the success of UN climate talks in Copenhagen, the White House said Wednesday.

“The phone call came amid warnings that the conference scheduled for Copenhagen in December will fall short of ambitious hopes for agreeing a global climate change treaty to replace the Kyoto accord.”

In related news, Wan Xu and Jing Yang reported in today’s Wall Street Journal that, “A senior Chinese climate-talks negotiator said efforts to broker a global climate-change deal may fail unless developed countries change their demands before a planned December summit in Copenhagen.

“The comments by Lu Xuedu, deputy director of China’s National Climate Center, added to fears that a growing divide between richer and poorer nations — laid bare in preliminary talks in Bangkok several weeks ago — is hurting prospects for an agreement.

“‘If the trend can’t be turned around in the next round of meetings, I estimate the Copenhagen meeting can only fail,’ Mr. Lu said.”

Meanwhile, a news release issued yesterday by Sen. Kit Bond (R-Missouri) indicated that, “As Democratic lawmakers and climate change proponents continue to push cap-and-trade bills through Congress, U.S. Senators Kay Bailey Hutchison (R-TX) and Kit Bond (R-MO) today discussed and released a report, Climate Change Legislation: A $3.6 Trillion Gas Tax, which explains how the proposals will levy a massive new national gas tax on American families, farmers, workers and truckers.

“‘Cap-and-trade is a giant new gas tax on America’s families, farmers and workers,’ said Senator Kit Bond. ‘We should not increase pain at the pump in these tough times.’

“‘We can improve the environment and economy through American ingenuity and technological advancement, not with taxes and mandates that increase costs and burden American families and businesses,’ said Senator Kay Bailey Hutchison.”

In an Op-Ed published in The Washington Times, the two Senators noted that, “Several industries will be penalized more severely by the gas tax than others. Our nation’s farmers and ranchers, who are tasked with producing high-quality goods for much of the world, will be harmed by Waxman-Markey’s $2 trillion tax on gasoline and $1.3 trillion tax on diesel fuel. Gas- and diesel-powered equipment, ranging from tractors to combines to fertilizing systems, are the operational foundation of American farms and ranches. Under the climate-change legislation, they will face $550 million in higher fuel costs in 2020 and $1.65 billion in 2050.”

A news release issued yesterday by the American Farm Bureau Federation noted that, “A crop and livestock producer from Texas today said cap-and-trade climate change legislation could hike the cost of fuel used for farming to the point that it will have a devastating economic impact on his and similar family-owned businesses.

“Speaking at a Capitol Hill news conference, Texas farmer and cattle producer Richard Cortese said increased fuel prices, on top of other energy-related costs, would deal a sharp blow to farmers and ranchers. Cortese, who farms near Little River, Texas, is a member of the Texas Farm Bureau board of directors.

“The event, hosted by Sens. Kit Bond (R-Mo.) and Kay Bailey Hutchison (R-Texas), highlighted a new report the senators released showing that cap-and-trade legislation will result in a considerable fuel tax increase on Americans. The senator’s report is the first such effort to quantify climate change legislation’s effect on fuel costs.”

Food Security

Reuters writer Roberta Rampton reported yesterday that, “In the old debate on whether you should give a poor man a basket of fish or a fishing pole, the United States wants to move to help impoverished nations expand agriculture at home and ease dependence on handouts from U.S. farmers.

“But don’t expect food aid to stop. The politically powerful lobby of farmers, shippers and processors who profit from the shipments — as well as the aid groups who distribute the food — are prepared to defend that use of U.S.-grown commodities overseas.”

The article added that, “Some experts say that the United States should buy as much of its aid as possible from developing countries to support those farmers while helping reduce hunger.

“But American interests involved in the food aid chain say that argument ignores the benefit of food aid, including its political support, which guarantees funding year in, year out.”

Yesterday’s article explained that, “Through the 1980s, the United States had strong funding for agricultural development. But that support dwindled, replaced by an increase in food aid.

“‘We’ve relied on food aid to fill our gap in support for agriculture, and most importantly, to reach the poorest people,’ Secretary of State Hillary Clinton said last week.

“‘We’re seeking to close that gap between development and humanitarian assistance by dedicating development resources to engage the poorest in the growth process and to support community development,’ she told reporters, emphasizing that food aid would continue to be deployed in emergencies.”

Ms. Rampton noted that, “Clinton is leading the Obama administration’s three-year, $3.5 billion food security plan — part of a pledge by the world’s richest countries to spend more than $22 billion addressing the root causes of hunger.

“If that funding means aid groups can get grants, rather than commodities, to pay for projects, that may reduce political opposition to an overhaul of food aid, said Christopher Barrett, an economist at Cornell University.”

Neil MacFarquhar reported in today’s New York Times that, “Scientists and development experts across the globe are racing to increase food production by 50 percent over the next two decades to feed the world’s growing population, yet many doubt their chances despite a broad consensus that enough land, water and expertise exist.

“The number of hungry people in the world rose to 1.02 billion this year, or nearly one in seven people, according to the United Nations Food and Agriculture Organization, despite a 12-year concentrated effort to cut the number.”

Today’s article stated that, “Agronomists and development experts who gathered in Rome last week generally agreed that the resources and technical knowledge were available to increase food production by 50 percent in 2030 and by 70 percent in 2050 — the amounts needed to feed a population expected to grow to 9.1 billion in 40 years.

“But the conundrum is whether the food can be grown in the developing world where the hungry can actually get it, at prices they can afford. Poverty and difficult growing conditions plague the places that need new production most, namely sub-Saharan Africa and South Asia.

“A straw poll of the experts in Rome on whether the world will be able to feed its population in 40 years underscored the uncertainty surrounding that question: 73 said yes, 49 said no and 15 abstained.”

The Times article indicated that, “The track record of failing to feed the hungry haunts the effort. But other important uncertainties also give pause. The effect climate change will have on weather and crops remains an open question. The so-called green revolution of the 1960s and ’70s ended the specter of mass famines then, but the environmental cost of chemical fertilizers and heavy irrigation has spurred a bitter divide over the right ingredients for a second one.

“In addition, the demand for biofuels may use up crop land. And as scores of food riots in 2008 showed, oil prices and other income shocks can quickly drive millions more people into hunger, sending ripples of instability around the world.”

Jenny Wiggins reported earlier this week at The Financial Times Online that, “The Royal Society has called on the government to invest an extra £50m annually in crop science, including genetically modified crops, to help the UK prepare for expected global food shortages.

“The society on Tuesday described global food security as ‘a chronic problem that is set to worsen’ and said the world needed to increase crop production to feed 9bn people by 2050.

“Professor Sir David Baulcombe, chair of the study, said new research investment was ‘urgent’ because it took 10-15 years to translate science into useful agricultural applications. ‘What we’re calling for here is a new agricultural revolution.’”

The FT article added that, “Hilary Benn, environment minister, said science would be ‘crucial’ to increasing food production. Mr Benn has previously said GM crops could be part of the solution for making British agriculture more self-sufficient.

“But Sustain, a charity promoting organic farming, said GM crops were not necessary to prevent a food crisis. ‘Low input systems, such as organic, can provide sustainable solutions to food security,’ it said.”

CFTC Issues

Bloomberg writers Dawn Kopecki and Alan Bjerga reported yesterday that, “The House Agriculture Committee approved legislation regulating over-the-counter derivatives after adopting a provision that may speed agreement on regulation of the $592 trillion industry.

“The amendment by committee Chairman Collin Peterson would exempt end-users — companies such as manufacturers and airlines that employ derivatives to hedge their operational risks — from increased capital, trading and disclosure requirements.”

The Bloomberg article noted that, “‘In crafting this bill, our target for greater regulation and oversight is not the end-user but their swap dealer or major swap participant counterparty,’ Peterson, a Minnesota Democrat, said during debate on the bill. ‘End-users did not get a bailout of billions of dollars. End-users are not responsible for what happened in markets last year.’

“The legislation was approved by voice vote. The House Financial Services Committee approved a bill on Oct. 15 with a similar exemption for end-users.

“The Obama administration called in August for Congress to enact rules governing the over-the-counter derivatives market, saying a lack of transparency exacerbated the credit crisis and contributed to the near-failure of American International Group Inc.”

Reuters writer Charles Abbott reported yesterday that, “The House Agriculture Committee approved a bill on Wednesday for federal regulation of over-the-counter derivatives — an Obama administration goal — that would require many swaps to go through clearinghouses.

“Swaps that go through clearinghouses would be required to move onto regulated exchanges or electronic platforms. Clearing and on-exchange trading are intended to reduce market risk.”

Mr. Abbott explained that, “It was the second approval in a week by a House committee of a bill to regulate the $450 trillion OTC derivatives market, widely blamed for amplifying last fall’s financial crisis.

“The Agriculture Committee oversees the futures markets. A similar bill was approved on Thursday by the Financial Services Committee, which has jurisdiction over banks and equities.

“Agriculture Committee chairman Collin Peterson estimated that 70-80 percent of OTC transactions would go though clearing under the bill. Customized contracts would face higher margin and capital requirements than swaps that are cleared.

“The two legislative versions will be merged into an overall package of financial regulatory reforms for a House vote, expected by early November. The Senate has yet to write a bill. Financial reform is one of the top three priorities for Congress this year.”

Keith Good

Posted by Keith Good • October, 22, 2009 • 4:33 am