A late-summer study by the Agricultural and Food Policy Center at Texas A&M University shows the South would be worse off under proposed climate legislation. Actually, outside some Midwest grain farms, few farmers would benefit.
Asked by Georgia Sen. Saxby Chambliss, ranking member of the Senate Agriculture Committee, to run the numbers, AFPC produced a 48-page document titled Economic Implications of the EPA Analysis of the CAP and Trade Provisions of H.R. 2454 for U.S. Representative Farms.”
In September, Delta Farm Press spoke with Joe Outlaw, co-director of AFPC, about the study. Outlaw was careful to explain the parameters and assumptions of the report. Among his comments:
How long did it take to put this together at Chambliss’ request? Had you done any preliminary work on this prior to his asking?
“We’d been thinking about it and pulling together information on what it would take to get carbon credits under the voluntary program. But, as I told the folks on Capitol Hill, this isn’t what we normally do.
“It took us three months, or more, to put together the report. We’ve been doing this for about 20 years and this one was the hardest we’ve ever done.”
Do the findings surprise you at all?
“Everything we did was based on the EPA (Environmental Protection Agency) analysis. If they’re wrong, then our findings are completely wrong. We used their numbers for the prices used to drive everything — carbon prices, commodity prices, energy costs.”
“Your readers need to understand what we did. We assumed that the ranches would be left out completely and won’t get any benefits. But, as was stated in the paper, ranches can get in there. However, they must leave a lot of available forage to show they’re sequestering carbon and we didn’t think that would be an economic advantage for them. It wouldn’t be viable for them to cut back 30 to 50 percent of their herds to get carbon credits.
“The only thing that’s striking to me is to get the needed carbon sequestering results there must be enough land moved out of crop agriculture. And when those millions of acres move out of agriculture, it will increase commodity prices — primarily for corn and soybeans, although every crop price rises a bit.”
According to your report, the Midwest is really the region that would benefit under this particular set of assumptions. Did you hear Nebraska Sen. Mike Johanns speaking on your analysis during Senate hearings? I believe he was talking about irrigated versus dryland acres in Nebraska…
“We spoke with his office. They’d asked for additional information.
“We told them that the farms we showed in Nebraska were from the dryland area. And they’d be better off (under cap and trade legislation).
“That’s a key: our analysis indicates anyone that has to irrigate — even feed grains — will be worse off under cap and trade. That’s because of the higher costs of pumping water.”
What about the regional differences? According to the report, the only thing that does better under cap and trade is feed grains — and there’s one cotton farm in extreme southern Texas.
“Yes, but that cotton farm has a lot of sorghum acreage. It’s labeled a cotton farm, but has so much sorghum it should probably be kicked over into another category.”
Are the feed grain farms showing benefits dryland?
“The ones that are green (see map on Page 27 of the report), yes. If you look at the feed grain farms in north Texas (marked red on the map), those are irrigated.
“If you look at the farms that stick out — say the Wisconsin dairy (that is green on the map) — it’s because it is too small to have a digester on it. Plus, they sell surplus corn and soybeans.”
How do you come up with the representative farms?
“We’ve been doing this type of analysis since 1983. We began working with panels of producers in Texas to develop farm budgets and the farming practices that were used on representative farms.
“We now have 98 representative farms around the country — but each represents five or six producers that we work with. We meet with all the cooperating producers every other year, sit down and update costs, practices and other things.
“So, we’re working with real producers. But the farms (on the map) are model farms for a particular area of a state. We’ve tried to put those farms in major production areas, although there have been some shift in land-use over the last 30 years.”
Time-frame the report looks at?
“We have a 10-year model. What we’ve tended to do for Congress is to start a few years (prior), to run it with historical data to make sure we’re on track with what was happening in the real world.
“So, we started (the analysis) in 2007 and projected out to 2016. Your readers need to know that isn’t where all the action would happen with cap and trade — that is just the phasing in period. The action on the higher carbon prices will happen 20 years out.
“To really look at this and get a good sense of it, we need to rebuild our models and go further. One of the problems I see is if producers get excited and sign up for (carbon sequestration) right away — and we assume they would in the paper — they’d be taking the lowest part of the carbon market to sell at. If they knew that, they most probably wouldn’t want to sell at that point but would wait until the contract prices rise.
“On the other hand, this is the one way they have to offset their costs from the new legislation.
“The one thing I hope for producers: that they understand if these carbon rules are put in place, the land will be saturated with carbon contracts and they won’t be able to get paid for carbon sequestration. So, if they want to work with the program, they want to do it when the prices are higher — but don’t wait too long.”
Any feedback on the report?
“So far the feedback has been fairly subdued. The analysis was contingent on one group’s estimation of what would happen. If they liked the results, obviously, there was positive feedback.
“There really hasn’t been any negative feedback other than a few people questioning assumptions and things like that. But that happens all the time. All we’ve said (in response) is, ‘If you don’t like our assumptions, tell us what you’d prefer.’
“For the lack of anything better, we had to tie ourselves to someone’s (numbers) — assuming the carbon market would work like voluntary markets. And we know that might not be true but we didn’t know what else to assume because no one seems to know exactly how it would work.
“The way I figure this is it’s our first attempt. We’ll refine it as we go forward. But we really want to wait on another baseline before doing more.”
“This is a really complicated issue. As I’ve tried to tell other reporters, this isn’t what I do for a living, normally. Carbon isn’t our usual topic of interest. This wasn’t to try and make the (proposed legislation) look bad or good. We were trying to learn on the fly — how it worked in the past, how it might in the future, as well as trying to interpret the bill.
“There is supposed to be protection for energy-sensitive industries. If it works, nitrogen fertilizer prices will be okay, or even lower than they would have been otherwise. But if it doesn’t work, all bets are off.
“That’s where we got the most questions from the minority staffs in D.C.: why would you assume those protections would work? I had to say, ‘Well, we didn’t know anything better. We were trying to analyze them based on how the bill said it would. That’s an assumption. If you want us to look at it again assuming it won’t work, we can.’
“I told all the staffers, ‘I don’t usually say this, but you need to read this report. There isn’t that much text, but it’s really important you understand the assumptions we lay out there. Those drive the whole thing.’
“Honestly, when you do, say, an analysis of farm provisions in a farm bill it is very simple compared to this cap and trade bill.”