The Ruminant

Ethanol Fuels More Than Cars

2007-06-11T18:18:00.000-07:00

The explosion of ethanol production is fueling more than cars -- it's also fueling the growth of algae in America's rivers and bays, creating new water quality challenges.

That's according to the Saint Louis Post Dispatch, which engaged scientists at the University of Illinois to assess the impacts of the biofuels boom that is sweeping the Midwest.

As more farmers plant more corn to take advantage of a 7.5 billion gallon ethanol mandate in the 2005 Energy Bill, farmers are applying -- and losing -- more and more fertilizer.

The same nutrients in fertilizer that help corn grow also contribute to the growth of algae. When the algae die and decompose, the tiny plants use up much of the oxygen in the water.

The best known low oxygen "dead zone" caused by agriculture is the 8,000 square mile dead zone in the Gulf of Mexico. But, most of America's bays feature "dead zones" and many of our rivers, including the Mississippi and its tributaries, suffer from poor water quality.

Agriculture is the most commonly cited reason for America's water quality woes.

Congress, of course, has a solution: produce even more ethanol. The House and Senate will soon vote on a proposal to increase the ethanol mandate to 36 billion gallons, including at least 15 billion gallons from corn ethanol.

Whether the mandate will include environmental safeguards remains to be seen.

According to USDA, producing even 15 or 20 billion gallons of ethanol without appropriate environmental safeguards will increase the amount of fertilizer applied by roughly 2 percent and 6 percent, respectively. But, as the Post Dispatch reported last weekend, some scientists warn that nitrogen runoff caused by such as an increase in ethanol production will increase by nearly 30 percent.

Some farmers are using fertilizers with greater precision, and many farmers are installing buffers of grasses along their fields to intercept and filter farm runoff. But, less than 40 percent of farmers conduct basic soil tests before applying fertilizer and less than 10 percent use special gizmos that link fertilizer applications to soil and plant needs.

Congress should not solve our energy problems by creating water quality problems. The next Farm Bill should dramatically increase incentives for farmers to use fertilizers with greater precision and the next Energy Bill should link any increase in the ethanol mandate to tough environmental standards.

Until we figure out a way to make ethanol from algae, we should find ways to keep fertilizers on our farms -- and out of our rivers.

Recycling the Cheap Food Myth

2007-06-10T14:25:00.000-07:00

It may suprise you that some farm organizations like to recycle. I am referring, of course, to the same tired arguments in favor of farm subsides that help far too few farmers at far too much cost to the taxpayers.

Perhaps the best (or worst) example is that old chestnut that farm subsidies keep food prices low.

As you know, most of the corn and soybeans grown in America goes in a pig or a pump. Eliminating corn subsidies, according to noted agricultural economist Bruce Babcock, would increase the price of pork by less than two cents a pound. That's because the cost of feeding the pig is just a fraction of the cost of processing and transporting the pork.

We don't have a cheap food policy in America. We don't even have a cheap meat policy!!

According to Babcock, the "mythical connection" between subsidies and food prices ignores a some "nuances" you missed in Freshman economics, including the following minor detail -- all corn and soybean payments that will be made over the next five years will be "direct" subsidy payments that are completely "decoupled" from planting decisions.

That means that corn and soybean farmers will get paid (almost $2.5 billion over the next five years) whether they grow corn or cassava.

Food prices are rising -- thanks to surging demand for biofuels, not subsidies. Expanding the production of ethanol from crop wastes and prairie grassess -- and taking the pressure off corn -- would be a far better way to keep meat prices low and would produce many more benefits for the environment.

Something to ruminate over.

Healthy Foods or Wealthy Farmers

2007-06-08T13:20:00.000-07:00

America faces a health threat today that could undermine many of the health gains we have made over the past century -- and many of these threats come from changes in what we eat.

One-third of Americans are obese and another third are overweight, including 16 percent of our children. Rising rates of diet-related diseases such as diabetes have increased the cost of America's health care system by more than $100 billion a year. What's more, the current generation may be the first to be less healthy and have a shorter life span than our parents. Jeepers!

One reason is that foods that make us fat are getting cheaper while foods that make us skinny cost more. Between 1985 and 2000, the cost of soft drinks fell by 23 percent while the cost of fruits and vegetables jumped by 38 percent, according to a recent report by the Institute for Agriculture and Trade Policy. Some writers, such as Daniel Imhoff and Michael Pollan, wonder whether farm subsidies are to blame for America's rising obesity epidemic.

Are farm subsidies making us fat?

Certainly, costly farm subsidies are diverting funds that could be better used to promote healthy food choices, such as farm-to-school programs that provide school children with fresh fruits and vegetables. Some legislators, including Senators Sherrod Brown (D-OH) and Hillary Clinton (D-NY) and Reps. Kind, Cardoza and Bluemenauer, hope to make health a central focus of farm and food policies when Congress renews the Farm Bill this year.

But, farm subsidies have little impact on planting decisions during times of high prices. Farmers are planting 90 million acres of corn -- or more corn than has been planted since World War II -- in response to surging demand for ethanol, not corn subsidies.

The right question to ask is whether we want to promote healthy foods or provide subsidies to wealthy farmers regardless of need.

There's never been a better time to call the question. According to a USDA report on family farms, average farm household income is about $81,000 a year -- much more than household income for ordinary Americans.

Here's what will really cause you some indigestion -- the average farm household income for the very large commercial farms that collect the lion's share of farm subsidies was more than $270,000 in 2004.

So, who is getting fat from farm subidies? Sounds like some farmers need to push themselves away from the trough.

End Ad Hoc Disaster!! Again.

2007-06-07T02:44:00.000-07:00

Every few years, Congress pledges to end "ad hoc" disaster bills designed to help "family farmers." These are, of course, the supplemental appropriations bills that shower roughly $3 billion a year on farmers.

This year is no exception. And it will represent the third time in this decade alone that we will have supposedly ended ad hoc agriculture disaster bills.

First, there was the massive expansion of the federal crop insurance program in 2000, which generously subsidizes the premiums farmers pay to purchase crop and and revenue insurance.

Then, there was the massive expansion of farm income subsidies in 2002.

In both cases, legislators pledged that the bill, in the words of Senator Tom Daschle, would "end disaster assistance as we know it."

Now, like the return of mold in a dank basement, Congess is pledging to end "ad hoc" agriculture disaster bills by providing a "permanent disaster program" that would allow the President to declare a disaster and distribute those big cardboard checks to every farmer in a particular county.

One permanent disaster proposal would allow the Secretary of Agriculture to automatically provide a very high level of crop insurance coverage to any farmer in a county where a disaster has been declared -- regardless of the level of coverage actually purchased by the farmer. That will make crop insurance -- which already pays off with the regularity of a swiss watch -- an even better bet for farmers.

Why not just give farmers $15 million a year and let them invest the funds in the market? At least we'd be helping farmers -- and not crop insurance agents.

As the Washington Post has chronicled, crop insurance and disaster payments frequently flow to private interests and farmers regardless of need.

Some legislators, led by Henry Waxman (D-CA), are moving in the opposite direction -- by raising tough questions about a $5 billion-a-year crop insurance program that provides huge underwriting gains to crop insurance companies and exorbitant commissions to crop insurance agents.

As Waxman said, the crop insurance system is "a textbook example of waste, fraud and abuse in federal spending." Citing testimony from the Agriculture Department's inspector general and a report from the Government Accountability Office, Waxman said that "over $8 billion in taxpayer funds have been squandered in excess payments to insurers and other middlemen" since 2000.

Would automatically providing high coverage levels to farmers end ad hoc disaster? Or would such a proposal turn a troubled program into an even bigger disaster?

Ad hoc disaster bills are as integral to politics as kissing babies and rubber chicken dinners. They are about as likely to go away as the Republic itself.

Our congressional leaders should instead fix the crop insurance program -- by setting reasonable limits on underwriting gains and agent reimbursement rates, lowering some premium subsidies, and prohibiting policies to farmers who plow up wetlands and grasslands to grow crops -- to provide the "disaster protection" legislators intended to provide in 2000.

Ending Our Addictions to Oil -- And Subsidies

2007-06-05T07:59:00.000-07:00

A spike in the amount of ethanol produced from corn is changing the landscape of rural America – and the political landscape in Washington.

Rising oil prices, changes in gasoline additive rules, and a federal ethanol mandate have sparked unprecedented investment in corn ethanol. Scores of new ethanol plants are being constructed to take advantage of a 7.5 billion gallon mandate included in the energy bill passed by Congress in 2005.

Ethanol production could soon top 12 billion gallons if many of the plants on the drawing board are constructed. That amounts to 8 percent of gasoline use, so ethanol will help end our addiction to foreign sources of oil -- and could help end our addiction to costly farm subsidies as well.

As demand for ethanol has increased, corn prices have increased, encouraging more farmers to plant more corn. USDA estimates that the number of acres planted with corn will reach 90 million acres in 2007, up from 80 million acres in 2006.

That's more corn than has been planted in America since World War II.

Many farmers are planting corn one year after the next – abandoning corn and soybean rotations – and some experts are worried that “continuous corn” will compound America’s water quality challenges. According to USDA, producing 15 or 20 billion gallons of ethanol without appropriate environmental safeguards could increase the amount of fertilizer applied by roughly 2 percent and 6 percent, respectively.

But, the next Farm Bill could help end our addictions -- to both foreign oil and to costly farm subsidies.

As corn prices soar in response to growing demand for ethanol -- and supplies of soybeans and wheat fall as corn production consumes a larger and larger share of the landscape -- corn subsidies will fall as well. Most corn subsidies are "counter-cyclical" -- which means that they are only triggered when prices are low -- so subsidies are expected to be low for the next decade or longer, according to USDA, when compared to recent years.

Reducing the cost of subsidies makes it easier for USDA to pay for incentives for corn farmers to use fertilizers with greater precision and to construct buffers of grasses, forests and wetlands that can intercept and filter farmland runoff. Right now, two out of three corn farmers offering to share the cost of clean water are turned away due to funding shortfalls.

With more funds, USDA could also accelerate the production of ethanol from other feed stocks, such as crop and wood wastes. America’s farmers could produce more than 1 billion tons of “biomass” in the coming decades – enough materials to produce 110 billion gallons of ethanol -- but major new investments are needed to get "cellulosic" ethanol off the ground.

Many good ideas have been proposed, including the creation or expansion of programs to provide grants, loans and loan guarantees to the refiners of cellulosic ethanol and iniatives to modestly and temporarly subsidize the producers of feed stocks such as switchgrass. But, these ideas will die on the vine if Congressional leaders inves in costly new subsidies, such as duplicative disaster assistance proposals.

Paying for Farm Bill Priorities

2007-06-04T14:16:00.000-07:00

More than 200 members have introduced bills to expand rural development, conservation, renewable energy, and nutrition programs when Congress renews farm and food policies in the 2007 Farm Bill.

Only five members have proposed ways to pay for these important priorities.

But, there's no real mystery where to look when it comes to paying for Farm Bill priorities.

The only significant sources of funds on the chopping block are direct subsidy payments linked to a farmer's production history and the administrative costs and underwriting gains being "earned" by crop insurance companies and agents.

In the words of National Farmers Union President Tom Buis, direct payments -- which are paid regardless of crop prices -- are "hard to defend" in a time of high prices.

Ironically, direct payments were created to wean farmers off subsidies in 1996 but have now instead become a sort of entitlement.

But, direct payments have few defenders, and everyone from fiscal conservatives like Jeff Flake (R-AZ) to farm subsidy supporters like Charlie Stenholm (D-TX) say the time has come for direct payments to go. Cutting direct payments would produce $26 billion in savings over the next five years that could be reinvested into conservation, energy and other urgent priorities.

As Buis said, "direct payments are a legacy of Freedom to Farm that didn't work." In light of high prices, "we don't need that particular payment anymore," adds former Senator Bob Dole.

Reforming crop insurance programs to limit the amount of money crop insurance companies and agents can "earn" from the sale of subsidized crop insurance policies is another way to pay for Farm Bill priorities. Crop insurance now costs the taxpayers more than $5 billion a year -- almost as much as the traditional farm safety net -- and reforms to limit administrative costs and underwriting gains could produce more than $2 billion in savings over the next five years.

Placing "hard" caps on subsidies, as proposed by Senators Dorgan (D-ND) and Grassley (R-IA), could also save as much as $2 billion over ten years -- but only if Congress really closes the loopholes that let some big rice and cotton farmers collect more than $1 million a year. Capping farm subsidies would also help create a level playing field for smaller farmers.

The presence of a $20 billion budget reserve -- spending that must be offset from other sources, such as taxes on oil and gas companies -- has led some legislators to so far avoid making the hard chocies needed to pay for Farm Bill priorities like expansion of the Wetlands Reserve Program. But, legislators who fail to make the tough choices should not be suprised when other leaders make the decisions for them -- on the floor of the House and Senate.

Methane Means Money to Vermont's Dairy Farmers

2007-06-03T09:39:00.000-07:00

Methane emissions captured from cow manure may soon be worth more than milk to Vermont's dairy farmers.

A program run by a state power utility allows consumers to pay an extra 4 cent per kilowatt-hour for "cow power" -- eletricity that is generated when local dairy farmers capture and burn the methane emitted from animal waste stored in large waste pits called, er, lagoons.

Manure-to-energy projects and programs like Vermont's "cow power" program could help many more farmers and the environment.

In many counties, farm animals produce far more manure than can be safely applied on nearby fields. Simply storing the waste in "lagoons" just turns a potential water quality challenge into an air quality challenge -- because lagoons emit methane that contributes to climate change and emit ammonia that creates other environmental and health challenges.

So, some farmers have installed “digesters” that cover their animal waste lagoons to capture and burn the methane to generate electricity. More than 100 digesters have been built so far, and nearly 100 more digesters are in the planning stages. Companies like E3 Biofuels are using digesters to power ethanol plants and feeding the left-over mash to the cows -- a closed loop.

Overall, about 7,000 dairy and swine operations could install digesters, generating enough eletricity to annually power 500,000 homes and preventing the release of 1.3 million tons of methane. Farmers could not only make money by selling premium eletricity (sort of like premium ice cream) but by selling greenhouse gas reduction credits.

As farmers like to say, "smells like money."

Daschle, Dole and Direct Payments

2007-05-31T06:01:00.000-07:00

Two architects of the modern farm safety net -- former Senators Tom Daschle and Bob Dole -- have concluded that the current mix of costly farm subsidies have made some forms of agriculture about as risky as crossing at the light.

Daschle and Dole are farm state Senators and long-time farm policy leaders who have long stood behind the "three-legged stool" that combines three different subsidies -- counter-cylical, loan deficiency, and direct payments -- to overwhelmingly support five row crops grown primarily in eight states.

When you include subsidized crop insurance and disaster payments, the stool is actually more like a height-chair.

But as crop prices soar and farm household incomes rival those in the Senators' swanky Washington neighborhoods, even Daschle and Dole have said it time eliminate direct payments -- which will cost roughly $25 billion over the next five years and be paid out regardless of market conditions -- and instead invest in conservation and renewable energy.

Investing in biofuels, helping farmers profit from the coming cap on carbon emissions, renting land for hunting and fishing, and supporting other emerging markets will put a lot more food on the farm table than simply farming the treasury, according to their report, Competing and Succeeding in the 21st Century: New Markets for American Agriculture. They would replace the height-chair with a sturdy pair of crutches -- a counter-cylical program and a "fair to all" marketing loan program subject to low payment limits.

In particular, Daschle and Dole would build on the 2005 Energy Bill, which included the ethanol mandate largely responsible for high corn and soybean prices, by dramatically increasing the renewable fuels mandate. They would also cap carbon emissions, and allow farmers to sell carbon reduction credits to power plants. To help farmers prepare for and profit from emerging these energy and carbon markets, they would create a no-interest revolving loan program.

Legislators should take notice when two farm state Senators who are notorious champions of farm subsidies say it's time to restructure and reduce our farm safety net.

A Stealth Safety Net?

2007-05-30T07:39:00.000-07:00

A Stealth Safety Net?

Two safety nets are better than one.

That must be the logic driving some farmers to hang on to traditional subsidies while USDA simultaneously subsidizes the expansion of crop and revenue insurance.

Raise your hand if you knew that roughly 80 percent of the acres of subsidized corn, soybeans, wheat, cotton and rice produced in America are covered by crop and revenue insurance policies.

USDA annually spensd more than $5 billion subsidizing crop and revenue insurance – or almost as much as we are likely to spend on traditional subsidies. At last count, USDA provided nearly $50 billion of protection to farmers growing 360 different crops. Between 1998 and 2006, insured cropland increased from 182 million acres to 242 million acres. To learn more, read the testimony of USDA experts Elliot Gould and Keith Collins.

Farmers are also increasingly shifting to policies that cover lost revenues, not just lost yields. What’s more, the coverage levels purchased by farmers are increasing as well, so a larger portion of average revenue is covered by a subsidized insurance policy. Between 2000 and 2006, the share of subsidized farmers with revenue insurance policies covering more than 70 percent of average revenue increased from 31 percent to 63 percent.

So, naturally, some legislators are wondering why the government should pay twice: once to subsidize premiums for crop and revenue insurance; and a second time through annual income subsidies linked to crop prices and production.

The growth of crop and revenue insurance – and increased coverage levels in particular -- might complement the transition to risk management accounts proposed by Senator Richard Lugar and Reps. Kind (D-WI), Flake (R-AZ), Crowley (D-NY, and Reichert (R-WA). Under their proposal, farmers could withdraw funds from their accounts to cover the all-too-common “shallow” losses associated with ups and downs of agriculture and purchase crop and revenue insurance to cover the “deeper” losses causes by natural disasters and other catastrophic events.

Something to ruminate over.

A Safety Net as Modern as Our Farmers

2007-05-29T06:09:00.000-07:00

By any measure, farm income is reaching record levels.

In 2007, farm income is expected to be $66.6 billion, up $8.8 billion from 2006 and $9 billion higher than the ten-year average. Average farm household income – which includes both on-farm and off-farm income – is expected to be more than $81,000 – or far more than household income generally. Very large commercial farms – or those farms with annual gross sales greater than $500,000 – are expected to have farm household income of more than $200,000 in 2007.

In other words, there's never been a better time to make the transition to a farm safety as modern and entreprenuerial as our farmers.

That's why the editorial pages of both the New York Times and the Washington Post are urging legislators to give careful consideration to proposals by Senator Richard Lugar (R-IN) and Reps. Ron Kind (D-WI), Jeff Flake (R-AZ), Joe Crowley (D-NY), and David Reichert (R-WA) to make a transition to a system of farmer-held risk management accounts.

Under the Lugar plan, farmers would make a a transition from costly Depression-era subsidies to a system of farmer-held risk management accounts that would help farmers weather the ups and downs of agriculture, make investments, and plan for the future.

In particular, subsidized crop farmers would be required to put a largers and larger share of their "direct" subsidy payments into risk management accounts. Farmers could contribute some of their own funds, but a match is not required. When sales fall below 95% of a farmer's average gross sales, a farmer can withdraw funds to cover the "shallow" losses that are not covered by revenue or crop insurance policies. Farmers could also withdraw funds to purchase crop or revenue insurance or to make investments in rural enterprises.

What's left in the account would serve as a farmer's IRA.

Given agriculture's success -- due in no small measure to the growth of ethanol -- and the dramatic expansion of crop and revenue insurance coverage, Congress finally has a chance to restructure and reduce the outdated subsidies that help few farmers and regions and to instead invest in more urgent priorities, such as conservation, renewable energy and rural development.

Sharing the Cost of a Healthy Environment

2007-05-27T08:01:00.000-07:00

America’s farmers, ranchers and forest landowners manage roughly 70 percent of the American landscape, so it should be no surprise that agriculture has a dramatic impact on the quality of our rivers, on the fate of rare species, or on the pace of sprawl.

In particular, agriculture is the leading reason 40 percent of America’s rivers, lakes and bays fail to meet water quality goals, the nation’s largest consumer of freshwater, and is a leading threat to America’s endangered and threatened wildlife species. Agriculture is also a significant source of air pollution in some regions and pesticides can drift from their intended target, posing threats to public health and wildlife.

Fortunately, farmers are eager to offer share the costs of a healthier environment. All of America's farmers already take steps to provide cleaner air and water and wildlife habitat, ranging from soil-conserving tillage systems to more precise applications of water, fertilizers, and pesticides. Our farmers are eager to do even more.

But, most farmers offering to share the cost of clean water and wildlife habitat are turned away because of our misplaced federal spending priorities.

What’s more, our federal farm policies send powerful economic signals through farm and crop insurance subsidies to plow up environmentally sensitive lands to grow crops that create new environmental challenges. The farm and ranchland commonly shifting in and out of production in response to these economic signals is far more likely to harbor rare species and pose water quality challenges. See a recent USDA paper on the subject.

Renewal of farm and food policies is a rare opportunity to reward – not reject – farmers when they offer to help meet America’s environmental challenges and to provide a farm safety net that helps farmers weather the ups and downs of agriculture without providing incentives to plow up environmentally sensitive lands. Unless we reward stewardship and reduce signals to plow up grasslands and wetlands, we will fail to meet some of America’s most pressing environmental challenges.

Restructuring our farm safety net and expanding conservation and renewable energy programs in the 2007 Farm Bill would also help many more farmers and communities, provide consumers with more energy and health choices, and boost rural prosperity.

Congressional leaders should heed the call of more than 200 of their colleagues and expand funding for stewardship incentives. Congressional leaders should also expand the use of better risk management tools.

In particular, policymakers should consider proposals by Senator Richard Lugar (R-IA) and Reps. Ron Kind (D-WI), Jeff Flake (R-AZ), Joe Crowley (D-NY) and David Reichert (R-WA) to begin a transition away from our Depression-era subsidies to a system of farmer-held risk management accounts that farmers could use to weather the ups and down of agriculture, make investments, and plan for the future. Their proposals would largely eliminate signals to plow up grasslands and provide significant new funds for USDA conservation programs.

As the Washington Post recently noted, Lugar and House leaders "are on a sensible track, and it is critical that their ideas get a fair hearing. The farm bill can be a vehicle for investing heavily in important priorities . . . without depleting the federal bank account or violating the Democrats' responsible pay-go budget rules -- but only if Congress is willing to make agriculture spending more rational."

House and Senate Proposals Shortchange Conservation

2007-05-27T06:43:00.000-07:00

Renewal of farm and food policies in the 2007 Farm Bill provides a rare opportunity to help more farmers and the environment.

But, neither of the conservation proposals unveiled by the House and Senate Agriculture Committees last week provides nearly enough funding to meet some of America's most pressing environmental challenges. As a result, most farmers will continue to be turned away when they offer to share the cost of a healthier environment with USDA.

Both proposals would provide roughly $29 billion for conservation programs over the next five years. But, both proposals would partially rely upon "offsets" -- cuts to other programs or new revenues.

Without including the "funny money," the House proposal is actually more generous than the Senate proposal -- the House would provide $25 billion in "real" funds for conservation, while the Senate would provide less than $23 billion. See some recent coverage on the subject.

Here's the kicker: neither proposal would provide as much "real" money as the proposal by the Bush Administration.

Agriculture Secretary Mike Johanns would provide $27 billion over five years in "real money" for conservation programs like the Wetlands Reserve Program and the Environmental Quality Incentives Program and would have restructured traditional farm subsidies to make the math work. Johanns has made an equitable farm bill that helps more farmers, communities and the environment the primary test of the 2007 Farm Bill.

So far, House and Senate Democrats appear to be failing that test.

There's no word yet on whether House Agriculture Committee Chairman Collin Peterson (D-MN) or Senate Agriculture Committe Chairman Tom Harkin (D-IA) will restructure or reduce traditional farm subsidies to help more farmers and meet other farm and food priorities, such as conservation, health and renewable energy. Both chairmen have said that $25 billion in "direct" subsidy payments linked to the production history of crop farmers are on the chopping block, but early indications are that the Chairmen plant to use a jack-knife rather than an an ax.

The House proposal includes important reforms to USDA's two major working lands incentives programs -- the Conservation Security Program (CSP) and the Environmental Quality Incentives Program (EQIP) -- that would provide more environmental benefits and better reflect local environmental priorities. The House proposal also promotes the use of 'cooperative conservation' agreements to bring local farmers together to meet local environmental challenges. The Senate proposal would combine CSP and EQIP into a single program. With the right reforms, a single working lands program could reduce administrative burdens and simplify the alphabet soup facing farmers.

But while both proposals provide an interesting roadmap to the right destination -- a healthier environment -- neither proposal puts enough fuel in the tank. Without more funds for conservation, two out of three farmers will continue to be turned away when they offer to share the cost of clean water and wildlife habitat. And many of America's most pressing environmental challenges will not be met.