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Wednesday, September 28, 2011

Environmental Regulation and Agriculture


Megan Stubbs, Coordinator
Analyst in Agricultural Conservation and Natural Resources Policy

As the U.S. and global economies continue to struggle, some inside and outside of Congress have expressed concern about how environmental regulation may stifle growth and productivity. Much of the criticism has focused on environmental regulations promulgated by the Environmental Protection Agency (EPA). Some claim that EPA is overreaching its regulatory authority and imposing costly and burdensome requirements on society. The agriculture community, among others, has been vocal in its concerns, contending that EPA appears to be focusing some of its recent regulatory efforts on agriculture. Environmental advocates, on the other hand, support many of EPA’s overall regulatory efforts to protect public health and the environment. Where agriculture contributes to environmental impairment, these groups say, it is appropriate to consider ways to minimize or eliminate the adverse impacts.

A healthy agriculture industry and a healthy environment are both important to the nation. However, agricultural production can have varying impacts on the environment. The use of both natural resources and synthetic inputs in agricultural production can sometimes create a negative impact on human health and the surrounding ecosystem. The magnitude of these environmental impacts varies widely across the country and changes over time. Given the agricultural sector’s size and potential to affect its surrounding environment, there is interest in tightening environmental policies while also maintaining an economically viable industry. Most recognize the agriculture community’s efforts to protect natural resources while striving to maintain a sustainable and abundant food supply.

The current federal response to environmental issues associated with agriculture is viewed as being both restrictive and supportive. Traditionally, farm and ranch operations have been exempt or excluded from many environmental regulations. The challenges and complexity of regulating numerous crop and livestock operations can be cost-prohibitive for government regulators; thus environmental policies have historically focused on large industrial sources such as factories and power plants, not farms. Much of the current farm policy addressing environmental concerns is through economic incentives to encourage beneficial production practices.

Growing interest in the impact of EPA’s regulatory actions on many sectors of the economy is evident in Congress, which has been examining the roles of EPA and other federal agencies in regulating environmental protection. Among the broad options for Congress, besides conducting general oversight, are reviewing rules under the Congressional Review Act, amending current law to modify an agency’s authority, introducing freestanding legislation, or using appropriations bills to prevent funds from being used for specific actions.

This report covers select environmental regulations that could affect agriculture. The majority of environmental regulations are administered by EPA, though not all. In some cases, agriculture is the direct or primary focus of the regulatory actions. In other cases, agriculture is one of many affected sectors. Of particular interest to agriculture are regulatory actions affecting air, water, energy, and chemicals. Issues associated with air (e.g., dust and emissions) and water quality (e.g., fertilizer and nutrient run-off) are a primary focus of many regulations affecting agriculture because of agriculture’s potential to affect these resources. Changes in energy policy, namely bioenergy, have recently become important to many in the agricultural industry based on the potential of corn-based biofuel production to contribute to the nation’s energy supply. Finally, the risks associated with agricultural chemical use and possible impacts on human health and the environment have led to recent federal regulatory reviews of chemical fertilizer and pesticide use.



Date of Report: August 24, 2011
Number of Pages: 42
Order Number: R41622
Price: $29.95

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Monday, September 19, 2011

U.S. Farm Income


Randy Schnepf
Specialist in Agricultural Policy

According to USDA’s Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at a record $103.6 billion in 2011, up 31% from the previous year’s total of $79 billion and easily surpassing the previous record of $87.4 billion achieved in 2004. Record revenues from strong crop markets, coupled with sharp gains in livestock revenues (also record high), are expected to offset a $32.5 billion increase in input costs to account for the forecast higher net returns.

The major drivers behind strong farm income projections are the outlook for record U.S. agricultural exports in 2011 (projected up 26% to $137 billion), and continued growth (mandated by federal usage requirements) in the U.S. corn ethanol industry. A recovering global economy (bolstered by particularly strong economic growth in China) is expected to support strong demand for cotton, feed grains, oilseeds, and livestock products. Severe drought in Russia, Kazakhstan, and the Ukraine during their 2010 growing seasons lowered export supplies from those traditional feed grain export markets and helped shift market interest to U.S. feed grains. Meanwhile, continued growth in U.S. corn-based ethanol production and strong livestock prices are expected to push corn and other crop prices steadily higher as they compete for a fixed amount of cropland. As a result, market prices for major program crops are approaching the record or near-record levels achieved in 2008, and have improved the earnings outlook in 2011 for most commodities, but especially for corn, wheat, cotton, and soybeans.

Government farm payments are projected down nearly 18% in 2011 at $10.2 billion as high commodity prices shut off payments under the price-contingent marketing loan and countercyclical payment programs.

Farm production expenses are forecast up 11% to a record $318 billion in 2011, led by higher fuel and fertilizer costs, and increasing outlays for crop insurance. Livestock producers face record costs for feed and replacement animals, which could diminish their net return prospects.

Farm asset values—which reflect farm investors’ and lenders’ expectations about long-term profitability of farm sector investments—are expected to rise nearly 7% in 2011 to a record $2,324 billion following a 6% rise in 2010. Farm land cash markets in early 2011 suggest that land values will continue to see gains related to strong crop prices in 2011. The farm debt-to-asset ratio had been steadily declining since 1998’s value of 16% to a recent low of 10.4% in 2007, before rising to nearly 12% in 2008 and 2009. The ratio is expected to return to about 10.4% in 2011.

These data suggest a strong financial position heading into the latter half of 2011 for the agriculture sector as a whole relative to the rest of the U.S. economy. However, there is substantial regional variation. In general, the increase in expenses will affect livestock producers more harshly than crop producers. Cash grain farmers in the Corn Belt and Northern Plains are experiencing record revenues. In contrast, livestock and poultry feeders are experiencing record high feed costs that have narrowed profit margins. In addition, a severe drought in the Southwest extending into the Central Plains and the Southeast has limited grazing opportunities and hay production for cattle ranchers in the affected regions and led to substantial herd liquidation.



Date of Report: September
7, 2011
Number of Pages:
27
Order Number: R
40152
Price: $29.95

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Document available via e-mail as a pdf file or in paper form.
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.

Thursday, September 15, 2011

Renewable Energy Programs and the Farm Bill: Status and Issues

Randy Schnepf
Specialist in Agricultural Policy

U.S. Department of Agriculture (USDA) renewable energy programs have been used to incentivize adoption of renewable energy projects including solar, wind, and anaerobic digesters. However, the primary focus of USDA renewable energy programs has been to promote U.S. biofuels production and use—including corn starch-based ethanol, cellulosic ethanol, and soybean-based biodiesel.

The 2002 farm bill (Farm Security and Rural Investment Act of 2002, P.L. 107-171) was the first omnibus farm bill to explicitly include an energy title (Title IX). The energy title authorized grants, loans, and loan guarantees to foster research on agriculture-based renewable energy, to share development risk, and to promote the adoption of renewable energy systems. The 2002 farm bill was followed by two major energy bills (the Energy Policy Act of 2005, P.L. 109-58; and the Energy Independence and Security Act of 2007, P.L. 110-140), which established and expanded a national biofuels mandate along with several other renewable energy programs.

The 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246) built on the 2002 farm bill as well as the previous renewable energy legislation, but refocused biofuels policy initiatives in favor of non-corn feedstocks, especially cellulosic-based feedstocks, in response to growing concerns about the emerging spillover effects of increasing corn use for ethanol production. Like the 2002 farm bill, the 2008 farm bill contains a distinct energy title (Title IX) that significantly expands the number and types of programs available to support renewable energy production and use. In addition, new renewable-energy provisions were included in the rural development (Title VI), research (Title VII), livestock (Title XI), and tax (Title XV) titles of the 2008 farm bill.

The 2008 farm bill authorized $1.1 billion in mandatory funding for energy programs for FY2008 through FY2012, compared with $800 million in the 2002 farm bill (FY2002-FY2007). Mandatory authorization in the 2008 farm bill includes $320 million to the Biorefinery Assistance Program, $300 million to the Bioenergy Program for Advanced Biofuels, and $255 million to the Rural Energy for America Program (REAP). The Biomass Crop Assistance Program (BCAP) is authorized to receive such sums as necessary (i.e., funding is open-ended and depends on program participation). Discretionary funding in the 2008 farm bill totaled $1.7 billion (including $600 million for the Biorefinery Assistance Program), compared to $245 million in the 2002 farm bill. However, all discretionary program funding is subject to the annual appropriations process, which may or may not appropriate funds due to budget constraints. Actual discretionary appropriations to Title IX energy programs have been substantially below authorized levels through FY2011.

Implementation of the farm bill’s energy provisions is ongoing. President Obama, in May 2009, directed USDA and the Department of Energy (DOE) to accelerate implementation of renewable energy programs. Notices, proposed rules, and final rules have appeared in the Federal Register soliciting applications for those programs with available funding. The primary energy-related issue for the next farm bill is the expiration at the end of FY2012 and lack of baseline funding going forward for all major energy-related provisions of Title IX. In addition, the appearance of substantial redundancy across renewable energy programs at USDA and DOE, the slow development of the U.S. cellulosic biofuels sector, and concerns about the emerging spillover effects of increasing corn use for ethanol production are issues that are likely to emerge during the next farm bill debate.



Date of Report: September 7, 2011
Number of Pages:
36
Order Number: R
41985
Price: $29.95

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Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.