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Published August 08, 2009, 12:00 AM

USDA study analyzes impact of climate legislation

WILLMAR — While everyone seems to agree that the climate legislation being debated in Congress would have a big impact on agriculture, not everyone agrees whether it will help or hurt farmers.

By: Wes Nelson, USDA Farm Service Agency , West Central Tribune

WILLMAR — While everyone seems to agree that the climate legislation being debated in Congress would have a big impact on agriculture, not everyone agrees whether it will help or hurt farmers.

Adding to that debate is a recently completed analysis of the impacts that the House-passed climate legislation will have on agriculture by the U.S. Department of Agriculture.

More specifically, the analysis examined the potential effects of the cap-and-trade program that would be implemented under HR 2454, the American Clean Energy and Security Act of 2009.

In addition to placing restrictions on carbon emissions, the legislation would also provide opportunities for farmers and farmland owners to receive payments for carbon offsets.

In their analysis, USDA assumed no technological changes, no alteration of agricultural inputs, and no increase in the demand for bioenergy as a result of higher energy prices. Therefore, the study probably overstates the impact of the climate legislation on agricultural costs in the short (2012-2018), medium (2027-2033) and long term (2042-2048).

In USDA’s analysis, short-term costs remain low in part because of provisions in the bill that reduce the impacts that the legislation will have on fertilizer costs. The analysis concludes that the agricultural offsets market may cover the slightly higher costs, resulting in a less than 1 percent decrease in net farm income.

Over the medium term and long term, costs to agriculture rise but remain modest, with net farm income decreasing 3.5 percent and 7.2 percent respectively. However, benefits to agriculture from the offsets market rise over time and will likely overtake costs in the medium and long term.

In summary, USDA’s analysis concludes that the agricultural sector will have modest costs in the short term, with net benefits over the long term.

This analysis was based on the energy price effects estimated by the Environmental Protection Agency and published in their analysis of HR 2454.

While USDA’s analysis did include the gross revenues associated with carbon offsets, the study did not consider the potential effects of the offsets market on commodity prices.

For example, the removal of cropland and pastureland for forest and biomass establishment would place upward pressure on crop prices, benefitting producers of livestock feed but leading to higher livestock input costs and higher producer prices for livestock and milk.

In addition, USDA’s analysis did not assess the change in farm income due to the Renewable Electricity Standard and other provisions in the legislation that could increase the demand for biomass, thereby providing additional sources of income for the agricultural sector.

To view USDA’s complete analysis of HR 2454, visit: www.usda.gov/oce/.

Dairy producers receive June MILC payments

Due to dramatically reduced milk prices during the month of June, dairy producers will receive payments under the U.S. Department of Agriculture’s Milk Income Loss Contract program.

Initially authorized by the 2002 farm bill, and then reauthorized under the 2008 farm bill, the program provides monthly financial assistance whenever the Boston Class I milk price falls below the payment trigger price of $16.94 per hundredweight. Dairy producers then qualify for a payment rate equal to 45 percent of the price difference.

Under the provisions of the 2008 farm bill, the $16.94 trigger price is adjusted upward whenever the monthly national average cost for a 16 percent protein feed ration is greater than $7.35 per hundredweight.

According to USDA, feeding costs for the month of June warranted an upward adjustment of the $16.94 trigger price to $17.42, resulting in a final payment rate of $1.84 per hundredweight for milk produced and sold during the month of June.

Corn, bean prices decline in July

According to the Minnesota Agricultural Statistics Service, prices received by Minnesota corn farmers during July averaged $3.25 per bushel, down $0.77 from June’s average corn rice.

Soybean prices also declined in July to an average price of $10 per bushel, down $1.30 from June.

Hog prices averaged $44.20 per hundredweight during July, an increase of $0.30 from the June price.

May beef cattle prices averaged $75 per hundredweight, an increase of $0.20 from June.

Minnesota milk prices during July averaged $11.60 per hundredweight, up $0.10 from June’s average price.

Wes Nelson is executive director of the USDA Farm Service Agency in Kandiyohi County.

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