A nonprofit organization advocating for farmers and ranchers recently released a study analyzing available data and cost-benefit studies to assess the effects of legislation aimed at the changing climate and agricultural economies of Arizona, Colorado and New Mexico. American Farmland Trust or AFT, Washington, D.C., sponsored the research to advance understanding of the economic implications for U.S. agriculture as Congress considers legislation that addresses the changing climate.
“Overall, the research suggests that while the legislation would challenge the agriculture sector in these states, there are improved revenues from higher crop prices, new bio-fuel markets, carbon-sequestration and offsets,” says study coauthor Brian Hurd, New Mexico State University. Coauthor George Frisvold, University of Arizona, adds that “only small changes are expected in regional land use as some farmers can benefit from reducing tillage and putting land into conservation reserve and grass.”
“It’s clear there will be a relative rise in energy and fertilizer costs. But we were surprised to learn that provisions in the legislation would likely limit fertilizer-cost increases to between 0.3 % and 2% by 2020, and that estimates from a variety of studies show energy-cost increases of 4% to 13% by 2020. Although modest increases, it’s always a factor for farmers who operate on thin profit margins,” adds coauthor Chris Goemans, Colorado State University. “However, in many cases, higher commodity prices estimated by many studies will contribute to farm revenues and could largely offset these projected cost increases.”
“The Rocky Mountain region is diverse and has unique agricultural characteristics,” says Anita Zurbrugg, Assistant Director of AFT’s Center for Agriculture in the Environment. “We wanted to learn how the agriculture sector might fare economically under various legislative proposals to limit greenhouse gasses, and to learn more about the potential for agriculture to earn new sources of income for providing carbon offsets or renewable energy.”
In western states, cattle and dairies are important segments of the agricultural economy. “Higher feed and energy prices will pose challenges,” Zurbrugg added. “Traditional ranchers, or those with significant feeding costs, could be the hardest hit?while dairies and concentrated feeding operations may be able to use methane digester technologies to generate income two ways: through carbon offsets and electricity generation.”
Zurbrugg notes that many producers perceive cost increases as more certain than revenue increases. “The study shows expected cost increases well within the range of recent energy-price variability. I think this may give farmers some measure of confidence that we’re looking at a timeframe that should give them time to adjust to the increases.”
The research team assessed eight existing studies and relevant reports to consider the implications of climate-change legislation, such as the American Clean Energy and Security Act of 2009 (ACES), on the region’s agricultural producers. The team also looked at potential land use changes and carbon offset potential. A copy of the study is available to download from farmland.org. www.farmland.org .
Key findings of the analysis include:
- Energy costs are expected to rise from 4% to 13% by 2020 while fertilizer cost increases range only between 0.3% and 2% because of rebates to manufacturers of Energy Intensive Trade Exposed Entities (EITEs) and projected decreases in natural gas prices.
- Improved revenues are expected from higher crop prices, new bio-fuel crop markets, and opportunities to sequester carbon and gain-offset revenue.
- Higher commodity prices along with new production and revenue opportunities will generally benefit farmers, and possibly more than offset rising costs in this region. Resulting feed-price increases could adversely affect many livestock and dairy producers.
- Dairy producers and concentrated livestock-feeding operations may be able to generate additional income by capturing and converting methane to electricity, thus providing revenue through carbon-offset markets and electricity sales.
- Even in cases where cost increases are not offset, expected increases are within the range of recent energy-price variability.
- Preliminary findings suggest the possibility for increases in state-level, net farm income of 1.2% in Arizona, 2.9% in Colorado and 4.1 % in New Mexico in 2020, based on expected patterns of cost and price changes.
- Evidence suggests only small and limited changes in land use with some potential to sequester carbon from reduced tillage and conversion of cropland to grassland, as well as some limited capacity for reforestation by converting irrigated cropland to fruit and nut orchards.
“We believe it is important to have a well respected third-party like this team to review the studies and look at the various legislative and economic scenarios. Then we can better understand costs and opportunities and find good policy options,” says Zurbrugg.
“Farmers and ranchers have a great deal at stake in federal legislation,” says Jon Scholl, AFT President. “If no clean-energy bill passes, the EPA is mandated by the Supreme Court to enact regulations under the Clean Air Act, which will affect agriculture. They are implementing those regulations now. Regulations without opportunities only brings costs to producers.”
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