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November 2008 Archive for Dairy Talk

RSS By: Jim Dickrell, Dairy Today

Jim Dickrell is the editor of Dairy Today and is based in Monticello, Minn.

$175 per cow gas tax

Nov 26, 2008

By Jim Dickrell, editor Dairy Today



The internet lit up last week about a possible Environmental Protection Agency (EPA) green house gas (GHG) tax on dairy cows that would amount to a $175 per cow annual fee simply for ruminating.

The urgency of the proposal, which was flitting around the web at byte speed, was fueled by the fact that comments on the proposal are due this Friday, November 28. The proposal, issued in an “Advanced Notice of Proposed Rulemaking,” is a mere 168 pages in the Federal Register.

EPA acknowledges that regulating GHG under the Clean Air Act is controversial: “The implications of a decision to regulate GHGs under the [Clean Air] Act are so far reaching that a number of other federal agencies have offered critical comments and raised serious questions during interagency review of EPA’s ANPR.

“Rather than attempt to forge a consensus on matters of great complexity, controversy, and active legislative debate, the Administrator has decided to publish the views of other agencies and to seek comment on the full range of issues that they raise.”
 

The problem, of course, is that EPA published the proposed rulemaking on July 30th—yep, four months ago—and few in the ag community seemed to take notice. Yet comments are due Friday—this Friday.

But before we all get our undies in a bundle, there is a bit of political gamesmanship going on here, suggests Andrew Walmsley, environmental services coordinator with the Florida Farm Bureau Federation.
 

“[President-elect] Obama is calling on Congress to enact global warming, cap-and-trade legislation within the next 18 months. If Congress doesn’t act, he would then let EPA move forward with the Clean Air Act regulating greenhouse gases,” he says.
 

If that happens, pain will follow. Title V of the Act requires any entity that will potentially emit more than 100 tons of green-house gas to obtain a permit. USDA estimates that any dairy farm with more than 25 cows or any beef operation with more than 50 cattle would be potential emitters of that 100-ton magnitude.
 

In 2008-2009, the “presumptive minimum fee” for the emissions permit is $43.75/ton/year of emitted GHG, which translates into $175 for each dairy cow, $87.50 for each head of beef cattle and $20 for hog. Can you say ouch?
 

The average U.S. dairy farm, which now milks 155 cows, would be facing a $27,000 annual GHG permitting fee.
 

Such onerous penalties are insane. What it would amount to, for the mere privilege of inhalation, exhalation, and flatulency, would be 87.5¢ fee on each hundredweight of milk produced. And that doesn’t include the higher feed prices driven by the permitting fees on crop farmers. (Farms with more than 500 acres of corn or 250 acres of soybeans would also be required to obtain—and pay for—emissions permits.) And for what?
 

Agriculture, and the dairy industry in particular, has done an incredible job of reducing methane emissions over the past 85 years. Over that period, milk production has doubled while cow numbers have dropped nearly 60%. Click here to read the stories from Dairy Today and the University of Minnesota. As a result, each gallon of milk produced today results in just a third of the methane emitted compared to 1924. The dairy industry should be applauded for that achievement, not penalized with put-you-out-of-business taxes.
 

Congress must get its clean air act together to enact cap-and-trade legislation. The alternative—an emissions tax on food production—stinks.

--Jim Dickrell is editor of Dairy Today. You can reach him via e-mail at jdickrell@farmjournal.com.

This column is part of the Dairy Today eUpdate newsletter, which is delivered to subscribers biweekly and includes dairy industry analysis, dairy nutrition information as well as the latest dairy headline news. Click here to subscribe.

Corn prices should be lower

Nov 11, 2008

By Jim Dickrell, editor Dairy Today


Oil at $70/barrel suggests that corn should be cheaper than it is—maybe 75¢ to 90¢/bu cheaper.

That’s if you use strict conversion formulas going from crude oil prices to gas prices to ethanol prices to corn prices. But we don’t live in a perfect world. Market forces, emotions and politics don’t pay attention to mathematical formulas—at least in the short term.
 

In an analysis published last week by Iowa State University (ISU), Bruce Babcock runs through the numbers. Babcock is director of ISU’s Center for Agricultural and Rural Development. Here’s how his numbers pencil out:
• “If crude oil prices stabilize at $80/barrel, the price of corn will stabilize at approximately $3.77/bu.”
• “If crude oil climbs once again to $120/barrel, then we should see corn prices climb again to the $6/bu mark.
• “If crude oil falls to $50/barrel, then the ability to pay for corn by the ethanol industry will fall back to around $2.15/bu.”

For Babcock’s entire analysis, go to: http://www.card.iastate.edu/iowa_ag_review/fall_08/article1.aspx

But Babcock is quick to point out that we’ll never see $2/bu corn again, or at least as long as the U.S. Renewable Fuels Standard is law. The reason: Under the Renewable Fuels Standard, gasoline blenders must blend 10.5 billion gallons of ethanol next year, and 12 billion gallons in 2010.
 

Yes, some of that ethanol could be imported from Brazil. But with “low” oil prices and import tariffs, it’s doubtful more than 5% of those mandates will come from Brazil, he says.
 

To produce 11.5 billion gallons of ethanol in 2010 will take 4.2 billion bushels of corn. And if we need 8.7 billion bushels for food and livestock feed, that means U.S. corn growers need to produce nearly a 13 billion bushel crop next year. That will require 90 million acres of corn plantings.
 

“Simply put, U.S. farmers will not plant 90 million acres of corn if the price of corn is $2.15/bu because this corn price would not cover the additional production costs of planting corn after corn,” says Babcock. “It will likely take a price of more than $3.50 to $4/bu to induce farmers to plant the required acres.”

Here’s the cold, hard truth: “At this point, 2008 [corn] prices will not fall any further. The bottom line is that ethanol mandates place an effective floor under corn (and soybean) prices,” says Babcock.
 

So there you have it. The food versus fuel debate marches on. And dairy producers and livestock feeders continue to lose.

--Jim Dickrell is editor of Dairy Today. You can reach him via e-mail at jdickrell@farmjournal.com.

This column is part of the Dairy Today eUpdate newsletter, which is delivered to subscribers biweekly and includes dairy industry analysis, dairy nutrition information as well as the latest dairy headline news. Click here to subscribe.
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