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September 2011 Archive for Out to Pasture

RSS By: Steve Cornett, Beef Today

Read the latest blog from Steve Cornett.

Break-evens, Justifications and GIPSA

Sep 19, 2011

Anybody who has ever done a break-even projection on cattle knows how much the assumptions affect the outcome. If you assume corn is cheap and fed cattle will bring $1.50 next spring, you can justify about any price you want to pay for feeder cattle.

That won’t necessarily make your projection right, but if you have an agenda—say you’re an order buyer trying to justify the price you’re asking—you might suggest that a potential buyer assumes just such a scenario.

I fetch the analogy because of testimony at last week’s House of Representatives Committee on Oversight and Government Reform. John D. Graham, dean of the Indiana University School of Public and Environmental Affairs, carried the committee through an example where regulators with the Department of Transportation and Environmental Protection Agency changed enough "assumptions" to justify aggressive new fuel efficiency standards for the auto industry.

You’ll recall that agriculture’s own GIPSA has a controversial regulation languishing somewhere in regulatory limbo awaiting a cost-benefit analysis.

One of the witnesses was the administration’s boss regulator, Cass Sunstein. He said that President Obama is serious about eliminating unnecessary and burdensome regulations. He said Obama’s directive to federal agencies:

  • "requires agencies to consider costs and benefits, to ensure that the benefits justify the costs, and to select the least burdensome alternatives.
  • "requires increased public participation. The order directs agencies to promote an open exchange with state, local, and tribal officials; experts in relevant disciplines; affected stakeholders; and the public in general. Attempting to bring rulemaking into the 21st century, the order requires use of the Internet to promote such an exchange. It also directs agencies to act, even in advance of rulemaking, to seek the views of those who are likely to be affected.
  • "directs agencies to take steps to harmonize, simplify, and coordinate rules. The order emphasizes that some sectors and industries face redundant, inconsistent, or overlapping requirements. In order to reduce costs and to promote simplicity, it calls for greater coordination within and across agencies.
  • "directs agencies to consider flexible approaches that reduce burdens and maintain freedom of choice for the public."
     

Do you want to argue that those are sound goals? I don’t. We all like "flexible" and "freedom of choice" and "least burdensome alternatives." But there is that pesky matter of which assumptions you base all those decisions on.

Graham, who worked at Sunstein’s job in the Bush administration, listed six "concerns" about the way Obama’s group changed assumptions to justify the new standards.

They "assumed" a 3% discount rate instead of the traditional and more defensible 7% discount rate when calculating the present value of annual fuel savings over a vehicle’s life—a move that gives fuel efficiency a much higher value to consumers.

They "assumed" oil prices will certainly rise.

Their "assumptions" deflated the size of the rebound effect (the extra miles driven in fuel-efficient vehicles).

They "assumed" a new category of "social" benefit from tighter mileage standards, a savings of $21 to $45 for each ton of carbon dioxide that is not emitted into the atmosphere due to higher-mileage vehicles.

And their assumptions don’t include "careful consideration" of engineering impacts on vehicle size, performance and safety.

And so we see how administrators with a policy in mind can manipulate assumptions to justify the policy they want.

This is of interest to the cattle industry because that GIPSA rule has been so long hidden from view, awaiting the results of the cost-benefit analysis Congress forced onto USDA. Three independent studies have indicated the costs will far outweigh the benefits. But, of course, those are all based on "assumptions" too.

USDA Secretary Tom Vilsack recently told the National Farmers Union that "we will need your help" when the final rule is announced. NFU is a big supporter of the GIPSA proposal. It makes you wonder what assumptions USDA is working with.

Climate Change We Can Believe In

Sep 05, 2011

Just as this damnable weather rivets our attention,  making us wonder if it’s cycle, aberration or vanguard of things to come, Al Gore weighs in that those who have doubts about climate change should be marginalized like racists.

Wait a minute. Don’t lump me in there. Some of my best friends believe in climate change. But, admittedly, some others have their doubts. Let me apologize for not being as certain. My brain is not large enough to absorb and process all the stuff I’ve read. I’ve no doubt there is a “consensus” among scientists that man-made carbon dioxide emissions are creating a greenhouse effect.

I suspect that consensus is right, but I do have my doubts, based on the tone of the research reports I read. Look at the official report from last year at www.globalchange.gov. You can tell the authors—smart folks, one and all, no doubt, and far more weather wise than I—are advocates. I don’t like to rely on research done by or sponsored by or directed by or interpreted by advocates.

I did that for years on tobacco and it turned out that both sides were picking and choosing which facts to pursue and which to ignore. For a while, I fell for the “all dietary fat is bad” consensus. I’ve read and heard plenty of “expert witnesses” come down on both sides of lots of scientific issues. (And economic issues, for that matter.)

Consensus of scientists does not equate to science.

So I’m not certain of global warming. I’m awful suspicious they’re right, but global climate is such a conglomerated mess, I can’t image that they’re certain of just what it all means.

My bigger question, given the fact that my unofficial thermometer has spent more days over 100 than under the last few months, is, supposing they are right, what should we do about it? Should I buy a smaller pickup? Turn off my air conditioner? Should we shut down the coal plants and demand ridiculous auto mileage standards? Feed my cows stuff that doesn’t make methane? I mean, we can spend a lot of money and effort here that we KNOW is gone on a problem we THINK is fixable.

If we do, will it stop global warming? Even if the Chinese and Indians continue to grow and produce more emissions? Probably not. No, certainly not. If the global warming alarmists are right about the science, they’re wrong about the solution. Their solution is like standing in the middle of the railroad tracks waving for the train to stop. Trains don’t stop very fast.

We are not going to make much of a dent in carbon emissions. It’s fine to try, but we should know it isn’t going to happen soon enough to change those awful predictions.

So we need to get ready for a warmer world. Green energy is fine. But is won’t be enough. We need to think of things like not asking FEMA to rebuild beach houses in areas that will be increasingly at risk from hurricanes and rising sea levels. We should begin developing ways to relocate folks from places like New Orleans next time their houses get washed away. Maybe into smaller, more ecologically friendly apartments, I guess. With mass transit handy.

What should we do about water in the Southwest, where all the projections call for hotter and dryer weather in the future? Should we continue to subsidize folks who choose to live there?  I mean here. Should we offer farm program benefits to land owners like me who pump the water under our farms knowing future generations will need it much worse? Should we even be using that precious water to produce crops for export? As a landowner, I’m all for it. But if I were King of America, I’m not sure I’d agree with me.

Those are all tough questions. Assuming that greenhouse science is right, we’ve got much more difficult challenges than a bit of ethanol and a few windmills before us.

About one, I have no doubts: We should be spending much more effort on building new crops that will produce in that awful future projected. Pioneer has a new drought resistant corn, and kudos to them and their fellow private enterprisers for it.

USDA’s Agriculture Research Service—working largely with industry funded checkoff money—is working on a number of projects to produce more drought tolerant soybeans and sorghum and corn. Great, so far as it goes.

But if this year is an example of what’s to come—whether it be caused by man or by natural cycles—there is much more to be done. If those at the top really believe the threat is so imminent that it justifies the billions a host of new regulations will cost us, they should be moving food and water research to the front of the line.

So I don’t profess to know yes or no on climate change. But I do know we’re not going to head it off. And if what we’re going through this year where I live we should be preparing for the inevitable rather than letting people feel they’ve done their part by buying a hybrid car.

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