Moneywise: Chesapeake Bay Pollution Debate Heats Up

April 5, 2011 10:59 PM
Moneywise: Chesapeake Bay Pollution Debate Heats Up

Farm groups are calling on the Environmental Protection Agency (EPA) to reconcile differences between its estimates and USDA estimates of agriculture’s contribution to nutrient pollution in the Chesapeake Bay watershed before it proceeds with new animal ag regulations.

A recent report by the Agricultural Nutrient Policy Council (ANPC) found EPA’s baseline sediment loads were almost three times the size of USDA’s. Tom Hebert, a senior adviser to ANPC, notes that this may be due to EPA’s assumption that half the crop acres in the bay are being plowed while USDA data says at least 88% are in conservation tillage.

The report also found that EPA’s nitrogen estimates are 25% lower than USDA’s and that EPA’s phos-phorus loads are 25% higher than USDA’s.

Top Liner

"I had rather be on my farm than be emperor of the world." -- George Washington

"In terms of sediment and phosphorus, this comparison could be interpreted to mean that agriculture has already met its TMDL [total maximum daily load] obligations, and in the case of nitrogen it would indicate that in absolute terms agriculture can meet EPA’s TMDL allocation," Hebert says. "But the real bottom line is that these differences are so substantial that the need for further work on the TMDL is apparent."

"If EPA bases its regulatory decisions on flawed modeling, we risk investing time and money in areas with limited environmental benefit," adds Rod Snyder, director of public policy for the National Corn Growers Association and steering committee member of ANPC. "This is bad for the farm economy and bad for the bay."

ANPC is a new organization that was formed in September 2010 by several agricultural groups, including The Fertilizer Institute, National Pork Producers Council and American Farm Bureau Federation. It has since grown to include more than 30 participants from the agricultural and forestry sectors that share the goal of seeking sound federal policy regarding nutrients and environmental quality. —Jeanne Bernick

Corn Belt Land Posts Second Highest Gain

Strong commodity prices and limited offerings rocketed land values higher across the central Corn Belt, according to the Federal Reserve Bank of Chicago. The bank’s latest survey of ag bankers found the value of "good" agricultural land rose 12% on an annual basis through Dec. 31, 2010.

midwest farm values

That percentage gain was tied for the second-largest increase in the past 30 years on a nominal basis. After adjusting for inflation, the 2010 increase stands as the second largest gain since 1976.

The survey also indicated that values jumped 6% versus the previous quarter. —Mike Walsten

Biofuel Backers on Defensive

bill clinton biofuelsJust a few short weeks after getting the ethanol blender credit and import duties extended at current levels through 2011, biofuel backers are once again on the defensive.

House action on a plan to reduce spending for the rest of the current fiscal year included amendments that would bar the Environmental Protection Agency (EPA) from moving ahead on E15 and prevent subsidies for installation of blender pumps. But what really set ethanol backers on their heels was the reaction of Sen. Chuck Grassley (R-Iowa). "As significant as it is to me because I’m a great ethanol fan, if in fact those things were in the bill to cut the deficit … I’d have to bite the bullet," he said.

Then, former President Bill Clinton warned at USDA’s Outlook Forum, "If we produce more bio-
fuels, that means less food and that will bring food riots," even while stressing that the U.S. needs to become more energy independent. "We have to make intelligent decisions," he said.

USDA Secretary Tom Vilsack weighed in with his thoughts, including a suggestion that the blender credit be reduced but the dollars put toward more infrastructure.

Now the industry is faced with tough choices many didn’t expect just a short time ago. —Roger Bernard

Developer Interest Shifts for Farmland

developers farmlandIn the past, farmland near a metro area experienced a sharp increase in value as residential housing crept closer. The current recession has halted that expansion. Instead of developers paying top dollar for land to subdivide and sell in lots, investors are buying it at close to farmland prices with the thought that when the housing market recovers, they may get some increase in value.

Troy Louwagie, a land consultant with Hertz Real Estate Services in Iowa, thinks developers are less interested in building inventory during the recession. "A lot of them are saying, Until we’re ready to put in sewer and water and build streets, we’re not investing in transitional land," he says.

With decreased investor interest, more than 70% of sales are to farmers, says Lee Vermeer, vice president of real estate operations for Farmers National Company, based in Omaha, Neb. He adds that the typical buyer is an established producer who is increasing the size of his operation. "To make an acquisition and come up with 30% to 40% of that equity takes a substantial amount of cash," Vermeer says.

With news of the increase in land value comes worries about an agriculture real estate bubble. Vermeer won’t speculate on when or if land values will decrease, but he says this growth is very different from the boom in the housing market.

"The reality is there’s a tremendous amount of cash coming into the market. Some sales are being leveraged, but they are still at levels that aren’t astronomical," he says. "Leverage is typically 50% to 70%—nothing like the residential market was, with financing at 125%. Most lenders are still relatively conservative." —Keena Lykins

Japan Rebuilds Markets

The massive earthquake and devastating tsunami that hit Japan on March 11 destroyed a patch of the earth’s crust 150 miles long and 50 miles wide. The country is in the process of rebuilding, but the markets still have a way to go before recovery.

"I am surprised at how many people in the trade perceived what happened in Japan as bullish," says Jerry Gulke of the Gulke Group. "A major disruption in economic activity by an economic powerhouse leads to some sort of demand destruction. The magnitude is yet to be determined."
In 2010, Japan was the U.S.’s fourth top trading partner, accounting for nearly 6% of total U.S. trade, according to the Census Bureau.

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