NGFA Urges Congress to Avoid Unilateral Approach or Land Idling under Climate-Change Legislation

For Release
IMMEDIATE (May 4, 2009)


WASHINGTON – The National Grain and Feed Association (NGFA) has urged Congress to pursue a global approach and not incentivize farmers to remove U.S. cropland from production when it begins considering climate-change legislation, perhaps as early as this month.

In a statement submitted recently to Congress in response to an invitation from House Agriculture Committee Chairman Rep. Collin Peterson, D-Minn., the NGFA cautioned that a unilateral U.S. cap-and-trade approach to reduce carbon emissions could create serious adverse impacts on the competitiveness of American agriculture while giving “fierce” foreign competitors not subject to carbon-emission limits a significant economic advantage.

The House Energy and Commerce Committee currently is considering internally a major draft energy and climate-change bill that is expected to include cap-and-trade provisions that would cap carbon emissions and provide an open market to trade carbon credits.

“The problems of climate change are global in nature, and we believe U.S. support toward a global solution has the best chance to lead to a successful outcome…while maintaining the competitiveness of U.S. agriculture – an industry that consistently has contributed a positive balance of trade for the U.S. economy,” wrote NGFA President Kendell W. Keith.  “…Any move to reduce carbon emissions must not inadvertently incentivize U.S. farmers to take land out of production or allow carbon emitters to purchase cropland and take it out of production to earn offsets.”  

The NGFA, established in 1896, consists of more than 950 grain, feed and feed ingredient, grain milling and processing, exporting, biofuels and other grain-related companies that operate 6,000 facilities and handle more than 70 percent of all U.S. grains and oilseeds. 

The NGFA urged that an assessment of carbon trading involving cropland or rangeland also analyze the adverse economic impact that such land-idling schemes would have on U.S. agriculture’s competitiveness and the livelihood of rural communities.  Noting that the Conservation Reserve Program already has idled more than 34 million acres, the NGFA said it would strongly oppose any legislation that provides incentives that further erode available acreage for crops produced for food, feed, biofuels and exports.

“Further idling of productive resources not only harms U.S. agricultural competitiveness and rural communities, but also can be a particular burden on young farmers and ranchers trying to build an economically sized operation…and find it difficult to compete with government programs that provide economic incentives to idle land rather than rent or sell those acres,” the NGFA said.  “Such a program inadvertently could turn into a lucrative retirement program for both landowners and fertile productive farmland needed to feed the world.  We want to make sure that the design of any (cap-and-trade) program will not allow for, nor encourage, large coal-fired power generators and other carbon emitters to buy large tracts of farm acreage, taking it out of production, and then converting it to rangeland and using the credits so they continue to emit greenhouse gases.”

The NGFA said that grain elevators and feed mills likely would not reach the carbon-emission levels currently being considered by Congress that would trigger coverage under a carbon-reduction program.  But that doesn’t mean such sectors would not be affected adversely.  The NGFA stressed that the grain, feed and feed ingredient manufacturing, grain processing, biofuels and grain-exporting sectors are significant users of energy and already are incurring increasing electricity and transportation costs to run operations and ship commodities and products to domestic and international markets.  A recent study by Oklahoma State University found that electricity costs for grain handlers have increased 19 percent over the last five years, a trend that is expected to continue.  Further, these agricultural businesses have incurred dramatically higher costs from increased financing needs and market volatility, the NGFA noted.  These cost pressures can affect farm prices negatively and exacerbate concentration in agribusiness as firms become uncompetitive.

“Major (energy) cost increases (expected under a climate-change bill) undoubtedly would hit grain, oilseed, feed and biofuels companies very hard,” the NGFA said, particularly because of the large geographical expanse that most commodity and agricultural product shipments must traverse.  “Those transportation cost increases inevitably would be passed back to producers through lower farmgate prices,” the NGFA noted, given the limited ability to pass those costs forward in a highly competitive global market.

The NGFA’s statement emphasized that any approach to climate change needs to be cost-effective, maintain the competitiveness of U.S. industry, be predictable, allow for sufficient transitioning, offer identifiable and measurable benefits and be conducted in concert with similar efforts by key foreign-country competitors.

“Given the magnitude and complexity of the climate-change issue, we support a deliberate, conscientious effort by Congress to carefully scrutinize a carbon-reduction program’s impact on both the domestic and global grain-, food-, feed- and biofuels-production industries, as well as the resulting impact on consumers and recipients of humanitarian food assistance,” the NGFA said.  “Whatever the makeup of the final approach (to address carbon emissions), it must not negate the competitive advantages in technology, transportation and infrastructure enjoyed by U.S. agriculture.”

The NGFA concluded by urging the United States to play a leadership role in a global effort on carbon-emissions reductions, rather than taking a “unilateral approach that may have a limited overall impact in reducing such emissions and trigger innumerable damaging, unintended consequences.”

The NGFA’s membership encompasses all sectors of the industry, including country, terminal and export elevators; feed mills; feed ingredient manufacturers; cash grain and feed merchants; end users of grain and grain products, including processors, flour millers, and livestock and poultry integrators; biofuel plants; commodity futures brokers and commission merchants; and allied industries, such as railroads, barge lines, banks, grain exchanges, insurance companies, computer software firms, and engineering and design/construct companies.  The NGFA also consists of 35 affiliated state and regional U.S. grain and feed associations, and has strategic alliances with the Grain Elevator and Processing Society and Pet Food Institute.