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Trends & Issues in Agriculture

Trends & Issues in Agriculture. 2009 Nationwide Agribusiness Annual Commercial Policyholder Conference Des Moines, Iowa August 20, 2009 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911. Increased Volatility Will Remain in Agriculture.

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Trends & Issues in Agriculture

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  1. Trends & Issues in Agriculture 2009 Nationwide Agribusiness Annual Commercial Policyholder Conference Des Moines, Iowa August 20, 2009 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

  2. Increased Volatility Will Remain in Agriculture

  3. Outside Influences (Jan. 2007 = 1)

  4. Input Costs Source: USDA, Agricultural Prices, July 31, 2009

  5. Ammonia Prices Source: http://www.fertilizerworks.com/html/market/ TheMarket.pdf

  6. Outside Influences (Jan. 2009 = 1)

  7. Agriculture’s Market Reach Is Expanding

  8. Renewable Fuels Standard (RFS) 50% GHG Emission Reduction 60% GHG Emission Reduction 20% GHG Emission Reduction If construction started after Dec. 2007

  9. Alternative Sources Solar Biomass Wind

  10. Bio-based Market Opportunities Source: Informa Economics, Biobased Multi-Client Study, March 2006

  11. Biobased Pathways Source: USDA, 2008, U.S. Biobased Products: Market Potential and Projections Through 2025

  12. Dept. of Energy Projections Source: Energy Information Administration, Annual Energy Outlook 2009

  13. The U.S. Is Taking A More “Global” Approach To Issues

  14. Draft Lifecycle GHG Reductions Source: EPA, May 2009

  15. CARB Fuel Carbon Values Source: CA Air Resources Board, Summer 2009

  16. Climate Change Legislation • American Clean Energy and Security Act of 2009 (H.R. 2454) • Requires utilities to supply an increasing percentage of their demand from a combination of energy efficiency savings and renewable energy (6% in 2012, 9.5% in 2014, 13% in 2016, 16.5% in 2018, and 20% in 2021-2039). • Provides for issuing, trading, banking, retiring, and verifying renewable electricity credits. • Establishes targets to cap and reduce greenhouse gas (GHG) emissions, annually, so that GHG emissions from capped sources are reduced to 97% of 2005 levels by 2012, 83% by 2020, 58% by 2030, and 17% by 2050; and establish a federal GHG registry. • Provides for trading, banking and borrowing, auctioning, selling, exchanging, transferring, holding, or retiring emission allowances. Source: Congressional Research Service

  17. Climate Change Legislation • Agriculture provisions in the bill • Provides some exemptions from the GHG emission reduction requirements for agriculture and forestry • Provides incentive-based approach to GHG emission reduction/capture • Allows USDA to help establish eligible GHG offset practices and review of those practices • Shifts question on indirect-land-use to an independent panel for study with EPA and USDA to review in the future (with a rule to be in place 6 years after passage) • Allows for a specific exemption for livestock (enteric fermentation from ruminant animals) from uncapped emissions guidelines Source: Craig Raysor, Gillon & Associates, PLLC

  18. Climate Change Legislation Source: USDA, Office of Chief Economist “A Preliminary Analysis of the Effects of HR2454 on U.S. Agriculture”

  19. Climate Change Legislation “Since farming is energy intensive, it will be hit hard by Waxman-Markey's energy price hikes. In addition to higher diesel fuel and electricity costs, prices for natural gas-derived fertilizers and other chemicals will also rise. Everything else affecting agriculture, from the cost of constructing farm buildings to the price of tractors and other farm equipment, will also go up. Consequently, farm profits are expected to decline by 28 percent in 2012 and will be an average 57 percent lower from 2012-2035.” Source: Ben Lieberman, Heritage Foundation, July 21, 2009

  20. Climate Change Legislation “Ultimately, greenhouse gas emissions are probably going to be regulated, whether Congress acts or not. In 2007, the Supreme Court ruled that the Environmental Protection Agency has the authority under the Clean Air Act to regulate greenhouse gas emissions if they are found to endanger public health or welfare. The Supreme Court required EPA to determine if they are a public health hazard or not, and earlier this year, the EPA put out a proposed finding that says greenhouse gas emissions are a danger to public health and welfare.” Source: Rep. Collin Peterson (D-MN), Hutchinson (MN) Leader, July 23, 2009

  21. But The World Keeps On Growing

  22. Population Source: U.S. Bureau of the Census, International Data Base

  23. Liquid Fuel Usage Source: Energy Information Administration

  24. Countries Pursuing Biofuels • US • Brazil • Argentina • Colombia • Paraguay • Canada • Uruguay • Mexico • Thailand • New Zealand • South Africa • South Korea • Philippines • Indonesia • Pakistan • China • India • Malaysia • Australia • Japan • EU • Russia • Not a complete list

  25. Spectrum of Biofuels • Grain/Sugar Ethanol • Biodiesel • Green Gasoline/Diesel • Cellulosic Ethanol • Butanol • Pyrolysis Liquids • Syngas Liquids Most Mature Least Mature Source: NREL, 2006

  26. Biofuel Challenges • Production costs • Conversion, ag. production, etc. • Infrastructure barriers • Developing supply chain for biomass • Continued development of biofuel distribution system • Growth in biofuel-compatible vehicles

  27. Biofuel Challenges • Investment risks • Higher capital costs, emerging technology • Biomass production shifts • Inducing farmers to produce new crops • Consumer understanding • About the fuels • About the tradeoffs

  28. A Long-Term Outlook on Agriculture

  29. Average Annual GDP Growth, 2008-2018 Source: FAPRI 2009 Outlook

  30. Average Annual Exchange Rate Change, 2008-2018 Source: FAPRI 2009 Outlook

  31. U.S. Crop Planted Area, 1998-2018 Source: FAPRI 2009 Outlook

  32. U.S. Crop Prices, 1998-2018 Source: FAPRI 2009 Outlook

  33. U.S. Crop Inputs, 1998-2018 Source: FAPRI 2009 Outlook

  34. U.S. Livestock Production, 1998-2018 Source: FAPRI 2009 Outlook

  35. U.S. Livestock Prices, 1998-2018 Source: FAPRI 2009 Outlook

  36. U.S. Farm Income, 1998-2018 Source: FAPRI 2009 Outlook

  37. World Wheat Trade, 2000-2018 Source: FAPRI 2009 Outlook

  38. World Corn Trade, 2000-2018 Source: FAPRI 2009 Outlook

  39. World Soybean Trade, 2000-2018 Source: FAPRI 2009 Outlook

  40. World Meat, 2000-2018 Source: FAPRI 2009 Outlook

  41. Thank you for your time!Any questions?My web site:http://www.econ.iastate.edu/faculty/hart/Iowa Farm Outlook:http://www.econ.iastate.edu/outreach/agriculture/periodicals/ifo/Ag Decision Maker:http://www.extension.iastate.edu/agdm/

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