The one thing that really irritated me last week about the testimony of USDA Chief Economist Joe Glauber and the academics that testified before a House Agriculture Subcommittee is this asinine fixation on econometric modeling.
It was just a couple of months ago I was at a conference hosted by the National Corn Growers Association in which the major emphasis was to tear down econometric modeling as the basis for making policy decisions. In that case, NCGA and biofuel backers hated the use of economic models that translated into acreages shift and land use changes, thus tying ethanol production in the U.S. to deforestation in Brazil.
After all of the denunciations in agriculture over indirect land use change models, people still are more than willing to use the same type of models to claim 60 million acres will go out of production because of climate legislation and carbon offsets.
It's just bunk. The models should be thrown out and the economists need to get out of their offices and find out what is happening in the countryside.
At the root of the problem, the USDA model fixates on what farmers and landowners will do if the price of carbon is $15, $30 or $70, etc. And then how much would ag gain from the price of carbon. That's the basis of much of the modeling. So it comes out that the forestry would collect $24 billion out of nearly $30 billion in potential offset income in 2050 because that's the limitation of the model.
Glauber did tell reporters after he testified that A. It's almost impossible to model out something 40 years. B. There are a ton of assumptions in the models and even more variables not considered.
I have a few things not considered:
There's no data on how many farmers or landowner across the U.S. will instead be asked to house windmills on their land as electric companies meet a 15 percent or 20 percent renewable energy standard. Nor how much per windmill those leases will be. I bet somewhere there's an energy economist who has modeled out how many windmills landowners will need to help put up just to address some of the renewable energy demands. They aren't going to put those up in the middle of forested properties.
There's no data on how much the coal plant is going to want to pay for biomass from your corn field. What, 1-3 tons of silage bales depending on yield? So think about that. Are you going to go for the four tons of carbon at $70 a ton by planting treed and locking in your land long-term or you going to grow your crop and sell 1-3 tons of silage that likely could have a selling price pegged close to the price of a carbon offset?
Increasing demand for biofuels? That income isn't going to happen by turning your soybean field into a wooded land.
Those are just a couple of quick hits. In Germany, they are building methane digesters on livestock operations much smaller than we have found feasible in the U.S. Those farmers are producing energy and selling it back to the grid. How is it we aren't as able to do so?
Interestingly enough some farmers who supposedly would get no value from the climate bill actually do as well. Rice growers in Arkansas and Louisiana already sell rice hulls that are burned for biomass. They have been doing it for years. Also, in China, they are burning peanut shells as biomass at a at a bioenergy plant in Beijing.
So my point is these economists holed up in cubicles really aren't let out enough to really know the potential income out there. But these models have become the best ammunition for critics, as witnessed by the news release Monday by Senate Agriculture Committee Ranking Member Saxby Chambliss, R-Ga., and Sen. Mike Johanns, R-Neb. They cite that farmers will be put out of business has 59 million acres shifts from crops and pastures to trees.
"This testimony confirms what we've known for some time: the cost of producing crops and livestock will increase, and energy prices will go up," said Sen. Johanns, member of the Senate Agriculture Committee. "American farmers will be asked to sacrifice 59 million acres of farmland while feeding a world population set to increase by 2 billion people. If this bill becomes law, producers will be driven out of farming; production will plummet as land shifts from food to trees; food prices will rise; and production overseas will increase. Perhaps most alarming, the testimony is from an Administration that wholeheartedly endorsed cap-and-trade legislation months ago. This is not a vision for American agriculture, it's a death sentence."
The modeling also shows that cap and trade will increase the food consumer price index nearly 5 percent by 2050, Chambliss and Johanns noted.
Now, let's mull that over. Anybody really think food prices will increase by less than 5 percent between now and 2050 if we don't do cap and trade?
I can be found on Twitter at chrisclaytonDTN.