Ag Policy Blog
Chris Clayton DTN Ag Policy Editor

Monday 12/07/09

Throwing Out the Ag Econ Models

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.

Posted at 4:38PM CST 12/07/09 by Chris Clayton
Comments (6)
From the epa site “Endangerment Finding: The Administrator finds that the current and projected concentrations of the six key well-mixed greenhouse gases--carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6)--in the atmosphere threaten the public health and welfare of current and future generations”. This is an obvious threat intended to herd us into the cap and trade corral. How much freedom will you have without abundant, reliable, affordable power? i
Posted by Steven Wegner at 8:36AM CST 12/08/09
Right Steve! How much freedom without abundant, reliable, affordable power! Not much has been commented on the IEA's recent world forecast stating that the majority of oil production in 2030 will be produced by "fields yet developed or found". The IEA continues to say that "sustained investment is needed to combat the decline in existing fields, which will drop by two thirds by 2030". An unidentified employee of the IEA was quoted saying the the "world is closer to running out of oil" This story can be found on "The Oil Drum" www.theoildrum.com which is a discussion page of energy experts but HEY what do those college guys know??? Lets pretend that there is no global warming, no fossil fuel depletion problems, its all leftist propaganda and we will just legislate more oil in the ground by right wingers chanting "DRILL BABY DRILL"!!! I also doubt that everyone agrees that sending billions to the Mid East is buying freedom or preventing terrorism. It is time we do something about the elephant in the room, (you know which one) that one you guys keep ignoring, peak oil AND its twin global warming!
Posted by Jay Mcginnis at 3:19PM CST 12/08/09
The Oil Drum? Jay you reveal yourself! I invite you all to go to their site where you will find quotes from fellows like Max Weber. A quick search on Max Weber and you find this. "Max Weber and Vladimir Lenin say, in almost identical words, that with regard to the use of force the state is always a dictatorship" You will find no quotes from Jefferson on The Oil Drum.
Posted by Steven Wegner at 9:55AM CST 12/09/09
My guess is you didn't type in Thomas Jefferson on the "Oil Drums" search feature or possibly you didn't spell his name correctly? I really didn't know that geology had an ideology but after surviving the Bush administration anything is believable.
Posted by Jay Mcginnis at 10:48AM CST 12/09/09
Jay did not know geology had ideology. Let me see if I can help. . Geology is studied by Geologists, Meteorology is studied by Meteorologists Climatology is studied by Climatologists. The point is clear but I’ll SPELL it out. They are all just people Jay. People who have ideology’s and are just as flawed as any one else. You can not seriously argue these people are immune to normal human behavior such as worrying about their job their reputation or their grant. The recent revelations of “climate gate” bear this out. Geology does have Ideology So now you know.
Posted by Steven Wegner at 5:03PM CST 12/09/09
The truth is there is a lot of oil right hear in the USA! http://www.snopes.com/politics/gasoline/bakken.asp
Posted by Steven Wegner at 6:47PM CST 12/09/09
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