Ohio State Agricultural Policy and Outlook Conference – Day Two recap

By Dusty Sonnenberg, CCA, Ohio Field Leader: a project of the Ohio Soybean Council and soybean checkoff.

Agricultural and Environmental Policy were the topics for Day two of the 2020 Agricultural Policy and Outlook Conference sponsored and hosted by The Ohio State University Department of Agricultural, Environmental and Development Economics.

Dr. Brent Sohngen, Professor in the Department of Agricultural, Environmental and Development Economics began the program by discussing Sustainable Supply Chains.

“A growing number of companies have Carbon Neutral goals,” said Sohngen. “Two thirds of the worlds economy want to be carbon neutral by 2050.”

There are multiple reasons why companies have set Carbon neutral goals. The Paris Agreement is one factor. “Many governments have made commitments to carbon neutrality by 2050, so if businesses want to remain in business in those countries, they will have to go along,” said Sohngen. “Consumers and Investors are pressuring companies. People with higher incomes want carbon neutral things, and they can afford it. Companies realize they can maintain or gain their customers without upsetting any of them. Investors are also responding to pressure.”

The direction companies take will have implications for farmers. “As a part of the global supply chain, farmers increasingly will be asked to measure their net carbon emissions and report it,” said Sohngen. “Carbon is already measured in an aggregate way for U.S. inventory, and to determine carbon emissions of ethanol for EISA 2007. The technology to trace emissions deeper into the supply chain is growing, and a number of start-ups are working on ways to credit carbon.   

The second session featured Dr. Margret Jodlowski from the Department of Agricultural, Environmental and Development Economics, discussing the role of off-farm labor and the use of the additional income to support the family and farming operation.

Since 1998, the income of farm households exceeded that of other U.S. households. This is attributed in part to the addition of off-farm income to the on-farm income. Off farm income makes up a larger portion of the total income of medium to small size farms, as compared to larger operations.

One external factor impacting off-farm labor opportunities, discussed by Jodlowski, was that of import competition from China. There is evidence that this competition impacts the manufacturing industry directly and the service industry indirectly. As a result, the competition can reduce off-farm labor opportunities in rural areas. This reduction in off farm labor opportunities may lead to reduced off farm hours for the primary operators, and reduced income potential for the operator’s spouse if lower wage employment must be sought in place of opportunities eliminated by the import competition.

“In response to declining off-farm job opportunities, the impact to the primary operator and primary operator’s spouse are different,” said Jodlowski. For the primary operator, off-farm income declines as off farm hours decline, however on farm labor hours remain the same. For the primary operator’s spouse, as off farm income opportunities decline, the number of off farm labor hours may increase to offset the income reduction, but as a result, the availability for on farm labor hours decrease.”

Declining off-farm opportunities increases debt load for the farm operation and household. “It is unclear if this debt indicates growth or financial stress,” said Jodlowski. “Farm operator versus spouse’s income appears to be treated differently.”

The third speaker was Dr. Aaron Smith, Deloach Professor of Agricultural Economics at University of California, Davis, discussing the Past, Present, and Future of Biofuels.

“Biofuels is a big deal in Ag Policy, but not through the Farm Bill,” said Smith. “Under the Federal Renewable Fuel Standard of 2007, corn provides 10% of the gasoline to fuel cars. Soybeans provide a significant portion of diesel fuel used. The annual subsidy to biofuel exceeded $10 billion in 2014-2016. This was funded by an equivalent tax on petroleum.”

“The Farm Bill Title includes about $100 million per year. Most of that is used to promote biofuels production and use,” said Smith. “This is approximately 1% of farm bill spending, excluding the nutrition program.”

“Currently one third of U.S. corn is used for ethanol production, and ethanol now makes up 10% of motor gasoline in the United States,” said Smith. “Corn ethanol gives small reductions in carbon emissions; however, sugarcane ethanol gives larger emissions reductions. Cellulosic ethanol is made from the inedible parts of plants, including wood, grasses, and corn stalks. It has much lower emissions than conventional ethanol, but it is currently not commercially viable.”

“Biodiesel can be made from vegetable oils and animal fats. Soybeans are the most used feedstock for biodiesel,” said Smith. “Biodiesel can be blended with petroleum diesel, and has lower emissions than conventional ethanol.”

The Renewable Fuel Standard (RFS) became a law in 2007. It mandated volumes for various biofuel types. The sub-mandates have larger estimated greenhouse gas emissions reductions. The RFS statue specifies biofuel volumes through 2022. “Volumes after 2022 shall be determined by the EPA, in coordination with the Department of Energy and USDA,” said Smith. “This will be based on six key areas, which include: impact on the environment, impact on energy security, expected future production of renewable fuels, impact on infrastructure, impact on the cost to consumers, and the impact of the use of renewable fuels on other social and economic factors.

It is unknown how the EPA will address the 2022 reset.

The 2020 Agricultural Policy and Outlook Conference continues for day three on Thursday, with a focus on Trade and Macroeconomy Outlooks.

For more information visit:  https://aede.osu.edu/programs/202021-agricultural-policy-and-outlooks

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