Ag Lays It On The Line

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Agriculture Lays It On The Line     

The agribusiness industry is in a holding pattern. Last year, Congress signed food safety legislation, but has yet to fund it. And for rural areas, which are well suited to support renewable energy projects, short-term incentives and the lack of access to the electricity grid, create more uncertainties than certainties when making these investments.

We asked Roger Johnson, the president of the National Farmers Union, which represents farmers and ranchers in all states, to weigh in on where the agribusiness sector is headed. While positive initiatives are moving forward, the struggle to fund them drags on.

Global Corporate Xpansion: Roger, highlight the renewable energy bus tour you went on earlier this summer in Wisconsin. What are the takeaways?

Roger Johnson: We had a German farmer out on the tour talking about what policies they have employed. The Germans have done an extraordinarily good job of ramping up renewable energy production in a widely dispersed fashion in their country in the last two decades.

They have done two fundamental things that are very important to growing the renewable energy sector. First, they have created a policy system that provides guaranteed access to the grid. So if farmers or individual citizens put up windmills, or solar photovoltaic systems on their rooftops, and they generate electricity, they are guaranteed they can put the electricity on the grid. In this country, that process takes many years. In fact, National Farmers Union has been involved in the development of a wind energy project in Minnesota for four or five years. We are not hooked up and there is no guaranteed access. Also, access to the system is burdened with regulatory oversights.

No. 2, the Germans also have a long-term contract that utilities, the grid operators, are required to enter into with those energy producers. That contract is for 20 years. It has variable rates that are paid back to the energy producers, depending on the type of energy that goes on to the grid.

This process provides enough certainty for the energy producer to take out loans to finance the project because they know they have a 20 year guaranteed income source.

The Germans have moved from something like 3 percent to 4 percent renewables on the grid in the early 1990s to more than 20 percent today. And in some types of renewable power, the percentage is significantly higher than that.

It has become almost a nonpolitical issue. The only debate is how fast they should ramp up the percentages.

GCX: What do we need to do in America to move renewable energy forward?

Johnson: No. 1, we need to have long-term incentives. We have a long history of offering one or two year tax credit incentives for different renewables. More often than not those incentives expire, and are renewed after the fact. That is a terrible formula for providing investment certainty because investors don't know what the policy environment will be like from year to year.

Whether we use a production tax credit, or grant funding, or some other incentive, the key is to make sure the incentives are put in place for the long term. Right now we see growth one year, and a dramatic drop off the next year. It is an economically inefficient way of growing any sector of the economy.

GCX: The National Farmers Union is involved in several agricultural-related initiatives. Let's talk about food safety.

Johnson: In regard to food safety, we were supportive of the food safety legislation that went through Congress, and which was signed into law late last year. It wasn't perfect but it certainly made some improvements.

The big issue now is will Congress decide to fund it so we can put in place the changes that were made.

One of the important initiatives was the mandatory recall authority, which we never had before. If you had a food that was unsafe or contaminated, and officials knew about it, they were unable to require that it be pulled from shelves. As a result you saw these problems expand rapidly, because with the transportation system in this country, it doesn't take long before unsafe food is spread to many locations. You get consumer backlash, fear and uncertainty. And very quickly you see consumers pulling back from purchasing whatever the product or suspected product may be. Sometimes it is not even the right product.

The other food-related issue that is important to remember is that we have limited resources in this country, and they should be focused on where the problems are the largest. There are two places where the potential for problems in this country are the largest.

The first area has to do with imports. We inspect something like 1 percent or maybe 2 percent, depending on whose doing the calculations, of all the food that is imported into the country. A high percentage of what is inspected fails inspection.

Because of our system, we have had cases where ships are turned away because they fail to meet U.S. requirements, and all they do is back out of the berth and head down the coast line and put in at a different place. They have a 98 percent or 99 percent likelihood of unloading without being inspected.

The second area of concern when it comes to resources has to do with large, complicated processing arrangements. If you have a contaminant that enters that system, and because of the volume of food products that are coming into that system, you have the likelihood of the contamination spreading to a lot of different places. As a consequence, we would argue, the last place you need to focus federal resources is on small farmers' markets, and direct marketing between farmers and consumers. That is not to say that they are all perfectly safe. But it is to say that if there is something, it will be isolated, and it is easy to quickly identify and rectify.

GCX: On another note, describe the land preservation initiative at NFU.

Johnson: NFU has long had a history of supporting conservation practices in trying to make sure that agricultural land is not all turned into developed land. This is a particular issue around urban areas where you see development pressures are increasing.

As it happens, many of the large urban centers are located in places where there is good agricultural land around them. This would suggest that we need to be careful about how we develop. It would also suggest that one of the opportunities we have to reduce the likelihood of the conversion of farmland into concrete and pavement is to have a robust series of programs that support small farmers in urban areas. This is so that they have the ability to develop economic activity of a higher value off of that farm land.

GCX: What's next for NFU and your members?

Johnson: Everyone in Washington, D.C., is held hostage by this debt limit debate. (Editor's note: This interview was conducted in late July, before an agreement was passed by Congress.) That will conclude at some point. And when it does, we would expect a lot of attention will focus on the next farm bill. And the next bill will provide opportunities for every one of these issues we have been talking about to be dealt with legislatively.

The farm bill widely affects everyone in this country. The biggest part of the bill is the nutrition title, which consumes two-thirds and occasionally, three-fourths of all the spending, and that is used for things such as food stamps, and school breakfast and school lunch programs. 

This is important because as a society we don't want to have hungry people, especially youngsters, because the impacts are felt through the lifetime of that individual. So not giving them proper nutrition has a negative impact on the economy.

One of our primary goals will be to end up with a strong safety net for farmers that will help when the market collapses, or when you have droughts, floods, fires, tornadoes or hurricanes. We know they will occur somewhere in this country every year. We need standing policies in place that will help in those times of difficulties, instead of following the old system of ad hoc disaster payments. The payments are not efficiently operated, and often passed in politically charged environments so you get other things added that may not be affiliated with the disaster at hand.

There will need to be a lot of balancing that has to be done because there is likely less money to write this farm bill.

Interview conducted by Rachel Duran.

To learn more about the National Farmers Union and its initiatives, visit www.nfu.org.

Reprinted from Global Corporate Xpansion Magazine

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