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YF&R Discussion Meet: Renewable Energy Policies Affect on Agriculture Matt Erickson Economist American Farm Bureau Federation® September 13, 2011.

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Presentation on theme: "YF&R Discussion Meet: Renewable Energy Policies Affect on Agriculture Matt Erickson Economist American Farm Bureau Federation® September 13, 2011."— Presentation transcript:

1 YF&R Discussion Meet: Renewable Energy Policies Affect on Agriculture Matt Erickson Economist American Farm Bureau Federation® September 13, 2011

2 Question Are the current and proposed Renewable Energy Policies beneficial to American agriculture?

3 Farm Bureau Policy Farm Bureau supports a comprehensive energy policy to help alleviate the energy-related economic hardship being suffered by U.S. farmers and ranchers by creating a more diverse energy supply, including domestic oil and gas exploration to renewable energy sources such as ethanol, biodiesel, biomass and wind.

4 Outline Oil The motivation: The importance of a domestic energy source Renewable Fuels What are some policies that are currently in place? How is the industry doing today? Success stories Challenges Food vs. Fuel Budget….Budget….Budget! Its all about the Budget! Concluding Remarks

5 Oil

6 Production Costs Moral of the story: High commodity prices DO NOT mean farmers pocket that entire price!

7 For How Much Longer? Planets ResourceDuration Oil160 years Coal500 years Gas240 years Nuclear Power (2 nd & 3 rd generation technologies) 200 years Nuclear Power (4 th generation technologies) 10,000 years Source: Oil Magazine. Pierre Gadonneix, Chair of the World Energy Council Interview. March 2011 Issue. Number 13.

8 = 44.7% oil imports = President of OPEC

9 By 2022 = 24 billion gallons of ethanol. By 2035 = 39 billion gallons of ethanol.

10 How Do Renewable Fuels Policies Benefit Agriculture? $0.45 tax credit (VEETC) $0.54 import tariff (VEETC) RFS2 Mandate Farm Gate Agriculture Increase Demand for Ethanol Acreage shift to corn causes decrease acreage for other crops. Increase Demand for Corn Acreage Higher Commodity Prices! $$$

11 But, They Also Benefit Consumers In 2010 United States = $0.89/gal East Coast = $0.58/gal Midwest = $1.37/gal What would happen if ethanol production came to an immediate halt? Gas prices increase by 41% to 92% Source: The Impact of Ethanol Production on US and Regional Gasoline Markets. Xiaodong Du and Dermot J. Hayes. Iowa State University. April 2011

12 Renewable Fuels Standard (RFS2) More information on the RFS2:

13 The Path to 21 Billion Gallons? 49.8% 43.3% 2% 4.6% <0.3% Renewable Fuels can give farmers new income opportunities!

14 Where are we today?

15 Ethanol Margins

16 The Path to Sustained Growth

17 MA Dairy Farm Success Story Massachusetts dairy farm success story Installed 112 photovoltaic panels on the roof of his cheese- making facility = Net Gain: $1,000/month Switched to a variable speed vacuum pump system in his milking parlor = Net Gain: $300/month Added energy efficiency motors to 30 fans in the cooling and aging rooms = Net Gain: $500/month Standard lighting replaced with energy-efficient bulbs = Net Gain: $100/month New refrigeration system cools milk more efficiently by running six hours less per day. panels-energy-costs

18 The Challenges Food vs. FuelThe Budget

19 Food vs. Fuel 26% of domestic corn production is used for ethanol. 3% of world corn supplies is used for ethanol.

20 Why not Food and Fuel? =+ 1 bushel of corn17-18 lbs. of DDGS 2.8 gal. of ethanol

21 Why are Food Prices Increasing? FarmFork

22 A Weak Dollar? 20%

23 Wheres the Corn? Supply Demand S2 Quantity Price Q1Q2 P1 P2 =

24 Budget Control Act Phase 1 $917 billion in cuts over 10 yrs. Phase 2 $ trillion in cuts over 10 yrs.

25 Budget: A Renewable Energy Policy Perspective Current Plan (VEETC) $0.45 per gallon tax credit $0.54 per gallon secondary tariff Set to expire December 31, 2011 Proposed Plan (Thune/Klobuchar) Immediately eliminate (July 31, 2011) $0.45 per gallon tax credit $0.54 per gallon import tariff $1.3 billion deficit reduction $668 million renewable fuels incentives Extends: Alternative fuel station tax credit (2014) The small producer ethanol credit (2012) Cellulosic biofuels tax credit (2015) Not included in recently passed Budget Control Act!

26 Murray - OR Kerry - MABaucus - MT Kyl - AZ Toomey - PAPortman - OH Clyburn - SCBecerra - CAVan Hollen - MD Hensarling - TXCamp - MIUpton - MI SenateHouse

27 Key Dates to Remember for 2011 August 2: Debt ceiling deal reached and signed by Pres. Obama August 16: Majority and minority leaders of the House and Senate will each appoint 3 members of the 12- member committee October 14: Each committee of jurisdiction in the House and Senate will report recommendations for cuts from the programs under its jurisdiction. November 23: The joint committee will vote on a bill. December 2: The joint committee will release legislative language on the bill. December 9: The committees will recommend whether or not to pass the committee bill. December 23: The House and Senate must vote on the bill.

28 Budget and the 2012 Farm Bill 22%

29 Concluding Thoughts National Security: Reduces our dependence on foreign oil. 2010: Displaced the need for approx. 445 million barrels of oil (1). Business and Entrepreneurship: Potential new income stream. Management: Potential to lower production costs. Economy: Provides jobs to Rural America (created over 400,000 jobs in 2010 from ethanol alone (1)). Environment: Reduces CO2 emissions and the use of fossil fuels. A Choice: As Farm Bureau leaders, it is ultimately up to you to decide! Are the current and proposed Renewable Energy Policies beneficial to American agriculture? Source: RFA via Cardno ENTRIX

30 Thank You! Matt Erickson Phone: (202)


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