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The future of ag policy debate

Photos by Curt Arens Irrigation equipment
BALANCED APPROACH: As more farmers adopt conservation practices such as intense irrigation management and cover crops, federal farm policy development and framework remain at the center of discussions about the future demands from the ag industry.
Policy Report: Here is a look at the major policy debates coming up in 2022.

As the calendar turns from 2021 to 2022, agricultural producers and policy stakeholders can look ahead to another year full of important issues and policy discussions.

Ongoing issues that are sure to continue into 2022 include policy debates and further developments over the pandemic response, climate and carbon, bioenergy, regulations, infrastructure and other federal spending, and immigration — all of which have an effect on agriculture. Then, of course, 2022 also brings with it the midterm elections and what should be the start of the 2023 Farm Bill debate.

It can be easy to get bogged down in the details of any of these particular issues, and I have done so (and will continue to do so) over time. But, as we turn to the new year, it is a good time to reflect on a broader agenda that doesn’t focus on the issue of the day, week or month — and instead looks to the policy issues that will affect agriculture over the coming years and decades.

Just as I teach students in class to understand the drivers of policy development, it is worthwhile to understand the fundamental challenges facing agriculture as a way to frame the policy issues and debate that is certain to come.

I believe the fundamental challenges or expectations of society for agriculture include four key questions: Will agriculture provide commodity food, feed and fiber production for global demand? Will it provide branded, specialized or production-process-verified products for local food systems? Will it provide bioenergy and renewable energy production to help meet U.S. energy demand? Or will it provide environmental benefits or agro-ecosystem goods and services for society?

Commercial agriculture

First and foremost, agriculture has been historically successful in serving U.S. and global food and feed demands. Statistics from USDA’s Economic Research Service (ERS) point to the growth in agricultural productivity since 1950, nearly tripling total output on approximately the same level of aggregate input (more purchased inputs, less land and labor).

This productivity growth has exceeded population growth in the U.S., essentially meaning supply has risen faster than demand, and real agricultural prices have gone down over time — to both the greater benefit of society and also the perpetual consternation of producer policy discussions.

More recent policy discussions have focused on the potential strains of maintaining agricultural productivity growth to meet the needs of growing global food demand. Population growth coupled with growing prosperity are expected to increase global food demand substantially in the coming decades. It is not just more mouths to feed, but also more affluent societies that want to shift their consumption patterns from staple carbohydrates to more proteins, and from plant proteins to animal proteins.

Whether traditional, commercial, commodity-scale agriculture can serve global food demand is in part tied to the policy framework under which it operates. Historically, the farm income safety net has been an important foundation given the market volatility and relatively inelastic (unresponsive) supply and demand factors that agriculture faces.

Without digging into details of what a safety net should look like or what the 2023 Farm Bill debate may entail, there is definitely a longer-run debate on the general size and structure of the safety net and the focus on income support versus risk management. Beyond direct farm policy intervention, agriculture may largely be asking for stability and reduced uncertainty, whether it is in trade policy and development; regulations on the environment, food, technology, and labor; or general macroeconomic policy.

Emphasis on continued investment in research and development is also generally thought to be key to continued productivity growth, even if that seems a self-serving perspective from my position at the University of Nebraska-Lincoln.

Local food systems

Just as agriculture has historically been successful in serving global food demand, agriculture is also being increasingly asked to serve specific consumer preferences through local food systems. In fact, it may be exactly because of agriculture’s success in serving food demand that consumers now have the luxury of demanding more specific attributes of the food it consumes or of the food system in general.

Additional statistics from the ERS note that the top fifth of U.S. households in terms of income spend more on food than the bottom fifth make in income. The bottom fifth has to worry about food security and food costs that represent more than a third of their total budget. At the same time, the top fifth still spends less than 10% of their income on food and has the luxury of making more demands on the food system with little concern or attention to price impacts.

Corn field with barn in background

BEST PRACTICES: Conservation, bioenergy and agro-ecosystems will be among the crucial topics of debate as the 2023 Farm Bill takes shape.

When those consumer demands create market opportunities for entrepreneurs and specific attributes or branded products, the policy framework can work to provide clear regulation of production, processing, marketing or labeling standards, as well as business and market development assistance.

When those consumer demands or interest group efforts translate into demands or regulations on the entire food system, the additional costs get absorbed into food prices, and the impact on low-income households heightens the need for attention to food security issues and, in particular, the role of food assistance programs and policies.

Bioenergy

As a foundation, note that agriculture is both a major consumer and a major producer of bioenergy. Bioenergy, or more specifically, biofuels production has been a part of agriculture for decades. The entire biofuel industry grew rapidly after 2000 as environmental concerns over fossil fuels, dependency on imported oil and, maybe most substantially, oil price shocks led to greater market demand and major legislation in 2005 and 2007.

The biofuels sector remains a significant user of commodities at present, even as policy uncertainty over the renewable fuels standard reaches peak levels in a battle between biofuels interests and petroleum interests.

The biofuels sector represented about 17% of the total renewable energy portfolio in the U.S. in 2020 and consumed more than a third of the nation’s corn crop (before accounting for the replacement feed value of ethanol co-products), as well as a growing portion of U.S. soybean oil and other vegetable oil production.

When you add other biomass (primarily wood and waste in forestry), along with wind and solar energy production that often occurs on farmland, agriculture and forestry becomes the major provider or landlord to renewable energy production in the U.S. at 76% of all renewables.

If agriculture is to continue to serve this current and potential growth in biofuels demand, the biggest policy issue may simply be stability and certainty in the regulatory framework. Resolving issues surrounding the renewable fuels standard, annual volume obligations for fuel refiners or blenders, and continued waivers of those obligations has been a protracted issue for several years with political complications along the way.

Add to that the uncertainty of the renewable fuels standard after 2022, and the policy framework for biofuels is a major question. Beyond fuels, renewable energy standards and regulations for wind and solar (and energy storage) will drive the outlook for the broader sector as well.

Agro-ecosystems

While agriculture is continually being asked to produce both food and fuel, it is also being asked to preserve and protect the nation’s natural resources, essentially producing environmental benefits or agro-ecosystem goods and services. Given that U.S. land east of the Rocky Mountains is overwhelmingly in private hands and that private lands are overwhelmingly used in agriculture, the nation’s farmers and ranchers have long been looked to as stewards of the nation’s resources.

Historically, producers were rewarded for this service through the general support provided by farm programs with the expectation that supporting farm incomes helped support environmental stewardship.

As the environmental movement grew over the past 50-plus years, more emphasis was put on regulatory efforts, as well as voluntary programs to incentivize targeted conservation practices or environmental goals. The broader policy question for the moment is about the relative balance between regulations, incentives and potential market-based solutions for environmental stewardship.

Historically, agriculture was much less regulated than other industries as early efforts of the EPA focused on regulating fixed polluters or point sources of pollution such as smokestacks and drainage pipes. Over time, EPA’s regulatory agenda for agriculture has grown as other sectors have been addressed, as more agricultural activities such as concentrated animal feeding operations look more industrial in scale, and as technology advancements better track the source of traditionally nonpoint-source pollutants.

At the same time, voluntary incentive programs have grown dramatically with the development of the Conservation Reserve Program in 1985 and the working lands programs (the Environmental Quality Incentives Program and the Conservation Security/Stewardship Program) in the 1990s and 2000s. These incentive programs provide nearly $4 billion in payments to producers and landowners annually, and could nearly double if current policy proposals in Congress move forward.

A third alternative that is receiving substantial attention is the potential role of markets for incentivizing environmental practices. Emissions markets have historically been developed for certain air-quality regulations, and agriculture is increasingly engaged in water markets.

Now, the attention to climate policy and carbon dioxide emissions has led to opportunities for agricultural producers to sequester carbon and earn credits to sell in markets. The demand side of those markets is driven by industrial emitters in regulated sectors that have to reduce emissions or buy offsets, as well as voluntary individual and corporate purchasers who are seeking to offset their carbon footprint or meet corporate or supply chain stewardship goals.

Balancing act

With potential market, incentive or regulatory approaches to agro-ecosystems and environmental stewardship goals, a major policy question is the appropriate balance between the alternatives. One argument for incentives over regulations for agriculture is that it may be more efficient and less costly to incentivize good conservation practices on U.S. farmland than it would be to police a regulatory requirement across more than 2 million farms and ranches and more than 900 million agricultural acres nationwide.

Another key issue related to emerging climate policy is the reach of regulations and the sectors that are mandated to reduce emissions or buy offsets versus those sectors that may be unregulated but are allowed to earn and sell credits. Finally, a major policy question that will drive all of the potential policy approaches is the fundamental science of environmental issues and the definition of stewardship or sustainability that drives the debate.

Thinking of the overarching policy questions raised above for commercial agriculture, local food systems, bioenergy and agro-ecosystems, it may be too optimistic to suggest that the policy framework can be achieved. However, it is predictable to think that these overarching issues continue to shape the policy debates for years and decades to come.

It is a reminder that agricultural policy issues and development efforts don’t just come and go like we might imagine each farm bill cycle does. In reality, farm bills and other agricultural policy issues evolve over time and demand continued attention and effort from producers, agricultural stakeholders and the general public interested in better policy for the future.

Lubben is the Extension policy specialist at the University of Nebraska-Lincoln.

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