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October 7, 2005 Prior to the Annual Meeting, interested members of the SLC Agriculture and Rural Development Committee met on July 30 for the 2005 AgForum on the 2007 Farm Bill. The Committee convened on Sunday, July 31, for a business meeting and on Monday, August 1, for a program session during the 59th SLC Annual Meeting, and participated in a technical tour on Tuesday, August 2. The following is a summary of the speaker presentations and Committee activities from each of these programs. 2005 SLC AgForum
I. The
2007 Farm Bill The 2005 SLC AgForum represents the first step for the Committee in establishing priorities for the upcoming reauthorization of the Farm Bill. Dr. Novak began by observing that for the past 50 years, a number of reasons have been given for why the federal government must help farmers. Among these are farmers’ economic disadvantages due to their small proportion of the population and their lack of concentration in one place.; their vulnerability to natural disasters as in no other industry; their necessity for national defense and domestic security; the need to feed our people; and their contribution to our democratic system. Dr. Novak reminded participants of the history of farm legislation, which dates back in some form to the late 19th century and was formalized in 1933 with the Agricultural Adjustment Act, which itself was rewritten in 1938 following a partial rejection by the Supreme Court of the 1933 legislation. Farm legislation was revisited in 1948 and 1949, creating the “permanent legislation” that continues today and provides much of current farm legislation. Congress alters the content of this permanent legislation through multi-year farm bills, he explained. The Farm Bill contains more than just crops, Dr. Novak noted, extending from commodities, conservation, credit and trade to nutrition, energy, rural development and forestry. Different eras have focused on different needs, although the primary focus has always been on support for the “basic commodities.” The 2002 Farm Bill, which will expire in 2007, had a 10 year cost of $180 billion, which includes an almost $6 billion increase in spending on program crops, largely because the 2002 legislation included within program spending the emergency payments made to farmers in the closing years of the 1996 Farm Bill. Dr. Novak observed that there are several critical issues for the 2007 Farm Bill. Chief among these are the federal budget deficit and trade negotiations and international competition. Other key issues will be market prices and farm profitability; rural community services and economies; conservation and environmental issues; value of land and farmland rents; costs of production; and biosecurity. Trade issues are looming, in large part, due to the current round of negotiations for the World Trade Organization (WTO), and recent decisions by the WTO dispute resolution board finding some U.S. support for cotton in violation of our trade agreements, decisions which cast into doubt the compliance of a large category of farm payments under the Farm Bill. Dr. Novak also noted that the federal budget deficit will apply tremendous pressure for cuts in farm programs. Because of this there will undoubtedly be less money for all programs in the next Farm Bill, including mandatory programs. Within the Farm Bill, more than half of the authorized spending is for nutrition programs, with commodities conservation and crop insurance amounting to an additional nearly two-fifths of all authorized spending. Deficit reduction targets of 40 percent or greater are likely to be in place for years to come, which will combine with the downward pressure on farm payments from our trade partners to point to lower farm payments and possibly a lifting on restrictions for the planting of specialty crops. Given this overview of the situation, Dr. Novak asked the participants to answer three questions: What is the purpose of farm policy? What works and does not work within the current farm policy structure? And what are the priorities for farm policy at the federal level? Opening the floor for discussion, participants identified several primary goals for farm policy, including: profitability; provision of a farm safety net; conservation (with a focus on working lands); provision of a level playing field for producers; rural development; support for research and innovation; food safety; trade support; farmland preservation; and energy. Participants noted during this conversation that there was an urgent need to educate the public about both the proportion of Farm Bill spending that is for non-farm (particularly nutrition) programs, and the value and purpose of farm payments in the farm sector. Drawing connections between farm programs and agricultural sustainability was also an identified need in the direction farm policy should take, particularly if conservation payments are curtailed. Among the concerns for biosecurity were both the need to secure the food supply from attack and to ensure that America does not become dependent on foreign countries for our food. America’s current cheap food policy, it was observed, is proving inadequate to the task of meeting both of these goals. A crosscutting role for federal policy that was identified was support for research and implementation of best practices for sustainable agriculture and conservation that also increase farmers’ bottom lines, such as cover cropping with non-commodity fuel crops. A key on the research agenda, it was hoped, would be improving the cost-effectiveness of ethanol production and other forms of renewable fuels. Another major area for improvement in the way farm programs were implemented was the extensive record-keeping and eligibility requirements, particularly among conservation programs. Participants raised several concerns over water and the potential for water conflicts in the years ahead. In response, federal support for water conservation activities, water planning, and revised rules on access to water were encouraged. With respect to the farm safety net, there was consensus that the existing risk management mechanisms were in need of reform and improvement to better serve the uncertainties of the current environment, including expanding eligibility. Finally, participants were interested in a comprehensive rural title for the Farm Bill, encompassing rural infrastructure, health, economic development, and enterprise support. Given this extensive list, Dr. Novak asked the participants to prioritize the various categorical areas for rural development in groups. The groups arranged the priorities in a variety of ways, ranking a farm safety net as the item of principal importance, followed by conservation and natural resources and biosecurity, with rural development also being regarded as highly important. Participants emphasized that the safety net included both programs designed to provide support to farmers as well as a food system in which farm producers were able to make a profit without the need for government payments.
Business Session I.Rural
Health
Background Dr.
Baquet’s Presentation Among the factors contributing to health disparities in a population are greater risk factors (e.g., tobacco and alcohol use, diet, occupational risks); poor knowledge, attitudes and behaviors; limited access to quality care; low participation in clinical trials; late stage at diagnosis of disease; and treatment disparities. Rural populations face a geographic disparity because of many of these factors. Demographic factors can help to predict which population areas are likely to face greater disparities, she added, noting that factors such as a community’s rurality, the percent of the population that is African American or Hispanic, and the percent of families and individuals below the poverty line all correlate with increased disparities. The overlapping impact of poverty, race and rural status in the SLC states contributes greatly to the presence of health disparities, she added. There is help, Dr. Baquet reassured the Committee. In a notebook prepared for the Committee and distributed to members at the session, Dr. Baquet outlined 14 Internet sites that provide useful information about programs, initiatives and funding and grant opportunities to address health disparities for rural minorities and the underserved. Three Websites of note include the Rural Assistance Center, operated by the U.S. Department of Health and Human Services; the Rural Information Center, operated by the USDA; and the Rural Minority and Multicultural Health Information Warehouse, operated by the National Rural Health Association. The notebook also included contact information for a number of state offices, associations and programs in the region for sharing information and ideas. Every state in the region except Kentucky has an office of either minority health or health disparities, with Kentucky seeking a funding source to initiate an already authorized program. Most state offices are charged with program development, assessment and coordination; information dissemination and public awareness; and policy analysis and development. Less common, she noted, were research and grant-making authority. The University of Maryland’s School of Medicine has had 30 years of experience in building innovative programs to reduce health disparities, Dr. Baquet noted. The key components of the School’s comprehensive approach to health disparities are infrastructure and community capacity building, including local offices in key political regions of the state; community partnerships with local organizations, healthcare providers and faith-based organizations; and leveraging resources and state dollars from cigarette restitution funds to obtain additional federal grants and private funds. Because funding for so many of Maryland’s programs is from different sources, there was a need for a coordinating umbrella organization--the Center for Health Disparities--to pull the various programs together. The goal is a policy of commitment to eliminate health disparities in the context of a sustainable program, Dr. Baquet said. The model for this sustainability is one that includes local partners who become community champions. The statewide health network serves to both coordinate activities and to distribute funding to local partners, which is from a mix of private, federal and state funds. Finally, Dr. Baquet summarized, there are tools available that provide guidance for developing a statewide comprehensive strategy to reduce health disparities. An opportunity awaits to reduce and eventually eliminate disparities in health. Ms.
Campbell’s Presentation The Consortium’s objectives are threefold. The first is to create a regional clearinghouse and provide technical assistance for disseminating best practice program models. The second is to establish the Consortium as the convener for regional consensus building. The third is to provide technical assistance in support of health policy development as a means of improving access to health services and health outcomes of medically underserved populations. To meet these objectives, Ms. Campbell said, the Consortium will conduct research to generate knowledge and descriptions of the region; transfer innovations through education and awareness; develop policy agendas and advocate for implementation; and incubate innovative demonstration projects. The Consortium will also be able to promote state initiatives in a regional forum and to evaluate the impact of these initiatives. The partnerships built up through the Consortium provide an opportunity to bring resources to the region and to advocate for policies to benefit the region, Ms. Campbell noted. It also provides an opportunity to replicate other states’ successes with the Consortium serving as a vehicle for sharing information and examples from exemplary programs from participating states. Part of what the Consortium was intended to do was to strengthen the rural health workforce in rural areas, Ms. Campbell continued. The Southern Rural Access Program’s Healthcare Workforce Development Program was created to increase the supply of healthcare providers in underserved areas; to strengthen the healthcare infrastructure in rural areas of the South; and to build capacity at the state and community levels to solve problems contributing to access to healthcare. This program worked with communities to recruit and retain health professionals, established a revolving loan fund to help develop the rural healthcare infrastructure, and built up networks that make healthcare in rural areas more efficient. These programs were sustained by folding program components into existing state services for health or workforce development and by leveraging state and federal resources with Program funding. The value of these activities to the states involved has been such that when the foundation funding that created and maintained them was set to run out, states stepped in to fill the gap. Ms. Campbell also highlighted one opportunity that is on the horizon, the Southern Crescent Authority Act of 2005, which is pending before Congress. It was written to assist economically distressed counties all across the Southeastern United States. The Authority would have $40 million annually for four years to work with 448 counties in seven states on a voluntary basis: Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina and Virginia. Finally, Ms. Campbell iterated the ways in which the Southern Regional Health Consortium could be of assistance to states. Among these are identification of proven best practices for improving health outcomes; technical assistance for replication of best practices; regional data; policy research; and regional advocacy for best practices and policies. Dr.
Wheat’s Presentation Once this program was established, Dr. Wheat said, the state created the Rural Medical Scholars Program which sets aside 10 slots at the University of Alabama Medical School for rural students who meet admission requirements. These students are selected competitively based on a range of factors, not the least of which was their desire to return to rural Alabama to practice medicine. A problem the program faced was that while the high school program was highly diverse, the medical school program had greater difficulty on this front because minority students interested in medicine were getting scholarships outside the state. To remedy this, Dr. Wheat said, a Minority Rural Health Pipeline program was started with funding support from the Robert Wood Johnson Foundation. This program reaches back into high school and continues with the student through college with summer programs all the way to medical school. These students then enter a residency program, very often in family medicine. The final piece of the pipeline which is yet to be put into place is a fellowship program to teach physicians to teach rural medicine and a rural practice incubator, which will help new doctors work out the appropriate type of practice for the community they are in. Dr. Wheat added that throughout this program it is expected that students at every level will spend a significant amount of time in the communities. The success of this depends on strong relationships with a wide range of community resources, including area health centers, the extension service, and local doctors. Furthermore, students in the Rural Medical Scholars Program spend five years (instead of the typical four) in medical school, with the extra year devoted to rural community health, to develop their leadership skills, and to orient them for the public health role they will play as rural doctors. Students who graduate from medical school and return to practice in rural areas are eligible for service scholarships to cover the costs of their medical education. Over the past 15 years, 316 students have entered the program. Of this, 264 students already have gone on to college, with 89 in medical school, 18 in primary care residency, with eight residency graduates, five of whom are in rural practice, Dr. Wheat explained. The pipeline is full for the next 12 years, but there is a need to expand the base of the program and make the system more efficient at moving the students through. The program has demonstrated a way to connect medical education with rural practice, Dr. Wheat said, and rural practice has a direct connection to rural development. The quality of life in a small town with or without a doctor is vastly different. Furthermore, the presence or absence of a doctor in a small town can have significant impact on time lost from work or school for a wide range of medical problems. Additionally, the health sector economic impact of a rural doctor is roughly $1.2 million annually and adds tremendously to industrial recruitment. Finally, Dr. Wheat noted how a local physician has numerous advantages in validating and promoting prevention campaigns, in identifying chronic illnesses earlier and in the prevention and treatment of illnesses. II.
Consideration of Policy Positions III. Election of
Officers
Program Session I.
Farming for Fuel
Background
Dr. Wisner’s Presentation There are 83 ethanol plants currently operating in the United States, Dr. Wisner said, with 78 to 100 plants in the planning or construction phase nationally, most of these using corn. This new production would add 1.87 billion to 2.4 billion bushels potential new corn processor demand, which raises the question of where all of that corn is going to come from. There are alternative crops for ethanol, including biomass, and diversifying will be important as the ethanol market matures. Even as ethanol has expanded, the two big producers (ADM and Cargill) have been relatively inactive, Dr. Wisner noted. Early expansion was in response to the phasing out of MTBE and its replacement with ethanol, with most of that demand growth now finished. Minnesota has mandated a 20 percent ethanol blend for fuel sold in the state, a lead Montana is following, among other states, which will again push up demand. The United States has been producing ethanol for fuel since the 1970s with production expected to reach 4 billion gallons in 2005, Dr. Wisner said. The price premium ethanol has carried over unleaded gasoline has been very volatile, with ethanol dropping below the breakeven point in late February of this year as the former-MTBE market became saturated and production premium price dipped. Price has rebounded and should be in the positive range in the long term, he observed. The terminal price for ethanol (the price for ethanol at the point where it is mixed with gasoline) also has fluctuated widely over the past 18 months, a fact that makes ethanol a fairly volatile investment. The economics of a 10 percent ethanol fuel mix are such that, given the federal tax incentives for the fuel additive (roughly 50 cents per gallon on ethanol), the fuel blend is slightly more affordable than unleaded gasoline. The local economic impacts of increased ethanol production include construction expenses for new plants, which can run between $50 million and $100 million, consuming 19 million to 22 million bushels of corn annually, employing 30 to 35 people, with indirect employment expanding to 170 jobs. Ethanol fits best in an area with dairy or feeder cattle operations since these are the primary outlets for the distillers’ grain and solubles which are a by-product of ethanol production, he added. This, unfortunately, places the Southeast in a disadvantage, since there is very limited beef feeding in the region. Dr. Wisner noted that ethanol is not shipped by pipeline, but is shipped by truck or rail car to where it is mixed, which is an advantage for the South given the numerous urban centers proximate to potential production centers. This advantage is countered by the added costs of shipping in corn and shipping out the feed by-products against production in the Midwest. Another disadvantage is the recent drop in corn available for export from the Midwest, related to local ethanol production there, which will increase the costs of corn for ethanol everywhere. The consumption of corn by increased ethanol production in the long term has several interesting complications. The first is that the amount of corn available for export will be cut in half by 2012 from current levels. The second issue, given an ethanol mandate in the Energy Bill, which will drive some new consumption of corn, is what happens to the industry in years when production is short, and what happens to feedstocks for livestock and poultry? It will be hard to get more corn acreage (Dr. Wisner predicts 8 million to 11 million acres will be needed), he noted, although some land could come out of soybeans unless soydiesel becomes stronger. Dr. Wisner noted that if the ethanol industry is concentrated on corn-based production, there is a need to focus on efforts in a regional manner, since few states in the region produce enough corn to support a large scale industry. This is reinforced by the limited market for distillers’ grains and solubles in the region. On biodiesel, he noted that the EPA move to take sulfur out of biodiesel will boost demand for biodiesel, which can be manufactured using a range of feedstocks, which also will apply pressure to the livestock and poultry industries if biodiesel expands. Industry development in biodiesel, lags behind ethanol, although some expansion is underway, with a handful of plants being added to existing soybean processing plants. The potential soydiesel production in the South is possibly more limited than for ethanol, although biodiesel can be made from a variety of oil sources, some of which the South produces in abundance. Dr. Wisner listed some advantages of ethanol for Southern states, including local job creation; positive secondary impacts on economy; proximity to large population centers and fuel demands; and the increased availability of feed for the dairy industry. Among the disadvantages were a lack of excess corn and need for in-shipment; current limitations of distillers’ grains and solubles in hog and poultry feeding; the need to ship out the feed by-products; and a disadvantage compared to the Midwest in getting the industry in place. Alternatives for the region include new research on ethanol from bio-mass; increased potential for sugar-based ethanol; a limited number of strategically located corn-based plants; and biodiesel using variety of oils.
Dr. English’s Presentation The base for renewable energy in the South will be from forests and agriculture, given the unsuitability of the region for either wind or solar power, Dr. English observed. The sources for these products might be mill and urban wastes (such as yard trimmings), field and forest residues, and dedicated crops such as switchgrass, energy cane and fast-growing tree species. As with all potential energy sources, he commented, the important point is the relationship between supply and demand. According to his research, a price of $35 a dry ton for forest residues would result in a harvest of about 30 million tons, with a price of $50 a dry ton bringing in only slightly more than that. For mill waste, the picture is similar, although more is available at a lower price because it is seen as a waste product. Urban waste is less productive and very localized, even as the price reaches $50 a dry ton. Switchgrass is entirely unavailable at $20 a dry ton because farmers won’t grow it, although at $30 a dry ton farmers will produce it, considering it a break even price for other crops, with production over 40 million tons at $50 a dry ton. Agricultural residues essentially are unavailable until the $50 a dry ton price point, but it is very limited in its availability. Given that
information on the supply side, Dr. English turned to the demand picture. The
two principal points for demand for feedstocks are co-firing with coal for
electricity generation and transportation fuels. Researchers have modeled the
electricity system to estimate the prices utilities can pay for biomass
feedstocks, the availability of those feedstocks, and the economic impact of
various co-firing arrangements. The conclusion, he noted, was that it was
economically feasible to co-fire at a 2 percent level without any incentives,
using forest residues, mill waste and urban wastes. In a scenario in which the
utility is co-firing at a rate of 15 percent biomass, dedicated crops become a
part of the mix, although this scenario would require incentives at some level.
The economic impact of the scenarios increased as the amount of biomass used in
co-firing was increased, even as some negative impact was accounted for due to
reduced coal demand. TECHNICAL TOUR
SLC Staff Contact:Jonathan Watts Hull, phone: 404/633-1866; e-mail: jhull@csg.org
Attendance List
Alabama
Arkansas
Canada
Colorado
District of Columbia
Florida
Georgia
Kentucky
Louisiana
Maryland
Mississippi
Oklahoma
South Carolina
Texas
Virginia
West Virginia
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