[Congressional Record (Bound Edition), Volume 155 (2009), Part 15]
[Senate]
[Pages 20384-20385]
[From the U.S. Government Publishing Office, www.gpo.gov]




                             CAP AND TRADE

  Mr. BARRASSO. Mr. President, I rise today to highlight the impact of 
cap and trade legislation on American agriculture.
  Mr. President, the House and Senate Western Caucuses yesterday hosted 
a hearing entitled, Cap and Trade: Impact on Jobs in the West and the 
Nation. Jim Magagna, the Executive Vice President of the Wyoming Stock 
Growers Association testified at the Hearing.
  I want to thank Jim for all he has done for agriculture in Wyoming. I 
also ask unanimous consent that his statement from yesterday's hearing 
be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

Testimony of James H. Magagna, Executive Vice President, Wyoming Stock 
                          Growers Association

       Co-Chairmen and Members of the Senate Western Caucus and 
     House Western Caucus:
       I am Jim Magagna, Executive Vice President of the Wyoming 
     Stock Growers Association (WSGA), the 137 year old voice of 
     the Wyoming cattle industry. I am also a life-long sheep 
     producer and former president of the American Sheep Industry 
     Association and the National Public Lands Council. I 
     appreciate the opportunity to appear before you today to 
     share my perspective on the impacts of cap and trade 
     legislation on jobs in the agricultural sector, particularly 
     in the West.
       My comments today will focus on four primary areas of cap 
     and trade impacts on agriculture: 1) Input costs; 2) Prices 
     received; 3) International trade and competition; and 4) 
     unintended environmental consequences. I will also briefly 
     discuss the role of proposed agricultural offsets. In 
     addition to providing an analytical overview, I will attempt 
     to put a personal face on these issues by introducing 
     comments provided to me by Wyoming agricultural producers.


                                  JOBS

       It is difficult to ascertain actual numbers of potential 
     lost jobs and lost new employment opportunities due to the 
     impact that cap and trade legislation would have on 
     agriculture. As smaller agricultural production enterprises 
     succumb to the cost-price squeeze exacerbated by the impacts 
     of cap and trade, farmers and ranchers will be forced to 
     enter the non-agricultural job market in increasing numbers. 
     This will particularly impact our young producers--those who 
     represent a bright future for American agriculture. In the 
     United States agricultural jobs are ``green jobs'' 
     contributing to the sustainable management of our natural 
     resources.
       A decline in the number and size of agricultural 
     enterprises has a direct impact on jobs in supporting 
     industries. These include animal pharmaceuticals, 
     fertilizers, feeds, farm equipment, fencing and tack. While 
     many of these jobs are located in manufacturing centers, a 
     significant number are sales and support positions in the 
     field.
       As agriculture declines so do our small western 
     communities. In many small towns in Wyoming the survival of 
     local businesses--the tire shop, repair service, bank, 
     grocery store--is dependent on the economic strength of the 
     agricultural sector. I am confident that this is true in many 
     of your states as well. These losses in turn affect the 
     public sector--schools, senior centers, hospitals and 
     clinics. The result is both a loss of jobs and a loss of a 
     culture and way of life.


                              INPUT COSTS

       Agriculture is heavily energy dependent. While the energy 
     needs of cultivated crop production are generally 
     acknowledged and serve as the basis for most studies, the 
     energy costs of those engaged in livestock production, in 
     particular range sheep and cattle operations, are seldom 
     analyzed. Livestock production and native hay production are 
     the primary agricultural enterprise in many of our western 
     states. In Wyoming livestock production accounts for over 82% 
     of total cash receipts from agriculture.
       The overwhelming prices of diesel, gasoline and propane in 
     2008 provide us with a preview of the impacts of high energy 
     costs. Many of my members who had already taken all feasible 
     steps to drastically reduce their input costs began to plan 
     their exit from production agriculture. Fortunately, the 
     relief in energy prices in 2009 has given them some renewed 
     optimism. The primary energy focused input costs for 
     agriculture include: direct purchases of fuels and 
     electricity (13%); fertilizer & pesticide costs (7%); feed 
     costs (25%); and transportation/storage costs (1%). According 
     to the latest available USDA NASS data these components 
     constituted over 45% of total purchased inputs excluding seed 
     and livestock. As one WSGA member recently noted, ``These 
     costs are already stifling growth and regular, necessary 
     maintenance items. Any additional costs imposed by government 
     are obviously another blow to any size business.''
       The EPA analysis of HR 2454 conservatively projects the 
     impact of cap and trade legislation on energy prices for the 
     period from 2015 to 2050. Price increases for electricity 
     range from 10.7% in 2015 to 35.2% in 2050. For natural gas 
     the corresponding increases are 7.4% and 30.9% while impacts 
     on petroleum prices are projected at 3.2% and 14.6%. 
     Agriculture simply cannot absorb these incremental increases 
     to already rising production costs in the light of current 
     flat to declining prices for many commodities.
       Western open-range livestock operations are typically 
     overlooked by analysts studying overall agricultural impacts. 
     This is true for both EPA and USDA analysis of the impacts of 
     cap and trade legislation. While per acre energy costs may be 
     almost negligible, several factors contribute to high overall 
     costs. Ranchers must often travel long distances with 4-wheel 
     drive vehicles pulling trailers to check their livestock, 
     pastures and waters. Winter feeding requires heavy duty 
     tractors and equipment. Federal land grazing permittees face 
     increasing energy related costs as they implement intense 
     rotational grazing systems requiring frequent movement of 
     livestock and increased sources of water. In addition, 
     livestock must often be moved from one allotment to another 
     using either rancher owned or contract trucks. Similarly, hay 
     and supplemental feeds are often trucked very long distances.


                            PRICES RECEIVED

       The cliche that agricultural producers are price takers has 
     a solid foundation in market analysis. While some inroads 
     have been made in recent years in vertical integration 
     through retained ownership, the use of co-operatives and 
     marketing affiliations, livestock in particular are most 
     often sold to the highest bidder. Thus, while some of the 
     added energy costs of processing and transporting 
     agricultural products will flow to the consumer, much of this 
     cost increase will be reflected in prices received by 
     producers. The recently released analysis of the agricultural 
     impacts of cap and trade by USDA fails to even address the 
     prices received side of the equation. (``A Preliminary 
     Analysis of the Effects of HR 2454 on U.S. Agriculture'', 
     USDA, Economic Research Service, July 22, 2009).
       Western cow/calf producers typically sell either calves or 
     yearlings which eventually move to a feedlot. While we have 
     seen growing demand for ``grass fed beef'', grain fed 
     products remains the preference of most consumers. Thus, corn 
     prices drive fed cattle prices. The dramatic increase in corn 
     prices fueled by the ill-advised government mandates and 
     subsidies for ethanol production have resulted in losses to 
     cattle feeders ranging from $100 to $140 per head. Feeders 
     are facing increased costs from EPA regulatory mandates under 
     the Clean Water Act and Clean Air Act. As feeders seek to 
     recover from this blow, feeder cattle prices may reach five-
     year lows this fall. Proposed cap and trade legislation will 
     only fuel this trend.
       A analysis of crop production costs under 2008 Senate 
     energy legislation (S. 2191) using scenarios from an EPA 
     study demonstrates that the cost of producing an acre of corn 
     could be expected to rise from $40 per acre to $80 per acre. 
     (``An Analysis of the Relationship Between Energy Prices and 
     Crop Production Costs'', Doane Advisory Services, May 2008) 
     The cost of transporting this corn to feedlots will increase 
     proportionately.
       Transportation of livestock, crops and food products is an 
     inherent component of U.S. agriculture. A typical calf 
     leaving a Wyoming ranch may travel to a calf lot in another 
     state for the winter, return to a summer pasture in the West 
     the following summer, then move to a feedlot before finally 
     being shipped to a processing facility. The added costs of 
     transportation projected to accrue from cap and trade will 
     affect the value of this calf at every level.


                  INTERNATIONAL TRADE AND COMPETITION

       Today most major agricultural products, both crops and 
     livestock, produced in the United States are dependent on 
     global markets. Market growth is expected to occur primarily 
     in the export arena. U.S. food products are in great demand 
     due to our high quality food safety standards and 
     environmentally friendly production methods. However, U. S. 
     agriculture struggles to remain price competitive. The 
     cumulative added input costs at all levels that are 
     inevitable under cap and trade will further erode our 
     competitiveness.
       If the U.S. is to remain committed to providing global 
     market access for its agricultural production, we cannot make 
     unilateral commitments to GHG reduction. To date China and 
     India, key export markets, have explicitly declined to commit 
     to a reduction in carbon emissions. Cap and trade 
     legislation, if adopted by Congress, should be made 
     contingent on Senate ratification of an international 
     commitment that imposes comparable standards on all 
     countries.

[[Page 20385]]




                 UNINTENDED ENVIRONMENTAL CONSEQUENCES

       Cap and Trade is being offered as a response to climate 
     change. Though the relationship remains tenuous and unproven, 
     it is important to assess the broader environmental impacts 
     of this legislation. As specifically related to agriculture, 
     the economic costs of cap and trade will make it more 
     difficult for some to continue and to enhance agricultural 
     practices that have no proven environmental benefits. Two 
     examples in the ranching field immediately come to mind. 
     First, rotational grazing has been shown to improve forage 
     production with benefits to the environment and wildlife, 
     including endangered species. These management systems 
     require more intense management, fencing, water development 
     and regular movement of livestock. All of these activities 
     will become significantly more costly under cap and trade. 
     Second, ranchers currently spend $5,000 to $10,000 per well 
     to convert from generators or undependable windmills to solar 
     pumping. Environmental benefits accrue both from less use of 
     gas engines and less need to visit the pumping sites. 
     However, the cost of solar pumping conversions can be 
     expected to rise significantly in response to cap and trade.


                          AGRICULTURAL OFFSETS

       The agricultural and forestry related offsets incorporated 
     in Title V of HR 2454 have the potential to benefit forestry 
     and, to a lesser extent, crop production. The level of 
     benefit and the practicality of administration of the program 
     remain in question. However, there is little evidence to 
     support the USDA analysis that, according to Secretary 
     Vilsack, ``opportunities for farmers and ranchers can 
     potentially outpace--perhaps significantly--the costs from 
     climate change legislation.'' Significantly, USDA's own 
     analysis of carbon sequestration potential by region, based 
     on a carbon price of $34/metric ton demonstrates virtually no 
     potential for offsets in the Mountain Region. While the 
     greatest potential is shown for the Pacific Region, (over 150 
     million metric tons), nearly all of this is achieved through 
     ``afforestation from pasture''. (Figure 4--Carbon 
     Sequestration Potential by Region, ``A Preliminary Analysis 
     of the Effects of H.R. 2454 on U.S. Agriculture'', USDA, 
     Economic Research Service, July 22, 2009). This translates to 
     thousands of acres removed from valuable pastureland for our 
     livestock. It is clear to me that, in touting the benefits of 
     agricultural offsets, our western states have been ignored.


                            A RETURN TO JOBS

       In closing I would like to return to the issue that is the 
     primary focus of today's hearing--jobs. Agricultural jobs 
     range from basic manual labor to highly skilled crop and 
     livestock production positions. For many individuals 
     agricultural work is both a profession and a passion. 
     According to the 2007 Ag Census there are nearly 10,000 hired 
     agricultural workers in my state of Wyoming. Over one-half of 
     these work less than 150 days per year days at their 
     agricultural job. These part time jobs are essential to both 
     Wyoming agriculture and to the families that they help to 
     support. They are at the highest risk in the cost/price 
     squeeze that will be exacerbated by cap and trade.
       Wyoming's experience shows that there is a well-established 
     progression in job losses related to diminishing agricultural 
     profitability among small and medium sized operations. First 
     the ``hired help'' is dismissed. This has already been 
     occurring at a rapid rate in our ranching industry due to 
     drought, input costs and livestock prices. As the squeeze 
     continues and the operation can no longer support two or more 
     generations, the younger family leaves the farm or ranch to 
     seek employment elsewhere. As a financial crisis approaches, 
     the older generation ``retires'' and the land is sold to 
     developers. I am sure that this scenario repeats itself in 
     many of your states. Agriculture holds multigenerational 
     families together. When the agricultural operation ceases, 
     these generational ties are lost, communities disintegrate 
     and a critical skill-set disappears. Our ability to feed 
     ourselves as a nation is diminished. This is a price that our 
     nation cannot afford to pay for a cap and trade system that 
     is at best an uncertain response to unsubstantiated climate 
     change concerns. In the words of one successful young 
     southeastern Wyoming crop and livestock producer, ``Even 
     though there may be some benefits, dad and I both agree that 
     we don't have confidence in our government to successfully 
     implement such a system.''
       I look forward to your questions.

                          ____________________