Posted January 28, 2013 by Dr. Steve Suppan
On January 19, Deutsche Bank (DB) issued “Questions and Answers on investments in agricultural commodities”. The DB stated that after an internal examination, it was resuming investments in agricultural derivatives contracts that it had suspended since March 2011. Nongovernmental organizations had successfully pressured the DB and a few other European banks to “stop gambling on hunger” due to the banks’ concern about risk to their reputations. The World Development Movement had organized an October 2011 letter signed by 450 economists to the Group of 20 (G-20) demanding an end to bank speculation on agricultural contracts, so the DB was an early adopter of the investment moratorium.
The derivatives contracts include both the regulated futures and options contracts that farmers and food manufacturers use to protect against price decreases and increases respectively, and the unregulated over-the-counter (OTC) contracts. The DB’s internal investigation, bolstered by non-cited studies of unnamed agricultural economists, found “there is little empirical evidence to support the notion that the growth of agricultural based financial products has caused price increases or volatility.”
Nor, of course, had financial speculation on agricultural commodities contributed to increased food insecurity and hunger, particularly in developing countries. Indeed, the statement concluded, financial speculation should not be limited by regulatory instruments, such as position limits on the share of the commodity derivatives contracts that any one entity and its foreign affiliates could control. To deny the effects of financial speculation on agricultural prices, Deutsche Bank had to ignore studies, such as those of Dr. Stephan Schulmeister’s trenchant analysis that showed how 1,092 algorithmic models for trading commodities have driven commodity price volatility. Schulmeister’s studies have been very influential in building European—and particularly German—government support for a Financial Transaction Tax to reduce the volume and volatility of such trading. On January 22, 11 European Union member states committed to levying an FTT.
It would be truly extraordinary for any bank—even one that had received $711 billion of U.S. Federal Reserve Bank emergency loans, as Deutsche Bank had as of November 2011—to admit to systematically dangerous investments that required a U.S. bailout to prevent the DB’s insolvency. (At a DB co-financed conference in November in Berlin, former IMF economist Randall Wray reminded participants of the scale of the bailout, in the context of a presentation on “What Banks Should Do” (slide 15). Professor Michael Greenberger, an advisor to Americans for Financial Reform, presented on “The Imperative of the Extra-territorial Reach of Dodd-Frank.”) But even by the standards of Too Big to Fail Bank self-exoneration and impunity from effective prosecution, the DB press release was a masterpiece of mea exculpa. (To be fair, in May 2012, Deutsche Bank and its U.S. affiliate Mortgage IT did admit to wrong-doing for reckless lending practices and paid a $202 million fine in a civil fraud case brought by the U.S. federal attorney for the Southern District of New York. Generally speaking, U.S. federal agencies allow corporate miscreants to pay usually risible fines without admitting guilt, thus protecting the corporations from further civil suits.)
Cynics will say that the result of the internal examination was preordained in the 2011 report of the Institute of International Finance (IIF), then headed by the Deutsche Bank CEO Josef Ackermann, to the G-20 finance ministers. The IIF report concluded that speculative investments by IIF member banks played no role whatsoever in the commodity price bubble and collapse of 2008–09 that triggered the ongoing G-20 investigation into commodity price volatility. The report further alleged that there was no economic evidence to demonstrate that anything but supply and demand fundamentals determined agricultural or other commodity derivatives prices.
A September 2011 letter from the Berlin based NGO World Economy, Ecology & Development (WEED) and several other NGOs rebutted the IIF report. They appended to the letter an annotated bibliography of studies documenting the effect of financial speculation in commodities trading. The list comprises now well over a hundred studies, many of them peer-reviewed academic studies. Many of the studies concern OTC energy derivatives contracts, particularly oil and gas. These studies are relevant to agricultural prices insofar as energy contracts are the dominant contracts in commodity index funds and index trading strategies, traded both OTC and on regulated commodity exchanges. In most index funds, agricultural contracts are the tail wagged by the energy contract dog.
Clearly, agricultural supply and demand factors are structurally important—but by no means the only—determinants of agricultural raw materials prices. The DB internal investigation must have failed to look at agricultural prices and its agricultural contracts included in the commodity index products it buys and sells as part of a purportedly effective portfolio diversification strategy for its clients. Portfolio diversification is not driven by short-term, or even long-term, agricultural supply and demand fundamentals but by the trading formulas and overwhelming weight of money of portfolio investors, such as pension funds and endowments. A recent essay by Myriam Vander Stichele shows how commodity exchange–traded funds, such as those of Deutsche Bank, pose risks for consumers, retail investors, institutional investors, commodity markets and financial markets.
That weight of money and the volatility induced by the rolling of indexed contracts drives commercial hedgers out of markets when the costs of trading in non-fundamental factor volatility become too high even for large agricultural derivatives investors. (To be fair, one of DB’s advisors, Dr. Andreas Beck, advised in January against including commodities in exchange-traded funds.) The studies Deutsche Bank reviewed could only have been of data from the regulated futures and options market and not studies evaluating data from the still unregulated and dominant OTC commodity derivatives market.
Corollary to the Deutsche Bank et al self-exoneration is the denial that cross-border government regulation of the OTC market is necessary. This denial was manifest in the voluminous foreign government and multinational bank comments on the draft Commodity Futures Trading Commission (CFTC) guidance on the cross-border application of CFTC rules on OTC trading to the foreign affiliates of U.S. banks. Deutsche Bank was among those banks that argued that foreign regulators, and not U.S. regulators, should decide whether or not their regulatory regimes provided “comparable comprehensive oversight” of the markets, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In an August 27, 2012 letter to the CFTC, Deutsche Bank argues that the CFTC should not have access to foreign OTC data depositories to verify that the foreign affiliates of U.S. OTC dealers are complying with Dodd-Frank. Furthermore, Deutsche Bank and others argued, the CFTC should adopt a narrow definition of “U.S. person” to exclude foreign affiliates of U.S. OTC dealers from liability for Dodd-Frank violations. No data access, no data surveillance, no enforcement, no violations. In other words, Deutsch Bank et al argued for no consequential change from Bush administration non-regulation of markets.
On December 4, regulators from more than a dozen national jurisdictions, including the European Union and the United States, issued a joint press statement about their intent to cooperate to regulate OTC markets “consistent with their [national] mandates.” Likewise, trade data access or lack thereof, due to data privacy laws protecting banks, would be consistent with national mandates. The diplomatically crafted statement left open the possibility that some of the signatories would be less than cooperative in turning over the data necessary for effective cross-border regulation of the global OTC market.
The foreign government and bank comments resulted in the approval of weakened cross-border guidance by the CFTC on December 21 and the granting of a six month extension to the banks and their foreign affiliates to register as OTC dealers with the CFTC and show other steps toward complying with Dodd-Frank. Registration is the first step toward regulation that will require the U.S. headquarters of the foreign affiliates to aggregate trading data for surveillance and possible enforcement actions.
By restricting the data field of its internal examination to that of regulated commodity markets, Deutsche Bank steers our attention away from the vast and unregulated OTC market. Its lobbying effort, and that of the Too Big To Fail banks, seeks to keep regulation by principle (otherwise known as “light touch regulation”), rather than regulation applied to the mandatory, comprehensive submission of trading data. A recent International Monetary Fund staff discussion note estimates that the collateral posted to trade $600 trillion in OTC trades annually was just $600 billion, or a dollar posted for every $1,000 in gross notional value (face value of each trade). Such a lightly collateralized market needs both more collateral posted and more stringent regulation, not less.
So, as a result of Deutsche Bank’s self-exoneration, it will profitably resume those investments and join the chorus of bankers urging regulators to simply trust that these actions won’t result in another food-price crisis, another financial meltdown or yet another bank bailout. Trust, but don’t verify (as data won’t be forthcoming anyway).
Posted January 18, 2013 by Shiney Varghese
Writing in National Geographic in December 2012 about “small-scale irrigation techniques with simple buckets, affordable pumps, drip lines, and other equipment” that “are enabling farm families to weather dry seasons, raise yields, diversify their crops, and lift themselves out of poverty” water expert Sandra Postel of the Global Water Policy Project cautioned against reckless land and water-related investments in Africa. “[U]nless African governments and foreign interests lend support to these farmer-driven initiatives, rather than undermine them through land and water deals that benefit large-scale, commercial schemes, the best opportunity in decades for societal advancement in the region will be squandered.”
That same month, the online publication Market Oracle reported that “[t]he new ‘water barons’—the Wall Street banks and elitist multibillionaires—are buying up water all over the world at unprecedented pace.” The report reveals two phenomena that have been gathering speed, and that could potentially lead to profit accumulation at the cost of communities and commons —the expansion of market instruments beyond the water supply and sanitation to other areas of water governance, and the increasingly prominent role of financial institutions.
In several instances this has meant that the government itself has set up public corporations that run like a business, contracting out water supply and sanitation operations to those with expertise, or entering into public–private–partnerships, often with water multinationals. This happened recently in Nagpur and New Delhi, India. In most rural areas, ensuring a clean drinking water supply and sanitation continues to be a challenge. For-profit companies such as Sarvajal have begun setting up pre-paid water kiosks (or water ATMs) that would dispense units of water upon the insertion of a pre-paid card. It is no surprise that these are popular among people who otherwise have no access to clean drinking water.
With climate change, however, the water crisis is no longer perceived as confined to developing countries or even primarily a concern related to water supply and sanitation. Fresh water commons are becoming degraded and depleted in both developed and developing countries. In the United States, diversion of water for expanded commodity crop production, biofuels and gas hydro-fracking is compounding the crisis in rural areas. In areas ranging from the Ogallala aquifer to the Great Lakes in North America, water has been referred to as liquid gold. Billionaires such as T. Boone Pickens have been buying up land overlying the Ogallala aquifer, acquiring water rights; companies such as Dow Chemicals, with a long history of water pollution, are investing in the business of water purification, making pollution itself a cash-cow.
But chemical companies are not alone: GE and its competitor Siemens have extensive portfolios that include an array of water technologies to serve the needs of industrial customers, municipal water suppliers or governments. (In the last year and a half two Minnesota based companies have become large players in this business—Ecolab, by acquiring Nalco and Pentair by merging with Tyco's Flow Control unit—both now belonging to S&P’s 500.)
The financial industry has also zeroed in on water. In the summer of 2011, Citigroup issued a report on water investments. The much quoted statement by Willem Buiter (chief economist at Citigroup) gives an inkling of Citigroup’s conclusion: “Water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals.” Once again, several others had already seen water as an important investment opportunity, including GE’s Energy Financial Services, Goldman Sachs and several asset management firms that are involved investing in farmland in Asia, Africa, South America and Eastern Europe.
Given these recent trends, initiatives that track the water use of companies or map information regarding water related risks could be double edged. Some examples include the ‘water disclosure project’ and the ‘water-mapping project’. Both are initiated by non-profits/ think-tanks, the former by UK-based Carbon Disclosure Project and the latter by the US-based World Resources Institute. While distinct, they are linked by their shared constituency: global investors concerned about water-related risks. These initiatives could help companies identify and reduce their water footprint, or could lead to company investments that follow water and grab it.
The Carbon Disclosure Project’s water disclosure project seeks to help businesses and institutional investors understand the risks and opportunities associated with water scarcity and other water-related issues. According to its most recent report, issued on behalf of 470 investors with assets of $50 trillion USD, over half the respondents to their survey have experienced water-related challenges in the preceding five years, translating into disruptions in operations, increases in expenses and other detrimental impacts.
Aqueduct Alliance and its water mapping project, which aims to provide companies with an unprecedented level of detail on global water risks, seems at one level a direct response to the findings of the global water disclosure reports by CDP. General Electric, Goldman Sachs and the Washington-based think tank World Resources Institute are the founding members of the Aqueduct Alliance. All of them identify water-related risks as detrimental to profitability, continued economic growth and environmental sustainability. The water maps, with their unprecedented level of detail and resolution, seek to combine advanced hydrological data with geographically specific indicators that capture social, economic, and governance factors. But this initiative has given rise to concerns that such information gives companies and investors unprecedented details of water-related information in some of the world's largest river basins.
Many of these investors, described as the “new water barons” in Jo-Shing Yang’s article "Profiting from Your Thirst as Global Elite Rush to Control Water Worldwide," are the same ones who have profited from speculating on agricultural contracts and contributing to the food crisis of the past few years. The food crisis and recent droughts have confirmed that controlling the source of food—the land and the water that flows under or by it—are equally or even more important.
A closer look at the land-related investments in Africa, for example, show that land grabbing is not simply an investment, but also an attempt to capture the water underneath. At the recent annual Global AgInvesting Conference (with well over 370 participants), the asset management groups and global farm businesses showcased their plans, including purchases of vast tracts of lands in varying locations around the globe. With tools such as water maps, such investors are further advantaged. The global rush for land grabbing, as well as the resistance to it, shows that all stake-holders—pension funds, Wall Street or nation-states on the one hand or the people who currently use these lands and waters, and their advocates on the other—are well aware of the life-and-death nature of land (and water) grabbing, especially in the case of developing countries.
National and international regulatory mechanisms must be put in place to ensure that basic resources such as land, water and the means for accessing fresh water do not become merely the means for profit accumulation for the wealthy, but are governed in a way that ensures the basic livelihood of those most dependent on it. The last session of the Committee on World Food Security (a United Nations mechanism set up to address the food crisis) was a good starting point, and has set in motion a series of consultations on principles for agricultural investments. Civil Society Organizations are tracking the various ways in which regulations may develop in national contexts: simply facilitate land grabbing, mitigate negative impacts and maximize opportunities or block (or roll-back) land grabbing altogether. Ultimately, any policy approaches must prioritize local communities’ access to food and water: Any water-related investments needs to be about allaying their livelihood risks and enhancing their ability to realize their rights, whether it is in developing countries or developed countries.
Posted January 17, 2013 by Jim Kleinschmit
Last week, IATP, in partnership with Sustainable Northwest and the National Rural Assembly, hosted the kick-off meeting in Minneapolis for a new initiative: the Rural Climate Network, designed to support rural action and education around climate change. This inaugural meeting brought together rural organizations and leaders from around the country to discuss what resources, tools and information are most needed to help rural citizens understand and respond to the mounting climate crises. The meeting made clear the need for a specifically rural effort that builds connections and capacity among existing organizations, supports and promotes on-the-ground climate projects and supports rural leaders who can speak to both rural communities and policy makers about the need and value of effective climate policy and action on the community, state, national and international levels.
The meeting took place at the McKnight Foundation and included representatives from the following organizations: California Climate and Agriculture Network; Center for Rural Affairs; Center for Rural Strategies; CROPP Cooperative and Organic Valley; CURE; Farm Aid; Forest Guild; Land Stewardship Project; Lutheran Coalition for Public Policy; MACED; Main Street Project; National Congress of American Indians; National Family Farm Coalition; NCAT; Pesticide Action Network; RAFI-USA; Sustainable Northwest; The Watershed Research and Training Center; Threlkeld Farm Organic Dairy / Organic Valley; and the Western Organization of Resource Councils.
Posted January 15, 2013 by Jim Harkness
Dear Friends,
The Institute for Agriculture and Trade Policy will be ending the IATP Food and Community Fellows program at the conclusion of the current two-year class of fellows’ term in April 2013.
Launched in 2001, the program has made major contributions to efforts for a fair, green, healthy and affordable food system. With 86 outstanding alumni, the program has supported the development of many leading public officials, farmers, community advocates, writers, filmmakers, academics, public health experts and other professionals contributing to a better food system. The IATP Food and Community Fellows website provides a biography for each fellow, as well as several blog posts that highlight some of the outstanding work over the years.
Over the past 12 years, the program has not only contributed to the career of fellows but has made major contributions to the growing food movement. Several fellows have been integral to efforts to address or promote farm to school, farmworker justice, childhood obesity, equitable food access, local food systems, better conservation practices, food sovereignty, and greater equity across race, class and gender in the production and distribution of food. We all benefit from the leadership and creativity that fellows developed over their two-year fellowship as many fellows are serving in positions of leadership or continuing to provide public education and outreach around these topics.
Funding has now ended for this program. IATP would like to express its enormous gratitude to past supporters of this program, including the W.K. Kellogg Foundation, the Woodcock Foundation and the Fair Food Foundation. IATP will continue to work on many of the topics addressed by fellows, and will continue to collaborate with many of the alumni of the program.
Sincerely,
Jim Harkness
IATP President
Posted January 9, 2013 by Ben Lilliston
Just when you thought Congress couldn’t screw up the Farm Bill any worse, they surprise us all. As part of a fiscal cliff, New Year’s Day bender, Congress and the White House extended a barebones version of the Farm Bill for yet another nine months—giving the bumbling legislative body more time to further decimate the nation’s main farm and food policy.
The Farm Bill extension, apparently written largely by powerful Republican Senator Mitch McConnell and VP Joe Biden, continues existing commodity programs (including controversial direct payments), keeps the food stamp program largely intact, and provides a temporary extension of the dairy program. But there’s a long list of what it doesn’t do, including funding extension for 37 programs. It also doesn’t include immediate emergency relief to livestock producers and fruit growers still dealing with the damaging effects of the ongoing drought. The Conservation Stewardship Program (CSP), a critical program supporting agroecology, can’t sign up new farmers to participate in 2013. Other programs that received no mandatory funding include a host of renewable energy programs, the Beginning Farmer and Rancher program, rural development programs and organic and specialty crop research programs. Additionally, an important pilot program for local and regional procurement of international food aid was not funded. (See excellent summaries of the deal by the National Farmers Union and the National Campaign for Sustainable Agriculture).
Aside from the program bloodletting, perhaps most jarring was the complete disdain Congressional leadership had for the Farm Bill itself and the Agriculture Committee Chairs in cutting this deal. Leadership in the Senate and House Agriculture Committees had reportedly agreed to an extension over the weekend, but that agreement was scrapped and agriculture committee representatives were cut out of the final fiscal cliff deal-making. This comes after the House leadership refused—since July—to bring the Farm Bill to a vote, with very little political cost to pay. As Senate Agriculture Committee chair Debbie Stabenow said on the Senate floor, “There is absolutely no way to explain this other than agriculture is just not a priority.”
What does this mean for the future of the Farm Bill? The next Congress will start from scratch, with the House expected to start working on a new Farm Bill in late February. The Farm Bills that came out of the Senate and the House Agriculture Committee last year will likely be a starting point. But we can also expect that the budgets will be even tighter when Congressional Budget Office issues a new Farm Bill baseline budget in March, so even more cuts will be needed. Two big disagreements remain: one over the shift of commodity programs toward a revenue insurance model (which due to climate change may ultimately result in higher government payouts), and the desire by Tea Party activists to cut the Supplemental Nutrition Assistance Program (SNAP). Politically, it is largely the same players at the Agriculture committees, Congressional leadership and at the White House, all trapped within the same budget-cutting straightjacket. It’s hard to see how real reform can emerge in 2013. But of course, things could get much worse.
In the bigger picture, the New Year’s madness reflects a major blow to the stature of the Farm Bill as an effective policy instrument. It wasn’t farmer or rural interests that drove the final deal, but the threat of higher milk prices for consumers. Even under optimal conditions, the Farm Bill has largely turned a blind eye to some of the biggest issues in the agriculture and food system: climate change, fair prices for all farmers, corporate concentration and marketplace competition, and the treatment of food workers.
In the future, the big policy changes needed in our farm and food system may need to come from beyond the Farm Bill. There are many policy approaches bubbling up at the community and state level, and even in other countries, that could serve as a basis for a new agenda grounded in resiliency (to environmental and economic instability), justice for farmers, workers and consumers, health throughout the food chain, and food sovereignty (community control and ownership of the food system). We can’t afford any more Congressional surprises.
Posted January 8, 2013 by Andrew Ranallo
It seems every week, mainstream media is reporting on a new study pointing to food A, or beverage B, as the latest malign of the American eater. The truth is, the rising obesity rates in the U.S., and the frightening rate of decline in children’s health in our country are complicated. While new research is vital in contributing to a better understanding of our food environment, and our physicians’ sound advice about getting more exercise and “eating right” may help strengthen our resolve, it has not—at least by any measurable statistic—proven to be enough to stop the host of diet-related disease we’re currently facing.
In a new contribution to Minnesota Medicine, IATP’s Dr. David Wallinga places the increasingly industrialized food system (as more and more science does) at the heart of our plight. Further, he asserts, health professionals hold one of the keys to making change: By getting involved in their patients’ health outside of the clinic and advocating for a healthier food system that makes “eating right” a more attainable goal.
Read Dr. Wallinga’s complete piece, “Our Unhealthy Food System: Why physicians’ voices are critically needed,” at Minnesota Medicine’s website.
Posted December 20, 2012 by Jennifer Billig
How could the landscape of food and farming policy change if health sector workers and consumers understood what it takes for farmers to grow and produce enough healthy food?
Earlier this year, IATP and Blue Cross Blue Shield of Minnesota created a historic statewide convening to foster dialogue and understanding between the health and agriculture sectors—State of the Plate: Minnesota Healthy Food Futures. Now, that meeting has served as proof of concept for cross-sector meetings in eight additional states: Texas, Illinois, Montana, Oregon, New York, Kansas, Mississippi and Iowa. While the purpose of all the meetings was to begin building bridges between the health and agriculture sectors, many of the meetings also included representatives from the anti-hunger, culinary and philanthropic sectors, among others.
IATP provided technical assistance to each of the states as part of its involvement on the steering team of the national Healthy Farms, Healthy People Coalition, which held the first national cross-sector convening in Washington, D.C. in 2011. That historic national meeting included representatives from diverse organizations such as The Farm Bureau, The American Public Health Association and United Fresh. The coalition also provided financial support for seven of the nine state meetings via a competitive application process that produced 61 proposals. The Minnesota and Illinois meetings received support from local funders and we hope other states will follow suit in 2013.
Participants across all the meetings were energized by the opportunity to learn about key issues from new perspectives and the prospect of new partnerships between the health and agriculture communities. The hope is that working across sectors will foster more innovative food system policy to support public health goals for healthier eating, but also support our farmers’ ability to make a living producing healthier foods like fruits, vegetables and food animals that serve those goals.
Minnesota kicked off the year with its meeting in early January and the year ended with meetings in Iowa and Kansas in mid-November, with most of the other meetings occurring in early fall. The meetings ranged in size from 42 participants in the less populated state of Montana to more than 335 participants in Minnesota, with most of the remaining meetings engaging approximately 75–100 health and agriculture stakeholders.
More than one of the meetings opened with a diverse panel of speakers from different sectors sharing their perspectives on key food system issues. Others opened with a keynote speakers, including Dr. Kelly Brownell of Yale’s Rudd Center who spoke to the Minnesota audience about the need to make healthy food the “optimal default” through policy and environment changes; Bob Martin, senior policy advisor at the Center for a Livable Future at Johns Hopkins School of Public Health made the case to the Kansas audience for a public health perspective on agriculture, particularly the linkages between the growing number of human antibiotic-resistant infections and the widespread use of antibiotics in animal agriculture; and Ken Meter of Crossroads Resource Center described the political economy of the food system in central Illinois and outlined an opportunity to reverse the trend of food and farm dollars flowing out of the region to distant corporations rather than supporting local producers and businesses.
Discussion of local and regional food system issues were prominent at all the meetings, from the Mississippi and Montana meetings which focused on building farm to institution programs in the states, to New York where food business owners participated in discussions about ways to expand consumer access to state products. In Oregon, participants discussed a state law prohibiting undocumented workers from having driver’s licenses threatens to hurt local farms and food businesses across the state, as well as worsen poverty among that population of workers and their families.
Other key issues discussed included the need for better public incentives and crop insurance for producers of fruits and vegetables, the need for scale-appropriate food safety laws that support development of local food systems, the need to reform state procurement laws to allow for more local sourcing and increasing access to federal nutrition programs at farmers markets.
It is our hope that work will continue on these and other key policy issues within the states and through creation of a national community of practice made up of leaders from each of the nine states, as well as others. With all this remarkable work bubbling up at the state level, shared learning about key issues and innovative policy development could spur similar discussions in additional states, as well as drive creation of healthier national food and farming systems policy.
Posted December 19, 2012 by Michael Pursell
It’s ironic that agriculture, an activity that is fundamental to sustaining large societies, has come to present so many risks to public and environmental health. As farms have grown larger, more productive, fewer in number, and more specialized over the last century, they’ve come to produce some less than desirable byproducts, just like any other major industry. But farming isn’t just another industry; it’s based on ecological principles and natural systems, which, if managed carefully, can be used to promote rather than harm health. A recently published study out of Iowa State University suggests that smart diversification and re-integration of plant and animal systems on the farm can pave the way to a healthier, more balanced agriculture.
Farmers have always had to manage soil fertility carefully or lose the foundation of their livelihood. For much of history, animal manure was our primary means of renewing that fertility. With the advent of cheap, effective synthetic fertilizers and herbicides in the early 20th century, long-term productivity became wholly divorced from its animal origins for the first time in history. Animals became unnecessary for large-scale plant production and economies of scale became possible; soon, fossil fuel–based fertilizers were being applied liberally to single-crop fields across the world. In parallel, animal operations also became more concentrated and monocultural, relying on less and less space and more commodity-derived feed. In this new scenario, animal manure was transformed from an essential link in the nutrient cycle into a potentially dangerous waste product.
In a nutshell, that’s why most American farmland today is densely populated by large monocultures of commodity crops and livestock, but productivity has come at a cost. Though this highly specialized mode of agriculture boasts historically unprecedented yields, it also generates a slough of harmful externalities for human and environmental health that aren’t reflected in the publicly supported price of its products. In order to remain productive and profitable, conventional commodity production requires ever-higher levels of inputs in the form of fossil fuel–based fertilizers and herbicides, while animal agriculture produces a toxic surplus of fertility in the form of concentrated manure. It is well documented that both of these excesses pose significant risk to human and environmental health, as they regularly enter into surface- and groundwater and ultimately play a central role in the eutrophication of downstream waters, like that currently underway in the Gulf of Mexico. Additionally, closely confined livestock production has produced a high reliance on the large-scale use of antibiotics, which can also enter groundwater and pose a risk for human populations.
Researchers from Iowa State University, USDA and the University of Minnesota have recently offered new evidence that carefully integrating animal and plant systems can dramatically decrease these health risks of industrial-scale agriculture. The controlled field trial took place over eight years at the Marsden Farm in Boone County Iowa—the heart of the Corn Belt—and was more important for its fusion of methodologies than for any particular innovation. Researchers simply took well-established integrated grazing and rotational practices and applied them to a conventional Midwestern commodity growing scenario, then compared costs and productivity over time.
In short, they de-specialized the farm by treating cattle—and their manure—as an essential part of the nutrient needs of corn and soybean production. In conjunction with a simple, extended crop rotation of alfalfa and small grains, the Marsden Farm study showed that integrating livestock into corn and soybean production protected or exceeded yields as well as profits over time compared to a conventional corn-soybean rotation. Critically, though, the improved rotation significantly reduced the amount of fertilizer inputs and loweredtheneed for herbicides by 88 percent. With these reductions came a huge reduction in factors that can impact human and environmental health down the road, and all without any loss of productivity. The study showed how much we have to benefit from closing the nutrient cycle: manure only poses a substantial risk to health when it’s concentrated and stored, but in such a diffuse application, even at a large scale, it can be a valuable asset.
Though farm profits remained stable between the conventional and modified rotations, the nature and proportion of production costs changed dramatically. Because successional grazing and rotation is much more labor-intensive than the two-step corn-soybean rotation used across much of the Midwest, labor costs rose as fertilizer costs dropped. Incidentally, this means that diversified practices end up providing an economic boost for American farm workers, who end up with a share of farm expenses that would otherwise go into the pockets of large fertilizer manufacturers.
The Marsden Farm study is particularly valuable because it offers an achievable vision for a healthy, productive 21st-century American agriculture that bridges the often polarizing divide between “conventional” and “sustainable” mentalities. It shows that it’s possible to balance health and long-term viability with a large-scale, highly productive commodity operation, a balance that could potentially be fostered and further explored by a number of existing Farm Bill programs. Such a “middle path” approach will likely prove to be a relatively politically attractive avenue for systemic movement toward a healthier agriculture.
Indeed, there are existing Farm Bill programs that can support further development of integrated systems. The Environmental Quality Improvement Program (EQIP) is a conservation program that offers incentives to farmers to better manage their nutrient inputs and outputs, among other things. The Sustainable Agriculture Research and Education (SARE) program also offers research grants annually to farmers across the country who are willing to conduct on-farm research for more sustainable practices. In general, the Research Title can be a powerful tool for change, as it provides ample opportunity to incentivize and explore alternative modes of production—though research funding in the Farm Bill tends to support conventional systems.
Obstacles certainly remain for those looking to adopt the vision proffered by the Marsden Farm study: fertilizer producers and other major agribusiness groups are sure to leverage their powerful lobbies against such a change, and commodity farmers themselves have invested so many resources (capital and otherwise) into the current mode of production that downstream externalities don’t necessarily provide a compelling enough argument to fundamentally change the way they operate.
Other recent research is also making a strong case for agricultural diversity and public health. A new paper in BioScience is among the chorus of voices arguing that agricultural diversity and integrated systems have a major, multifunctional role to play in securing the long-term health and stability of the food system, specifically as the effects of climate change threaten to destabilize agriculture across the globe; past United Nations research echoes this assertion.
In all, the emerging picture of integrated farming systems gives public health advocates another reason to hope that agriculture can become a sustaining force in our society, one that combines large-scale agricultural productivity with clean waterways, long-term resilience, healthy animals and healthy people.
Michael Pursell is a researcher on health and agricultural policy currently on contract with IATP.
Posted December 12, 2012 by Shefali Sharma
The 18th annual climate negotiations of the U.N. Framework Convention on Climate Change (UNFCCC) just ended Saturday night. These government officials had a historic and an urgently critical task at hand: how to effectively address the increasing climate chaos characterized by extreme storms like Hurricane Sandy, Typhoon Bhopa (which recently just devastated several islands in the Philippines), droughts, floods and eerily erratic weather before it’s too late.
The “Doha Climate Gateway,” as the outcome is being called, resulted in a second commitment period for the Kyoto Protocol (the KP) and built the “gateway” for a new climate treaty that is supposed to come into force by 2020. In three year’s time, governments will have to finalize this new treaty that will now be negotiated in a track they call the Ad-hoc Working Group on the Durban Platform for Enhanced Action (ADP).
Because the KP’s first commitment period was set to expire this month, the Protocol’s future was uncertain. The U.S. continued to express disdain for the KP, Canada, Japan and Russia pulled out of it and New Zealand’s rejected it. Despite all this, somehow, governments agreed to a second commitment period (minus Japan, Canada, Russia and New Zealand)—but a very weak, almost farcical one. Thirty-five industrialized countries making up about 15 percent of global emissions will be party to the second commitment period, with no enforced total aggregate target for reducing emissions and a “maybe” option for increasing their ambitions for further emissions reductions by 2015. The cruel irony is that all governments in this latest UNFCCC outcome took note “with grave concern the significant gap between the aggregate effect of Parties’ mitigation pledges in terms of global annual emissions of greenhouse gases by 2020 and aggregate emission pathways consistent with having a likely chance of holding the increase in global average temperature below 2 °C or 1.5 °C above pre-industrial levels.”
In other words: “yes, we governments know that we have a massive gap between what we have said we would do to prevent catastrophic climate change and what is actually needed to prevent it, but hey! Let’s take another three years to figure that out and another eight to bring something binding into force. What’s the rush? We only began this process in 1992.”
The farce becomes apparent when you read the technical fine print of how these governments will meet some of these commitments. According to Carbon Market Daily1 governments did little in Doha to curb the biggest failure of the carbon market: the oversupply of carbon credits that are already at “rock-bottom” prices. However, governments continued to endorse emissions trading and the Clean Development Mechanism as ways to account for their emissions reductions in the second commitment period. These approaches are heavily criticized by many civil society organizations as not only ineffective in dealing with climate change (since emissions continue to rise), but also because the markets themselves are speculative and deeply flawed. In the last few years, the prices of the credits certified as legitimate by the UNFCCC have crashed from 22 euros to 50 cents.2 Countries like New Zealand, Japan, Canada and Russia will rightly be excluded from claiming “certified emissions reduction” credits from the UNFCCC given that they have not committed to the KP the second time around. Instead, Thomson Reuters reports, Japan will “develop a new market mechanism to help meet a voluntary 2020 emissions pledge” while New Zealand may reduce its own reduction ambitions given that both countries rely heavily on buying credits to compensate or “offset” their own domestic emissions.3
Carbon market proponents want to not only keep these flawed mechanisms in place in the new treaty and but also develop “new market mechanisms” in the interim that will allow for further loopholes for major polluters albeit at a much larger scale (i.e., sectoral trading—estimating emissions reductions across an entire manufacturing sector or landscape that includes agriculture and forestry). These proposals are highly controversial and raise serious questions about environmental integrity. And governments failed to reach agreement over them in Doha. Countries like the U.S., New Zealand and Japan want to put in a framework in place that allows for them to use these market mechanisms to account for their emissions reductions and pay for them without actually having to commit to any legally binding targets. But actual investors think it’s pointless to have yet newer market mechanisms when there are no ambitious binding emissions reductions targets in the first place.
In spite of these issues, the “new market mechanisms” now have a placeholder in the development of the new treaty because parties have directed the Subsidiary Body for Scientific and Technical Advice (SBSTA) to develop a work program that may or may not be agreed at the next Conference of Parties (COP 19). Elements of this work programme include “means to stimulate mitigation across broad segments of the economy, which are defined by the participating Parties and may be on a sectoral and/or project-specific basis”; hence, the option for sectoral trading, but also carbon accounting (monitoring, reporting and verification) of carbon sinks. These mechanisms can have voluntary participation, but somehow must lead to “standards that deliver real, permanent, additional, and verified mitigation outcomes, avoid double counting of effort and achieve a net decrease and/or avoidance of greenhouse gas emissions.”
What this essentially means is that the fight on environmental integrity and the prospects of the carbon market will continue into the next year and in the formation of the new agreement. The decision invites countries and observers to submit comments on how that might work by March 25, 2013.
The challenging questions about oversupply of credits and the environmental integrity associated with these offset credits, particularly in the clean development mechanism, have been postponed to a review that will take place next year on the CDM. Thomson Reuters reports that investment in the CDM has virtually stopped given that its value has plunged by 95% in the last four years, crushing hopes for investor profits.4
The big fight on the broader issues related to agriculture continued in the SBSTA—one of the four bodies of the UNFCCC charged with scientific and technical advice. The decision reached was the following:
After several interventions by Parties, the SBSTA Chair ruled that there was no consensus amongst Parties to refer this matter to the COP for further consideration…SBSTA would continue its consideration of this agenda item at its thirty-eighth session.
In other words, this will be another fight at the next UNFCCC meeting in April 2013. The fight, as reported in our last blog, is about agriculture emitters looking for ways to account for agriculture emissions through offsetting and trading credits, in particular through flawed approaches such soil carbon sequestration accounting. New proposals from the EU that include “full landscape accounting” would broaden this approach to include forestry and agriculture and create even more room for creative accounting. Developing countries have continued to insist that their agriculture priority is adaptation given climate change’s devastating impacts on food production and food security.
However, there is now a placeholder for this debate to continue under an agenda item in the ADP negotiating track for the new treaty. The ADP track has two workstreams: the first to discuss what the post-2020 agreement will look like; and the second relating to “pre-2020 ambition.” One of the Doha decisions for workstream 2 is to hold a series of workshops and roundtables based on submissions by March 1, 2013 from governments and observers to the UNFCCC on several issues including:
(a) Mitigation and adaptation benefits, including resilience to the impacts of climate change;
(b) Barriers and ways to overcome them, and incentives for actions;
(c) Finance, technology, and capacity-building to support implementation.
Though seemingly in code, this is a good placeholder for the fight on agriculture mitigation and adaptation—by whom, for whom. The World Bank, along with New Zealand, the United States and other industrial agriculture countries are eager proponents of soil carbon markets and the expansion of land use and land use change accounting to include agriculture. Both New Zealand and Australia are building their own national and sub-national markets that hope to expand coverage to agriculture. Developing countries, particularly African countries, are being “sold” the idea that they would make money off of this by developing their own credits. Carbon markets are dramatically proving otherwise for all credits let alone these types of risky credits. The World Bank hopes to broker these types of credits.
The discussions in SBSTA on the expansion of agriculture credits in LULUCF in the KP track will continue. See IATP’s blog, "What’s at stake for agriculture in COP 18" for more on these discussions.
The one big achievement of the talks was the agreement to address “loss and damage” from the impacts of climate change on developing countries and to develop a mechanism for it. But the U.S. remained adamant that any promises for “aid” for loss and damage need not be additional to what is already being provided under current donor schemes.
The stage is therefore set for more of the same in the coming years in the climate negotiations—a blueprint for a dramatic shift out of our global crisis was nowhere visible in the Doha outcome.
In the closing plenary of the Kyoto Protocol track, a representative from the government of Philippines made a moving plea:
Have we managed to give justice to what the world demands of us?…as we sit here, every single hour, even as we vacillate and procrastinate here, the death toll is rising. There is massive and widespread devastation. Hundreds of thousands of people have been rendered without homes. And the ordeal is far from over, as Typhoon Bopha has regained some strength as it approaches another populated area in the western part of the Philippines…And I am making an urgent appeal, not as a negotiator, not as a leader of my delegation, but as a Filipino. I appeal to the whole world, I appeal to leaders from all over the world, to open our eyes to the stark reality that we face. I appeal to ministers. The outcome of our work is not about what our political masters want. It is about what is demanded of us by 7 billion people.
In the lifetime of the climate treaty, rather than responding to the dire, evolving and new challenges that climate change is bringing to our civilization, government ministries charged with the responsibility have done nothing but cater to the corporations most likely to lose from the concerted and determined actions required to effectively deal with one of the most critical crises of our times. It seems unfathomable—given what has come out of Doha—that these governments will do anything differently next year or in three years unless every citizen (very soon) considers this, quite literally, the very matter of survival of our species on this planet.
1.Thomspson Reuters 2012. U.N. envoys extend Kyoto, agree path to global deal. Carbon Market Daily, Point Carbon News Publication, Vol. 11, Issue 21: December 9.
2.Ibid.
3.Ibid.
4.Ibid.
Posted December 12, 2012 by JoAnne Berkenkamp
As I look at the snow outside my window, I have to admit it: The summer’s bounty of sweet corn and tomatoes is long gone, but the demand for local food keeps chugging along—particularly among K-12 schools that are eager to keep their Farm to School program going even after the snow flies.
How can we provide new opportunities for our farmers and make local foods available year-round? One strategy worth a look is preserving the local bounty through freezing fruits and vegetables.
Today, IATP is releasing new research on innovative strategies for freezing locally and regionally grown produce for the K-12 marketplace. We looked at several small and mid-scale approaches including schools freezing on-site in their own kitchens, multi-use kitchen facilities, small freezing enterprises, and “co-pack” relationships where a processing company freezes produce on behalf of a third party, like a group of farmers.
Our research draws insight from the first-hand experience of ventures around the country that are now freezing fruits and vegetables grown in their region. While there has been considerable zeal of late around the concept of “food hubs,” we found a mixed picture, and reasons for both optimism and caution. Here are a few highlights:
One way that schools can tap into frozen, local foods is to buy fresh produce and do the freezing themselves, in their own kitchens. A variety of schools around the country are now doing so and their experience shows that:
A range of small freezing businesses, business incubators and commercial or multi-use kitchens are now exploring various approaches to freezing locally grown fruits and vegetables. Their experience illustrates the importance of focusing very strategically on suitable crops, finished products that are tailored effectively to the marketplace and efficient processing methods. Business models that rely solely on processing smaller quantities of seasonal product may struggle to cash-flow, but ventures that complement freezing with other types of processing activity are showing promise.
For farmers, selling to entities that will freeze their product is worth exploring. Benefits from such relationships that were identified in these case studies include limited marketing time for farmers, the potential for sales contracts in advance of the growing season, repeat business, and a market for surplus produce and “seconds” that may otherwise be hard for farmers to sell.
Lastly, co-pack relationships with existing freezing companies can connect schools with a source of high quality, regionally grown frozen produce.
Depending on the size and practices of the co-packer, farmers selling into co-packers can face some significant hurdles. Co-packers’ sourcing protocols may include significant minimum delivery amounts from farmers (e.g., by the semi-load), on-farm food safety audits and deliveries to the processing facility within very narrow windows of time.
This, in turn, may require growers to carefully coordinate planting, harvesting and delivery schedules. Crop varieties suited to the fresh market may not be optimal for freezing on a commercial scale.
The availability of potential co-pack partners also depends greatly on location. In Minnesota, intense consolidation in the produce freezing industry in recent decades has sharply reduced the number of independent freezing companies. Other regions of the U.S. that have more moderately scaled freezing operations in place may offer a broader range of co-pack opportunities.
So, all in all, it’s a mixed picture and one that reflects the intertwined challenges and opportunities of food entrepreneurship. Please check out the report to learn more about the experiences of schools and food entrepreneurs working to keep the bounty coming, even after the snow flies.
Read Frozen Local: Strategies for Freezing Locally Grown Produce for the K-12 Marketplace.