Tag Archives: california
Growth In Farmland Values Slowing But Still Hot
AUGUST 6, 2013 By: Fran Howard Land values, particularly for cropland in the Corn Belt and Northern Plains, soared again in 2013, but analysts warn that current growth rates are not sustainable given the recent declines in grain and oilseed prices and the strengthening U.S. dollar. According to USDA’s Land Values report , released Aug. 2, U.S. farm real estate value, a measure of the value of all land and buildings on farms, averaged $2,900 per acre in 2013, up 9.4% from 2012 values. Regional changes ranged from a 23.1% increase in the Northern Plains region to flat in the Southeast. Not surprisingly, the highest farm real estate values of $6,400 per acre were in the Corn Belt. The Mountain region had the lowest farm real estate value of $1,020 per acre. “The last few months, the growth rate has been coming down,” says Ernie Goss, MacAllister Chair in Regional Economics at Creighton University, Omaha, Nebraska. “Softer corn and soybean prices, the stronger dollar, and slower economic growth globally are all combining to put a dent in the growth in farmland values.” Still, Goss anticipates that long-term average farmland values will continue to grow at about 7-8% a year. “Rising interest rates could also take a little air out of the land-price bubble,” Goss says. “Growth rates of 23%, 15% are not sustainable.” Yet even if land values were to fall, he says, the country would not see a repeat of the 1980s farm crisis because farmland is nowhere near as highly leveraged today. The average value of U.S. cropland, according to the report, increased $460 per acre, up 13% from 2012 levels to $4,000 per acre. Year-over-year cropland values in the Northern Plains and Corn Belt rose 25 and 16.1% to $2,950 and $6,980 per acre, respectively. In the Southeast, the value of cropland fell 2.8% to $3,410. The highest valued cropland was in New Jersey at $12,800 per acre up 4.1%, followed by California at $10,190, and Colorado at $9,000. Iowa and Illinois values were close behind at $8,600 and $7,900. Farmland values in Iowa have risen by double digits in each year since 2010, when the value of cropland was $5,064, according to the Iowa State University land value survey. “Where does this leave us? Many people have discussed the possibility that land is on a speculative bubble and that land values are going to collapse. Will the land market collapse like it did in the early 1980s or similar to the housing market a few years ago? No one knows for sure. But there are several key variables to watch to formulate an opinion,” says Michael Duffy, extension economist with Iowa State University, on his website. “One of the key variables to watch is income. Theory tells us it would be the net income per acre that is the key, but analysis shows that the total income is a better predictor. In Iowa there is a 95% correlation between land values and the value of agricultural production in the state. There is an 89% correlation between land values and net farm income,” Duffy says. According to USDA’s recent report, value of cropland fell in four states, Florida, South Carolina, New Mexico, and New York, and held steady in seven others. The average value of U.S. pastureland increased to $1,200 per acre, up 4.3% from 2012 levels. Southeast pastureland fell 1.5% below year-earlier levels to $3,380, while pastureland in the Northern Plains soared 18.4% to $81. “The attraction of farm life is increasing, so there is a high motivation to return to the farm, but buying a farm operation is not easy,” Goss says. As today’s landowners die, leaving the farm to their heirs, the heirs are often unable to buyout their siblings or cousins. Thus farms will continue to get larger and larger, he adds. Continue reading
California Calling: Australia Isn’t Alone On Carbon Action
Tony Wood 2 Aug, 9:32 AM The Conversation Australia will not be linking its emissions trading scheme to California any time soon. But Australia will have to increase its emissions reduction targets to between 15-25 per cent below 2000 levels by 2020, following climate action by the European Union, US, Canada, and China. At a public seminar hosted by Grattan Institute earlier this week, the chairman of the California Air Resources Board destroyed two myths. Mary Nichols, one of Time Magazine’s 100 most influential people, demonstrated that the world is moving on climate change and that cap-and-trade emissions trading schemes are well and truly alive. However, political uncertainty regarding the future of Australia’s emissions trading scheme means that, for California, linking the Australian and Californian schemes, and by extension the EU scheme, are not an immediate priority. So, what can we learn from California and from climate action around the world? California dreaming This year President Obama resorted to regulation to ensure that the USA meets its target to reduce greenhouse gas emissions by 17 per cent below 2005 levels by 2020. Professor Ross Garnaut joined Mary Nichols at last night’s seminar and noted that, before its election, the Obama administration had been looking to cap-and-trade as the most efficient and lowest cost way to reduce emissions. Having failed to get that legislation through Congress, they accepted that regulation would be necessary , albeit inefficient and higher cost. However, individual states have flexibility in how they proceed, and California has adopted an ETS . Its target is to scale back emissions to 1990 levels by 2020. The scheme became operational from January 1 2013, and there have been three auctions of carbon allowances to date. The scheme now covers electricity, cement, refineries and other large industries, with natural gas and transport to be included from 2015. The scheme also covers emissions produced in other states to generate electricity consumed in California. Permits are currently trading above US$13 per tonne, and the scheme includes mechanisms to support companies so they don’t move operations elsewhere to avoid the carbon price. Linking to Quebec From January, 2014 the Californian scheme will be linked with Quebec’s cap-and-trade scheme . Mary Nichols made it very clear that this linkage had been carefully planned, and that there is close alignment between both schemes on the important design elements. While Quebec will auction its permits, in contrast to California’s decision to allocate most of its permits for free, this does not affect the value of the permits in the carbon market place. It will be interesting to see if and when other US states follow the Californian example, rather than go down the higher cost, regulatory route. While in Australia, Mary Nichols signed a Memorandum of Understanding with the chair of Australian Climate Change Regulator, Chloe Munro, to guide collaboration between the agencies in addressing the global issue of climate change. Both agencies intend to learn much from each other’s experiences in implementing an ETS. What about China? Discussion regarding international action on climate change and policies doesn’t make sense without considering China, now the world’s biggest emitter. Both Mary Nichols and Ross Garnaut highlighted progress being made in China to reduce the emissions intensity of its economy. Measures include shutting down old, dirty coal-fired power plants, constraining coal consumption, supporting renewable energy and introducing pilot ETS programs . At a conference on Tuesday, Xie Zhenhua, the vice chairman of the National Development and Reform Commission, said China could spend nearly $US300 billion on renewable energy in the current five-year plan. He also confirmed that, in 2015, the government will gradually expand the carbon trading pilot program towards the creation of a national market. Australia doing its part In Australia, both the government and the Coalition support Australia’s international commitment to reduce emission by 15-25 per cent below 2000 levels by 2020, conditional on international action. The actions being taken by the European Union and countries such as the US, Canada and China demonstrate that this commitment will need to be formally triggered. It may not be as neat as many environmental activists might wish, but global action on climate change is well beyond the claims of sceptics and those opposed to Australia’s playing its part in this action. In April, 2011 Grattan Institute’s report, Learning the hard way: Australia’s policies to reduce emissions , concluded that only an economy-wide carbon price can achieve the scale and speed of reductions required for Australia to meet its 2020 commitments without excessive cost to the economy or taxpayer. Adoption of this approach by an increasing range of governments suggests that this conclusion is the right one. Tony Wood is Program Director, Energy at Grattan Institute. He owns shares in a number of companies, both directly and via his superannuation fund. Some of these could be impacted positively or negatively by the policies associated with this article. This article was originally published at The Conversation . Read more: http://www.businesss…n#ixzz2atkOUETC Continue reading
EU’s Carbon Pricing Strategy Takes A Potentially Fatal Hit
Posted by Anthony Harrington , July 29, 2013 If you believe that global warming is the biggest catastrophe and economic disaster coming our way, then attempts to retrofit measures to contain CO2 emissions onto a global industrial base that has evolved largely without regard to emissions (other than as pollution) is a hugely important task. Finding a way of putting a price on carbon is the obvious route to go. The EU set itself up to be the global leader in creating mechanisms for carbon pricing but its emissions trading scheme, which has been copied by a number of countries, including Australia, South Korea and some Chinese provinces, is now in disarray. A vote by the European Parliament in April effectively holed the EU’s carbon pricing scheme below the waterline, to quote a recent article in The Economist . There are basically two ways to get industry to reduce its carbon emissions . You can mandate it by law, in a command-and-control manner, using the power of the state to force compliance, with massive fines and even prison as the ultimate sanctions for non compliance. Or you can set a cap-and-trade policy and leave it to the market, which is what the EU has done. Under a cap-and-trade approach you set limits to the emissions of the heaviest producers and then allocates or auctions carbon credits to cover production up to the limit. Firms that manage to reduce their emissions below the limit will have surplus credits that they can sell to other companies. By lowering the limit over time, the government can bear down on emissions, gradually reducing them over time, while trading in carbon credits creates a true, market based per-tonne price for carbon. That, at least, is the theory. What the EU did not count on when it set up the scheme back in 2005 was that advanced markets would suffer a global financial crash which would lead to years of no-to-very-low growth. This resulted naturally in falling emissions and so to surplus numbers of credits washing about in what was supposed to be a limited-supply market. It is now obvious that the EU handed out far too many carbon allowances from day one, back in 2005, and every year since, to the point where, according to The Economist , there is now a surplus of about 1.5 to 2 billion tonnes of carbon allowances in the system, causing the price per tonne to drop from twenty euros in 2011 to just five euros a tonne in 2013. The EU’s solution to this was a plan to withdraw some 900 million tonnes of carbon allowances off the market, with the idea of reintroducing them at some unspecified point in the future when the price per tonne of carbon had firmed up. The idea was dubbed “backloading” by the EU. Constraining supply has always been a good way of driving up price and since the whole market is artificially created there is probably no logical reason why the EU shouldn’t be able to tinker with the scheme to firm up prices. But the EU needed the European Parliament’s approval to put this scheme into action and on 13 April 2013 the European Parliament rejected the idea. The price of carbon sank like a stone, bottoming at under 3 euros. Since the International Energy Agency is warning that the price of carbon needs to be at least fifty euros to be effective in moving power generation companies away from coal to gas and renewable sources, this does not look hopeful for the EU’s best lever against global warming. There is now a serious question mark over the future of emissions trading schemes generally, which is not particularly helpful for California, which introduced its cap-and-trade scheme in January 2013 . The Californian scheme raised far less, by way of auctioning of carbon credits, than State authorities had anticipated and the tribulations of the EU scheme will not go unnoticed. Australia had been planning to link its cap-and-trade scheme to the EU’s scheme, creating an international trading market in carbon allowances, but that too, now looks rather unappealing. Right now the EU’s ETS scheme looks like no more than a rather useless additional “green” tax which the power companies simply pass on to the consumer. As a behaviour changing mechanism, it is dead in the water until and unless the EU finds a way of shoring up the price. Unfortunately for the EU no one actually wants carbon in the way that they want gold. The market is entirely artificial and carbon allowances, as a tradable asset class have just given a graphic illustration of what is meant by “political risk”. Continue reading
