Tag Archives: southern
Slowing Midwest Land Prices Stoke Ag Sector Fears
The slowdown forecast for farmland prices in the southern US Plains may already have struck in the Midwest, where values put in their worst performance in four years, amid fears over prospects for the farm machinery market too. Farmland values in states including Iowa, the top corn and soybean producing state, and second ranked Illinois showed no growth in the April-to-June quarter over the same period a year before, the Federal Reserve’s Chicago bank said. “The last time there was no quarterly increase in agricultural land values was in 2009,” the bank said, in a report which showed a decline in Illinois prices. And while year-on-year growth remained strong, at 17%, the bank forecast that this figure looks set to decline, with lenders surveyed expecting values to remain flat. “While the farmland values on a year-over-year basis still appeared to be soaring, changes in farmland values on a quarterly basis may be presaging shifts in the year-over-year pattern in the latter half of 2013.” ‘Important shift’ The comments follow a report from the Kansas City Fed saying that while values in its area, which includes Nebraska and the top wheat-growing state of Kansas, continued to climb in the latest quarter, many bankers feel prices may now “have peaked”. The concerns reflect ideas that the weaker crop prices expected for this year’s crop will, in depressing returns, reduce the appeal of farmland, and farmers’ own financial firepower for deals. Furthermore, data from both Chicago and Kansas City banks shows the first rise in interest rates in two years – albeit to levels still low by historical standards. “The uptick in interest rates on farm loans may mark an important shift in the district’s agricultural credit conditions,” the Chicago Fed said. There was a feeling that “the anticipation of lower crop revenues – especially when combined with potentially rising interest rates on farm loans – portended softness in future farmland values”. ‘Higher and higher unsold inventory’ Ideas of a market slowdown were supported separately by data from Creighton University showing the rise in farmland prices across major agricultural states, including Illinois, Iowa and Kansas, decelerating in August for the eighth time in nine months. “Lower farm commodity prices are slowing growth in farmland prices,” Ernie Goss, Creighton economics professor said, adding that he expected “farmland price growth to continue to weaken as agriculture commodity prices soften.” The weakened agricultural economy had already pushed the farm equipment sector into decline, with a market index falling to 49.2 to stand below the neutral level of 50.0 for the first time in four years. “I am concerned that agriculture equipment dealers may find themselves with higher and higher unsold inventory,” Professor Goss said. “The direction we are seeing in agriculture commodity prices, while helpful to livestock producers, is pushing farmers to pull back on their equipment purchases.” ‘Don’t see Paul Volcker’ The comments follow a lively debate at a Deere & Co investor meeting on Wednesday, at which analysts repeatedly questioned the tractor maker’s forecast of only a small fall in 2014 in farm cash receipts, a key indicator of machinery demand. However, there are few expectations of a 1980s’-style industry collapse, which was fuelled by a rapid jump in interest rates. “I can’t see any way this time that people are going to have to be paying more than 20% on their borrowings as they did last time,” a leading agricultural commentator told Agrimoney.com. “I don’t see Paul Volcker [then Federal Reserve chairman] standing on the sidelines.” Continue reading
Profits From Forests? Leave The Trees Standing
Financially, using the NSW Southern Forestry Region for carbon credits is a better option than continued harvesting. Flickr/Tony Rodd In debates about climate change and the mitigation of greenhouse gas emissions, there is a widely-held belief that market mechanisms, like the Labor government’s carbon pricing scheme, will reduce emissions in the cheapest possible way. As a matter of pure theory, this is correct but, in practice, it depends on what is included and excluded from the scheme and how it is designed. One of the most commonly overlooked sources of carbon abatement is public native forestry, which is currently excluded from the carbon pricing scheme and the government’s offset scheme, the Carbon Farming Initiative . This is despite the fact that stopping the harvesting of public native forests is one of the cheapest ways to reduce Australia’s emissions. A struggling industry For the past two decades, the Australian native forest sector has been in decline, primarily because of increased competition in domestic and international wood product markets. Starting in 2008, an already bad situation took a turn for the worse as the global financial crisis choked-off demand for native woodchips and solid wood product consumption slumped. Since then, the native woodchip sector has struggled to stay afloat, a fact reflected in the financial performance of state forest agencies. For example, over the period 2009 to 2012, the Forests Corporation of NSW (formerly known as Forests NSW) made a total net loss before tax (excluding net fair value adjustment, asset revaluation and impairment of assets) of $85 million, or $21 million per year . In total, the native forest sector, which takes in growing, harvesting, processing and manufacturing wood products, now accounts for a mere 0.1% of Australian Gross Domestic Product — roughly $1.5 billion per year. The emergence of carbon markets offers an alternative use for native forests. Rather than chopping them down for little financial return, the forests could be left standing in order to generate carbon credits. Opportunity for carbon credits The Australia Institute recently conducted a financial analysis on the Southern Forestry Region of New South Wales , which compared the net financial benefits from harvesting and processing native logs to the net financial benefits that could be derived by using the forests to generate carbon credits. For the period 2014-2033, the Forestry Corporation of NSW and relevant hardwood processors were estimated to suffer losses of between A$40 million and A$77 million. In contrast, stopping harvesting could generate 1.7 million carbon credits per year for the NSW Government over the period 2014-2033, and the sale of these credits (accounting for transaction and management costs) is likely to provide net benefits of approximately A$222 million. The simple message is, if the public native forests of this region continue to be used to produce woodchips and sawnwood, the industry and taxpayers will lose money. If the forests are used for carbon credits, they are likely to return a profit for the community. Some uncertainties Leaving our trees standing is a cheap way to reduce carbon emissions. Flickr/Poytr Of course, any analysis of this nature comes with caveats. For starters, conditions in domestic and international wood product markets could improve, or new markets might emerge, reviving the fortunes of native forest operators. This is possible but unlikely. There is also the challenge of accessing carbon credits. After recent changes to international accounting rules, stopping or reducing harvesting in native forests will now provide credits that can be used by the Australian government to meet its international mitigation commitments. However, as noted, projects involving stopping harvesting in public native forests are not currently eligible to generate carbon credits under the Carbon Farming Initiative. The federal government is expected to change this rule in the near future and thereby ensure that state governments are able to benefit from improvements in forest management practices. Finally, even if the Carbon Farming Initiative is expanded to include these projects, there are uncertainties surrounding the calculation of carbon credits and the price they will attract in relevant markets. Despite these uncertainties, the analysis shows that even under adverse circumstances, using the forests for carbon credits is likely to bring greater financial returns than continued harvesting. While debate about cutting greenhouse gas emissions usually focuses on the energy sector, the reality is that some of cheapest ways we can cut emissions is through changes in the way we use our forests and landscapes. Preserving native forests is no longer just for tree huggers. The time has come when leaving forests standing makes sense for purely financial reasons. Continue reading
Southern U.S. Logging Soars To Meet Foreign Biofuel Demand
By Tanya Dimitrova , special to mongabay.com June 06, 2013 In order to meet the European Union’s goal of 20% renewables by 2020, some European utility companies are moving away from coal and replacing it with wood pellet fuel. The idea is simple: trees will regrow and recapture the carbon released in the burning of wood pellets, making the process supposedly carbon-neutral. But just like other simple ideas, it misses out important details that can turn it on its head. The catch is that the process could be carbon neutral only after the trees regrow to the original size. In the case of cutting 100-year old forest, it would take a century. If the forest is clear-cut, it may never regrow, unless replanted. If the new forest plantation is composed by different or fewer tree species, it will most likely store less carbon than the original forest. Finally, if the forest ecosystem was rich and valuable, as for example a wetland forest, its wildlife may be lost forever. Cutting old-grown forests, wetland forests and clear-cutting is illegal or highly regulated in most of Europe. In the Southern U.S., however, it is perfectly legal. That is where the large wood pellet producers are staging their operations. A Maryland-based company Enviva is one of the top five largest pellet producers in the US. Its facilities in North Carolina and Mississippi currently produce and export to Europe more than half a million tons of wood pellets every year. The company plans to triple its output in the next few years to meet ever-increasing demand for wood biomass fuel, mainly from European utilities, but also from U.S. power plants. Enviva’s facility in Ahoskie, North Carolina. The photograph shows that the company is using large quantities of whole tree trunks for its pellets. Photo by: Southern Environmental Law Center. Enviva claims that it produces wood pellets only from low-grade wood resources such as chips, bark, sawdust by-products, treetops, branches, and other forestry debris remaining after the tree trunks from commercial forests have been shipped for construction material. These unprocessed residues would most likely otherwise go unused as a resource. Additional biomass sources currently include low-grade wood fiber and small logs. However, North Carolina private loggers and land-owners interviewed for a Wall Street Journal investigative report last week admitted that trees more than 100 years old, including some from wetlands, does wind up in pellet plants. “Enviva, now they need wood bad enough that they’re paying for some swamp logging,” one logger said to the WSJ reporter. The company did not respond to an information request by Mongabay this week. Scot Quaranda from Dogwood Alliance, and NGO working on protecting Southern forests, explains that there is little to no regulation impacting the management of forests in the Southern U.S.. Unfortunately, 90% of the forests are privately owned and lack legal protection. Most of the management guidelines that are on the books are completely voluntary and do not include limitations to large-scale clear-cutting, conversion of natural forests to plantations, logging of wetlands, use of toxic chemicals, or logging of endangered forests. That is why Dogwood Alliance and the Natural Resources Defense Council have launched a new campaign, dubbed Our Forests Aren’t Fuel . “We focus our work on the marketplace, because in the South, big corporations drive both the destruction and changes in forest practices,” says Quaranda. The irony is that European utility companies restrict the import of wood pellets to developed countries such as the U.S. exactly in order to avoid illegal logging. “The US forest sector is well set up and managed, meets our sustainability criteria and the supplies of sustainable biomass are plentiful,” says Melanie Wedgbury from Drax Power—the largest British electrical power generation company. Last year Drax announced plans to transform itself into a predominantly biomass-fuelled generator. The company is converting three of its six generating units to run on 100% biomass instead of coal. According to a BBC report , Drax will be burning seven million tons of plant material a year. Bayou forest in Lousiana. Photo by: Rhett A. Butler. REFERENCE: Searchinger, Timothy D., et al. “Fixing a critical climate accounting error.” Science 326.5952 (2009): 527. Read more at http://news.mongabay…kycyOfw7HjE2.99 Continue reading
