Thursday, February 19, 2009

"Green Payments" in Agriculture

The Southwest Farm Press reported on a discussion by Secretary of Agriculture Vilsack about green payments in agriculture. In a nutshell, Vilsack is discussing the potential that agriculture receive payments for environmental amenities (for example, carbon sequestration) produced on farms. This would, theoretically, be in place of traditional farm income support payments (I say "theoretically" because existing programs rarely disappear when new programs are introduced; but may have to now given the financial mess we are in). Although I have long argued that this was the direction we were headed with farm programs, I do think two questions are relevant before embarking down this road:
  1. Current payments are related to factors such as farm size, crops, etc., that lead to a certain distribution of these payments across the country. Land values, equipment loans, etc., are tied to the existence of those payments. Changing payments to be based on environmental amenities is likely to result in a distribution of payments that is at least somewhat different than the current distribution, which could have impacts on land values, cropping patterns, etc. Do we understand this process well enough? Are we ready to accept the consequences of those changes?
  2. Green payments are presumably not tied to farm revenue, prices, production, or any other historical variable related to the farm. As such, the revenue these payments would provide are not counter-cyclical to farm revenue. Do we care if farm policy does not provide income risk protection?
These are but a couple of questions relevant to the debate that is likely to begin soon.