Vilsack: USDA Focused on Climate Future

Commodity Credit Corp. May Play Role in USDA Climate Efforts

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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U.S. Secretary of Agriculture Tom Vilsack said on Monday that current carbon markets are not designed for farmers. (DTN file photo)

OMAHA (DTN) -- As the Biden administration ramps up efforts on climate, U.S. Secretary of Agriculture Tom Vilsack said on Monday USDA will play a major role in building market opportunities for farmers.

Exactly what the future looks like, he said during the Agri-Pulse Ag and Food Policy Summit, will depend on what the agency learns from farmers along the way.

The use of funding through the Commodity Credit Corp. is taking center stage on climate in policy debates among members of Congress and USDA officials.

How might the CCC be used?

Vilsack said the CCC may provide an opportunity to establish a carbon bank for farmers.

"Remember, the charter of the Commodity Credit Corp. speaks specifically to markets, stabilizing markets, and yes, creating markets," he said.

"So, it's really designed for this kind of opportunity. I want to assure everyone who's watching this, though, that we are very conscious of the responsibilities that Commodity Credit Corp. as it relates to farm bill programs, and making sure that there's adequate resources to make sure that we can pay when we have to, under the farm bill programs."

Vilsack said there is "significant capacity" in the CCC and "if we fail to take the opportunity to utilize it to find out how things could potentially work to improve or create a new market opportunity for farmers, then I think we probably haven't done what we need to do on that new market side of the equation."

House Ag Committee Ranking Member Rep. Glenn Thompson, R-Pa., said during the summit he and many other lawmakers are opposed to using the CCC as a carbon bank. Thompson said he doesn't believe the secretary of agriculture has the authority to do so.

The concern is using CCC funds to establish a carbon bank would interfere with other USDA programs important to farmers. Currently, CCC funds are capped at $30 billion.

"If it would make our rural communities, you know, struggle financially, nobody intended to do that," Thompson said.

"I think this concept does have bicameral and bipartisan opposition, and I recommend that USDA not pursue climate action unilaterally."

Private carbon markets have experienced some success, he said, "and they're, I think, at the start of what we're going to see some very exciting things. And I'd hate to see the federal government bigfoot around in this new and growing market."

House Agriculture Committee Chairman Rep. David Scott, D-Ga., said during the summit the committee's first hearing focused on climate change in agriculture for a reason. The committee is looking at how carbon markets might benefit farmers.

"We've got to make sure that our farmers are not being taken advantage of; it is a new industry," Scott said.

He added, "If we don't set some guardrails, I'm mighty afraid that some disadvantages may take place. I certainly don't have the answers. This is why I say agriculture is where we've got to have the point of the spear. We want to make sure that our farmers are not being taken advantage of but are being really productive and understand what they're getting into."

CCC A TOOL

Vilsack said the CCC is just one tool, and using CCC funds for carbon programs would depend on the flexibility of the program.

The CCC is funded on a 10-year basis. So, if the fund increases from $30 billion to $50 billion, he said it would be scored as a $200-billion increase across 10 years.

"But, again, I don't think we need to get into that discussion as it relates at least to a carbon bank," he said, "until we know for a fact how it could be set up, whether we're going to use CCC and, if so, to what extent that doesn't compromise our ability to meet our other responsibilities."

Vilsack said the existing carbon market isn't set up for farmers. It requires a lot of paperwork, he said, and payments are not high enough to "overcome the hassle that's connected with the carbon market anyway."

The current market includes about 134 million carbon credits outstanding, Vilsack said, with between 2 million and 3 million directed toward agriculture.

"Whatever carbon bank is established has to be set up in a way that speaks to farmers' needs that is really designed, if you will, for farmers and about farmers," he said.

Last week, USDA posted to the Federal Register a number of questions for farmers about how to set up a carbon bank, among other issues.

Vilsack said USDA needs to find out if such a bank would pay for carbon credits, guarantee credit prices, finance sequestration and carbon-capture projects.

"How can we establish it in such a way that farmers are excited about this opportunity," he said. "How do we set it up in such a way that it speaks to all farmers of all sizes."

CFAP FUNDS

Agriculture sectors left out of previous Coronavirus Food Assistance Program aid since 2020 may have some good news on the way.

Vilsack said USDA expects to be making an announcement in the coming days about additional CFAP aid on the way.

"I expect and anticipate, in the next week or so, that we're going to be able to lay out the plan in terms of what we're going to try to do over the course of the next several weeks and months as it relates to CFAP," he said.

The U.S. biofuels industry, for example, has not received CFAP aid despite having nearly half of its production shut down or cut back at one point during the height of the COVID-19 economic shutdown, https://www.dtnpf.com/….

Most recently, the needs of custom cattle feeders have come to light, https://www.dtnpf.com/….

"We've been taking a look at the wide variety of needs that need to be met by the resources that have been provided, and so we have work to do on this. But I'm positive that we're going to provide a wide range of assistance and help," Vilsack said.

BUILDING AG MARKETS

The Trump administration reached trade deals with both China and Japan during the past four years. China is obligated under the phase-one deal to purchase $50 billion in U.S. commodities.

Vilsack said the Biden administration will be focused on expanding markets not just through trade but in climate. The United States-Mexico-Canada Agreement opens opportunities for U.S. dairy farmers, wheat farmers in Canada, as well as markets in Mexico.

"There are implementation issues, to make sure that those markets remain open," Vilsack said.

"It's also important for us to continue negotiations with our friends in Japan. Our beef producers are now currently faced with the fact that we've met the quota (242,000 metric tons). And, as a result, for a period of time, we may be at a slight disadvantage in terms of beef sales to Japan because of the nature of the phase-one agreement that was reached with Japan. We need to begin the process of negotiating phase two, to open up that beef market, which is an incredibly important market for us. Obviously, the phase-one market in Japan was important, but we need to go to the next level."

In addition, Vilsack said USDA under his leadership will continue to monitor China's efforts to reach phase-one agreement purchases. Though the Chinese have yet to reach the trade goals, work continues on that front.

RESILIENT SUPPLY CHAIN

Vilsack said USDA will be working to create local and regional markets for farmers domestically.

The COVID-19 economic shutdown exposed weaknesses in the food supply chain, he said.

"We found, I think, during the course of COVID, that our supply chain needs to be bit more resilient. And so, it is necessary, I think, for us to look for ways in which we can provide opportunities for local and regional markets," Vilsack said.

Todd Neeley can be reached at todd.neeley@dtn.com

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Todd Neeley