Global Warming Treaty Called ‘Major Threat’ to Small Family Farms U.S.

Published January 1, 1999

The global warming treaty negotiated by the Clinton-Gore administration in Kyoto, Japan, would decrease farm income by 24 to 48 percent and cause the demise of hundreds of thousands of family farms, according to a new study from The Heartland Institute.

The study, “The Kyoto Protocol and U.S. Agriculture,” was written by Terry Francl, senior economist and commodity specialist for the American Farm Bureau Federation; Rich Nadler, editor-in-chief of K.C. Jones magazine in Kansas City; and Joseph Bast, president of The Heartland Institute.

Francl and his coauthors note that farming is an energy-intensive process. Fuel and oil costs account for about 30 percent of a typical farm’s total energy bill, but the remaining 70 percent lies hidden in the prices of manufactured inputs, such as fertilizer and pesticides. For that reason, proposals to tax fossil fuels or cap carbon dioxide emissions would raise the cost of many farm inputs.

The Clinton administration contends the requirements of the Kyoto Protocol could be met by imposing the equivalent of a 25 cents-per-gallon tax on gasoline. Other sources place the cost much higher, between 60 and 68 cents per gallon. To make their analysis as conservative as possible, the new study’s authors chose two scenarios: a low estimate of 25 cents and a high estimate of 50 cents.

The 25 cents-per-gallon tax would reduce the average farmer’s net profits by at least 10 percent (for soybeans) and as much as 40 percent (for hogs). A 50 cents-per-gallon tax reduces net profits on soybean production by 20 percent, and net profits on hogs by a dramatic 84 percent. Milk producers would see net profits fall by over half.

Total U.S. farm production expenses, according to the study, would rise by over $10 billion if gasoline taxes were raised 25 cents a gallon, and by more than $20 billion if taxes were raised 50 cents a gallon. The lower figure equals 24 percent of net farm income, while the higher figure equals 48 percent of net farm income.

“The Kyoto Protocol would decrease U.S. farm income by 24 to 48 percent, destroying hundreds of thousands of family farms,” conclude the authors. “The significant decline in farm income would force hundreds of thousands of small farmers, who typically have a higher average cost of production, to sell to large farmers or go out of business.”

“Not only would this hurt lenders, but it would also have an adverse economic impact on small towns and rural America in general.”