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FEDERAL RESERVE BANK OF KANSAS CITY ISSUES STATEMENT ON GLOBAL WARMING'S EFFECTS ON AGRICULTURE

 FEDERAL RESERVE BANK OF KANSAS CITY ISSUES STATEMENT
 ON GLOBAL WARMING'S EFFECTS ON AGRICULTURE
 KANSAS CITY, Mo., May 27 /PRNewswire/ -- The Federal Reserve Bank of Kansas City today issued the following statement:
 The corn belt drifting northward? Food prices rising as the nation buys more of its food from abroad? Though unlikely today, these are just some of the potential costs global warming could bring in the decades to come. Because agriculture is conducted mostly outdoors, it will bear the biggest brunt of global warming.
 If carbon dioxide levels double by the middle of the next century as some scientists predict, the earth's temperature could rise an estimated 4.5 degrees. Such a warming could radically change food production around the world.
 Scientific opinion is divided on how much and how soon the climate might change, but the social costs of change could be big. Policymakers would be well-advised to prepare the nation's vital food industry now for an uncertain future climate. The United States is considering measures to do just that.
 When U.S. delegates gather with other world leaders in Rio for next month's "Earth Summit," they will have in hand a program of specific policy measures that can help U.S. agriculture adapt successfully to the threat of global warming.
 A review of that program appears in the current issue of Economic Review, a research journal published by the Federal Reserve Bank of Kansas City.
 The program, formulated by a panel commissioned by the U.S. Department of Agriculture, lays out a strategy for investing in and managing 10 key agricultural assets. Such a portfolio approach, its developers say, would enable U.S. agriculture to prepare for an uncertain future climate and at the same time, head off serious social costs later if global warming does occur.
 Mark Drabenstott, a vice president and economist at the Kansas City Fed, was one of three economists on the 11-member panel assembled by the Council for Agricultural Science and Technology (CAST). He summarizes the panel's major findings and recommendations for the Economic Review.
 In his article, "Agriculture's Portfolio for an Uncertain Future: Preparing for Global Warming," Drabenstott notes that the key problem in preparing for climate change is uncertainty.
 "The climate seems likely to change," he writes, "but how soon or how much, we do not know. We do know that global warming poses a bigger threat to agriculture than to any other industry. If the climate changes, there will be social costs to the nation and the costs could be large. A prudent way to hedge the risk of those costs is to hold a diverse portfolio of assets and make sure we have the flexibility to use them."
 U.S. agriculture has a strong portfolio of 10 climate change assets. But the nation must take steps to strengthen them and make them more flexible. Diversity in the portfolio is key because no one knows which assets will be needed most in tomorrow's climate. Flexibility is needed to shift from one asset to another as the climate changes.
 The portfolio would include these assets and management strategies:
 -- Land: reform agricultural policy to encourage flexible land use;
 -- Water: reform markets to encourage wiser use and introduce measures to enhance efficiency;
 -- Energy: make energy more efficient in food production, develop new biological fuels, and find ways to stash more carbon in trees and soil;
 -- Physical Infrastructure: maintain and improve storage and distribution systems;
 -- Genetic Diversity: encourage continued preservation and cataloging of plant and animal genes and conduct further research on alternative crops and animals;
 -- Research Capacity: broaden the nation's research agenda to include climate change, encourage private research on adaptation, find farming systems that can be sustained in new climates, and develop alternative food systems;
 -- Information Systems: improve communications for global weather data and develop technology to encourage the exchange of agricultural research;
 -- Human Resources: strengthen rural education (especially continuing education) and make flexible skills the hallmark of agriculture's human resources;
 -- Political Institutions: harmonize agricultural policies and institutions so that compatible behavior among various groups is assured; and
 -- World Market: promote freer trade and avoid protectionism.
 The CAST panel stresses that assembling such a portfolio and making the recommendations work will not be free. Yet the outlay for many of the actions requires only a small public investment today and could mitigate severe social costs tomorrow.
 "Such a portfolio," Drabenstott says, "offers the best chance for agriculture to adapt successfully to whatever climate unfolds. The actions outlined in the report, if adopted, will pay economic and social dividends even if the climate stays the same."
 Drabenstott's article also describes the greenhouse effect in some detail, notes the small part U.S. agriculture plays in emitting greenhouse gases, and discusses the much more significant role it could play in reducing the amount of greenhouse gases overall through reforestation and conservation tillage practices.
 The CAST report, titled "Preparing U.S. Agriculture for Global Climate Change," will be released at the end of May.
 -0- 5/27/92
 /CONTACT: Barbara Sagraves, 816-881-2240, or Lowell Jones, 816-881-2797, both of the Federal Reserve Bank of Kansas City/ CO: The Federal Reserve Bank of Kansas City ST: Missouri IN: FIN SU:


TQ-TS -- NY003 -- 4111 05/27/92 09:16 EDT
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