C.R.P. under scrutiny as market presses for more acres

by Jay Sjerven
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Demand for corn from the ethanol sector prompts call for reforming conservation policies

WASHINGTON — Current and potential explosive growth in the demand for corn for use in manufacturing ethanol has directed attention to the nation’s conservation policies, in particular the Conservation Reserve Program. Adjustments to the C.R.P. in the 2007 farm bill were viewed as essential by several grain industry organizations concerned that if the market is not allowed to bid back into production many of the 36.7 million acres currently idled under the C.R.P., the increased demand for corn for ethanol production could significantly reduce acres planted to other crops and threaten the profitability of other industries heavily dependent on corn, chiefly the livestock industry.

The C.R.P. was established by the Food Security Act of 1985 to assist owners and operators in conserving and improving soil, water and wildlife resources on their farms and ranches by converting highly erodible and other environmentally sensitive cropland and marginal pasture to long-term resource-conserving covers.

Under the program, farmers apply to enroll cropland they deem highly environmentally sensitive. Their offers are assessed by means of the Environmental Benefits Index developed by the U.S.D.A. to ensure the most sensitive acres are enrolled or reenrolled first, with other offers considered in order of their E.B.I. scores. If a producer’s acres are accepted for enrollment, he or she is prohibited from producing crops on the land and instead must put the acres into approved conserving uses. Farmers receive annual payments while their cropland is idled under a 10-year or 15-year contract (the 15-year contracts applying to wetlands).

Under current law, C.R.P. enrollment is capped at 39.2 million acres. Actual enrollment at the end of October 2006 was 36.7 million acres, the highest on record. Contracts covering 16 million acres expire on Sept. 30. But the U.S.D.A. already is processing offers to reenroll or extend expiring contracts on at least 13 million of those acres. Not all the acres retained in the C.R.P. will qualify for full 10-year or 15-year contracts. Under a change authorized by the Bush administration, only those acres with E.B.I. scores in the 80th to 100th percentile will be reenrolled under full contracts. Other acres under expiring contracts will be considered for contract extensions ranging from two to five years, based on their E.B.I. ratings.

This approach may provide some flexibility for Congress to adjust the C.R.P. in the next farm bill and perhaps allow more acres to exit the program sooner than they otherwise would. But it will provide few new acres for corn or other production in the 2007 crop year.

While the grain industry has supported efforts to remove highly erodible cropland from active production, it has been critical of the C.R.P. for idling acres that could remain in production if farmed in an environmentally sustainable manner.

"Secretary of Agriculture Mike Johanns recently has acknowledged that U.S.D.A. may need to release some acres from the C.R.P., but the administration has not announced any firm game plan to do so, and some folks at U.S.D.A., presumably those linked to C.R.P. administration, are suggesting the federal government needs to conduct a lengthy rulemaking and possible environmental impact assessment to determine whether to provide any flexibility for the market to bid for currently enrolled C.R.P. acres," said Kendell W. Keith, president of the National Grain and Feed Association. "But policy change is desperately needed. We need to build as much production flexibility into farm programs as possible. We cannot afford the luxury of keeping 35 million to 40 million acres in the C.R.P. where they are locked away for 10 years or longer. If the C.R.P. truly is a ‘reserve,’ it should be available for crop utilization when needed. It would appear we’ve about reached that point. If the program really isn’t a ‘reserve,’ then the name of the program should be changed."

In recent testimony before the House Committee on Agriculture, Michael Malecha, senior vice-president, US BioEnergy, Inver Grove Heights, Minn., speaking on behalf of the N.G.F.A., said, "Over the life of the next farm bill, it is entirely conceivable that the U.S. will require an additional 8 million to 10 million planted acres of corn to avoid triggering sharp declines in livestock profitability, supply interruptions to long-term export markets and supply shortages that could hamper ethanol profitability."

Mr. Malecha urged Congress in the next farm bill to reduce the current statutory cap on C.R.P. enrollments, place a statutory limit on the annual authorized funding level for C.R.P. and/or alter how rental rates are established to ensure government does not over-subsidize land-idling programs to the detriment of economically viable land-use options.

"Government bidding for productive C.R.P. acres in competition with the private sector hampers efficiency and dampens U.S. agricultural growth," Mr. Malecha said. "Regardless of the method, it is critical for the long-term viability of the U.S. grain and oilseed industry to provide sufficient flexibility to bring idled cropland back into production and limit idling of productive land when market conditions warrant."

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