Schafer rules out penalty-free early release of C.R.P. acres

by Jay Sjerven
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WASHINGTON — There will be no penalty-free, early release of Conservation Reserve Program acres this fall. Secretary of Agriculture Ed Schafer on July 29 stated, "After carefully considering recent crop reports and weather conditions, the price trends we are seeing in grain markets and the likelihood of increasing land for crop production, we have decided not to allow the penalty-free release of C.R.P. land at this time."

Producers and the food and feed industries, in response to expanding U.S. and world demand for grains and oilseeds, recently intensified long-standing efforts to encourage the department to allow producers with acres enrolled in the C.R.P. that could be farmed in an environmentally responsible manner to withdraw those acres from the program without penaltybefore the contracts idling the acres expired. Currently, the only way producers may withdraw acres from the program before their contracts expire is to repay all annual rental payments and other benefits they received plus interest and a penalty. For most producers, the cost of withdrawing acres is prohibitive.

The C.R.P. is the nation’s principal farmland conservation program. It was established by the 1985 farm bill with the initial aim of withdrawing the most highly erodible and otherwise environmentally sensitive acres from production. Over the years, many acres acknowledged to be cropland that could be farmed in an environmentally responsible manner were enrolled. Currently, 34.7 million acres are idled under the program by means of 10-year or 15-year contracts.

Mr. Schafer discussed factors the department considered in reaching its decision. He said the damage and disruption caused by floods in the Midwest in June will be less than initially thought and the corn crop this year should be the second largest produced in the United States. Grain and oilseed prices recently declined from record highs in response to good growing weather for wheat and the fall crops. He said the price decline "is helpful to the livestock industry and will allow current C.R.P. contract holders to make informed decisions about whether they want to take an early exit from the program."

Mr. Schafer pointed out in the 2008 farm bill that Congress lowered the cap on the total number of acres allowed in the C.R.P. in fiscal years 2010, 2011 and 2012 to 32 million acres from 39.2 million. As a result, program enrollment will have to shrink.

"And looking out over the next few years, we have 1.1 million C.R.P. acres scheduled to expire on Sept. 30 of this year, and that number jumps to 3.8 million acres on Sept. 30, 2009, and then 4.4 million acres on Sept. 30, 2010," Mr. Schafer said. "So, large blocks of land will be available for other uses, if landowners choose to pursue them."

He pointed out this past spring, the number of acres withdrawn early, with financial benefits being repaid by the producers, ran more than 50% higher than last year.

"So where this option makes economic sense to contract holders, they clearly are willing to use it," he said.

Senator Tom Harkin of Iowa, chairman of the Senate Committee on Agriculture, Nutrition and Forestry, agreed with the U.S.D.A. decision and said, "There are existing rules covering early exit from C.R.P. contracts, and a good number of producers who wanted to take land out of C.R.P. early have paid the penalty. Releasing land from C.R.P. now without any penalty would have been unfair to those who paid the penalty."

The National Grain and Feed Association, one of the principal proponents of a penalty-free, early-out option for producers holding C.R.P. contracts, was deeply disappointed with the department’s decision, said Kendell W. Keith, president. Mr. Keith said penalty-free, early outs were a prudent policy response necessary to give producers the flexibility to help relieve the precariously tight supply situation confronting grain and oilseeds markets.

"The C.R.P. simply is the most readily available tillable acreage to produce more grains and oilseeds," Mr. Keith said. "There is exploding demand globally for food, feedstuffs and biofuels that the U.S. can no longer ignore. We believe the administration should adopt policies that signal that the U.S. still wants to compete internationally in grain, livestock and meat to help feed a hungry world."

Robb MacKie, president and chief executive officer of the American Bakers Association, said, "U.S.D.A. missed another opportunity to relieve American families from spiraling food costs."

Mr. MacKie said while there are many factors pushing food prices higher that are beyond the control of government, the amount of productive acres available for planting is within the control of the U.S.D.A.

"It is outrageous for the U.S.D.A. to continue to ignore the plight of consumers, bakers and even farmers by refusing to take action to alleviate the food price crisis," he said. "How expensive does bread have to get for action to be taken, $5 or $6 a loaf?"

This article can also be found in the digital edition of Food Business News, August 5, 2008, starting on Page 1. Click here to search that archive.

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