NGFA Urges Congress to Reform CRP During 2012 Farm Bill

Seventy-two national and state agribusiness, meat, livestock and poultry organizations have told Congress that historically tight supplies of grains and oilseeds make it imperative that farmers be allowed to remove from the Conservation Reserve Program (CRP), without penalty, land that can be cropped in an environmentally sustainable way.

            In a letter submitted to all members of the House and Senate Agriculture Committees, the groups said a fundamental rethinking of the CRP during development of the 2012 farm law is justified by major concerns over providing sufficient quantities of grains and oilseeds to meet burgeoning U.S. and foreign market demand. 

         “Increasingly, this challenge of adequacy of grains and oilseeds is not simply a U.S. supply issue,” the letter said.  “It is a global concern where many nations are trying to provide an affordable food supply (and) finding it difficult to meet basic nutritional needs” of their people.  The organizations said that providing flexibility in rules governing the CRP is essential if the United States is “to respond to market signals and grow adequate grains and oilseeds to provide basic foodstuffs to world consumers.”

         Under the CRP, landowners enter into binding contracts with the U.S. Department of Agriculture (USDA) to idle land for 10 to 15 years.  Prohibitive penalties – including forfeiting all rental and cost-share payments received for the entire life of the CRP contract (encompassing any contract extensions), plus interest and liquidated damages – currently apply to CRP contract holders who wish to end their contracts prior to expiration.  USDA repeatedly has refused to utilize its authority under the 2008 farm law to waive such penalties.  The CRP currently represents, in acreage terms, America’s fourth largest crop – comprising approximately 31 million acres (roughly 15 percent of available U.S. farmland).

 The organizations’ letter to Congress also referenced several major risk factors for global grain supplies in 2011 and beyond that were identified in an accompanying 20-page paper authored by William J. Hudson, principal, The ProExporter Network, for the firm’s clients.  The paper, entitled “Expanding American Agriculture:  Can It, Should It and Will It Be Done?” was written for PRX commercial clients in the firm’s normal course of providing commercial opinion about the future of agribusiness and the outlook for capital investments. 

        The paper warned that a 5 percent reduction in corn yields in 2011 below trend – as occurred as recently as the 2010 crop – would create precariously low carryover stocks and force prices to increase even more to ration demand.  Among other factors cited by the paper as supporting the need for additional U.S. planted acreage were the following:

•    Absent increased planted acreage, the current low stocks situation will require record corn crops on a consistent basis in 2011 and beyond.  “Without acreage expansion, (the United States) needs record yields year after year to build comfortable stocks (levels),” the paper stated.

•  While U.S. corn yields have increased to about 2.5 bushels per acre per year since 1996, such yield growth generally has occurred during “extremely benign weather,” with the possible exception of 2002.  The paper noted that expansion of U.S. planted acres could help offset yield variability resulting from weather anomalies, particularly given tightening stocks-to-use ratios.  It noted that bad weather events have occurred at a rate of about four per decade during the last 50 years – including last year’s La Nina that adversely affected crops in Russia, Pakistan, Indonesia and Australia.  “In today’s context of low stocks…, it does not matter where the bad weather event occurs, the event will affect the world price of the commodity concerned, and the effect will spread to the whole family of crops,” the paper stated.   [Emphasis in original.]