Conservation Reserve Program acreage will not be released early without penalty, the USDA announced Tuesday afternoon.
“After carefully considering recent crop reports, weather conditions, the price trends received in the grain markets and likelihood of increasing land for crop production, we’ve decided not to allow the penalty-free release of CRP land at this time,” U.S. Secretary of Agriculture Ed Schafer.
“Despite the damage and disruption caused by the very severe floods that hit the Midwest last month, indications so far are that the impact on this year’s corn and soybean crops will be less than what was originally feared.”
Markets have “reacted favorably to the good growing weather we’ve been experiencing in recent weeks and encouraging reports on crop conditions. Cash prices for corn are down 25 percent and (down 14 percent for) soybeans from their record highs just last month.”
Flood damage and cropping delays aside, the corn crop is “on track to be the second largest on record with an anticipated harvest of nearly 79 million acres.”
Schafer said the livestock industry is being helped by the current “easing of prices … and will allow current CRP contract holders to make informed decisions about whether to make an early exit from the program.”
Another factor in the USDA decision: millions of CRP acres will soon be leaving the program anyway. In past legislation, Congress mandated the CRP program acreage drop from 39.2 million acres to 32 million. As a result, “the 34.7 million acres now enrolled in the program will have to shrink.
“Looking out over the next few years, 1.1 million CRP acres are scheduled to expire (this) Sept. 30. That number jumps to 3.8 million acres on Sept. 30, 2009. (In 2010, another) 4.4 million acres will” drop from the CRP.
“So, large blocks of land will be available for other uses if landowners choose to pursue them. Owners also have the option of taking their acres out of the program in exchange for returning all payments they’ve received, plus interest and a penalty. Some are doing so now.”
This spring, the number of CRP acres withdrawn early ran 50 percent higher than in 2007. “So where this option makes economic sense to contract holders, they’re clearly willing to use it.”
Asked for more specifics on the withdrawal figures, John Johnson, deputy administrator for farm programs with the Farm Services Agency, said only 19 months of data exists. “This spring — in April and May — we saw (CRP withdrawals) peak. In April, just over 34,000 acres paid their way out of CRP. In May, almost 37,000 acres (did the same). Over the 19-month period, the average per month exiting CRP by buy-out was just over 15,000 acres.”
Schafer concluded: “We believe the decision we’re announcing strikes the best possible balance between supporting programs that protect our natural resources and meeting the nation’s need for grain production.”