Reactions to CRP Early-Out Decision

July 29, 2008 07:00 PM

Pro Farmer Editors


Following are reactions to USDA's decision not to allow a penalty-free early-out on the Conservation Reserve Program for the 2009 crop season.

Check this link for more details on USDA's decision.

American Rivers: "We applaud Secretary Schafer for agreeing that we need to protect natural areas along rivers and streams in order to absorb flood waters and prevent future flood damage. USDA's decision will maintain natural flood protection and will continue to help protect the millions of people who live in riverside communities.”


"Decision makers at the local, state and federal levels have a responsibility to overhaul the way our nation prepares for and responds to floods. With climate change bringing more frequent and severe floods, business as usual won't work anymore. We need bold decisions that improve natural flood protection and protect our communities. Today's decision by the USDA is a good start.”



Pheasants Forever & Quail Forever: Pheasants Forever (PF) and Quail Forever (QF) support the U.S. Department of Agriculture's decision not to offer "early outs" to Conservation Reserve Program (CRP) contracts without penalty. Today's USDA announcement comes after months of speculation about early outs, which would have led to a multi-million acre loss of environmentally sensitive lands currently providing wildlife habitat, protecting water quality, and safeguarding soil resources. However, PF/QF warns of further trouble ahead for CRP, which has already seen 3 million acres leave the program with an additional 13 million more acres in line for expiration in the next three years.

"We are pleased with the USDA's announcement today, and thank them for protecting CRP's legacy for wildlife and natural resources," said Dave Nomsen, PF/QF's Vice President of Government Affairs. "However, there is no question CRP is in jeopardy of heading down the Soil Bank path if we don't address the program's economic viability given the landscape of today's agricultural market."

Often credited with producing the "glory days" for wildlife, the Soil Bank Conservation Reserve Program was terminated by the USDA in 1962. As Soil Bank contracts expired in the early 1970's, millions of acres of critical wildlife habitat were plowed fence row-to-fence row; causing wildlife populations to plummet. Not till the creation of CRP in 1985 did wildlife populations begin to rebound, bringing numerous environmental and landowner benefits as well.

CRP offers annual payments for 10-15 year contracts to participants who establish grass, shrubs, and tree cover on environmentally sensitive lands. Landowners receive CRP payments based on the soil rental rates of a given area. As the demand for crops increase, so does the value of a landowner's acres for row crop production; however, the CRP soil rental rates have not kept pace with the current agricultural economy.

"It is imperative for CRP soil rental rates to get updated immediately. Updated soil rental rates would keep our most environmentally sensitive acres in conservation, benefiting all of society through flood mitigation, protected water quality, as well as providing critical habitat for wildlife," explained Nomsen. "Additionally, USDA should continue to expand the CRP practices that are gaining momentum. The new SAFE practice has been met with widespread farmer enthusiasm. I'd like to again reiterate Pheasants Forever and Quail Forever's request for an additional 500,000 SAFE acres to maximize our conservation opportunity at present."

Environmental Defense Fund: U.S. Agriculture Secretary Ed Schafer's decision today against allowing the penalty-free early release of millions of acres of the land enrolled in the Conservation Reserve Program (CRP) will preserve the nation's most successful conservation program, according to Environmental Defense Fund. Some members of Congress and producer groups had lobbied the administration to release up to 24 million acres from CRP so the land could be put back into crop production. Currently, there are almost 35 million acres of land enrolled in CRP, but contracts for more than nine million acres of CRP land are due to expire over the next three years.

"Secretary Schafer should be commended for resisting calls to gut the nation's oldest and most successful farm conservation program," said Sara Hopper, director of agricultural policy for Environmental Defense Fund and a former staff member of the Senate Agriculture Committee. "Putting millions of CRP acres back into crop production would have resulted in the loss of billions of dollars in taxpayer investments in conservation and caused untold environmental damage, while providing little, if any, relief from high commodity prices."

CRP is a federal program designed to reward farmers who take fragile land out of production for 10 to 15 years and instead plant grasses or trees or restore wetlands. Up until now, CRP enrollees who terminated their contracts prior to the end of their 10- to 15-year terms had to reimburse - with interest - the federal government for the rental and cost-share payments they had received, plus pay a 25 percent penalty. Some members of Congress and producer groups had proposed that the USDA waive all these costs for program participants.

Lands are enrolled in CRP precisely because they are environmentally sensitive, highly erodible, and marginally productive cropland. While these lands are generally less reliable for producing row crops, they deliver significant public benefits by retaining soil and preventing erosion, cleansing polluted runoff, providing important wildlife habitat and serving as natural flood barriers. Wetland restorations on CRP lands function as an important safety valve, reducing peak flows during storm events by holding water, filtering it, and slowly releasing it into streams and groundwater.

Senator Tom Harkin (D-Ia.): Senator Tom Harkin (D-IA) today issued the following statement on Agriculture Secretary Ed Schafer's decision to maintain acres in the Conservation Reserve Program (CRP) and not allow penalty-free release from the program. Harkin is Chairman of the Senate Committee on Agriculture, Nutrition and Forestry and the author of the Conservation Stewardship Program (CSP).


"After the spring and early summer disasters throughout the Midwest, USDA rightly allowed emergency use of CRP land for grazing and for hay harvest beginning August 2. I believe Secretary Schafer has drawn a sound distinction between that emergency access versus offering an option for CRP contract holders unilaterally to cancel their contracts and put land back into crop production without any penalties or interest.


"There are existing rules covering early exit from CRP contracts, and a good number of producers who wanted to take land out of CRP early have paid the penalty. Releasing land from CRP now without any penalty would have been unfair to those who paid the penalty. Today's decision also protects the public's investment in conservation paid for through years' worth of CRP payments. We already expect that millions of acres will exit CRP over the next few years as contracts expire and landowners choose to return the land to cropping. This more gradual transition promises to sounder for conservation and for everyone with an interest in the CRP.”


National Grain and Feed Association: The National Grain and Feed Association (NGFA) today (July 29) expressed disappointment in the Bush administration's decision not to immediately authorize the penalty-free early release of acreage in the Conservation Reserve Program (CRP).

But the NGFA encouraged the administration to keep the door open to reassessing the situation, saying that CRP penalty-free early outs were a "prudent" policy response that is necessary to give producers the flexibility to help relieve the precariously tight supply situation confronting grain and oilseed markets.

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

Established in 1896, the NGFA consists of 935 grain, feed, processing, exporting and other grain-related companies that operate about 6,000 facilities that handle more than 70 percent of all U.S. grains and oilseeds.

The NGFA said continuing to rely on perpetual good weather in the United States is not a prudent policy response, particularly given strong domestic and world demand for grain-based products, including meat. The NGFA noted that if corn yield were to decline just 7.5 percent from trend yields, which U.S. Department of Agriculture (USDA) data show occurs 22 percent of the time, 2008/09 year-ending stocks would be cut nearly in half, to 456 million bushels based upon USDA's July 11 projections. A similar 7.5 percent yield decline in trend yields for soybeans, which occurs every fourth year, theoretically would result in negative carryover stocks. While such low stock levels are unlikely to occur, this calculation suggest severe rationing of crops may be necessary with any significant crop-production disruptions that might occur before harvest.

The NGFA also noted that even steeper food price inflation is likely in coming months. It noted that the 5.3 percent increase in the consumer price index registered in June compared to a year ago lagged the 8.3 percent increase in the producer price index over the same period. Normally, these two price indices are 99 percent correlated.

The NGFA for the past two years has urged repeatedly that USDA exercise its legal authority to waive the CRP penalty to provide the market with an additional tool to meet growing world demand for food, feed, exports and biofuels. Of the 34.7 million CRP acres currently enrolled, only 1.2 million acres are under contracts scheduled to expire on Sept. 1.

The NGFA also said USDA's failure to act leaves in place a paradoxical policy that actually encourages CRP contract holders to bring the most environmentally sensitive land back into production because the economic penalties for doing so are less. USDA in 2006 allowed CRP contract holders the option to renew or extend existing contracts comprising the least environmentally sensitive land for an additional two to five years. But the economic penalty that applies if those acres are removed from the CRP amounts to 100 percent of the rental rate received over multiple years covering both the original CRP contract and the renewed contract period, plus interest and liquidated damages. Thus, for instance, landowners who in 2006 extended for an additional two years their initial 10-year CRP contracts representing acres with lower environmental benefit assessments are required to repay all 10 years of those original CRP contract rental payments, plus any rental payments received thus far on the extended contracts, plus interest and liquidated damages, before being allowed by USDA to remove those acres from the CRP for planting.

National Pork Producers Council: Stating that it will have adverse consequences for the U.S. pork industry, the National Pork Producers Council expressed extreme disappointment over the U.S. Department of Agriculture's decision today not to release land from the Conservation Reserve Program (CRP) to address the need for more acres in crop production to meet the growing demands for food, feed and fuel.


Pork producers have lost an average of $20 per hog since the start of this year because of lower feed supplies – and higher prices – driven by the ethanol industry's demand for corn, which has grown by 1 billion bushels over last year. Ethanol production is predicted to use about one-third of the U.S. corn crop in 2008, up from 22 percent last year, and the demand is expected to grow by as much as 1.4 billion to 1.9 billion bushels in 2009.


"We are cutting back our swine herd and production by as much as 10 percent over the next several months, and even then we will need more acres and more corn in 2009 to meet the demands of ethanol producers and other users and to feed this smaller herd,” said NPPC President Bryan Black, a pork producer from Canal Winchester, Ohio. "Without these CRP acres, which can be responsibly farmed using today's modern techniques to prevent soil erosion and protect the environment, we will have no ability to grow our industry to respond to worldwide demand. Pork producers are deeply disappointed by USDA's short-sighted decision.”


According to NPPC, an additional 5 million to 7 million corn acres will be needed in 2009 to meet the ethanol industry's demands and to keep the U.S. pork industry from contracting even more than the 10 percent predicted by many over the next several months.


"That 5 to 7 million acres will allow us just to keep our heads above water going into 2010,” Black said, "but that only works if we have strong corn yields in 2009. Bad weather next year, without additional CRP acres in production, will again mean producers going out of business and even further consolidation in the pork industry.


"We are extremely disappointed that USDA is willing to take this kind of risk with pork producers' livelihoods and not work to find a way to bring enough of the right CRP acres back into production in the right way to bring some relief to all corn users,” added Black.


Created in 1985, the CRP is a land reserve program that gives farmers an annual rental payment to take acres out of crop production and use them for conservation purposes for 10 years. There are approximately 34 million crop acres in the program today.



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