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No extra crop acres coming from early CRP opt-outs in '08

If last Friday's USDA reports were any indicator, U.S. farmers are going to need to grow more corn and soybeans this year. Many say doing so will be impossible without bringing more acres into production. But, additional acres, at least from one source -- the Conservation Reserve Program -- won't come, at least in 2008.

Friday's crop reports showing smaller stocks of corn and the lowest wheat ending stocks in 60 years have added to the pressure on USDA to allow early release from CRP contracts, an Iowa State University (ISU) economist says.

"I think it will add to the political pressure. I don't think there's any doubt about that," says Chad Hart, economist with the ISU Center for Agricultural and Rural Development (CARD). "We were having those discussions when prices were going over $4 a bushel and now we're over $5."

These discussions may continue -- and the pressure may continue to mount -- but no action will likely be taken to these ends in time for '08 spring planting. Acting Secretary of Agriculture Chuck Conner announced Monday morning that, because of the time required to make such a change, no early CRP acreage withdrawals will be allowed in time to affect the 2008 crops.

Currently, about 37 million acres are enrolled in the CRP nationwide, but not all of that land would be suitable for corn production. High concentrations of CRP enrollment in Plains states, and only about 7 million acres in CRP are considered less erodible and suitable for corn production. As of November of last year, the top five CRP states, by acreage, were:

  1. Texas: 3,935,000 acres
  2. Montana: 3,323,000 acres
  3. Kansas: 3,131,000 acres
  4. North Dakota: 2,988,000 acres
  5. Colorado: 2,425,000 acres

In October, Conner said it appeared that market forces would provide adequate acreage for grain crops in 2008 without an early release of CRP land. But he said USDA would continue to closely monitor the need for additional acres. Previously, USDA chief economist Keith Collins, in late-2006 testimony before the Senate Environment and Public Works Committee, said CRP would be a prime candidate for acres if row crop demand -- driven namely by biofuels expansion -- surged enough to warrant a shift.

"Preliminary assessment concluded that 4.3 to 7.2 million acres currently enrolled in the CRP could be used to grow corn or soybeans in a sustainable way," Collins said in late 2006. "The extent to which producers voluntarily exit the CRP or changes in CRP policy could reduce the effects of rapid ethanol expansion on corn prices."

Hart says that with current prices, some producers might choose to take land out of the CRP and repay rental payments plus a penalty, even if the USDA doesn't decide to release acres from 10-year contracts early with no penalty. But that would work only for CRP land enrolled within the last year or two, he says. Landowners with land in the CRP for nearly 10 years or those who extended existing contracts would probably owe too much in back rental payments to make it work.

But, regardless of what happens with CRP, a likely shortage of corn and soybeans remains on the horizon, some farmers say. It's creating cause for some serious decisions right now, especially in the livestock sector, says one Agriculture Online Marketing Talk member.

"I'm trying to decide whether to sell all the sows and keep a few gilts to farrow in '09. If this is the case, I may just as well stay out longer, or for good," writes ajb71. "Selling $6.00 corn is a lot easier. I do think this hog market should get better, but it will need to get really ugly first."

Without another acreage source, like the one represented in early CRP contract withdrawals, already-short corn and soybean stocks could lead to an even more grim supply situation.

"It looks as if we will have to ration because there will not be enough acres," writes Marketing Talk member ag678. "I hope it isn't the case of losing long-term demand because of short-lived price increases."

If last Friday's USDA reports were any indicator, U.S. farmers are going to need to grow more corn and soybeans this year. Many say doing so will be impossible without bringing more acres into production. But, additional acres, at least from one source -- the Conservation Reserve Program -- won't come, at least in 2008.

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