USDA DECIDES NOT TO RELEASE CRP ACRES PENALTY FREE
Jul. 30, 2008
Statement by Sec'y Schafer:
"We have just completed a very thorough review of whether we should allow the early release of acres enrolled in the Conservation Reserve Program (CRP) without penalty to land owners.
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 CRP land at this time.
Despite the damage and disruption caused by the very severe floods that hit the Midwest last month, the indications so far are that the impact on this year's corn and soybean crops will be less than was originally feared.
The markets have been reacting favorably to the good growing weather we have been experiencing in recent weeks and encouraging reports on crop conditions. Cash prices for corn are down 25 percent -- and for soybeans, 14 percent from their record highs last month.
Even with the damage and delays in planting caused by the floods, this year's corn crop is on track to be the second largest on record with an anticipated harvest of almost 79 million acres.
The strength of the commitment America's farmers have made to meeting the nation's need for corn for food, feed and fuel use has reassured the markets that there will be an adequate supply available this year.
The recent easing in prices is helpful to the livestock industry and will allow current CRP contract holders to make informed decisions about whether they want to take an early exit from the program.
Another factor we considered is the simple reality that under the provisions of the 2008 Farm Bill, and the terms of existing CRP contracts, total acreage in the program is going to drop without any action by USDA.
In the 2008 Farm Bill, Congress lowered the cap on the total number of acres allowed in the CRP program from 39.2 million acres to 32 million acres.
As a result, the 34.7 million acres now enrolled in the program will have to shrink.
And looking out over the next few years, we have 1.1 million CRP acres scheduled to expire on September 30th of this year, and that number jumps to 3.8 million acres on September 30th, 2009 and then 4.4 million acres on September 30th, 2010.
So, large blocks of land will be available for other uses -- if land owners chose to pursue them.
Owners, of course, also have the option of taking their acres out of the program early in exchange for returning all payments they have received plus interest and a penalty.
This spring, the number of acres being withdrawn early -- with financial benefits being repaid -- was running more than 50 percent higher than last year. So where this option makes economic sense to contract holders-they clearly are willing to use it.
The action we took in May to allow haying and foraging on up to 24 million CRP acres this year-after the primary nesting season ends-provided contract holders with another choice for managing their lands and feeding livestock.
We believe the decision that we are announcing today strikes the best possible balance between supporting programs that protect our natural resources and meeting the nation's need for grain production. "