WASHINGTON, D.C., U.S. — Seventy-two national and state agribusiness, meat, livestock and poultry organizations have told the U.S. 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 U.S. 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% 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% 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 U.S.) 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.

  • Grain and oilseed demand show no signs of abating. Indeed, world demand for all grains and oilseeds has increased 30% over the last decade — or by 90 million metric tonnes — largely because of the economic expansion in Asia. China’s imports of soybeans have accounted for 50 million tons of that growth. “With the combination of biofuel demand and economic demand from China, the pressure on grain stocks is likely to continue,” the paper stated. “Yield gains are not rapid enough to keep pace, and yield gains do not come without weather interruptions.”

  • Several hundred million bushels of corn — perhaps within the range of 400 million to 700 million bushels — potentially could be produced in an environmentally sustainable way on land currently enrolled in the CRP. Of the approximately 30.9 million acres currently enrolled in the CRP, about 14.6 million are located in the 12 main Corn Belt states, the paper noted. About half of those 14.6 million acres are located in the high plains states of Kansas, Nebraska, and North and South Dakota. CRP contracts representing only 1.6 million of those Corn Belt CRP acres are scheduled to expire in 2011.

  • According to data from USDA’s Foreign Agricultural Service, U.S. harvested acreage of the 10 major row crops remained constant at 232 million acres during the past decade, while world harvested acreage increased by 169 million acres. As a result, the U.S. share of the world’s harvested acreage declined by 1% since 2000-01 to 11.1%.

  • The use of grain for biofuels has negated the rationale used previously that land-idling programs, like the CRP, were needed as a way to control stocks. Further, the paper cited land-use policy constraints imposed by Congress under the Energy Act of 2007 that force food and biofuels to compete against one another for the United States’ prime cropland. That occurs because the U.S. Environmental Protection Agency (EPA) under that law is required to count as “renewable biomass” (in the case of crops and crop residues) only those feedstocks produced on the estimated 402 million acres that was cleared prior to Dec. 19, 2007 and actively managed or fallow on that date when calculating whether the renewable fuel mandate (currently 36 billion gallons) has been met. This puts off limits — at least when calculating whether the renewable fuel mandate has been met — roughly 584 million acres of grassland pasture and range, as well as 134 million acres of grazed forest land.