There is no shortage of American grain; current cash prices prove it.
Corn is marking time at $2, wheat hangs just above $3 and soybeans, at $5.50, sit in the cross hairs of another full-bore South American crop three months hence.
But the holiday season is a time of giving and agbiz forces are now laying the groundwork for Congress to give grain processors and input sellers the gift that will give for years: “Reforming” the 34.7-million-acre, 10-year Conservation Reserve Program (CRP) to bring millions of acres of now-idled land back under the plow.
Advocate. The groups advocating the cuts are the National Oilseeds Processors, the National Grain and Feed Association, the North American Export Grain Association, and the North American Millers Association.
While the groups represent hundreds of firms that store, process and export the overwhelming majority of America’s grain, you’d be correct in assuming that the global powerhouses – Cargill, ADM, Bunge, ConAgra – belong to each.
Thus their interest in paring back the program.
More acres mean more grain. More grain means cheaper prices. Cheaper prices mean cheaper processing costs, greater exports and greater profits. Yes, Virginia, there is a Santa Claus.
U.S. taxpayers. And since U.S. grain producers are the world’s best at producing, the more-acres-cheaper prices scenario nearly guarantees U.S. taxpayers will get nicked for larger farm program payments to grain producers if the 2007 farm bill clips Conservation Reserve Program.
How much more is anyone’s guess.
One safe guess, however, would be far more than the program’s entire cost today, $1.7 billion per year.
Case to slash. Despite this near-certain forecast, the merchants of grain can make a case to slash the program.
Their key complaint – that many of today’s Conservation Reserve Program acres, enrolled in the mid-1980s and re-enrolled in the mid-1990s, do not meet today’s USDA soil and water conservation standards – is valid.
For example, when the bulk of today’s CRP was enrolled into the 10-year (and longer) “conservation” program, its main goal was more price-boosting than soil-, water- and wildlife-saving.
In short, back then more CRP land meant less grain and, hopefully, higher grain prices.
Today, however, CRP enrollments are throttled by a more restrictive Environmental Benefits Index.
If land offered into the program doesn’t meet or exceed a specific soil, water and/or wildlife threshold, it doesn’t make it into the program.
Tougher regs? As such, said Big Grain in a joint Dec. 14 press release, “there is compelling evidence that USDA should not simply re-enroll the 16.1 million acres represented by CRP contracts scheduled to expire in 2007 and 6.1 million acres in 2008.”
Instead, any new or re-enrolled CRP acres should use even tougher regs to “focus on filter strips, buffers and