There are indications that the U.S. government will release Conservation Reserve Program Acers for crop plantings. About 34 million acres are enrolled in the CRP.
In May, USDA did allow some conservation land to be used for hay and grazing after the nesting season ends for grass-nesting birds. Farmers would pay only a $75 fee. As of last week, more than 500,000 million acres had been signed up.
While official amounts are still unknown, the Midwest floods have washed out an estimated 4 million acres of the nation's prime farmland. Given that the United States is the world's grain supplier, the Bush Administration is under increasing pressure to do what it can to bolster the food supply.
Sen. CharlesGrassley (R-Iowa), last week urged USDA to release tens of thousands of farmers from CRP contracts. This is an extraordinary request,” Grassley said as he toured his flooded state. “I would not make it if the situation in the Midwest were not so dire.”
Of course, the CRP acres will have little impact this year as it is too late for corn to planted, and in many locations soybeans as well.
Also, the voices against the national ethanol mandate are growing. In the case of disasters such as extreme flooding, the Environmental Protection Agency can roll back those requirements, which could take some pressure off of corn prices. However, they will no doubt remain high.
The government’s latest projection, released Friday, is that food prices will rise as much as 5.5 percent this year. Next year looks to be higher as well. The products most likely to see the largest price increases are cereal and eggs-- expected to rise about 10 percent.
According to USDA, Grassley's CRP proposal would be considered. USDA Secretary, Ed Schafer, said the department will consider “everything possible” to aid farmers.
Keith Collins, USDA's former chief economist, has released that suggests that about half of corn prices' dramatic increase is related to ethanol production. Collins said he would be surprised if USDA did not open up some CRP acres.
USDA's current official position is that American ethanol production has had only a small impact on increases in world food prices. Schafer points to a multitude of developments such as fuel costs, growing populations, rising demand, crop failures in some countries and, of course, the Midwest floods, that have lead to high prices.
The White House will have to address the ethanol situation in July, as states can ask for waivers on the corn ethanol mandate, based on whether its harming the economy or the environment. Texas Gov. Rick Perry has already done that.
Source: New York Times