MODERATOR: Good afternoon from Washington. I'm Larry Quinn speaking to you from the Broadcast Center at the U.S. Department of Agriculture. Welcome to today's news conference with Secretary of Agriculture Ed Schafer to discuss the Conservation Reserve Program.
Joining the Secretary in this studio are Chuck Conner, deputy secretary of Agriculture; and John Johnson, deputy administrator for Farm Programs with the Farm Service Agency.
Reporters, I remind you that if you have questions that you would like to ask, please let us know that by pressing *1 on your telephone touchpad.
Now it's my pleasure to introduce Secretary of Agriculture Ed Schafer.
SEC. ED SCHAFER: Thank you, Larry. Thank you, and good afternoon, everyone. Thank you for joining us. We do have Deputy Secretary Chuck Conner here and John Johnson our deputy administrator for Farm Programs with Farm Service Agency to discuss this issue and to help answer any questions that you might have.
We have just completed a very thorough review of whether we should release the early release of acres enrolled in the Conservation Reserve Program without penalty to landowners. After carefully considering the recent crop reports, weather conditions, the price trends we're seeing in the 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 what 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 just 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 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 make an early exit from the program.
Another factor we considered is the simple reality that, under the provisions of the 2008 farm bill, 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 in September 30 of this year. That number jumps to 3.8 million acres on September 30, 2009, and then 4.4 million acres on September 30, 2010. So, large blocks of land will be available for other uses, if landowners choose 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. Some are doing so now. 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 acres of 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.
And those are the end of my prepared comments. And now Chuck and John and myself are here ready and willing to answer your questions.
MODERATOR: We do have a question here. Roger Bernard from Pro Farmer and Farm Journal. Roger, go ahead.
REPORTER: Mr. Secretary, as you look at, we've got the renewable fuels standard out there that sets the requirement of 9 billion gallons this year and increasing that next year, the biodiesel mandate starts kicking in. You've got a significant livestock sector out there that's facing some high feed prices. Yet you're not offering the early out without penalty from the side. Was there pressure coming from elsewhere outside of your department not to do this?
SEC. SCHAFER: Well, you know, we looked at a lot of factors. And certainly we've had many letters, calls and comments in to USDA about allowing an early release. We have had the same for people saying, "Don't allow an early release." You know, there are a lot of groups that feel strongly about this issue either way. So if you want to count that as pressure, certainly we have heard the message on both sides of the equation here.
But the reality is, we have acres that are coming out because of expiring contracts. Those acres are not perpetual easements. These are contracts for a certain period of time, and so we are trying to understand everybody's concerns about this issue and feel this decision at this point in time took into consideration all the factors that we had on the table. And this is the way we're calling it.
REPORTER: How about agencies –
MODERATOR: The next question comes from Andrew Martin with New York Times, and he'll be followed by Peter Shinn. Andrew?
REPORTER: Hi, Mr. Secretary. Can you just walk through those numbers again that you mentioned in your presentation? I'm sorry.
SEC. SCHAFER: Andrew, you're talking about the numbers coming out of CRP?
REPORTER: Yes. Yes.
SEC. SCHAFER: In September this year we've got 1-point-1 million acres.
In September of '09 next year, 3-point-8 million acres.
And in September 30 in 2010 there are 4-point-4 million acres.
It's a total of 9-point-3 million acres that will be coming out of the program and available if farmers choose so in the next two years.
REPORTER: The other question I have was, you mentioned that early withdrawals were 50 percent higher. Can you give us any perspective on what that means? I mean, how many acres are actually being taken out?
SEC. SCHAFER: I'm going to let John Johnson do that. John's here with us and he's got the numbers at hand.
REPORTER: Thank you.
MR. JOHN JOHNSON: We don't have a database on this that goes back many years. We've got about 19 months worth of data, and in the spring of this year, in April and May of this year we saw them peak upward. In April it was just over 34,000 acres paid their way out of CRP; and in May it was over, almost 37,000 acres -- 36,890. And that was the high point that we've seen in recent times.
Over that 19-month period the average per month of people exiting CRP by buying their way out was just over 15,000 a month. So those two months of this spring we saw a substantial increase over what we'd seen in previous months.
REPORTER: Thank you very much.
MODERATOR: Peter Shinn has the next question from Brownfield Network, and Peter will be followed by Sally Schuff. Peter, go ahead.
REPORTER: Well, thank you very much, Larry. As always Mr. Secretary, thank you for hosting this call. And two quick questions. One has to do specifically with CRP. Do you think then that this will be your final word on CRP during the Bush administration? That's question number one.
And number two has to do with the Doha Round – word out now that the Doha Round, the latest talks have collapsed. And your thoughts on that collapse?
SEC. SCHAFER: As I mentioned previously, we had made the decision for the '08 enrollments coming out, and we said we'd look at this again for the '09 crop probably end of August, early September. We've moved that up because the conditions are constantly changing. They are going to continue to constantly change, and we're going to continue to evaluate the situation.
As I mentioned, we are making this call at this point in time. I think it's an appropriate call. If something changes in the future, we may be back revisiting the issue.
REPORTER: The Doha Round, sir?
SEC. SCHAFER: As far as Doha, you know I'm wondering if "collapse" is the right terminology. Certainly we've reached an impasse. But if you look at the progress that was made in the last several months, I mean we moved in big directions. And you know, the United States took the lead here in saying we'll reduce internal subsidies, we want access to markets. We were making the lead here in these discussions.
I'm not sure that the discussions are over. I think we've come to an impasse kind of where we just couldn't agree on some of the issues in developing countries in trying to shield their subsidies while making us reduce ours and also shielding access which we think is the fair trade-off for our reduction of subsidies. So you know, it's an impasse. I'm not sure it's a collapse. I think we're going to continue discussing, and hopefully we can see our way through some of these issues and continue to make progress.
REPORTER: Thank you very much.
MODERATOR: Our next question comes from Sally Schuff of Feedstuff. Sally?
REPORTER: Yes. Hi, Mr. Secretary. Thank you for taking my question. The question is, all these contracts that are coming out in September '08, particularly '08, have you done an analysis on what type of plantings might go in? What are those acres suitable for? Are they wheat, corn, soybeans? Are they located near plants or are they located near livestock feed yards? Who would benefit?
SEC. SCHAFER: We have looked at that, Sally. And I'll let John again, who's got the information in front of him on that, because that is a significant issue.
MR. JOHNSON: Sally, we don't have a specific breakdown on where each one of these contracts are that we can look at on a map, but I can just tell you if you look at general distribution of CRP acres, we have a high percentage of them in the High Plains States which is more typically more arid climate and wheat production area, and then a lesser amount in the corn, soybean belt of the Midwest.
So I think it's a fair assumption that of the 1-point-1 million acres, for example, that are expiring this year that the majority of those would be in wheat producing areas; and a somewhat lesser amount would be in the corn, soybean areas. But that's a generalization.
REPORTER: Okay.
MODERATOR: Philip Brasher from the Des Moines Register is next. And he'll be followed by Gary Truitt. Philip?
REPORTER: Yes. This is probably a question for John. You all have I understand been told the state offices, local offices, had them go back and review the rental rates or adjust the rental rates which I guess would be effective next year -- maybe it's effective for this fall – based on the '06, '07 and '08 rental rates? At least this is what I understand. How much of an increase is that going to be in the CRP rates? And when is that going to come out?
And second of all, did you all – NASS (USDA's National Agricultural Statistics Service) was doing a re-survey this month of the corn and soybean acreage -- at least in the flooded areas -- and I wonder if you took that into consideration in making your decision on early outs.
SEC. SCHAFER: Let me answer the second part of your question first, Phil, and then we'll give it back to John. As far as the additional survey work done in July, that work is not complete. We will incorporate that fully in the August 12 presentation of the NASS report. So we have not taken that into consideration. As you know, there was a portion of that, a critical sample issue of that on the June 10 NASS report, and what I can tell you is that we're completing that survey. And the numbers coming in are similar to the numbers that we saw on that partial survey that happened in June.
MR. JOHNSON: Regarding the CRP soil rental rates, you are correct. For the third year in a row we have directed our county offices to update their soil rental rates. I want to stress though that our locally elected farmer committees, FSA committees, have authority to revise CRP rental rates at any time that they think they are not consistent with the local market conditions. But we have directed all offices nationwide to do this three years in a row. And as you point out, this is our third year. And we do use a three-year average. And so you're correct; we're looking at '06, '07, '08, when we come up with these new rental rates.
We hope to have that process done by August of this year, and once they are completed then those new rates are used prospectively -- going forward -- for any new contracts that are entered into.
A revision in soil rental rates does not affect the price that's paid for any existing contract. It's only used prospectively for new contracts entered into going forward.
So we hope to have that completed nationwide by sometime in August.
REPORTER: Gary Truitt from Hoosier Ag Today is next, followed by Jacqui Fatka. Gary?
REPORTER: Thank you, Mr. Secretary. We will get our first official numbers on this year's crop in a little over a week, but having made this decision prior to the August crop report are you saying that you're comfortable with the potential of corn production this year and certainly the potential to meet the supply in the demand of corn and soybean production for next year?
SEC. SCHAFER: Well, what I can tell you is, I -- like you -- don't know what the numbers are going to be on the NASS report in a week or so. But we've got a lot of anecdotal information; we've got a lot of crop reports, eye sights. We talked to local or state commissioners of agriculture, secretaries of agriculture. You know we put all of the information together. And as I mentioned in my comments, we don't feel the corn and soybean crops are going to be as bad as we originally feared. Certainly there's going to be a hit there in the flooded areas. We have a lot of water damage. We had a lot of prevented planting, delayed planting. Weather hasn't been the greatest in some areas and in other areas it's really good. So we don't know what the numbers are going to be, but the sense is that they are going to be better than we originally had thought they were going to be.
MODERATOR: And before our next question, I'd just remind if you have a question press *1 on your telephone touchpad. Next question comes from Jacqui Fatka, Feedstuffs Newspaper.
REPORTER: Hello. Thanks for taking my call. First question, when it comes to the early outs, Mr. Johnson, you talked about 19 months. Can you give us a total acreage of how many total acres have opted out in those 19 months? And also too, can you talk about the environmental impact, studies that you guys have done, and if you guys made any changes in this decision after what happened in the last couple of weeks with the CRP critical feed use ruling? Thank you.
SEC. SCHAFER: John, why don't you give her the acres you've got there, and then I'll talk about the judge's ruling?
MR. JOHNSON: The 19 month history I talked about -- the average 15,200 acres per month of feed people leaving CRP early by paying their way out -- totals for that 19-mohth period is 288,726.
SEC. SCHAFER: -- Acres.
MR. JOHNSON: Acres, yes.
SEC. SCHAFER: As far as the court ruling, we see these as separate issues. We follow along the procedures, the environmental analysis, the critical uses that we always do here at this department and have historically done. And as that decision from the judge out in the Ninth Circuit came to bear, there's a lot of different ways you can look at that. But the most critical important issue I think is that that was not tied to early out without penalty decision; nor did our attorneys here feel that that decision affected what this decision might be.
MODERATOR: Next question comes from Alison Winter of Greenwire, and standing by should be Alan Bjerga. Alison?
REPORTER: Hi. Given the reduced overall acreage in the farm bill, when is the next time you think you would have a general sign-up for CRP?
SEC. SCHAFER: You know, we just don't have any plans, Alison, for a sign-up. I mean if we're at 34.5 million acres or 34.7 million acres now, we've got to get down to 32. We gave you the numbers of things that are coming out. Some of that's going to be reenrolled, you know, on a continuous program, and we just need to see what it is. But we have no plans at this point in time of doing a new enrollment for CRP acres.
MODERATOR: Next question comes from Alan Bjerga from Bloomberg News. Alan?
REPORTER: Yes, Mr. Secretary. Last week the USDA had data come out that said they are still expecting food inflation this year to be about up to 5-point-5 percent. And next year it would be up to 5 percent. Given that you are not going to be releasing acres free from CRP, does that mean you area comfortable with 5 percent food inflation next year? And if you are not, what could you do to combat that rate of food inflation?
SEC. SCHAFER: Well, Alan, if I answered your question "yes," it would save me a long answer. Right? But you know, I have a lot of confidence in our economic forecasters and especially Joe Glauber and his shop up there. But this is tight. We know that stocks are tight. Minute differences in weather or yield or production somehow can have a dramatic effect here. So we realize that we're in a situation that can change rapidly and quickly. But at this point in time, we are comfortable with the numbers we're seeing coming out, and they do a pretty thorough analysis there and I have to no reason to doubt it.
MODERATOR: And that was our last question, Mr. Secretary. Any final thoughts today?
SEC. SCHAFER: Well, thank you all for joining us. We appreciate that. We want to assure you that this has been, as you know, a thorough and a long-thought-out decision. We appreciate all your input and all your articles out there that have kind of directed us and maneuvered us into where you wanted us to be. But we've made the decision – like I said, I think it's appropriate.
I want to congratulate all the people at USDA who have had input into this; a tremendous amount of work has been done. And as I mentioned earlier, I think we have the right decision here. And we look forward to working with you on this and other issues as we go forward. Thank you.
MODERATOR: Secretary of Agriculture Ed Schafer.
I'm Larry Quinn bidding you a good afternoon from Washington.
