Comments to USDA
regarding
Re-enrollment and Extension of Certain Contracts
for Land Enrolled in Conservation Reserve Program
submitted by
Alliance for Agricultural Growth and Competitiveness
June 24, 2005
This statement is submitted on behalf of the members of the Alliance for Agricultural Growth and Competitiveness (AAGC). AAGC is a coalition of associations and companies involved in agricultural inputs; marketing, handling, and processing of grain and grain products; meat, livestock and poultry production; and production of other food, feed and industrial-use products derived from grains, oilseeds and meats.
The members of AAGC understand the importance of conserving natural resources to maintain a sustainable agricultural production base. But we also know that the manner in which conservation practices are implemented can have a direct impact on the ability of the U.S. to compete in global grain, meat and processed product markets. Conservation programs need to be balanced so as to not impede the productivity and opportunities for the U.S. agricultural sector to grow and compete.
We will comment directly on the specific questions being posed by USDA regarding the handling and management of the large number of CRP contracts. However, to set the stage, we first want to raise the following points of concern about how this program is being administered.
- The June 3, 2005, Federal Register notice states that “The U.S. Department of Agriculture is committed to full enrollment up to the authorized level of 39.2 million acres.” The 39.2 million acre cap is not a mandate; it simply sets the maximum number of acres to be enrolled, given funding limitations and other program goals. We strongly believe that the administration should not make such an unconditional, over-arching commitment to a specified number of acres, because Congress and other observers of the CRP program certainly understand that there are trade-offs between the total level of acreage enrollment and other factors that need to be managed to maximize environmental benefits. Putting a narrow strip of land along a waterway into the CRP may be considerably more expensive on a per-acre basis than the average CRP acre, but it may provide environmental benefits many times that of enrolling flat land in drier climates. We submit that given the multiple goals of the CRP program (reduce erosion, protect water quality, enhance wildlife---all with limited funds), it is inappropriate to view the legislated maximum acreage cap as a singular policy “goal.”
- Members of the AAGC share the concerns of USDA and others regarding the large number of acres in the CRP that are expiring over a short period. We are concerned because we think it would be easy to make some serious policy mistakes in re-enrolling nearly 10% of U.S. cultivated acreage for a 10-year commitment in a 3-year sign-up (2007-2009). USDA’s federal register announcement is troubling in that it seems to indicate it prefers a CRP re-enrollment program that may be most administratively expedient, with little critical evaluation of current contract performance in meeting policy goals. We submit this is ill-advised, particularly for a program that will control land use for a 10-year period.
- A related concern to the second one noted above is that the CRP program has been authorized by the Congress only through 2007. If USDA were to preemptively re-enroll huge tracts of existing lands prior to 2007, would the Department be usurping Congressional prerogative to adjust program goals, objectives and constraints? Or would USDA in effect be reducing options that Congress might otherwise have in possibly moving some CRP funding into other conservation programs deemed worthy of expanded government investment? It would certainly seem that this could become an unintended consequence of an overly aggressive re-enrollment program for existing CRP contracts and could limit the ability of Congress to make policy choices. (It is noteworthy in this regard that tighter budget constraints in the future are very likely in the current economic environment. With finite, and likely shrinking overall funds available for conservation, USDA shouldn't lock away the vast majority in what already is its single most expensive conservation program – about $2 billion annually. To do so would effectively continue an entitlement program for another 10 to 15 years, thereby short-changing other more worthy conservation programs that could contribute more to enhancing water quality, which is the U.S. animal agriculture sector's most significant short-and long-term environmental challenge.) It would also seem appropriate at this juncture for USDA to report on the number of acres and whole farms now enrolled in the CRP program that have been enrolled for the full length of the program (approaching 20 years). Such acres might be considered lower priority for whole farm enrollment in order to permit others to enroll in the program, or USDA should somehow offer justification as to why the government should rent the same large acreage segments on a continuous basis for two and very possibly three decades. In many cases, these lands may have entered as whole farms, but really only a small portion of the farm is environmentally sensitive or prone to erosion. In such case, the CRP contract might be amended to provide for only a partial field re-enrollment.
- The CRP program is not, as we understand it, intended to be a supply control program but it no doubt has an impact on available supplies of grain to support food consumption, the livestock sector, renewable fuels and exports. In consideration of the growing and widespread mandates for ethanol use in U.S. fuels, a growing bio-diesel sector, and production threats like soybean rust that defy accurate impact assessment at this stage (as we do not have experience with yield impacts), traditional U.S. agricultural sectors like livestock, poultry, grain processing and exporting face considerable uncertainty regarding long-term supplies of whole grain feed stocks. We cannot force the U.S., through acreage- idling programs and fuel mandates, into a position of becoming a less competitive exporter or even a net importer of grain without economically forcing livestock operations and traditional processors to re-locate outside of the U.S. Thus, a 10-year commitment of non-sensitive, productive acres into the CRP raises a number of longer-term sustainability and competitive issues for U.S. agriculture.
- We also are concerned about whether there is adequate balance in the CRP program goals when USDA’s assessment indicates that “enhanced water quality” represents only 8% of the non-market benefits of the program. Water quality is one of the most important long-term challenges for U.S. agriculture and should be a measurable goal that is given much more weight in program administration. This low number for water quality benefits is strong evidence of the need for the program to be redirected away from the whole farms and toward more filter strips and partial field enrollments.
- It is our observation that the CRP program has not been geographically administered with adequate sensitivity toward local market impacts. We are very much aware of the rather surprising conclusion of the 2004 ERS study on CRP impacts that stated that counties with large acreage in the CRP program were, on average, not substantially damaged by the large tracts of idled productive acres. This conclusion is in direct contrast to other studies that have been conducted, and is also contradictory to virtually all anecdotal information on the program. USDA needs to spend more time in the field taking a look at real-world impacts, talking to local leaders, merchants and long-time residents to see if their study results are truly verifiable. We also urge USDA to reconsider how it administers the so-called 25% cap in a given county. It appears that because outdated data on cropland is being used to determine the cap acreage, in many counties the total acreage being removed from production far exceeds 25% of a modern-day “normal cultivated acreage” (in the absence of a CRP program) for a given county. Also, because so many counties are already at the 25% cap as now being administered, USDA is being prevented from enrolling valuable filter strips in such counties that could contribute meaningfully to water quality objectives. This is another important reason not to rush to judgment on re-enrollments of existing CRP acreage.
- Another concern that we have about the market impacts of CRP program administration is the opening up of CRP ground for emergency haying and grazing in years when droughts occur. While such feed from CRP acreage may be needed to avoid dislocations of herds or untimely liquidations, the widespread and/or frequent use of such policy without requiring any repayment of CRP payments provides an effective subsidy to the recipient who is competing against other ranchers that are not so subsidized. USDA needs to be sensitive in its program administration to avoid creating an uneven playing field between cattlemen in direct competition with each other.
- USDA in August 10, 2004, posed some of the same questions now being asked in this hearing. The deadline for public comments in that previous rulemaking was December 2004. However, for some reason, USDA officials did not permit access to the public comment files for that rulemaking until very recently. On several occasions, members of AAGC requested access to those documents, which we believe should have been accessible and readily available in the public domain, but we were not granted such access until about two weeks ago. Without public access to review those comments, USDA will not likely receive the best advice and information in this follow-up hearing. We would encourage USDA to conduct rulemakings in a more transparent way in the future, or publicly explain why USDA officials might consciously choose to restrict access to what would normally be considered fully public information.
Concerning specific responses to the questions being posed:
Topic 1:
How should CCC address the large number of expiring CRP contracts and their associated acres in a manner that achieves the most environmental benefits but is also administratively feasible and cost effective? What methods should be pursued that would address the large acreage expiring beginning in 2007 (for example, how could CCC stagger the contract expirations over several year intervals, and what criteria could CCC use to select and extend contracts)?
The USDA has stated its commitment to maintain the environmental benefits of CRP. However, we do not believe simply offering re-enrollments or contract extensions for those contracts expiring in 2007 and 2008 as proposed would contribute to meeting that commitment. While large numbers of the acres due to expire are highly erodible or environmentally sensitive, there are also large tracts of farmable land that are neither erodible nor sensitive and in some cases have been idled for 18 years already. Additionally, many of those acres that are due to expire entered the program under less stringent environmental benefits measurements. Using CRP acres for this type of land rather than focusing on filter strips or riparian buffers appears to run counter to maintaining the environmental benefits of CRP.
We encourage an approach that reflects the Administration’s commitment to free enterprise and support for U.S. agricultural economic growth. The concern for the large number of acres expiring in 2007 and beyond is real – but the approach must be balanced. Thus, consistent with administrative realities, we believe early re-enrollments should be matched by providing the opportunity for early opt-outs of contracts without penalty. If this action is not legally possible, early re-enrollments that permit whole farms to re-enroll, without any consideration of whether such contracts should be reduced to partial field enrollments in an effort to maximize overall benefits, should be severely restricted. To alleviate perceived administrative challenges, short-term extensions, no more than one to two years in length, could be permitted. USDA should allow a large proportion of the contracts to expire and only reenroll or extend those that provide the most significant environmental benefits under current EBI standards. USDA should remain mindful that the 39.2 million acres prescribed by Congress is a cap and not a mandate. By letting contracts expire, USDA could focus the program to provide better environmental targeting of idled land and limit the negative economic consequences of keeping large tracts of land out of production. If USDA does not permit the bulk of CRP contracts to expire and require re-bidding against other lands, it will only serve to further the perception that the government is involved in a permanent land-idling scheme with economically damaging impacts very similar to the discounted resource-idling policies that have been discontinued in previous farm legislation.
Topic 2:
If CCC offered CRP re-enrollment without competition, how could it ensure
that program goals are achieved in a manner that results in the most environmental
benefits but is also administratively feasible and cost effective? How could CCC
determine which contracts and acres would be most environmentally valuable to re-
enroll into CRP without competition through a standard EBI ranking process?
Enrollment without competition should for the most part be avoided and should be granted on only the most environmentally sensitive land (likely less than 10% of the acres currently enrolled in the CRP program should qualify). Competition to enroll land is critical to ensuring that only the land that provides the most significant environmental benefits are idled, leaving potentially productive cropland available to farm. Additionally, the USDA should avoid mass re-enrollments which give a perception that the CRP is a permanent land-idling scheme similar to those that have been discredited in the past. Re-enrollments without competition to discipline the process run a serious risk of poor program performance in achieving goals as well as excessive taxpayer expense. From an equity standpoint, USDA also should allow other landowners access to the program, particularly in regions where the same lands (in particular whole farms) have been idled for nearly two decades. The program needs to be operated in a competitive environment to manage the overall costs and benefits in a fiscally responsible manner. Poor fiscal management will only lead to further public concerns about the need for more judicious use of taxpayer dollars.
Thank you for the opportunity to comment. We are happy to respond to questions.
This statement is being submitted on behalf of the Alliance for Agricultural Growth and Competitiveness and specifically on behalf of the following signatories:
Agricultural Retailers Association
American Bakers Association
American Feed Industry Association
CHS Inc.
Food Products Association
Grain & Feed Association of Illinois
Independent Bakers Association
Kansas Grain & Feed Association
Louis Dreyfus Corp.
Michigan Agribusiness Association
Michigan Bean Shippers
National Chicken Council
National Grain and Feed Association
National Grain Trade Council
National Oilseed Processors Association
National Turkey Federation
North American Export Grain Association
North American Millers’ Association
North Dakota Grain Dealers Association
Oklahoma Grain & Feed Association
Pet Food Institute
Texas Grain & Feed Association
The Biscuit & Cracker Manufacturers’ Association
The Fertilizer Institute
The Scoular Co.
United Grain Corporation
United Harvest LLC
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