The visitor knows the answer to his question even before Joe Nichols speaks. "So, for you to plant the CRP, it's not a tough decision—not something you have to think about, right?" Nichols nods. "Some people will be upset to see what we do," he says. "If it weren't for $6 corn and $14 soybeans. ..." He never finishes his answer. No need to.
This year Nichols and thousands like him are swinging for the fence, breaking out a 2.5-million-acre chunk of the Conservation Reserve Program. It would be almost crazy not to, given the gigantic demand for high-priced grains. "We missed a gold mine last year because of the drought," he says. "This year, even an average crop will be a home run."
High prices will push more acres out of the CRP. Iowa State suggests that, short of an overhaul, 20 million acres may exit the program over the next 10 years. That's more than half of the entire CRP.
That would gut the 34.6-million-acre program. But then, Washington didn't buy this land; it only rented it. Planting the CRP is motivated by market forces—big demand at home for food and feed, a booming renewable fuels industry and a depressed dollar that lowers the cost of U.S. exports.
Nichols plans to produce a lot. He farms 15,000 acres, most of which are rented. His Seven Springs Farms at Cadiz, Ky., is home to 1.1 million bushels of grain storage. This spring Nichols put up another 200,000 bushels of storage on space that threatens to cut into the yard around his home. With a dealer-size line of "green" equipment on call, he intends to fill every last cubic inch of storage.
Nichols has been aggressive in assembling his production machine. He has leased CRP ground—1,300 acres, some in the program for 20 years—and 400 acres of pasture. He is withdrawing 200 acres from the CRP before the contract expires.
The economics are easy. Unless USDA sharply raises CRP rental rates, landowners will remove acres from the program—in some cases even paying a penalty to do it, as Nichols is doing.
"It's a no-brainer," says Don Talley of Plattsburg, Mo. Among Talley's planted acreage this year is 350 acres that were in the CRP last year. He also is planting 140 acres of pasture.
Three cropping seasons ago, Talley was getting $1.65 for corn and $4.50 for soybeans. "The CRP made a lot more sense," he says. Not today.
Talley says his CRP ground will produce 160 bushels of corn. "It belongs in row crops."
So, what is the nation giving up? Taxpayers have invested $35 billion in the CRP, and the program is a world-class environmental success story.
The CRP has cut soil erosion by 450 million tons a year, keeping sediment, fertilizers and pesticides out of waterways and water supplies. Pheasant populations are up 22%. Two million more ducks take wing every fall than would have without the program. The CRP has increased outdoor spending in the U.S. by $300 million a year, and it brings $39 million a year to landowners who offer hunting and recreational access to their land.
But for some, those benefits are going away. The Prairie Pothole region (download map as a PDF file) is ground zero to Dave Nomsen's fears. As contracts ended last fall, the CRP in the Dakotas, Nebraska, Iowa and Kansas took a million-acre hit. And another 600,000 acres may disappear this fall.
"Returning to fencerow-to-fencerow production helps no one," says Nomsen, Pheasants Forever's vice president of governmental affairs.
"This is about more than bakers," he adds. "Logic says we're losing critical nesting habitat. This is also about water quality."
That's right, bakers, not bankers. In what must be a rare concern for farm policy, American bakers are calling for a 9-million-acre cut in the CRP to lower wheat prices. It is stranger still that the National Cattlemen's Association joined them.
"Two months ago I would never have imagined that American bakers would be pushing against the biggest conservation program in history," says Neil Shader, spokesman for Ducks Unlimited.
These are strange days. Concern for the CRP is pitting birds against fuel and fowl against food. "If you want to talk about pheasants, you have to talk about ethanol," Nomsen says.
There is that. Congress has mandated that 15 billion gallons of corn-based ethanol be blended into the nation's fuel supply by 2022. Today, 147 plants produce 8.5 billion gallons. An additional 61 facilities—new plants and expansions—will add 5.1 billion gallons of ethanol to the supply.
The bet across the Corn Belt is that ethanol will be an increasingly powerful consumer of any extra corn. "The ethanol market is there, and it's a market where demand should be met," says David Ward, chairman of the National Corn Growers Association's Production and Stewardship Action Team.
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Ducks Unlimited argues that all corn, soybeans and wheat have a cost: Insurance costs and disaster payments rise on marginal ground.
USDA itself may have increased that risk, say Bruce Babcock and Chad Hart, Iowa State University economists.
Two years ago, USDA saw that CRP contracts were soon set to expire on 28 million acres. To head off a potential flood of acreage withdrawals, the agency offered a re-enrollment extension program (REX). As a result, 23 million acres were re-enrolled for varying lengths of time. Landowners received brand-new 10- and 15-year contracts for the most highly sensitive ground.
At a time of lower grain prices, it looked like a good policy play. Not so much now, and here's why: Landowners can break a CRP contract by reimbursing the government for payments, plus interest and a penalty. On those brand-new 10- and 15-year contracts signed only two years ago, the penalty on a few years of payments isn't all that punitive.
In the case of contract extensions—a period of years added to the original contract—the penalty for early withdrawal is assessed back to the beginning of that original contract. That could be as many as 17 years, and it would be expensive.
Iowa's Babcock and Hart reason that USDA has actually provided an incentive to remove its most sensitive acres to landowners already inclined to withdraw early from the CRP.
That's one problem, but American agriculture faces a very real problem right now: How does it fill demand? They aren't making any new dirt—not in the U.S. anyway.
"Losing a million acres a year to concrete" is even worse, says the National Corn Growers Association's Ward. Because of all the development, there isn't much new land to farm except for what is in the CRP, he adds.
The National Corn Growers Association isn't calling for CRP's demise though. Ward says 12 million acres should never be farmed; but a third of the CRP could be planted without ecological damage—more with rotations and conservation tillage.
John Hoffman agrees. "It makes good sense to pull that land out of the CRP that is not environmentally sensitive," says the president of the American Soybean Association.
Instinctively, farmers sense a longer-term danger in their ability—or inability—to compete in world markets.
Some 30 nations are said to be at risk of upheaval due to climbing food prices. It's a point well made by angry rioters. What's a solution to food riots? The unmistakable signal heard in grain markets is to grow more, no matter where it's produced.
Unlike farmers elsewhere, U.S. farmers may face a land shortage. Today's grain market is a highly profitable opportunity that farmers in Brazil, Argentina, Africa and Eastern and Central Europe will not fail to miss. As those low-cost heavy hitters show up, American grain farmers could quickly find themselves down another rung or two.