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To be a cornfield or not to be

Marketplace Staff May 8, 2007

To be a cornfield or not to be

Marketplace Staff May 8, 2007


BOB MOON: The growing interest in ethanol as a gasoline replacement is fueling a spike in the price of corn. That’s helping corn farmers, but pinching others who rely on low corn prices, such as exporters and livestock producers. To help bring prices down, some agricultural groups have been pushing the federal government to release millions of acres of land currently tied up in a conservation program. But as Minnesota Public Radio’s Annie Baxter found out, there’s little agreement that strategy would help.

ANNIE BAXTER: Tony Thompson is walking along a dirt road at his farm in southwestern Minnesota, with his dogs at his heels. Just a few miles up the road, a big ethanol plant looms like a giant.

TONY THOMPSON: Half of my corn goes into very local ethanol production.

After years of low-profit margins on his corn crop, Thompson has been thrilled to see corn prices skyrocket due to what many farmers call “the ethanol effect.”

But at the same time, Thompson has also been happy with his choice to enroll some of his land in the Conservation Reserve Program, or CRP. He gets paid to keep that land out of production.

CRP is meant to prevent erosion and protect environmentally sensitive areas. Part of Thompson’s CRP land helps filter the water running from his cropland down to a marshy area, where toads sing. Using CRP lands for the benefit of water quality and wildlife makes Thompson proud.

THOMPSON: I just happen to love the great plains. And this part of it is the part that I can influence with my own life’s work.

But some ag groups want farmers like Thompson to ditch their CRP contracts and plant more corn to feed the ethanol giant.

Problem is, the penalties for doing so are steep. So those groups want U.S. agriculture officials to waive the penalties.

Kendall Keith, president of the National Grain and Feed Association, says land is at too great a premium right now, given high corn prices, to tie up acreage in the CRP.

KENDALL KEITH: If we’re not going to let the CRP land come out, then the U.S. may have a difficult time competing in export livestock markets, where we’ve seen growth in the past.

But some ag experts say a lot of the CRP land wouldn’t be suitable for growing corn.

The chair of the House Agriculture Committee, Minnesota Congressman Collin Peterson, agrees. He says the CRP debate is a red herring. Peterson thinks the groups advocating for early release of CRP lands are mostly big exporter types who should get used to higher corn prices.

COLLIN PETERSON: This is in a sense repricing agriculture. I think we’ve been selling our farm products too cheap.

For the time being, the U.S. Department of Agriculture will not allow “early outs” on CRP contracts, because recent planting projections suggest farmers will plant enough corn to satisfy demand. But if those projections don’t bear out, that could add fire to the CRP debate.

In Bingham Lake, Minn., I’m Annie Baxter for Marketplace.

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