U.S. May Free Up More Land for Corn Crops

By Dan Gill for The New York Times
June 21, 2008
CHICAGO – Signs are growing that the government may allow farmers to plant crops on millions of acres of conservation land, while a chorus of voices is also pleading with Washington to cut requirements for ethanol production.
Kirk Siegle, fearing flooding, removed corn Monday from a bin on his farm in Oakville, Iowa.
The Midwest floods have washed out an estimated four million acres of prime farmland, crimping this year’s harvest as the world desperately needs more grain. With corn prices setting records and soybean prices not far behind, the Bush administration is under intense pressure to do what it can to bolster the food supply.
Senator Charles E. Grassley, Republican of Iowa and one of Capitol Hill’s main voices on farm policy, on Friday urged the Agriculture Department to release tens of thousands of farmers from contracts under which they had promised to set aside huge tracts as natural habitat.
"This is an extraordinary request," Mr. Grassley said in a telephone interview as he toured his devastated state. "I would not make it if the situation in the Midwest were not so dire."
In disasters, the Environmental Protection Agency can roll back requirements for ethanol production, which could free up a large amount of corn for animal feed. Mr. Grassley, a strong ethanol backer, rejected that proposition, but in recent days many industries that depend on corn have urged the government to act.
A quarter of the United States corn crop is used for biofuels rather than animal or human food, and the percentage is rising. What this has done to the price of gasoline is debated by ethanol’s critics and defenders, but it has certainly benefited farmers, who have not seen such demand for their corn crop in decades.
On the losing side of the equation have been cattle, hog and chicken producers, as well as consumers. The government’s latest projection, released Friday, is that food prices this year will rise as much as 5.5 percent. Some products, including cereals and eggs, are expected to rise about 10 percent.
An Agriculture Department spokesman said Friday that the Grassley proposal would be considered. This week, the agriculture secretary, Ed Schafer, said his department would consider "everything possible" to aid farmers.
In the last couple of days, corn fell from its recent highs as traders grew convinced the government would release conservation land. Corn closed Friday at $7.21 a bushel, still an extraordinary price by historical standards.
The idea of easing ethanol mandates, while it would also lower the price of corn, is contentious. "There are different forces at work in the administration that are basically duking it out over how this should come out," said Brent Erickson, executive vice president of the Biotechnology Industry Organization, a Washington group that follows the issue.
Keith Collins, the former Agriculture Department chief economist, will release a study on Monday saying that as much as half of the sharp increase in corn prices over the last few years is due to the demands of ethanol production.
That view diverges sharply from the view of Mr. Collins’ former boss, Mr. Schafer, who said at a Rome conference that only a tiny percentage of the increase in world food prices was due to American ethanol production.
"We’ve seen a tremendous range of unintended consequences" from the requirement that increasing amounts of ethanol be blended into gasoline, Mr. Collins said.
The economist, who was hired by the Kraft food company to prepare his report, said he would be surprised if the Agriculture Department did not open up some conservation lands. He would not speculate about a change in the ethanol mandates.
The White House will be forced to confront the ethanol issue next month. States are allowed to asked for waivers of the mandate for corn ethanol on the ground that it is harming the economy or the environment.
In April, Gov. Rick Perry of Texas did just that, saying the "misguided" mandate was devastating the livestock industry in Texas. He asked for a large decrease in ethanol requirements to free up corn for use as animal feed.
The comment period for the waiver ends on Monday; the E.P.A. administrator has until July 24 to make a decision.
President Bush has been a strong supporter of alternative fuels, including ethanol. But Keith B. Hennessey, Mr. Bush’s chief economics adviser, said in an interview last week, "We have pushed renewable fuels to the point where we are getting counter-pressure saying we are going too far".
About 34 million acres are enrolled in the government’s biggest conservation program, known as the Conservation Reserve Program. Farmers enroll their land for as long as a decade and cannot take it out without paying severe penalties.
Last month, the Agriculture Department took the unprecedented step of saying that some conservation land could be used for hay and grazing after the nesting season ends for grass-nesting birds. Farmers would pay only a $75 fee.
As of Friday, more than half a million acres had been signed up for the modification.
Environmental and hunting groups generally went along with that shift, but were quick to decry Mr. Grassley’s latest proposal.
"Clearly there is elevated pressure every day to take land out of the program, but it would be completely devastating to wildlife," said Dave Nomsen, vice president of governmental affairs for Pheasants Forever, an advocacy group.
A better idea, Mr. Nomsen said, would be to take the millions of flooded acres and put them into conservation programs.
Sheryl Gay Stolberg contributed reporting from Washington.