Grainnet

Washington, DC--The National Grain and Feed Association (NGFA) has urged Secretary of Agriculture Mike Johanns to “seriously consider” measures to make tillable, non-environmentally sensitive acres enrolled in the Conservation Reserve Program (CRP) more available to the market to meet what are expected to be significant commodity supply/demand challenges in 2008.

In a letter to Johanns, the NGFA said it conservatively estimates the United States will need to plant at least 4 million to 5 million additional acres of wheat, corn and soybeans in the 2008-09 crop year than were planted this year to avert potentially dangerous supply disruptions for U.S. domestic and export customers.

The NGFA’s projections evaluate tightening grain and oilseed carryover levels, but also assume trend-line yields with no weather-related supply disruptions.

Citing U.S. Department of Agriculture (USDA) data as of mid-August, the NGFA noted that global wheat stocks have declined in seven of the last eight years, and now are estimated to be 18.5 percent of usage.

Meanwhile, global soybean carryover stocks are projected to decline from 29 percent of usage to 22 percent at the end of the next crop year.

Further, while the United States appears to have “dodged a bullet” with respect to corn stocks this crop year, the NGFA said, the global stocks-to-use ratio for that commodity is expected to decline from 13.8 percent to 13.3 percent in 2007-08.

USDA also projects that 1.25 billion bushels of additional corn will be required for ethanol production during the 2007-08 crop year, with further growth expected in 2008-09. But the NGFA also cited recent reports from European market analysts suggesting that the European Union corn crop may be 7.9 million metric tons less than estimated by USDA in its July World Agricultural Supply and Demand Estimates, while EU wheat production may be nearly 5 million metric tons less than projected by USDA in July.

There also are indications that the drought-ravaged Australian wheat crop may be as much as 3 million metric tons less than currently estimated.

These factors could further expand potential U.S. wheat and corn exports, resulting in further reductions in U.S. and global carryover stocks, the NGFA cautioned.

“Obviously, these trends cannot continue or markets will have further, and potentially severe, rationing to do in a short-crop year,” wrote NGFA President Kendell W. Keith.

The NGFA, established in 1896, consists of 900 member companies from all sectors of the grain, feed, processing and exporting business that operate about 6,000 facilities nationwide and handle more than 70 percent of all U.S. grains and oilseeds.

The NGFA also consists of 35 affiliated state and regional U.S. grain and feed associations, as well as two international affiliated associations.

In addition, the NGFA has strategic alliances with the North American Export Grain Association, Grain Elevator and Processing Society, and Pet Food Institute.

Among the options available to Johanns is to allow producers to terminate CRP contracts without penalty.

Without such action, a hefty economic barrier discourages producers from removing tillable acres from the CRP prior to contract expiration.

To do so, producers first must pay back all CRP rental and cost-share payments received over the entire life of the contract.

This is in addition to the costs producers bear in preparing idled CRP land for production, as well as forgoing future CRP rental payments on land removed from the program.

The NGFA encouraged Johanns to act “relatively soon,” given the time required for landowners and producers to evaluate whether to remove tillable, non-environmentally sensitive land from the CRP and prepare idled land for planting.

The CRP currently represents – in acreage terms – America’s “fourth largest crop,” consisting of 36.7 million acres that represent roughly 15 percent of available farmland.

The NGFA’s membership encompasses all sectors of the industry, including country, terminal and export elevators; feed manufacturers; cash grain and feed merchants; end users of grain and grain products, including processors, flour millers, and livestock and poultry integrators; commodity futures brokers and commission merchants; and allied industries.

Canadian and Mexican firms also are NGFA members, and use its Trade Rules and Arbitration System by specific reference in their contracts. For further information, please contact Randy Gordon, NGFA vice at 202-289-0873.

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