 "Clues about the potential impact of the CRP's critical feed
initiative on feed grain consumption will come from the number
of acres enrolled," said Darrel Good. "The USDA's September 2008
and December 2008 Grain Stocks reports will provide an
opportunity to uncover the impact in the calculation of
quarterly domestic grain disappearance."Our guess is that the
impact will be small enough that it will be difficult to detect,
lost in the noise of the annual variation of quarterly feed
consumption. If so, this program has little implications for
grain prices."
Good's comments came as he reviewed the Conservation Reserve
Program, a program that allows participants with certain
established vegetative cover to request a voluntary modification
to contracts in order to make available certain land for
critical feed use, including haying or grazing, or lease the
privilege to others. A
fact sheet outlining the program is available online from
the USDA's Farm Service
Agency.
"The critical feed use initiative is designed to augment the
livestock feed supply during a period of high prices for field
crops," Good explained. "There are a number of conditions for
qualification for the program."
Some of these conditions are as follows: Only CRP acreage
that is fully established and devoted to designated practices
qualifies; no more than 50 percent of the eligible CRP acreage
may be used for haying; grazing is allowed at 75 percent of
Natural Resources Conservation Service recommended stocking
rate; and the critical feed use is available only in 2008 for
the period after the primary nesting season ends through Nov.
10, 2008.
The ending date of the primary nesting season varies by state
and ranges from July 1 in the Southwest to Sept. 15 in North
Carolina. A
map identifying these ending dates by state is available on
the Farm Service Agency site.
[To download Adobe Acrobat Reader for
the PDF file, click
here.]
"Participants must obtain a modified conservation plan for
haying and grazing management," he said. "There will be no
reduction in the rental rate paid for contracts in this program,
but owners will be required to pay a fee of $75 for modification
of CRP contracts."
Good said the immediate question raised by grain market
participants is: How much will this additional forage production
substitute for grain feeding in the last half of the 2008
calendar year?
"There is no obvious answer to that question, but it can be
approached in at least two ways," he said. "One way is to try to
estimate the level of participation in the program, the amount
of forage produced by the program and the nutrient content of
that forage. Under the assumption that all of the additional
forage production is fed as replacement for grain, a calculation
of the amount of grain displaced can be made."
[to top of second column]
 |
Not all CRP acres are eligible for the program, he added. Ineligible
acreage includes wetlands, buffers, filter strips, useful-life
easements and land within 120 feet of a stream or other permanent
body of water. The USDA's news release describing the program
indicates that more than 24 million acres of CRP land are eligible
and that the program will make available "up to" 18 million tons of
forage.
Under the assumption that the forage will have, at best, 50
percent of the nutrient value of grain, feeding of an additional 18
million tons of forage could replace 9 million tons, or about 320
million bushels, of grain. This calculation assumes that forage
produced under this program is a net addition to feeding and does
not simply replace forage from other sources.
"A second approach to estimating the impact of the program on
potential feed grain consumption is to evaluate the capacity to feed
additional forage," he said. "Presumably, the additional forage
could replace grain consumption by beef cattle, dairy cattle, horses
and sheep. Most seem to believe that the quality of CRP forage is
such that the primary use would be for beef cows, replacement
heifers and, perhaps, backgrounding of fed cattle.
"The USDA's Economic Research Service estimates the number of
grain-consuming animal units by species for each feed grain
marketing year. For the period September 2008 through August 2009,
the ERS projects a total of 93.5 million grain-consuming animal
units, of which 3.78 million (4 percent) will be cattle other than
cattle on feed or dairy cattle -- about the same percentage as in
the previous marketing year."
The ERS estimates that about 6.6 million bushels of grain will be
fed in the September 2007 through August 2008 marketing year and
projects that 5.73 million bushels will be fed in the September 2008
through August 2009 marketing year. If additional forage production
replaced all of the grain fed to these "other" cattle for an entire
year -- 4 percent of all grain fed -- the displacement would equal
about 250 million bushels.
"If the grain fed to these cattle was replaced for six months
rather than a year, which still may be too generous of an
assumption, the displacement would be about 125 million bushels,"
said Good. "The replacement would occur mostly in the last quarter
of the 2007-08 feed grain marketing year and the first quarter of
the 2008-09 marketing year.
"If evenly divided between the two years, the displacement would
represent about 1 percent of the total feed grain consumption in
each year. The secondary impacts of the program are expected to be
minimal. The program announcement is too late for most producers to
alter cropping patterns, and the one-year nature of the program
provides little incentive to expand the beef cow herd."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
 |
