I suppose few people are regular readers of Wheat Life.
If not, and you have any interest in the Conservation Reserve Program, I think this article is unusually good. And I don't say that just because the Jim Putnam quotes me. He quotes almost all the leading authorities on the subject. He covers many key aspects of the program, albeit predominantly from a Pacific Northwest viewpoint.
Thin posting in general these days because I've got higher priorities. I do hope to pick things up on a semi-regular basis by the middle of March.
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What impact do you think CRP has on crop prices? 30M acres is significant, but less so when considering the productivity of the average acre in the program.
ReplyDeleteIf we flipped a switch tomorrow, and all CRP acres were available to farm, would production increase 1%? 5%? And what's a reasonable range for the price elasticity of supply?
I'd assume the impact on the wheat and hay markets would be biggest (or maybe "more direct" would be a better way to say it). I understand that just because the marginal acre isn't next-best suitable for corn doesn't mean it won't hit corn prices.
Joe
ReplyDeleteSorry for my late reply. I've been neglecting this blog due to a docs on other priorities.
Yes, I think CRP makes a significant difference, even though it's low quality land. Demand is very inelastic. A small revision in USDA harvest forecast can really move prices, even though such shocks are mostly buffered by inventories. So, long-term retirement of 30+ million acres of low quality land could make a big difference.
I'll note that I haven't always held this view. But that was before I had an appreciation for how inelastic demand for agricultural commodities must be.