U.S. land reserve could ease ethanol squeeze

WASHINGTON (Reuters) - The Bush administration could calm the jittery corn market and give fuel ethanol a boost by returning idle Conservation Reserve land to crop production, the leader of an Iowa ethanol group said on Tuesday.

Without more corn land, "we go to a religion-based energy policy -- pray for good weather," said Monte Shaw, head of the Iowa Renewable Fuels Association.

Shaw spoke as part of the Reuters Global Biofuel Summit. He said action was needed "in the next couple of months" to influence plantings this spring.

Twenty percent of the 2006 corn crop will be used in making ethanol, an alternative fuel, helping to reduce the corn stockpile to a paltry three-week supply by the time the new crop is mature. Ethanol's share is estimated to rise to 30 percent of this year's crop.

During a telephone news conference, Shaw said "we need to take a serious look" at the Conservation Reserve as a source of crop land. If farmers are given the go-ahead soon, they could convert land to crop use this year.

"Some of those acres could very easily come out, take the pressure off the marketplace," Shaw said. "There are acres that are in the CRP (Conservation Reserve Program) not for any environmental reason whatsoever."

Some 36.7 million acres are enrolled in the Conservation Reserve, which pays farmers an annual rent, averaging $49.30 an acre, for idling environmentally fragile land for 10 or 15 years. Various analyses say 4 million to as many as 18 million acres could be farmed safely.

There is a precedent for releasing land from the reserve under the "opt out" discussed by Shaw. In 1995 and 1996, the last time that U.S. corn stockpiles ran low and the farm-gate price hit a record $3.24 a bushel, the Agriculture Department let owners withdraw land with no penalty.

The offers result in withdrawal of 704,000 acres in 1995 and 768,000 acres in 1996. Farmers were required to take steps to prevent erosion.

At present, if landowners want to break a Conservation Reserve contract, they must refund all payments plus interest and any damages to the Agriculture Department.

A coalition of millers, foodmakers, shippers and the poultry industry says Congress should consider trimming down the size of the reserve.