Over the last two decades, conservation on cropland to improve water quality and provide other environmental benefi ts has been of growing interest. Federal government expenditures on conservation and environmental programs have been 80 percent higher under the current (2002) farm act than under the previous one, and several new programs, including the Conservation Security Program and the Grassland Reserve Program, were also introduced in 2002. As the expiration date for the current act draws near, it is apparent that the total expenditures and priorities of conservation programs will again be at the heart of legislative debates. The likelihood of tight fi scal budgets over the coming years suggests that competition for federal funding of conservation programs will be at least as intense as in the past. Hard questions concerning the impacts of these programs on water quality and the environment will need to be answered if such funding is to be maintained or increased. However, there are currently no easy and clear answers to these questions.

U.S. pork exports have nearly tripled during the past 10 years, reaching 907,000 metric tons in 2005. Exports now account for 13 percent of U.S. pork production. Japan, Mexico, and Canada have underpinned U.S. exports since 2000, when Canada replaced Russia as the third-largest importer of U.S. pork. But U.S. exports to other markets also have made sizeable contributions toward U.S. export success (see Figure 1). Although the individual markets that make up these “other” importers are much smaller than the top three, cumulative exports to these markets have grown quickly. The fi ve markets shown in Figure 2 showed especially strong growth from 2003 to 2005.

There is no doubt that the ethanol boom will mean a signifi cant increase in corn acres over the next two to ten years. Chad Hart argues elsewhere in this issue that much of the increase will likely come from Corn Belt states for the simple reason that the Corn Belt is where most suitable agricultural land is located. An additional 12 million acres—representing more than 5 billion gallons of ethanol—could be grown in Iowa, Illinois, Indiana, Nebraska, Minnesota, and South Dakota if two acres of corn were planted for each acre of soybeans. But will farmers be willing to sacrifi ce the agronomic and economic benefi ts of a cornsoybean rotation?

By the end of September 2006, there were 105 ethanol plants in the United States, with a combined production capacity of 5 billion gallons of ethanol. According to the Renewable Fuels Association, there are currently 42 new ethanol plants under construction and 7 plant expansions underway. These will add 3 billion gallons of ethanol production capacity to the United States. Beyond this, there are currently more than 300 business proposals for additional ethanol plants, which if built would create over 20 billion gallons of ethanol. So to say that the ethanol industry is booming may be an understatement. And the ethanol industry expansion is heating up corn futures prices and making corn a more lucrative crop to plant

I ncreased demand for corn from ethanol plants, short wheat crops, and stagnant South American soybean yields have led to $3.00 corn, $5.00 wheat, and $6.00 soybeans. These high prices suggest that producers of these commodities should not expect any loan defi ciency payments or countercyclical payments for either their 2006 or 2007 crops. If futures prices are any indication, then farmers might not see any payments from these programs for at least three or four years. High prices will not affect direct payments, of course. So $2.1 billion in annual aid will fl ow to corn farmers, $1.15 billion will go to wheat farmers, and soybean farmers will receive $608 million for both crop years despite the high prices.