Debate Over CRP Acres

OMAHA (DTN) -- One of the bigger and potentially costlier program shifts being pitched for the next farm bill revolves around what to do about the Conservation Reserve Program.

The last two farm bills passed by Congress during the commodity boom lowered the acreage cap in CRP from 37 million acres down to 24 million acres. At least some lawmakers and groups are trying to get CRP acres bumped back up -- for a variety of reasons.

Last weekend at a Senate Agriculture Committee field hearing in Michigan, Ducks Unlimited called for increasing the CRP cap. Kyle Rorah, a policy specialist for Ducks Unlimited in the Great Lakes region, told senators that hunters spend $4.8 billion a year just in Michigan and often rely on CRP land for habitat.

"Lands enrolled in CRP help absorb farm field run-off before it hits the ditch or stream, help recharge groundwater resources, and help keep the soil on the landscape," Rorah told senators.

Rorah did not recommend a specific acreage increase, nor did Michigan farmer David Williams, who testified for the American Soybean Association. Williams also noted ASA delegates voted at Commodity Classic to support an increase in CRP acreage, though the group did not take a position on how much to increase CRP or how to pay for it.

Back in February, Pheasants Forever called for boosting CRP "to a minimum of 40 million acres." Dave Nomsen, Pheasant Forever's vice president of governmental affairs, testified in a House Agriculture Subcommittee hearing that cutting CRP to 24 million acres has left landowners looking for options and has been disastrous for upland wildlife.

The most current USDA report on CRP shows payments for 2016 were $1.8 billion on 23.9 million acres for an average per-acre payment of $76.55 nationally with combined general signup contracts and continuous enrollment contracts. The average rental rate is about 18% higher than when the farm bill was enacted in 2014.

USDA pays an average of $201.89 an acre in Iowa, the highest of any state with a substantial CRP enrollment. While the value of the average acre of farmland in Iowa went down 17.3% from 2013-16, the average CRP rental rate in Iowa has gone up 24.7% since 2014. (Massachusetts is the only state with a higher average CRP rental rate than Iowa, but Massachusetts has only 10,000 acres in the CRP, while Iowa has 1.79 million acres.)

The plausibility of boosting CRP acreage also comes down to cost. A $76.65 average payment then would cost at least $76.7 million per year for every million acres added to the program. If CRP were bumped up to 30 million acres, it would cost about $462 million more per year. That would translate into increasing CRP costs at least $4.62 billion over 10 years under the way the Congressional Budget Office scores the costs of programs. So boosting CRP would likely have to ensure offsetting reductions in commodity programs and crop insurance for any new land enrolled in the program.

"It's like everything else in the farm bill," said Ferd Hoefner, policy director for the National Sustainable Agriculture Association. "It's a question of whether they put more cash on the barrel or not. I guess I'm not expecting to see that, but you never know."

And not everybody is on board with an acreage increase. Young farmers and ranchers especially feel squeezed, competing with the federal government for land. Amy McLaughlin, who raises about 50 cow-calf pairs with her husband near Shelby, Iowa, has to go more than 100 miles away from home at times for her cattle to have a place to graze.

"It's a serious struggle around here for us to find pasture," McLaughlin told DTN.

McLaughlin said she would like to see the CRP rental rates better match what farmers and livestock producers are paying to rent ground. She understands why older landowners would rather enroll in the program than rent to a younger producer. "It's really hard to compete with what the government is paying landowners in the program," she said.

Another group opposing a CRP acreage increase is the National Grain and Feed Association. The group that represents grain elevators and feed mills has successfully lobbied in the last two farm bills for acreage cuts, and NGFA doesn't see a reason to go back now. NGFA wants CRP kept at 24 million acres, which the group says is "right-sized." Further, NGFA wants more conservation funding invested in the working-lands programs: the Conservation Stewardship Program and Environmental Quality Incentives Program. NGFA also wants better prioritization of sensitive lands that go into CRP as well as addressing issues about escalating rents in the program.

Sen. John Thune, R-S.D., has pitched a plan to increase CRP to 30 million acres but also allow more flexibility for haying and grazing. One of Thune's ideas would allow landowners to receive lower rental payments during grazing periods and allow up to 25% of the stocking rate for livestock on the land. Thune pitched the plan because 57% of South Dakota's CRP enrollment is expected to come out of the program in the next few years.

"After receiving feedback from stakeholders throughout South Dakota, it was clear that we needed to make some changes," Thune said when he rolled out his plan.

Currently, CRP is encroaching on the 24-million-acre cap, which is why signup for continuous CRP has been frozen, likely until fiscal-year 2018 begins. Contracts for about 2.5 million acres will end this fall, opening up more room for continuous CRP. Agriculture Secretary Sonny Perdue has not indicated if USDA will have a general sign-up.

David Widmar, an economist at Purdue University, wrote a column this week on some of the impacts of CRP acreage cuts over the past decade and what the impact might be of returning CRP to its peak acreage.

A 12.9-million-acre increase is a small drop in the bucket compared to the 179.5 million acres of expected corn and soybean planted acres this spring, along with 46.1 million acres of wheat. But a 12.9-million-acre decline in production could have an impact on ending stocks, Widmar told DTN.

"So it's not that big of an impact. It's a small change in production," Widmar said. "The impact is in the margin, and that margin is felt in the ending stocks."

Historically, CRP has been bigger in wheat states, so acres would be more likely to come back into CRP in wheat country. Widmar's examination projected a 12% decline in wheat production. That would reduce the ending stocks-to-use ratio from 51.8% currently for wheat to 39.1%. Production for corn and soybeans would scale back about 4% each. Ending stocks to use for corn would drop from 15.7% to 11.7% as well.

Higher CRP acres might lower ending stocks, but that wouldn't exactly boost commodity prices, noted DTN Senior Analyst Darin Newsom. There is little correlation between ending stocks and the final average cash price. The last time corn had a final marketing-year ending stocks of approximately 11.7% was 2006-07 -- just before Congress first started to ratchet down on the CRP acreage. That year's final calculation came in at 11.6%, with USDA calculating average cash price received that year at $3.04.

However, wheat had an average cash price of $5.99 a bushel in 2014-15 when ending stocks to use came in at 37.3%.

Widmar noted CRP will continue to look attractive to landowners, especially if the rates remain strong. Yet, it's hard to increase the cap given those per-acre costs.

"That's the challenge when those rental rates are high is that it is really expensive to add more acres," Widmar said.

Widmar's column "What if CRP acres increase?": http://ageconomists.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(BAS/AG)

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