Young Farmers Battle With CRP

Iowa Producers Express Frustration to Ag Secretary Over Rental Rates

Chris Clayton , DTN Ag Policy Editor
Shelby County, Iowa, farmer Amy McLaughlin (far right) talks to Agriculture Secretary Tom Vilsack (far left) about how high CRP rental rates are making it hard for younger farmers such as herself to lease ground where she lives. McLaughlin knows about the rental rates because she also works at the local FSA office. (DTN photo by Chris Clayton)

AMES, Iowa, (DTN) -- Young and beginning farmers told Agriculture Secretary Tom Vilsack on Wednesday that one of their biggest frustrations in finding access to farm ground or pasture is competition from the Conservation Reserve Program.

Agriculture Secretary Tom Vilsack held a roundtable Wednesday with a mix of young and beginning farmers Iowa farmers. The farmers used the forum to talk about their success or complications with various USDA programs, but the young farmers often raised reoccurring themes about access to land and access to capital.

The Conservation Reserve Program is at its lowest acreage level nationally in decades with 25 million acres enrolled this year, down from 37 million in 2007. The farm bill pushed down acreage in the program as a budget-saving move, but rental rates offered by USDA also lag behind the current market. Landowners are getting contracts based more on what the rental market looked like two years ago rather than now.

In general, as older farmers look to retire, the next generation want to see more incentives for those landowners to turn over the ground to someone else to farm rather than retire with a CRP rental contract.

CRP CONTRACTS GETTINGS LAND

Amy McLaughlin told Vilsack she started out in a young and beginning farmer program by taking out a loan to start a cow-calf operation. McLaughlin farms with her husband in western Iowa, but also works temporarily at the local Farm Service Agency office. She noted where she lives has virtually no open pasture to lease. But she also saw roughly 14,000 acres quickly get enrolled into CRP locally this summer, of which all the land went for "well over $300 an acre," she said.

"I am for the conservation side of it," McLaughlin said. "I am for it and totally respect it, but coming from the young and beginning farmer side, we cannot compete at this rate. We cannot cash flow it."

Weed control on idle ground also is becoming a problem, and the county is facing a breakout in Palmer amaranth, she said. Additionally, a lot of ground going into CRP is seeing perennials or pollinator crops that aren't good for livestock. So once the land comes out of CRP, it's all going to get torn up just to convert it to a practical pasture or crop.

McLaughlin said she wished there were a way to provide an incentive for landowners to return to crop-share leases rather than demanding cash rent. Vilsack said that would be a tough row to hoe.

TWEAK INCENTIVES FOR TRANSITION

Nathan Anderson, a northwest Iowa farmer, said a transition incentive program in CRP should be tweaked to better help landowners who are retiring transition to turning the ground over to a young farmer. Anderson lost out on that incentive because the landowner-farmer took longer to fully retire than expected, he said. Anderson also cited problems with rental rates on CRP. He said about 500 acres of good farm ground near his home got put into the program this year, "and they are getting $350-$400 a year" per acre.

"In one scenario, a farmer lost the land he was renting and is out of state working in a factory in Omaha because the landowner chose to get $400 an acre for his land instead of renting it the farmer," Anderson said. He added, "It's a fantastic program, but there is continued room for improvement on that one."

Yet another young farmer in central Iowa pointed to absentee landowners putting land in CRP, taking away pasture ground, and then letting the ground go to weeds. "That is a big frustration on my part," said Ben Hollingshead, who farms with his brothers. "In my mind that land shouldn't be allowed to just go into trees and thistles."

Vilsack said concerns about CRP vary from one region of the country to another. Some areas complain rental rates are too low and not competitive while others argue the rate is too high, he said. Again, the secretary indicated members of Congress need to look at the need for the next farm bill and the management concerns that should be addressed by the program.

"How do we modernize the CRP program?" Vilsack said. "I hear a number of concerns about how we manage CRP land, and that's a reasonable concern. Are there other things we need to do?

"Do we have to have a better understanding for that balance and access to pasture land for that livestock industry that is incredibly important to the country, and to communities and producers, versus the need for conservation benefits that CRP provides?" Vilsack asked. "Is there a way of trying to figure out how to merge those two interests, or create some kind of better synergy and benefits than what we heard in there today? That, I think, is the challenge for us."

VETERAN TAX CREDIT HELPS

Aaron White, another farmer attending the event, noted that as a Marine veteran, he was able to lease some ground because Iowa provides the landowner up to an 18% non-refundable tax credit if the beginning farmer is a veteran. "That actually helped me acquire that 150 acres of row crop," White said. "That has been a blessing the state of Iowa has done, but I don't know if that is something that can transfer to the farm bill and become national."

White, who also owns a small cow-calf herd, also added that it was difficult to find pasture because so much ground was planted to row crops after corn hit $7 a bushel. Finding ground remains tough because row-crop farmers can pay far more for rent than a livestock producer can pay.

Keying in on tax policy and land transfer, the secretary criticized farm groups for focusing on repeal of the estate tax, or "death tax" as it is often called by its opponents. The secretary noted the estate tax is paid by very few people and an even smaller number of farmers. "Frankly, it is an incredible waste of time to talk about it because hardly anybody ever pays it," Vilsack said.

According to the IRS, there were 659 estates in 2014 that owned farm assets and paid the estate tax out of more than 11,900 estates that filed such returns.

Vilsack reiterated he has no incentive to sell his ground because the taxes would be high, but his children can inherit the land, receive the stepped-up basis on the value and sell the ground while paying little capital gains on it. The secretary said tax policy should be changed to encourage tax breaks for selling that ground to a younger farmer or rancher. "We should be thinking about a way that I can sell to a farmer that doesn't kill me from an income-tax perspective," Vilsack said. "We should be having a different conversation about taxes."

FUNDS PROVIDED FOR PROJECTS

Vilsack also used the meeting with the young farmers to announce $17.8 million in funds released for 37 projects under the Beginning and Farmer Development Program. The awards cover 27 states and include a range of projects.

Despite some of the frustrations expressed, the secretary said he was optimistic that more options were expanding for farmers to start small, market fruit and vegetable farms or get into direct marketing in various ways. He pointed to the microloan program and said he hoped the next farm bill would expand that program. "The question is will they (Congress) go any further?" Vilsack asked. "Will they make it feasible for that farmer to purchase a piece of land?"

As part of the transition to the next administration, Vilsack also said USDA will host several forums this fall, starting in September, dealing with various issues including land tenure, climate change, research and development, emerging pests and diseases, and local and regional foods. Vilsack said the workshops would provide the next administration a primer for issues facing agriculture around the country.

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

Follow him on Twitter @ChrisClaytonDTN

(AG/ES)

Chris Clayton