Back in the mid-1980s, fragile land across the nation was retired from farming through a popular government program called the Conservation Reserve. But many of those parcels are now being forced to go back to work, at a time when input costs are high, commodity prices are falling and concern for wildlife and the environment remains strong.
The 2008 Farm Bill instructed the Farm Service Agency to reduce CRP acreage to 32 million acres from approximately 36 million acres a few years ago.
The consequences are being felt, especially in states like Texas and Colorado, which together have the highest number of CRP acres coming out of the program this year. Only 40 percent of expiring contracts were eligible for renewal in Colorado last year, meaning more than 1 million acres are getting the boot.
“It’s not an economically obvious time to be tearing this ground out and putting it back into farming,” noted John Deering, an agriculture and business management specialist with Colorado State University at Akron, who farms with his brother and uncle near Yuma.
Most of the land that was idled in exchange for government rental payments came out of wheat production and other dryland crops.
If a solid carbon market was in place, farmers with expiring CRP contracts could leave the land in grass and sell carbon credits. “That’s not a viable option right now,” Deering said.
The reduction in CRP acreage raises several concerns. An increase in production generally brings down crop prices. An analysis done by CSU Ag Economist James Pritchett predicts a resulting 30 percent increase in Colorado wheat acreage, a 7 percent increase in rangeland and pasture and 6 ½ percent increase in corn acreage. Resulting price drops expected to be most significant are a 6 percent reduction for hay and 3-4 percent reduction for sunflowers; in total, a 47 percent decrease in CRP payments and a 24 percent decline in farm income for Colorado.
Land values could also suffer
“We would expect land values to fall, not drastically at first, but especially in the Southeastern part of the state, if land sales begin to snowball, it could be significant,” Deering says.
He urges expiring contract holders to carefully consider their options, one of which is simply “waiting things out.”
There has been some discussion of another CRP signup occurring perhaps as early as late 2010, though nothing definitive is in the works.
In the meantime, Deering suggests landowners look first for areas of the property that would still qualify for continual renewal conservation practices like field borders or buffer strips. “It may be a way to help with conservation issues on your farm and allow you to still get some payments,” he explained.
Turning idle land back into cropland is a big undertaking. Researchers at CSU and in surrounding states have tried to gather information on what it takes to convert old CRP land back into productive cropland. From what research is available, the process isn’t easy or cheap.
“When you commit to a tillage operation there’s no other option after that except for more tillage,” Deering said.
A study done at Tribune, Kan., shows that extra tillage (two disking operations and two sweep operations) is required even to plant a no-till crop. The high level of organic matter in idled land also increases nitrogen demands. That adds fuel and fertilizer costs that make a profit margin unlikely the first year. In fact, the study estimates a loss of $25 to $50 an acre calculated on a 35 bushel per acre wheat yield.
Added capital costs are even more challenging when credit is as tight as it is now, Deering added.
“Even with an optimistic yield we have a hard time in front of us with some of these properties,” he advised. “It’s not an obvious money-maker, for sure. It’s important to look at what you are getting yourself into.”
Grazing is a middle-of-the-road option that incurs fewer inputs. Other alternatives are non-agricultural uses such as hunting and recreation or enrollment in a conservation easement or land trust, he said.
One silver lining is that putting land back into production does yield economic benefits. Colorado’s expiring CRP acres are projected to create $300 million in economic activity for rural businesses selling seed, fertilizer, custom harvesting and more.
Despite the state of the federal budget, conservation programs remain relatively popular in Washington. Groups like the National Wildlife Federation want to keep land out of production and worry about the impact of farming on wildlife and bird populations. According to the FSA, the Conservation Reserve has reduced soil erosion by over 400 million tons, protected over 2 million acres of wetlands and resulted in buffers on over 100,000 miles of streams and rivers. In fiscal 2010, USDA will distribute approximately $1.7 billion in CRP rental payments to producers holding about 758,000 contracts on 424,000 farms for an average of $51.52 per acre.
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Back in the mid-1980s, fragile land across the nation was retired from farming through a popular government program called the Conservation Reserve. But many of those parcels are now being forced to go back to work, at a time when input costs are high, commodity prices are falling and concern for wildlife and the environment remains strong.
The 2008 Farm Bill instructed the Farm Service Agency to reduce CRP acreage to 32 million acres from approximately 36 million acres a few years ago.
The consequences are being felt, especially in states like Texas and Colorado, which together have the highest number of CRP acres coming out of the program this year. Only 40 percent of expiring contracts were eligible for renewal in Colorado last year, meaning more than 1 million acres are getting the boot.
“It’s not an economically obvious time to be tearing this ground out and putting it back into farming,” noted John Deering, an agriculture and business management specialist with Colorado State University at Akron, who farms with his brother and uncle near Yuma.
Most of the land that was idled in exchange for government rental payments came out of wheat production and other dryland crops.
If a solid carbon market was in place, farmers with expiring CRP contracts could leave the land in grass and sell carbon credits. “That’s not a viable option right now,” Deering said.
The reduction in CRP acreage raises several concerns. An increase in production generally brings down crop prices. An analysis done by CSU Ag Economist James Pritchett predicts a resulting 30 percent increase in Colorado wheat acreage, a 7 percent increase in rangeland and pasture and 6 ½ percent increase in corn acreage. Resulting price drops expected to be most significant are a 6 percent reduction for hay and 3-4 percent reduction for sunflowers; in total, a 47 percent decrease in CRP payments and a 24 percent decline in farm income for Colorado.
Land values could also suffer
“We would expect land values to fall, not drastically at first, but especially in the Southeastern part of the state, if land sales begin to snowball, it could be significant,” Deering says.
He urges expiring contract holders to carefully consider their options, one of which is simply “waiting things out.”
There has been some discussion of another CRP signup occurring perhaps as early as late 2010, though nothing definitive is in the works.
In the meantime, Deering suggests landowners look first for areas of the property that would still qualify for continual renewal conservation practices like field borders or buffer strips. “It may be a way to help with conservation issues on your farm and allow you to still get some payments,” he explained.
Turning idle land back into cropland is a big undertaking. Researchers at CSU and in surrounding states have tried to gather information on what it takes to convert old CRP land back into productive cropland. From what research is available, the process isn’t easy or cheap.
“When you commit to a tillage operation there’s no other option after that except for more tillage,” Deering said.
A study done at Tribune, Kan., shows that extra tillage (two disking operations and two sweep operations) is required even to plant a no-till crop. The high level of organic matter in idled land also increases nitrogen demands. That adds fuel and fertilizer costs that make a profit margin unlikely the first year. In fact, the study estimates a loss of $25 to $50 an acre calculated on a 35 bushel per acre wheat yield.
Added capital costs are even more challenging when credit is as tight as it is now, Deering added.
“Even with an optimistic yield we have a hard time in front of us with some of these properties,” he advised. “It’s not an obvious money-maker, for sure. It’s important to look at what you are getting yourself into.”
Grazing is a middle-of-the-road option that incurs fewer inputs. Other alternatives are non-agricultural uses such as hunting and recreation or enrollment in a conservation easement or land trust, he said.
One silver lining is that putting land back into production does yield economic benefits. Colorado’s expiring CRP acres are projected to create $300 million in economic activity for rural businesses selling seed, fertilizer, custom harvesting and more.
Despite the state of the federal budget, conservation programs remain relatively popular in Washington. Groups like the National Wildlife Federation want to keep land out of production and worry about the impact of farming on wildlife and bird populations. According to the FSA, the Conservation Reserve has reduced soil erosion by over 400 million tons, protected over 2 million acres of wetlands and resulted in buffers on over 100,000 miles of streams and rivers. In fiscal 2010, USDA will distribute approximately $1.7 billion in CRP rental payments to producers holding about 758,000 contracts on 424,000 farms for an average of $51.52 per acre.
