Land Retirement Questions Abound05/31/2017
As of May 3, enrollment in the U.S. Department of Agriculture’s Conservation Reserve Program reached its statutory limit of 24 million acres, and new enrollment won’t resume until after Sept. 30.
The historic results of CRP, which pays farmers for retiring their cropland for periods of 10 to 15 years, are varied. Under the 1995 farm bill, CRP acreage was capped at 40 million acres. In ensuing farm bills, caps varied from 32 million to 36 million acres to the current limit of 24 million acres.
For many in agriculture, the current reduced CRP acreage level has caused an increase in production resulting in farm prices than in some cases are lower than the cost of production.
The solution many members of Congress see as they enter into the debate on the 2018 farm bill is an increase in land retirement programs such as CRP. This leads to question such as how much acreage should a future CRP hold and how much should producers receive in payments.
Ask any member of a congressional agriculture committee and you’ll come up with a different answer on CRP acreage limits. A few want 30 million acres, others want 32 million, others wish a return to 40 million and one or two would like to see as high as 60 million.
Cost is driver
As much as everyone wants to see a bigger CRP, the big question surrounding the size of the program going forward is how much would this thing cost?
One member of the Senate Agriculture Committee, Sen. John Thune, R-SD, has already put forward his proposal for changes in CRP and create new management options for other easement programs. Thune has been a part of writing three previous farm bills as a member of both the House and Senate.
In March, Thune announced he would introduce multiple and incremental farm bill proposals throughout 2017, well in advance of the current farm bill’s September 2018 expiration. Thune’s proposals include, among others, increasing the CRP acreage cap by 25 percent to 30 million acres, creating a new concept for establishing CRP target acreage enrollment for each state by using a 10-year average enrollment, allowing greater flexibility for grazing and haying on CRP-enrolled land, and setting new more flexible rules that would improve all other existing and new farm bill easement programs.
“These common-sense management changes are much-needed, and they would go a long way in improving several farm bill conservation programs,” Thune said in an interview in his Washington office. “Like most states on the Plains, CRP is a popular program in South Dakota, but due to expiring contracts, the state is expected to lose 57 percent of its existing CRP acres over the years covered by the 2018 farm bill.
“After receiving feedback from stakeholders throughout South Dakota, it was clear that we needed to make some changes.”
Thune also has an answer for those wondering about costs. He’s offered two scenarios where CRP acreage sits at 30 million acres with another at 40 million acres.
Scoring the dollars
Thune explained the Congressional Budget Office has offered two “scores” of his proposals to fund an expanded CRP under the 2018 farm bill.
“The cost of CRP, surprisingly, was less at 30 million acres than we thought it was going to be. It’s about $1 billion,” Thune said. “To get to 40 million is about $9 billion. Going from the current 24 million to 30 million is manageable. We gain some savings by changing through flexibility. That gains an additional $100 million in savings.
“Obviously, we have to find a way to pay for stuff within the bill, but how much? The CRP, at least in its current incarnation, just isn’t adequate to keep up with the demand out there. Commodity prices being what they are, there’s a lot more interest in the program. It has all the ancillary benefits of the environmental equities as well as wildlife habitat and those sorts of things, too.”
Breaking down Thune’s CRP proposal, boosting the current 24 million acre cap to 30 million acres would establish a reasonable and defensible CRP acreage cap for the duration of the next farm bill.
Each state would establish a target CRP acreage. It would be determined by dividing the 10-year CRP enrollment average of all CRP-enrolled acres in a state by the 10-year national CRP acreage enrollment (carried out to eight decimal places), times the CRP enrollment cap for the next farm bill (30 million acres).
Using a 10-year average represents periods of both high and low commodity prices and various diverse weather patterns.
Grazing would be allowed on CRP acreage during the grazing period and at 25 percent of the stocking rate that is established by the county FSA committee for Livestock Forage Program purposes.
There would be no restriction for grazing during the primary nesting period. The CRP rental rate for acres grazed according to this provision shall be reduced by 25 percent.
Vegetative cover could be mechanically harvested every three years on land enrolled in CRP under all practices, with no more than one-third harvested each year and a 25 percent reduction in CRP rental payments for each acre mechanically harvested. There shall be no restriction, except for harvest for seed, on the use of the vegetative cover mechanically harvested.
Thune’s proposal also includes other conservation program improvements such a related wellhead protection, removal of base acres on certain CRP contracts, Transition Incentives Program and other easement program changes.
Thune’s other idea may prove more controversial. He recently announced his idea for the Soil Health and Income Protection Program, which would provide participating farmers with a short-term acreage conserving use program. Unlike CRP, SHIPP would require a commitment of only three to five years.
“Most farms include a percentage of cropland that is less productive due to soil type, slope, wetland characteristics, lack of fertility and other factors,” Thune said. “With today’s low commodity prices that are expected to continue over the next few years, I think most farmers would like to see an alternative to cropping their less productive land, especially with the high cost of inputs required to grow a crop.
“CRP is typically not a viable option for farmers who work less productive land, since it requires a commitment of 10 or 15 years, and residue and cover on CRP- enrolled acres has been historically difficult to control. With today’s technology, we can provide farmers with information to help them identify the least productive land on their farms and help give them a benefit.”
Enrollment in SHIPP will require verification by their local Farm Service Agency that the land a farmer enrolls is the least productive land on the Farm Serial Number is required. Under Thune’s proposal, both the landowner and the operator must sign the SHIPP contract.
Land is enrolled in SHIPP for three, four or five years. The secretary of agriculture will have discretionary authority to terminate SHIPP contracts, if necessary.
A maximum of 15 percent of the cropland on a FSN may be enrolled in SHIPP, and enrolled land must have been planted or considered planted to a commodity crop for three consecutive years prior to enrollment.
SHIPP acres must be planted to a perennial conserving use cover.
SHIPP acres may be harvested for seed after nesting and brood rearing period, but cannot be insured (25 percent reduction in rental payment if harvested for seed).
Base acres on the FSN are suspended (and will be reinstated when the SHIPP contract expires) on a 1:1 basis for each acre enrolled in SHIPP.
Perennial conserving use cover crops and planting rates shall be determined by the State Technical Committee and be established at the lowest cost practicable.
SHIPP enrollee shall pay the establishment cost of the perennial conserving use cover crop.
The SHIPP annual payment rate shall be one-half of the CRP general sign-up rental per acre rate for the county. Land must have been planted or considered planted for three consecutive years prior to the date of enactment.
A one-time sign-up will be held, beginning with the first crop year after the next farm bill has been enacted. The premium discount for insured crops planted in a crop insurance unit each year shall be increased by 2 percent if the unit contains acres enrolled in SHIPP. It applies only to premium discounts less than 80 percent and does not apply to catastrophic coverage.
If an FSN with SHIPP-enrolled acres contains more than one crop insurance unit, the increased premium subsidy applies to all crop insurance units in the FSN.
SHIPP acres may be hayed or grazed outside the nesting and brood-rearing period established for the county, with adequate stubble height left standing to protect the soil, as determined by the state technical committee.
“We don’t have a score with SHIPP yet, but we think there are some things in it that achieve savings, too. A lot of people have perhaps 10 to 15 percent of their acreage that is low yielding, and is particularly above the cost of production,” Thune said. “The idea is to take it out for three to five years, on a voluntary basis, and get a rental payment and a break on their crop insurance premiums.
“This is for those acres that aren’t being farmed and you aren’t getting an ARC payment on it. This reduces your exposure when it comes to crop insurance. This offers optimum flexibility. The idea behind this is that you have to think commodity prices will improve. It offers a solution where a farmer can decide he can crop that ground again. It’s an alternative and a complement to CRP because it’s shorter term with maximum flexibility and if things turn around the farmer can make a different decision.
“We know ARCs not working and we have de minimis payments. We’re trying to create discrete solutions that work for these economic times. The SHIPP program is designed to take low-yielding land and give a little income protection to farmers as well as promote soil health. We also need to make CRP more of a working lands program and give farmers alternatives they don’t have. We are trying to find multiple solutions to give farmers as much flexibility as they need. We’re open to all kinds of ideas. If people present them as good ideas we’re open to them.”
Source: Larry Dreiling, High Plains Journal