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The Farm CPA

RSS By: Paul Neiffer, Top Producer

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

Challenges Facing Conservation Reserve Program

Jul 01, 2010

With the 2008 farm act, substantial changes were made to the USDA Conservation Reserve Program (CRP). The major change was reducing the maximum enrollment acreage from about 37 million acres to 32 million acres, which is about a 14% reduction in maximum acres. Also during this period, a substantial increase in commodity prices took place, which has caused CRP rent prices to increase dramatically in some areas.

The June 2010 issue of Amber Waves has a very good article on the challenges facing the CRP.  A brief history shows that the program began in 1985 and 1986 and the primary goal was to retire highly erodible farmland from production for a 10- to 15-year term. Enrollment grew quickly, reaching about 33 million acres by 1990. After the initial contracts were issued, program goals were modified to include water quality and wildlife habitat improvements in addition to reduced soil erosion. To capture these multiple benefits, starting in 1990, program administrators used an Environmental Benefits Index (EBI) to rank competing offers received during periodic "general sign-ups." The EBI computes a score using a formula that weighs such factors as soil erodibility, location within a priority zone, the proposed conservation practice and the requested rental rate -- with offers accepted only if an EBI score exceeds a cutoff value.

1n 1996, a continuous CRP was added to enroll parcels of land with high enviromental benefits outside of the EBI ranking process.

Between 1990 and 2008, CRP enrollment fluctuated around 33 million acres, with a high of 36.8 million in 2007. As of February 2010, the total acres in CRP are about 31.2 million. This includes about 4.5 million acres of continuous sign-up acres.

With the new farm bill coming up in the near future, it will be interesting to see what changes will be made to the program.

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COMMENTS (1 Comments)

In central Nebraska CRP rental rates are about half the market rates. Take out the haying provisions of the contracts and I can double my net by tearing it up and cash renting. Also won't have the headachs of weed control and keeping up with the property taxes.
8:09 AM Jul 2nd
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