Diversify With Conservation Acreage

October 28, 2015 02:34 AM
 
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Low commodity prices could drive interest in 2016 enrollment

Taking farmland out of crop production might sound like a poor way to generate stable cash flow. Yet for a growing number of producers, enrollment in initiatives such as the federal Conservation Reserve Program (CRP) is a viable way to diversify.

“From the revenue side, it was kind of a black-and-white decision,” explains Doug Winter, a southeastern Illinois farmer who grows corn, soybeans and wheat on about 2,400 acres, along with managing 65 CRP acres. At the time he began enrolling 14 years ago, per-acre CRP profits were 5% to 10% higher than his five-year grain crop average on the same land. He made the move on ground that eroded even under no-till and produced variable crops. 

As CRP enters its 30th year, robust enrollment interest is expected when general sign-up begins Dec. 1. Enrollment lasts between 10 and 15 years. In part, the program’s renewed attractiveness results from low commodity prices, which are forcing producers to examine creative financial strategies. 

“Acreage that’s of a highly environmentally sensitive nature, wetlands, erodible lands—those typically have been good candidates for enrollment in the CRP program,” says Val Dolcini, administrator of Farm Service Agency (FSA), which oversees CRP. “It probably will be among the most competitive sign-ups we’ve had in some time.”

It’s true producers took about 105,000 acres out of CRP and put it into crop production after the corn and soybean price boom, Dolcini says. Nonetheless, then and going forward, most are looking for wider-reaching benefits both economic and environmental. 

“By and large, when somebody enrolls in the CRP program, they’re doing it with the long-term in mind,” Dolcini points out. “They take a longer view about the benefits of staying in a program that will allow them a certain set payment for a good long period of time.”

Millions Of Opportunities. The 2014 farm bill lowered the cap on federal CRP acreage to 24 million, down from a high of about 36.8 million in 2007, Dolcini says. 

Rental rates are different for each state, and while they typically lag behind economic conditions, FSA aims to ensure they are competitive.

“We try to tie them to actual local rental rates so as not to skew the local rental markets in the places where CRP acreage is being sought,” Dolcini notes. Farmers interested in the program should begin by visiting their local FSA office to learn more.

In his part of Illinois, about 100 miles southeast of St. Louis, Winter says CRP rates are slightly up this year compared to 2014. He adds there are incentives to enroll beyond rent paid to farmers, including machinery costs just 15% of what he pays on cropland.  

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