FOCUS ON AG
May 31, 2021
USDA ADDS EFFORTS TO EXPAND CRP ACRES
“Carbon sequestration” is a common topic these days in the halls of Congress, at USDA, in farm organizations, and among farmers and ranchers. One federal conservation program that has been around for over 35 years and has assisted with carbon sequestration is the Conservation Reserve Program (CRP). The CRP program was established in December of 1985 as part of the 1985 Farm Bill. The initial goal of CRP was to reduce soil erosion on highly erodible cropland and to help curb the over-production of farm commodities. Secondary objectives of CRP included improving water quality, fostering wildlife habitat, and providing income support to farmers, and as time passed enhancing carbon sequestration.
History of the CRP Program
USDA began enrolling crop acres into the CRP program in 1986. CRP has been the largest and most important conservation program in the United States since that time, making major contributions to national efforts to improve water and air quality, prevent soil erosion, protect environmentally sensitive land, and enhance wildlife populations. The CRP program offers landowners 10 or 15-year contracts to take farm land out of production. Following initiation of the program, CRP acreage quickly rose to over 30 million acres by 1990, and then increased even more, to around 35 million acres by 1993-1995, before dropping off slightly following the 1996 “Freedom-to-Farm” Farm Bill. CRP acres then began to increase again in the late 1990’s and early 2000’s, reaching a peak of 36.8 million acres in 2007.
During a 15-year period from 2007 to 2021, CRP acreage has declined by nearly 16 million acres or 43 percent. Approximately 20.8 million acres are currently enrolled in CRP, which is at the lowest level since 1988. The reduction in CRP acres has been due to high crop prices, strong farm income levels, and mandated reductions in maximum CRP acreage by Federal legislation. The 2007 Farm Bill reduced the maximum CRP acreage from 37 million acres down to 32 million acres, which was followed by the 2014 Farm Bill that reduced the maximum CRP acreage even further, down to a maximum level of 24 million acres. The 2018 Farm Bill established a gradual increase in maximum CRP acres up to 25 million acres in 2021, 25.5 million acres in 2022 and 27 million acres in 2023.
Current CRP Enrollment
As of March 31, 2021, there were a total of 564,021 CRP contracts in place, with just under 20.8 million acres enrolled in the CRP program. This is over 4 million acres below the maximum of 25 million acres for 2021 that was allowed as part of the last Farm Bill. Of the total CRP acres, approximately 11.3 million acres are enrolled under General CRP contracts, just over 6.3 million acres are enrolled in Continuous CRP, just under 1.9 million acres are enrolled in the grassland program, and the balance of the CRP acres are enrolled in the CREP program, wetlands programs and other special CRP initiatives. Forty-six percent of the Continuous CRP and CREP acres are enrolled in the Clean Lakes, Estuaries and Rivers (CLEAR) program.
The U.S. average CRP rental rate is $83 per acre, including an average of $54 per acre for land enrolled under General CRP contracts, $137 per acres for Continuous CRP land, and $180 per acre for land enrolled in CREP. In Minnesota, the average CRP rental rate is $140 per acre, which includes $88 per acre for General CRP contracts and $163 per acre for Continuous CRP acres. Iowa has an overall CRP rental average of $229 per acre, with $166 per acre for General CRP and $254 per acre for Continuous CRP. Average CRP rental rates in other States include Illinois at $202 per acre, Indiana at $192 per acre, Wisconsin at $159 per acre, South Dakota at $75 per acre, Nebraska at $58 per acre, North Dakota at $52 per acre, and Montana at $29 per acre.
There are eight States that have over 1 million acres currently enrolled in CRP as of March, 2021, mainly in the Upper Midwest and Plains regions. CRP acres enrolled in these States include: Texas (2.4 million acres), Kansas (1.8 million acres), Iowa (1.7 million acres), Colorado (1.6 million acres), South Dakota (1.4 million acres), Nebraska (1.3 million acres), North Dakota (1.2 million acres), and Minnesota (just over 1 million acres).
Given the current challenge to get more acres enrolled into the CRP program, one concern is the rather large number of CRP contract acres that will be expiring in the next few years. CRP contracts will expire on about 3 million acres in the U.S. on September 30, 2021, along with approximately 4 million acres on September 30, 2022 and 2 million acres on September 30, 2023. A total of 9 million acres, or 43 percent of the current total CRP acres, will have contracts expiring in the next three years.
USDA Announces New CRP Initiatives
In order to address the declining CRP enrollment rate in recent years and to more fully utilize CRP as a tool to enhance carbon sequestration, USDA announced new CRP initiatives in mid-April. These initiatives included higher payment rates, new incentives, and a more targeted focus. The 2018 Farm Bill that was passed by Congress limited maximum CRP annual rental rates to 85 percent of established county average rental rates for a given county for land signed up under a General CRP contract and to 90 percent of the average rate for land signed up under a Continuous CRP contract. One way that USDA can circumvent the reduced CRP rental rates is to offer sign-up incentives to implement certain practices and to cover CRP establishment expenses.
In mid-May of 2021, USDA Secretary Tom Vilsack announced that agriculture producers in the “Prairie Pothole” region can now enroll in the Soil Health and Income Protection Program (SHIPP), which is a pilot program being offered under the CRP program. The SHIPP program is a short-term CRP option to plant cover vegetation on less productive agricultural lands, while improving soil health and enhancing carbon sequestration. The SHIPP program takes farm land out of crop production, while still allowing livestock producers to utilize the land for having and grazing. States that are eligible for the SHIPP program include Minnesota, Iowa, Montana, North and South Dakota. The current SHIPP enrollment period continues through July 16, 2021.
Summary
The CRP program has a long and successful history of preventing soil erosion, improving water quality, enhancing wildlife habitat, and aiding in carbon sequestration. While it may seem quite logical to utilize expansion of the CRP program to reach further goals related to carbon sequestration, there could be some obstacles in accomplishing those goals. Commodity prices for corn and soybeans are their highest levels in 8 or 9 years. Farm profit levels have improved considerably in the past couple of years, which is also resulting in higher land rental rates in many areas. This may make it difficult to convince farmers and landowners to take farm land out of production in order to enroll in the CRP program, unless there are some added financial incentives.
Increasing CRP annual rental rates back to comparable farm land rental rates in a given area is likely to face some “kickback” by some members of Congress and by farm organizations. The reduction factors in the maximum CRP rental rates that were put in place in the last Farm Bill were due to CRP competing with farmers that were trying to rent farm land for crop production, especially younger beginning farm operators. This CRP rental rate reduction had bipartisan support in Congress during the development of the 2018 Farm Bill. Hopefully, USDA and Congress kind find a workable solution to the CRP rental rate situation, as the CRP program does seem to be a sensible approach toward further enhancement of carbon sequestration efforts in many areas of the U.S.
For more information on the current CRP enrollment, expiring CRP acres, rental rates, etc., landowners and farmers should contact their local FSA office or refer to the USDA CRP web site at: http://www.fsa.usda.gov/crp
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Note — For additional information contact Kent Thiesse, Farm Management Analyst and Sr. Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960) E-mail — kent.thiesse@minnstarbank.com) Web Site — http://www.minnstarbank.com/