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summarizes the program's net effect on government spending.

For social welfare, it is necessary to estimate product and service value changes that occur with and without the CRP. In 1990, when the CRP stood at 33.9 million acres, ERS estimated net social benefits of $4.2-$9 billion in present value over the life of the program (Osborn and Konyar, 1990). This is the extent to which the social benefits of the CRP exceeded its social costs. Social benefits included increases in net farm income ($2.1-$6.3 billion), the value of future timber ($3.3 billion), preservation of soil productivity ($0.6-$1.7 billion), improved surface-water quality ($1.3-$4.2 billion), lower damages due to windblown dust ($0.3-$0.9 billion), and enhanced small-game hunting ($1.9-$3.1 billion). Social costs included higher food costs to consumers ($2.9-$7.8 billion), costs of establishing vegetative cover on CRP acres ($2.4 billion), and USDA technical assistance ($0.1 billion). Since then, the U.S. Fish and Wildlife Service has estimated additional wildlife benefits of $1.4 billion for waterfowl hunting, and $4.1 billion for nonconsumptive wildlife benefits, making wildlife the largest benefit category for the CRP and bringing overall net benefits of the CRP to $9.7-$14.5 billion (see box, "Wildlife Benefits of the Conservation Reserve Program").

In 1990, ERS also estimated the net government cost (the second evaluation framework) of the CRP at

$6.6-$9.3 billion in present value over the life of the program. Program expenses were estimated at $14.6 billion in present value, of which $13 billion represented annual rental payments. Commodity program cost savings were estimated at $5.3-$8 billion. However, estimates of commodity program savings are very sensitive to assumptions about annual acreage reduction programs that would exist in the absence of the CRP. Estimates of commodity program savings, for example, would be much smaller if it were assumed that annual acreage reduction programs in the absence of the CRP would be larger.

While the CRP has provided significant conservation and environmental benefits, especially for wildlife, most agree that the overall program could have been structured to provide even greater benefits. In addition, the government cost of enrolling some CRP acres could have been lower, particularly in the Great Plains. Experience of program implementation before and after passage of the 1990 Farm Act shows that (1) active targeting of bids based on relative comparisons of environmental benefits and contract costs improves program cost-effectiveness, and (2) consideration of the productivity of the acres offered in each bid can reduce the likelihood of overpayment.

Signups 1-9, conducted under authority of the 1985 Farm Act, were subject to mandatory minimum annual enrollment levels as established in the Act. In an effort to meet these enrollment levels, USDA did

Recent ERS Reports on the Conservation Reserve Program

The Conservation Reserve Program: Enrollment Statistics for Signup Periods 1-12 and Fiscal Years 1986-93, SB-925, Nov. 1995 (C. Tim Osborn, Felix Llacuna, and Michael Linsenbigler). Through the 12th signup, 36.4 million acres had been enrolled in the CRP with an average annual rental cost of $49.67 per acre and an average annual erosion reduction of 19 tons per acre.

"Changes in Store for CRP," Agricultural Outlook, Sept. 1995 (C. Tim Osborn). Administration actions on the CRP as of 1995 are reviewed as are proposals for the future of the CRP, including legislative proposals by members of Congress, the Senate Agriculture Committee's early version of the conservation title, and the administration's farm policy guidelines.

Expiration of Conservation Reserve Program Contracts, AIB-664-2, April 1993 (C. Tim Osborn and Ralph E.
Heimlich). Outlines the imminent expiration of CRP contracts, what is at stake, and alternative policy options.

"A Fresh Look at the CRP," Agricultural Outlook, Aug. 1990 (C. Tim Osborn and Kazim Konyar). Based on the 33.9 million acres enrolled in signup periods 1-9, net economic benefits of the CRP were estimated to be $4.2-$9 billion in present value over the life of the program. This included benefits to farm income, timber production, soil productivity, water quality, wildlife, and air quality.

The Conservation Reserve Program: An Economic Assessment, AER-626, Feb. 1990 (C. Edwin Young and C. Tim Osborn). The net economic benefits of a 45-million acre CRP were estimated to be $3.4-$11 billion in present value over the life of the program (1986-1999). Effects of placing less emphasis on soil erosion control and more emphasis on forestry and environmental benefits were also examined.

Natural Resources and Users Benefit from the Conservation Reserve Program, AER-627, Jan. 1990 (Marc O. Ribaudo, Daniel Colacicco, Linda L. Langner, Steven Piper, and Glenn D. Schiable). This report provides detailed natural resource benefit estimates resulting from the CRP, including soil productivity, water quality, air quality, wildlife habitat, and groundwater supply.

(Contact to obtain reports: C. Tim Osborn, (202) 219-1030 [tosborn@econ.ag.gov])

not rank bids in signups 1-9. Rather, bids were accepted as long as (1) ownership and land eligibility criteria were met, and (2) the rental rate requested by the producer did not exceed a USDA maximum acceptable rental rate (MARR) established for a multicounty area or State. Therefore, an eligible parcel with twice the erodibility of another eligible parcel had no greater priority for enrollment. In addition, USDA established only one MARR for each area and this amount eventually became known to producers. As a result, producers could receive rental payments in excess of prevailing cash rents for enrolling less productive land. Also, MARR's were sometimes set too high in relation to average cash rents, primarily in the Great Plains, also contributing to overpayment.

Based on the need to enroll only a limited amount of additional acreage during 1990-95, under authority of the 1990 Farm Act, USDA actively ranked bids for

acceptance in CRP signups 10-13. The ranking processes were designed to select acreage that provided the greatest conservation and environmental benefits relative to the government cost of enrollment. In addition, to reduce overpayment, new rental rate screening processes were instituted.

In signups 10-12, the rental payment requested by a producer was screened against a soil productivity-adjusted estimate of the rent that could be earned on comparable local cropland. Bids that exceeded this amount, adjusted for other costs incurred by producers due to CRP participation, were rejected. The bid screen amounts used in these signups were not related to the MARR's in signup periods 1-9. Next, eligible easement bids, primarily filterstrips, and wellhead protection bids that survived the rental rate screen were automatically approved for CRP enrollment. These bids typically involve a limited number of acres and a small government cost,

but provide significant conservation and

environmental benefits. Finally, standard bids that survived the rental rate screen were ranked for acceptance based on the ratio of an environmental benefits index (EBI) to the government cost of the contract. In signups 10-12, the EBI was comprised of seven coequal indicators (surface-water quality, groundwater quality, soil productivity, conservation compliance assistance, tree planting, Hydrologic Unit Areas identified by the USDA Water Quality Initiative, and conservation priority areas). When submitting a bid, producers were not informed of the rental rate screen amount for their soil or how the EBI was calculated. Approximately 2.5 million acres were enrolled in signups 10-12. As discussed earlier, in signups 13 and 15, revised EBI's were used to rank bids and rental rate requests were screened against productivity-based soil rental rates that were announced during the signups.

Author: C. Tim Osborn, (202) 219-1030 [tosborn@econ.ag.gov]. Contributor: Marc Ribaudo.

References

Johnson, R., E. Ekstrand, J.R. McKean, and K. John (1994). "Economics of Wildlife and the CRP," in When Conservation Reserve Contracts Expire: The Policy Options. Soil and Water Cons. Soc., Ankeny, IA.

Osborn, C. Tim, and Kazim Konyar (1990). "A Fresh Look at the CRP," Agricultural Outlook, U.S. Dept. Agr., Econ. Res. Serv., AO-166, Aug., pp. 33-37.

Ribaudo, M.O. (1989). Water Quality Benefits from the Conservation Reserve Program. AER-606. U.S. Dept. Agr., Econ. Res. Serv. Feb.

Ribaudo, Marc O., Daniel Colacicco, Linda L. Langner, Steven Piper, and Glenn D. Schiable (1990). Natural Resources and Users Benefit from the Conservation Reserve Program, AER-627, Jan.

U.S. Department of Agriculture (1997). Clinton Administration Accepts 16.1 Million Acres for Enrollment in CRP, Press Release No. 0168.97, Washington, DC, May 22.

Wildlife Management Institute (1994). The Conservation Reserve Program: A Wildlife Conservation Legacy. Washington, DC. Oct.

PROGRAMS

6.4 Conservation Compliance

The 1985 Food Security Act introduced the Conservation
Compliance and Sodbuster programs to combat soil erosion.
These programs require farmers to implement approved soil
conservation systems on highly erodible land (HEL) in order
to receive certain USDA program benefits. These programs,
along with other measures, have significantly reduced
erosion on U.S. cropland. In 1995, approved conservation
plans were being applied to nearly 90 million acres of
cropped HEL, while an additional 30 million acres of HEL
were enrolled in the Conservation Reserve Program. Major
soil conservation practices implemented include

conservation cropping sequences, crop residue use, and
conservation tillage.

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USDA program benefits. Conservation Compliance applied to HEL previously cultivated in any year between 1981 and 1985. It required farmers producing crops on HEL to implement and maintain a soil conservation system approved by the Natural Resources Conservation Service (NRCS) on that land by 1995. These conservation systems achieve a substantial reduction in soil erosion on a field or group of fields containing HEL. HEL placed into the Conservation Reserve Program (CRP) is also considered to be in compliance. The stricter Sodbuster Program applied to HEL not cultivated during 1981-85. Sodbuster required farm program participants bringing HEL under cultivation to apply basic soil conservation systems. Basic systems are intended to reduce soil erosion to the soil tolerance level (T): the rate above which long-term soil productivity may be depleted. This is a higher level of erosion control than often required under

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Conservation Compliance. Under both programs, farmers who continued to cultivate HEL without implementing an approved conservation system would be ineligible to receive Commodity Credit Corporation price supports or payments, CRP payments, farm storage facility loans, disaster payments, Consolidated Farm and Rural Development or Farmers Home Administration loans, or Federal Crop Insurance. However, this provision was modified under the Food, Agriculture, Conservation and Trade Act of 1990, giving the Secretary of Agriculture discretion to determine that a person, although in violation, acted "in good faith" without the intent to violate Conservation Compliance requirements. In such cases, the person's payments may be reduced by not less than $500 nor more than $5,000, but the person would remain eligible to participate in USDA programs if the violation were corrected.

The Federal Agricultural Improvement and Reform Act (1996 Farm Act) made further changes in provisions governing cultivation on HEL. First, the 1996 Act made compliance no longer a requirement for Federal Crop Insurance. Second, the Act eliminated distinction between HEL cultivated from

1981 to 1985 and HEL brought under cultivation after 1985, doing away with the Sodbuster Program. Newly cultivated HEL may use conservation systems other than the basic systems previously required under Sodbuster. Alternative systems can be applied where they do not result in substantially higher soil erosion. However, alternative conservations systems may not always adequately prevent a substantial increase in soil erosion when converting HEL fields from native vegetation. In these cases, basic conservation systems may still be required.

The 1996 Farm Act also included several modifications to reduce compliance and monitoring costs. These include: (1) expedited variances for timely responses to producer requests for relief from climatic or economic hardship; (2) grace periods for good-faith violations to provide producers with unintended violations to come into compliance without penalty; (3) onfarm conservation research authority to examine innovative conservation systems; and (4) provisions to allow farmers to report residue

measurements.

Status of Conservation Compliance: 1995 About 146 million acres, roughly one-third of total U.S. cropland, had been designated as HEL and potentially subject to Conservation Compliance.3 In 1995, the first year conservation systems were to be fully applied and maintained, conservation plans had been approved for 139 million HEL acres (USDA, NRCS, 1996b). Of those acres with approved plans, 91 million were cultivated non-CRP HEL subject to compliance, while another 16 million acres were either not under cultivation in 1995 or were subsequently determined not to be HEL (USDA, NRCS, 1996a).* These acreage estimates can fluctuate with year-to-year changes in cultivated acreage. An estimated 30 million acres were enrolled in CRP and considered in compliance (USDA, FSA, 1997). A remaining 2 million acres had not had compliance determinations. NRCS determined that approved conservation practices and systems were actively applied on over 86 million (95 percent) of the 91 million acres of non-CRP HEL subject to compliance (USDA, NRCS, 1996a). The proportion of HEL units determined as subject to compliance and

3

5

4

This includes some non-HEL soils that are in fields that are predominantly HEL.

4 Land not currently in cultivation could be planted in cover crops

or be in other conserving uses.

5 Acreage of HEL enrollled in CRP could not be estimated directly from the NRCS 1995 Status Review and had to be derived from other sources.

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