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Published May 13, 2013, 10:37 AM

The cost of compliance

Farmers may opt out of farm program with loss of direct payments

By: Daryll E. Ray and Harwood D. Schaffer, Agweek

KNOXVILLE, Tenn. — The unwillingness of the House leadership to bring a farm bill that had been adopted by the House Ag Committee to the floor for a vote in 2012 resulted in a nine-month extension of the 2008 farm bill during the “fiscal cliff” negotiations. The resulting bill ignored the work of both the agriculture committees and continued the direct payment program while leaving some other programs unfunded.

In eliminating the direct payment program, the Senate bill reattached conservation compliance to the crop and revenue insurance program that was subsidized by the federal government. The House bill, on the other hand, did not require conservation compliance for participation in the subsidized insurance program.

As long as the direct payment program remains in effect under the extension, the 95 percent of wheat farmers, 98 percent of corn and soybean farmers and the 99 percent of rice and cotton farmers who also participate in the insurance program are already participating in conservation compliance.

In 1985, as it became apparent that the farm program safety net encouraged farmers to drain additional wetlands and keep cropland in production that was contributing to excessive erosion, the farm bill authors required conservation compliance in exchange for participation in farm program benefits, including crop insurance. Conservation compliance requirements were applied to two types of land: Highly Erodible Land (104 million acres) and wetlands that were not converted to cropland before 1985 (28 million acres).

The original legislation gave farmers five years to comply with the new conservation requirements. Though no working acres were excluded from production, some farmers did put vulnerable HEL in the Conservation Reserve Program in addition to wetlands.

In his paper, “Conservation Compliance: A 25-year Legacy of Stewardship,” former U.S. Department of Agriculture Deputy Secretary Jim Moseley reports that “because conservation treatments have been applied to over 140 million acres, farmers have saved 295 million tons of soil per year — soil that has been held in place and kept from entering our rivers, lakes and streams. Further, an estimated 1.5 million to 3.3 million acres of vulnerable wetlands have not been drained as a result of compliance.”

So in one sense, conservation compliance can be viewed as a type of social contract reached between the public and farmers. In exchange for giving farmers protection from the economic vicissitudes of life — crop failure and chronic low prices — the public is requiring that farmers leave wetlands untouched and engage in conservation practices on HEL.

With the elimination of direct payments almost a certainty — either in the next farm bill or other legislation — some (or many) farmers might decide to jettison participation in the farm program altogether, freeing themselves from conservation compliance and other rules. Under the bill proposed by the House in 2012, those farmers could continue to buy existing federally subsidized crop insurance without being subject to conservation compliance. Not so, in the 2012 bill proposed by the Senate.

But there are other alternatives. For example, the aforementioned social contract between the public and farmers could be terminated. Then farmers could decide if converting wetlands to crop production or reverting to traditional farming practices on HEL is worth paying 100 percent (or some other large percentage) of their crop insurance premiums on all of their crop production, rather than the federally subsidized 38 percent that they pay now. The “public” would no longer receive the benefits of conservation compliance on the converted acres. But neither would the public be paying for benefits they do not receive.

Of course, if doing away with conservation compliance meant dropping out of the farm program, farmers also would forgo any other government aid should crop prices drop well below the cost of production.

Editor’s Note: Ray is the director of the Agricultural Policy Analysis Center at the University of Tennessee. Schaffer is a research assistant professor at APAC.