Future Plans For CRP Acres
Acreage enrolled in the Conservation Reserve Program (CRP) program has been getting considerable attention in recent weeks as a possible way to add more crop production acres, which may be needed in the next few years to address the rapidly increasing demands for renewable fuel production in the U.S. The CRP program, which takes farmland out of production for 10-15 years, has been extremely popular with U.S. farmers and landowners. Currently (2007), there are about 37.1 million acres enrolled in the CRP program, which is up about 1 million acres from 2006. The maximum potential nationwide CRP acreage under the current Farm Bill is 39.2 million acres. In fiscal year 2007, USDA paid approximately $1.8 billion in CRP payments to participating landowners, or a national average of $48.88/acre on 739,000 CRP contracts. Following is a summary of ways that CRP acres could be impacted in the next couple of years, and possibly brought back into production:

No General CRP Sign-up – In the proposed federal budget recently released by President Bush, USDA is proposing no general CRP sign-up in either 2007 or 2008. This proposal would lower the current national CRP acreage of 37.1 million acres to an estimated 33.6 million acres by the end of 2008. The added crop acres from CRP contracts would be added to production for the 2008 and 2009 growing seasons. USDA would likely still allow continuous CRP sign-up on environmentally-sensitive land in 2007 and 2008.

New Farm Bill – In the recently released USDA proposal for the 2007 Farm Bill, USDA proposes to authorize CRP at the current acreage limit (39.2 million acres), and to continue targeting farm land for CRP that has the greatest environmental benefit. It is also highly likely that CRP acres, or some other special conservation acres, could be designated for growing plant materials to be used for cellulosic ethanol production, under program provisions in the next Farm Bill.

Expiring CRP Acres – In recent years, approximately 85% of the 10-year CRP contracts have been re-enrolled in CRP, when they have expired. It is estimated that 13 million acres of the approximately 16 million acres (81%) that will expire on Sept. 30, 2007, were re-enrolled into CRP during re-enrollment opportunity periods in 2006. So, a total of approximately 3 million CRP acres will actually expire in 2007; however, these potential crop acres will not be available until the 2008 growing season, unless USDA offers an early-out incentive to bring those acres back into production for 2007, which seems unlikely at this time. The impact of the added CRP acreage in 2008 could have a very limiting impact on a major amount of added corn acreage in 2008. Only about 355,000 of the CRP acres expiring in 2007 are in the five largest corn and soybean producing states, and approximately 1.4 million of the expiring CRP acres are in North and South Dakota, Montana, Kansas and Texas.

Incentives to Withdraw CRP Acres – USDA and Congress could create incentives for landowners to withdraw from some CRP contracts early, and to return the acres to crop production. The main incentive would be to waive the current USDA penalties for withdrawing from CRP before the end of a contract. The last time USDA offered an early-out option for CRP contracts was in 1995 and 1996, when grain stocks were extremely tight. In 1996, USDA did offer some incentives time to landowners that brought those CRP acres back into production. Another issue that needs to be addressed is that currently CRP acres that are returned to production are not eligible for DCP farm program direct and counter-cyclical payments. Those crop base acres were removed when that acreage was entered into CRP.

Some have suggested that USDA more aggressively attempt to enhance the return of CRP acres back into crop production, targeting the least environmentally sensitive acres. Some have recommended that as many as 5-7 million CRP acres to be brought back into production, utilizing a freeze on re-enrollment of expiring CRP contracts in the coming years, and through early-out incentives to release land owners from existing CRP contracts. The idea of putting existing CRP acres back into crop production is being touted by some livestock producer groups, as well as by some individuals and groups promoting renewable fuel production. However, the idea of reducing CRP acreage is not setting well with some conservation groups and wildlife organizations, as well as with some farm operators and grain producers.

Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at kent.thiesse@minnstarbank.com.