1. Conservation and the 2002 Farm Bill Kathy Baylis January 15, 2002

2. Background z2002 Farm Bill currently being debated zConservation title is controversial – role of environmental groups is increasing zLots of $$ at stake

3. Why Do We Care About Ag. Conservation Programs? zAgriculture affects a lot of resources. zConservation funding under the farm bill is a large portion of Environmental $$. zSeen as a “trade-friendly” way to transfer income. (Holy Grail of farm programs)

4. Outline zBrief History of Ag. conservation programs zCurrent Programs zProposed Changes in the 2002 Farm Bill zRelationship with Commodity Programs zIssues

5. Brief History - the early years zBegins in 1930s yLand Retirement: xAg. Conservation Program 1936 (also included cost-share component); xConservation Adjustment program 1933; yTechnical Assistance xSoil Conservation Service (est. 1935)

6. Types of Conservation Programs

7. Conservation expenditure Source: USDA 2001

8. Current Programs - CRP zWhat? x10-15 year contracts for idling cropland xAt soil adjusted county rental rate zHow Much? x36.4 million acres ceiling (4.2 million especially sensitive land) x25% max per county x31.4 million enrolled by end of FY2001 zWhy? (Purpose of Program) xsoil erosion xsince 1996, based on Environmental Benefits Index (e.g. water, habitat) xsupply reduction (?)

9. CRP Rental Payments by State, 2001 (% of U.S.) 0 - 0.9 % 1 - 1.9 % 2 - 2.9 % 3 - 3.9 % > 3.9 % 11.5 5.8 6.5 5.9 6.4 7.2 7.0 9.1 Source: FSA 2001

10. Direct Commodity Payments by State, 2000 (% of U.S.) 0 - 0.9 % 1 - 1.9 % 2 - 2.9 % 3 - 3.9 % > 3.9 % 7.0 Source: ERS 2001 8.7 10.0 5.3 6.6 6.3 5.0

11. Agricultural Cash Receipts by State, 2000 (% of U.S.) 0 - 0.9 % 1 - 1.9 % 2 - 2.9 % 3 - 3.9 % > 3.9 % 13.0 5.6 6.9 Source: ERS 2001

12. Other Land Retirement zWRP, Farmland Protection Program (FPP) z92 cents of every $1 of direct conservation payments go to retired lands. zOver 1/2 the CRP Payments go to people who are not ‘farmers.’

13. Environmental Quality Incentives Program (EQIP) zWhat? xCost-share program x5 to 10 year contracts xFunding split between livestock and crops xState-determined priority areas zHow much? x80,000 contracts, covering 34 million acres xbacklog of 197,000 applications on 67 million acres xCurrent cost $200 m.

14. EQIP Allocation by State, 2001 (% of U.S.) 0 - 0.9 % 1 - 1.9 % 2 - 2.9 % 3 - 3.9 % > 3.9 % 12.2 Source: NRCS 2001

15. 2002 Farm Bill Debate zFocus on “working lands” programs. zBoth House and Senate increase CRP cap. zBoth increase EQIP funding ($200 m to $1,250 m or $1,500 m), and increases per producer cap. zBoth introduce Grasslands Reserve Program (GRP) to retire pasture. zSenate introduces Conservation Security Program (green payments).

16. Bohlert-Kind & Reid-Leahy Amendments zTransfer close to $2 billion/year from commodity programs to conservation. ztake funds from large farms. zramped up some programs 10 fold in a few years. zBohlert-Kind lost 200 to 226. zReid-Leahy also adds water retirement under CRP.

17. Commodity Title zBoth bills continue fixed payments on updated acres (although Senate bill phases them out). zBoth bills propose ‘countercyclical payments’ paid on past production. zBoth bills continue loan rates – although Senate increases level and adds commodities.

18. Proposed Loan Rates Commodity2001HouseSenate2002e price Wheat ($/bu) 2.58 3.002.75-2.85 Corn ($/bu) 1.89 2.081.85-2.15 Rice ($/cwt) 6.50 6.854.10-4.40 Soybeans ($/bu) 5.264.925.203.90-4.70 Cotton ($/cwt) 0.519 0.550.325* Lentils ($/cwt) n.a. 12.7910.60** * Ave Aug-Nov 2001 ** Ave 2001

19. Target Prices & Fixed Payments Target PriceFixed Payments CommodityHouseSenate2001HouseSenate Wheat4.043.450.460.530.45 Corn2.782.350.250.300.27 Rice10.829.30n.a.2.352.45 Soybeans5.865.75n.a.0.420.55 Cotton0.740.680.0670.070.13

20. Issues zLink between conservation and commodity programs (e.g. CRP) zMarket for Green Payments versus Maximizing benefits (WTO-compliant?) zIs conservation becoming another commodity? zOther yCAFO funding under EQIP yWater rights y$$ for carbon sequestration pilots and other “innovation grants”

21. CSP zTier 1 yAddress 1 resource concern (both new and existing practices), 5 year. y6% of county rental rate (for specific land use), $20,000 ceiling zTier 2 y1 resource concern for total operation, 5 to 10 year. y11% of county rental rate, $35,000 ceiling zTier 3 yAll resource concerns for operation, 5 to 10 year. y20% of county rental rate $50,000

22. Senate Agriculture Committee Members, 2001 Source: Senate 2001 Members from states in white