UNL CropWatch Feb. 15, 2011 USDA Looks at How Rising Commodity Prices May Affect CRP

Published before 2015

Feb. 15, 2011

Further Information

Report Abstract

This report considers how increased commodity prices might influence enrollment in and benefits from the Conservation Reserve Program (CRP) using two complementary models:

a likely-to-bid model that uses National Resources Inventory data to simulate offers to the general signup portion of the CRP
an opt-out model that simulates retention of current CRP contracts.

Under several higher crop price scenarios, including one that incorporates 15 billion gallons of crop-based biofuels production, maintaining the CRP as currently configured will lead to significant expenditure increases.

If constraints are placed on increasing rental rates, it might be possible to meet enrollment goals with moderate increases in CRP rental rates, but this will mean accepting lower average Environmental Benefits Index scores as landowners with profitable but environmentally sensitive lands choose not to enroll.

In a period of higher crop prices, if CRP maintains its acreage and the environmental benefits it provides, CRP program payments will need to increase, according to a report released Friday from USDA's Economic Research Service.

This assessment was based on a study that looked at two models and several program scenarios focusing on higher crop prices and the resulting economic effects and including the effects of bioenergy production and possible carbon credits and marketing.

Among their findings the study's authors, Daniel Hellerstin and Scott Malcolm, reported:

"Given the established interest in the program and its longstanding popularity with landowners, if USDA’s policy of using prevailing rental rates were altered, it might be possible to meet acreage goals with moderate increases in payment rates. But this would mean accepting offers providing fewer environmental benefits, as landowners with environmentally sensitive, but increasingly profitable, lands choose to withhold their land from the program.

"Using the unusually high crop prices seen in summer 2008, the model shows a large response by CRP participants. Maintaining the CRP payments at their current level results in fewer acres offered to the program, making it unlikely that the program could reach its goal of 32 million acres. Over the long term, to enroll acreage that would maintain the environmental benefits currently provided by the program would require roughly doubling CRP rental rates."

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