The Conservation Reserve Program has a long history of promoting conservation practices and farmland stewardship in the United States. The CRP program was established in December of 1985 as part of the 1985 Farm Bill.
The initial goal of CRP was to reduce soil erosion on highly-erodible cropland and to help curb the over-production of farm commodities. Secondary objectives of CRP included improving water quality, fostering wildlife habitat, and providing income support to farmers. More recently, the CRP program has been identified as a valuable tool through the Federal government as a method to promote “carbon sequestration” on working farmland. Currently, getting farmland enrolled into the CRP program is being challenged by very positive economic returns from crop production and by tight grain supplies worldwide.
Economic challenges for the CRP program
The rising dilemma for the CRP program is that current farm economics tend to counteract enrollment into the CRP program. Based on the 2021 South Central College Farm Business Management Summary for over 350 crop farms in south central Minnesota, the average return on cash rented farmland over direct expenses for seed, fertilizer, chemicals, fuel, repairs, etc. — including land rent, land rent — was $442 per acre for corn and $334 per acre for soybeans. The average return above all direct and overhead expenses, including annual machinery and facility investments, was $335 per acre for corn and $260 per acre for soybeans.
By comparison, the 2021 average CRP rental rate in the 13 counties in the 13 county south central Minnesota Farm Business Management region was $214 per acre. Based on the 2021 FBM summary, the average direct and overhead expenses — including property taxes — to maintain CRP land was $92 per acre in 2021, resulting in a net return of $122 per acre. According to the 2021 FBM summary, the average cash rental rate non-farm landowners received from farm operators in 2021 was about $225 per acre, before property taxes and overhead expenses. Cash rental rates for 2022 are likely to be 10-15 percent higher than 2021 rental rates in south central Minnesota.
As a result of the 2018 Farm Bill, expiring CRP acres in 2022 could only receive a maximum of 85 percent of the average county cash rental rate, based on U.S. Department of Agriculture data, compared to 100 percent of the average rate when the land was originally enrolled into the CRP program. In some cases, that may result in landowners actually getting a lower CRP rental rate for 2023 than they received under the current contract. At the same time, average land rental rates for 2023 in the same county may be 20-25 percent higher than rental rates a few years ago.
Refer to the accompanying table for additional CRP economic data and average rental rates.
Current CRP enrollment
As of April 30, 2022, there were a total of just over 22 million acres enrolled in the CRP program, which is about 3.5 million acres below the maximum level of 25.5 million acres for 2022 established in the last Farm Bill. Of the total CRP acres, approximately 10.2 million acres are enrolled under a General CRP contract, 6.8 million acres in Continuous CRP, just under 3.9 million acres enrolled in the grassland program, and the balance of the acres in CREP, wetlands and other special CRP initiatives. Forty-three percent of the Continuous CRP and CREP acres are enrolled in the Clean Lakes, Estuaries and Rivers (CLEAR) program.
There are nine states which have over or near 1 million acres currently enrolled in CRP as of April, 2021 — mainly in the Upper Midwest and Plains regions. CRP acres enrolled in these states include Texas (2.3 million), Colorado (2 million), South Dakota (1.8 million), Kansas (1.7 million), Iowa (1.7 million), Nebraska (1.5 million), North Dakota (1.2 million), Washington (just over 1 million acres), and Minnesota (just under 1 million acres). CRP acreage in many of these states has dropped considerably in recent years.
Expiring CRP acres and re-enrollment of CRP acres
Given the current challenge to get more acres enrolled into the CRP program, one concern is the rather large number of CRP contract acres expiring in the next couple of years. CRP contracts will expire on nearly 4 million acres on Sept. 30, plus an additional 2 million acres in 2023. A General CRPP sign-up was held earlier this year (CRP sign-up number 58), in which USDA accepted early 20,000 CRP contracts representing just shy of 2.1 million acres into the CRP program starting Oct. 1. This represented approximately 87 percent of the CRP contracts and 90 percent of the acreage offered by landowners in the latest CRP sign-up period.
Only about half of the CRP acres expiring in 2022 were re-enrolled into the CRP program during the 2022 sign-up. The balance of those acres, over 1.7 million acres, will likely be returned to crop production in 2023. The data for the 2022 CRP sign-up period indicated that 75 to 100 percent of the expiring CRP acreage was not offered for re-enrollment in 2022 in southern and western Minnesota and Iowa, as well as in eastern North and South Dakota and northeast Nebraska. The percent CRP re-enrollment for 2022 was much higher in states such as Texas, Kansas, Colorado and other western states.
Summary
The future of the CRP program is likely to garner considerable discussion in the next couple of years during the writing of the next Farm Bill. The CRP program has a long and successful history of preventing soil erosion, improving water quality, enhancing wildlife habitat, and aiding in carbon sequestration. While it may seem quite logical to utilize expansion of the CRP program to reach further goals related to environmental stewardship and carbon sequestration, there could be some obstacles in accomplishing those goals. Commodity prices for corn and soybeans are their highest levels in the last decade and farm profit levels have been very solid in recent years, which is also resulting in higher land rental rates in many areas. This makes it difficult to convince farmers and landowners to take farmland out of production to enroll in the CRP program or to re-enroll some expiring CRP acreage — unless there are some added financial incentives.
For more information on the current CRP enrollment, expiring CRP acres, rental rates, etc., landowners and farmers should contact their local USDA Farm Service Agency office or refer to the USDA CRP web site at http://www.fsa.usda.gov/crp
Kent Thiesse is a government farm programs analyst and a vice president at MinnStar Bank in Lake Crystal, Minn. He may be reached at (507) 726-2137 or kent.thiesse@minnstarbank.com.
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