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June 5, 2002

Farm bill a plus for both environment, farmers, experts say

WEST LAFAYETTE, Ind. – The 2002 Farm Bill should please both environmentalists and farmers who must deal with environmental regulations, say two Purdue University agricultural economists.

The 2002 Farm Bill contains many new or enlarged conservation programs and offers payments to entice farmers to adopt environmentally friendly management plans.

Officially known as the Farm Security and Investment Act of 2002, this farm bill has the largest number of programs and is the most expensive and expansive ever. The environmental programs make up $17 billion of the approximately $180 billion total for the bill.

"Overall, I'd say it's a plus for the environment over where we were," says Stephen Lovejoy, professor of agricultural economics. "I think there's a lot for the environmental community to like about this farm bill. There are significant revisions to current conservation programs, such as the Environmental Quality Incentive Program, and there are increased limits on the Conservation Reserve Program, which sets land aside for wildlife habitat. And there are new, important programs, such as the Conservation Security Program and the Grasslands Program."

Otto Doering, professor of agricultural economics, says this farm bill has the potential to improve the environment in the United States, but as with all government programs, the devil is in the details.

"I think one of the key questions is whether we are going to be able to do the right thing in running the programs," Doering says. "Are we going to be able to provide good technical assistance, good monitoring, good enforcement, good evaluation and good targeting to make sure the right farms are participating? If we can keep high standards, the extra dollars are going to yield the public good conservation benefits.

"But because of the tremendous expansion in the amount of money spent, we're going to have to work very hard to do it right at such a bigger scale."

Lovejoy says the biggest obstacle to the success of the conservation programs is the largess of the other farm bill provisions.

"In terms of funding, it's a definite step up for conservation. But you can't look at the conservation title separate from the farm bill," Lovejoy says. "Because the incentives for farmers are so lucrative in other parts of the farm bill, 2 million additional acres of land come under crop production. That's most likely marginal land that will have higher environmental costs to produce crops."

One of the biggest environmental programs in the 2002 Farm Bill – and, according to Lovejoy, perhaps the most innovative environmental program ever for U.S. agriculture – is the new $2 billion Conservation Security Program.

This program pays farmers to institute or continue environmentally friendly practices. The program is divided into three tiers, and farmers can choose their level of participation.

The Conservation Security Program is a major shift in agricultural policy, Lovejoy says.

"Before, we tried to achieve environmental goals by withholding farmers' loan payments or program payments, but there was poor compliance at the local level," he says. "Now farmers are given positive incentives to utilize environmentally friendly practices. And depending on the level of a farmer's commitment, they can get more and more money. This makes a whole lot more sense. Positive incentives are always more successful than negative incentives."

In the lowest tier of the Conservation Security Program, farmers can receive 5 percent payment of a national rental value for the land by addressing one resource of concern for five years on program acres.

In Tier II, farmers can receive 10 percent payment of a national rental value for the land by addressing one resource of concern for five to 10 years over the entire farm.

In Tier III , a farmer can receive 15 percent payment of a national rental value for the land by implementing a comprehensive resource management plan for the entire farm for five to 10 years.

"Farmers who are running their operations in an environmentally friendly way might not have to change anything to receive those payments. It's a reward for those who are good stewards of the land," Lovejoy says.

Unlike some previous conservation programs, the Conservation Security Program is available to all farmers, including fruit and vegetable farmers and livestock producers.

"If you have a livestock operation and you have a nutrient management plan and you spread that manure over 1,500 acres, all of those acres could be involved in this program," Lovejoy says.

Take, for example, an Indiana hog farmer who is a protector of the environment and has already implemented no-till crop production and has a pit manure storage facility. To qualify for the top tier of the program, this farmer might hire a crop consultant to help develop a crop nutrient plan and also address other resource concerns by implementing a comprehensive resource management plan for the whole farming operation. Such a plan might include addressing soil erosion, enhancing wildlife habitat and adding buffers to protect streams from chemical runoff.

"Suddenly this farmer could be looking at $25 an acre, plus, in payments," Lovejoy says. "With the low commodity prices and reduced returns, $25 per acre would be a very significant income enhancer for many farmers and ranchers."

In addition to the Conservation Security Program, the 2002 Farm Bill includes two other new programs.

• The Grasslands Reserve Program ($250 million) will conserve up to 2 million acres of grassland, including pasture in the Midwest.

• The Desert Terminal Lakes Program ($200 million) provides funds to help conserve desert terminal lakes found primarily in California and Nevada.

Besides these new programs, the 2002 Farm Bill makes significant changes to existing conservation programs.

• The Environmental Quality Incentive Program, or EQIP ($9 billion), has been revised to allow large livestock producers to be eligible to participate in the program. The program provides funding for technical assistance in complying with environmental regulations, with most of the funding (60 percent) targeted to livestock operations. The revised program allows that technical assistance to be provided by private consultants.

• The Conservation Reserve Program ($1.52 billion) expands from 36.4 million acres to 39.2 million acres and increases the wetlands pilot program to 1 million acres.

• The Wetlands Reserve Program ($1.5 billion) increases the acreage cap to 2.275 million acres.

• The Farmland Protection Program ($985 million) receives a 20-fold increase in funding. This bill preserves farmland in areas that are becoming urbanized in order to provide wildlife habitat and improve water quality.

• The Wildlife Habitat Incentives Program ($700 million) receives a tenfold increase in funding.

• The Water Conservation Program ($600 million) offers incentives and financial assistance for efforts to conserve water.

• The Small Watershed Rehabilitation Program ($275 million) provides funding for the rehabilitation of small, aging flood-control dams.

• The Underserved States Agricultural Management Assistance Program ($50 million) provides EQIP-type assistance to states that don't receive large commodity payments, particularly states in the Mountain West and the Northeast.

Despite the abundance of programs, Lovejoy and Doering say it's not certain there will be rejoicing from all corners.

"One kicker is a new clause in the bill that allows livestock grazing and other activities on protected lands, which wasn't allowed before," Doering says. "The cattle industry has pushed for years to get grazing on Conservation Reserve Program lands, and this bill allows it on CRP land and also on other protected land. This will become a tug of war between the cattle industry and environmental groups. Eventually the secretary of agriculture will determine where grazing and other activities are allowed."

The Farm Bill also may face opposition from global trading partners in the World Trade Organization (WTO).

"Basically, our foreign trading partners aren't happy campers with the farm bill," Doering says. "They certainly have grounds to attack provisions of the commodity programs. The question is whether they will attack provisions of the conservation title as well."

The WTO allows payments for environmental programs, but under strict guidelines.

"If these conservation programs are not targeted towards environmental goals and most facilities are eligible for the payments, one could argue that these programs subsidize agricultural production."

Doering says the first trade challenges will most likely come over commodity payments and not conservation programs. But he says he doesn't think the conservation programs will go unchallenged.

"In the past we've been tough in challenging other people, so I expect they will show no reluctance in challenging us," he says.

More information can be found in the Purdue Cooperative Extension Service publication "Conservation and Environmental Enhancement in the 2002 Farm Bill" (CES-344), authored by Lovejoy and Doering. The publication is available online or in Indiana, at county Purdue Extension offices.

More analysis of the farm bill by Purdue economists can be found at the Purdue Extension farm bill Web site.

Writer: Steve Tally, (765) 494-9809; tally@purdue.edu

Sources: Stephen Lovejoy, (765) 494-4245; lovejoy@purdue.edu

Otto Doering, (765) 494-4226; doering@purdue.edu

Ag Communications: (765) 494-2722; Beth Forbes, bforbes@aes.purdue.edu; http://www.agriculture.purdue.edu/AgComm/public/agnews/

Purdue News Service: (765) 494-2096; purduenews@purdue.edu


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