Document Type

Article

Publication Date

9-15-2008

Keywords

Conservation Reserve Program, crop production, land use, USDA

Abstract

The Conservation Reserve Program (CRP) was created in the 1985 Farm Bill as a program to remove highly erodible and environmentally sensitive land from agricultural production for from 10 to 15 years. Although CRP was originally viewed as a supply control program it rapidly evolved into a program that met many environmental objectives. In 2007 South Dakota had 729,397 acres of CRP contracts expired, which was nearly 47% of the 1.56 million acres enrolled in the program. During this period, there was no new farm bill or new CRP policy provisions. The policy environment in late 2006 and most of 2007 consisted of CRP program offers for renewals or extensions (2-5 years) of many CRP contracts against a backdrop of escalating crop prices and economic incentives to return expiring contract acres to agricultural production. Overall there was a net reduction of 263. 7 thousand acres of CRP land in South Dakota, or 17% of acres previously enrolled in CRP. The economic conditions in 2008 are markedly different. Commodity prices are nearly double what they were a year ago and many producers view putting CRP acres back into production as a viable and profitable option. Approximately 508,000 acres of CRP contract will be expiring from 2008 to 2010, 420,700 from 2011 to 2013, and an additional 364,600 acres between 2014 and 2023 (FSA). Just as enrolling these acres into the program had significant negative impacts on revenue generation in the farm and rural economy in South Dakota, putting these acres back into production will also have significant positive impacts on the economy of the state. The objective of this study is to estimate the economic impacts that could occur as some of these CRP acres are converted back to production for three different regions within the state. The effect of converting some of the CRP land to grazing is not examined in this analysis. Only the effects of converting CRP land to crop production is analyzed here.

Publisher

Department of Economics, South Dakota State University

Series Number

2008-4

Number of Pages

14

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