If you can read the writing on the political wall, it will probably spell out increased emphasis on conservation programs in the 2007 Farm Bill. That should probably come as no surprise to anyone, given 1) the political flavor in Congress, 2) public scrutiny of current farm subsidy policies, and 3) the force of the World Trade Organization to change US farm supports away from production incentives. So what can be expected in the 2007 Farm Bill regarding conservation programs?

First, let’s review the administration’s proposal for conservation spending, which is probably more of a starting point than anything that is over budgeted, given the expressed desires of the House and Senate chairs of the respective Agriculture Committees:
• The 2008 budget includes nearly $4 billion to provide conservation financial and technical assistance on a cumulative total of 215 million acres.
• The largest of these programs is the Conservation Reserve Program, estimated at just over $2 billion in 2008.
• Funding for the Environmental Quality Incentives Program (EQIP) will be maintained at $1 billion in 2008.
• The budget proposes over $455 million for the Wetlands Reserve Program (WRP), an increase of $191 million, or nearly 72 percent over 2007. The projected WRP enrollment for 2008 would be the largest ever, involving up to 250,000 acres, and will bring the total acreage enrolled in the program to 2,275,000 acres, the maximum level authorized by the 2002 Farm Bill.
• Funding for the Conservation Security Program in 2008 is estimated to be $316 million, an increase of $57 million, to continue support to the more than 19,000 contracts signed in prior years.
• The 2008 budget also proposes $825 million in discretionary funding for on-going conservation work. This supports programs providing high quality technical assistance to farmers and ranchers to address their most serious natural resource concerns.

In his announcement of the administration’s Farm Bill proposal Agriculture Secretary Mike Johanns said conservation programs are an element of the Commodity Credit Corporation, “USDA fosters environmental stewardship through conservation programs supported with CCC funding.” In the February edition of USDA’s Amber Waves e-magazine USDA economist Roger Claassen used 2004 statistics and found 6% of all farms received both commodity payments and conservation program payments. In total, commodity payments were $8 billion and conservation payments were $2 billion. Conservation payments were increasing, and Claassen reports many farmers are benefiting from those programs, “Nonetheless, about half of conservation payments made in 2004 went to farmers who also received income support, suggesting that a significant share of additional conservation payments will also flow to producers who do not receive income support.”

However, when Claassen further analyzed the statistics, 17% of farms which received commodity payments also received conservation payments. When you think about the relatively small overlap, there are two basic reasons:
1) Farms receiving commodity payments are primarily larger farms, operated by full time farmers, who have all possible land in row crop production.
2) Farms receiving conservation payments are more likely to have land in the Conservation Reserve, and may be operated by part time or semi-retired farmers. They could also be primarily livestock operators receiving EQIP funding, whose acreage may be pasture or forage crops ineligible for commodity programs.

USDA conservation funding has increased tenfold in the past 20 years, from $500 million to more than $5 billion. During that period an increased amount of spending has been targeted to address specific problems, according to USDA economists LeRoy Hansen and Daniel Hellerstein. In another article in the February issue of Amber Waves, they say, “Targeting is an efficient means of achieving this goal because it directs funds to conservation program participants based on the expected environmental benefits.” They say targeting can be made toward: 1) broad areas such as a large watershed which might be environmentally sensitive, 2) acreage with fragile features such as highly erodible soil, or 3) specific fields and farms that will give the greatest return on money spent to provide environmental benefits.

Over time, USDA conservation officials have created objectives for those goals with the help of the Environmental Benefits Index (EBI), which has become most familiar to landowners with CRP acreage. The higher the EBI ranking, the greater the chance the land will be accepted into the CRP. USDA says the value of the conservation benefits has nearly doubled since the EBI was employed, but with the same amount of money being spent for CRP rental payments. Economists Hansen and Hellerstein say targeting will increase to achieve more conservation goals, but it will have to utilize more satellite imagery and geospatial equipment.

Another effort toward cost effectiveness in federal spending on conservation is the practice of accepting bids from landowners according to USDA economists Robert Johanssen and Marcia Weinberg, writing another article in the February edition of Amber Waves. As you may know, “Farmers would “bid down” the payment rate according to their own costs for installing and maintaining that practice, but only if it was in their best interest to do so. The program manager can then rank the bids in terms of costs, benefits, or both,” say Johanssen and Weinberg.

The economists calculate the public can get more benefit from the bidding practice, making it more attractive to the taxpayer for continued funding, “Simulation results suggest that if farmer contracts were selected on the basis of environmental benefits, environmental performance on cropland could be improved by about 8.5 percent relative to the baseline at a cost of $500 million. If bidding down costs were allowed, the same $500 million program could improve environmental performance by about 12 percent, relative to the baseline.” They say the bidding process works best in programs that have limited funding.

Summary:
USDA spending on conservation programs has grown rapidly in the past several Farm Bills, and that trend is expected to continue for the 2007 legislation. But funding will still probably be less than what some advocates want, resulting in more reliance on the processes of targeting of benefits, and allowing landowners to bid on program participation. Congress will likely look at these practices as part of the next generation of conservation programs.