February 10, 2012
On Thursday, February 9, the U.S. Department of Agriculture’s Economic Research Service (ERS) published a graphic that displays new information on farm program enrollment and conservation compliance.
The Venn diagram shows the number of farms and farm acres that received conservation payments, direct commodity payments, and crop insurance in 2010, where those groups do and do not overlap, and to which groups conservation compliance requirements would apply if the Farm Bill eliminated direct payments or reattached compliance to crop insurance.
The ERS diagram speaks to an increasingly worrisome problem associated with the provision of federally subsidized crop insurance and the likely elimination of direct payments in the next Farm Bill. Basic conservation requirements to protect against soil erosion and wetland drainage have been a condition of receiving farm subsidies since 1985. This conservation compliance has dramatically reduced soil erosion on farmland and protected wetlands, keeping land productive and natural resources intact. Since 1996, however, these requirements have not applied to subsidized crop insurance.
Most of the farmers that are today enrolled in the crop insurance program are also enrolled in the direct payment program, the disaster assistance program, or the conservation programs and are therefore subject to conservation compliance. There are farms, however, that are enrolled only in crop insurance and are therefore not currently subject to basic compliance. If direct payments were to be eliminated, this number would certainly increase. It is therefore exceedingly important that the next Farm Bill attaches basic conservation compliance provisions to both federally subsidized crop insurance and whatever replaces direct payments in the Commodity Title.
According to the ERS diagram, 33 million acres of cropland that were enrolled in the direct payment program but not in the conservation programs or the corp insurance program in 2010 would no longer be subject to compliance requirements if the direct payment program was eliminated. Roughly 17 million acres of cropland were enrolled in the crop insurance program but not in the direct payment program or the conservation programs in 2010. A portion of these acres would be subject to conservation compliance for the first time (or for some farmers, for the first time since 1996) if compliance requirements were reattached to crop insurance.
This new diagram is a very important contribution by ERS and helps clarify who would be subject to compliance requirements under various circumstances. However, it is worth pointing out that there are a number of significant challenges and limitations when using enrollment and compliance data. First, this data is from 2010 and do not reflect the current distribution of enrollments between crop insurance and direct payments; second, the data do not delineate which acres include highly erodible land or wetlands; and third, the data includes acres that are planted to non-annually tilled crops such as fruit trees or permanent sod, which are not subject to compliance requirements.
Due to these last two reasons, the number of acres that would be subject to compliance requirements for the first time if these requirements were reattached to crop insurance would likely be significantly smaller than the 17 million acres displayed in the diagram.
Today, in 2012, the Federal Crop Insurance program is the most dominant means of taxpayer support to agricultural producers, whether measured in total amount of taxpayer-provided subsidies, program participation rates, or geographical scope. While direct payments may be eliminated in the next farm bill and while basic soil erosion prevention and wetland protection requirements should be attached to whatever program or programs replace direct payments, it is important to remain cognizant of the fact that federally subsidized crop insurance has become the centerpiece of the farm safety net.
Moreover, the subsidized risk reduction provided by crop insurance has the potential perverse effect of encouraging producer’s to expand production without consideration for cumulative effects (e.g. increased soil erosion, or loss of wetlands and their functions) or even land productivity. A risk management program should not itself heighten risk, especially not with taxpayer’s money.
Whether or not direct payments are eliminated, and regardless or precisely what they may be replaced with, it is increasingly clear that the 2012 Farm Bill must reattach the Federal Crop Insurance program to highly erodible land and wetland compliance provisions.