The Economic Impact of CRP Acres in South Dakota Returning to Crop Production

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 10-15 years. Originally viewed as a supply control program it rapidly evolved into a program that met many environmental objectives. In 2007 SD had 729,397 acres of CRP contracts expired, which was nearly 47% of the 1.56 million acres enrolled. 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 (17%) of CRP land in SD. Economic conditions in 2008 are markedly different. Commodity prices are nearly double that of a year ago and many producers view putting CRP acres back into production as a viable, profitable option. Approximately 508,000 acres of CRP contract will be expiring from 2008-2010, 420,700 from 2011-2013, and an additional 364,600 acres between 2014-2023 (FSA). In 2006 and 2007, the FSA made enrollment offers for 10-15 years or contract extension offers of 2–5 years for many CRP contracts expiring from 2007–2010. For SD contracts expiring in 2007, a total of 52.7 thousand CRP acres were re-enrolled and 370.6 thousand acres were accepted in contract extensions. The remaining 306 thousand acres of expired contracts were not re-enrolled or extended and likely converted to crop or forage production. In addition, there were 38.8 thousand CRP acres added through new enrollments. Just as enrolling these acres into the program had significant negative impacts on revenue generation in the farm and rural economy in SD, 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.


Issue Date:
2008-09
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/56763
Total Pages:
14
Series Statement:
Economics Staff Paper
2008-4




 Record created 2017-04-01, last modified 2017-04-28

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