Grasslands in the Northern Plains are being converted to cropland, at what USDA ag economists report to be a significant rate. The implication of the report is that farmland owners are making the choice after being enticed by various economic incentives, namely crop insurance, commodity programs, and disaster programs. How quick is this shift happening? You might be surprised by the percentages.
USDA’s Economics Research Service reports the Prairie Pothole Region of the Northern Plains is a breeding habitat for migratory birds, specifically in parts of Iowa, Minnesota, the Dakotas, and Montana. Environmental organizations have expressed concerns that federal farm programs are causing land owners to shift the grasslands to croplands so certain benefits can be obtained. In a lengthy report the ERS economists say crop insurance benefits could be denied under terms of the Sodsaver Program, if requested by a state governor, but none has requested the action. Their research focused on the speed of grassland conversion to cropland, whether the Sodsaver program could really work, and what role have farm programs had in causing the shift?
The study included the years of 1997 to 2007, which the economists acknowledge ends just before commodity prices begin to substantially climb. (2007 was when the federal ethanol mandates took hold and bolstered the corn market, with subsequent demand for soybean and wheat acreage pushing up commodity prices.—Editor)
So what did the study find? The following quote the USDA economists:
1) Compared with other regions, producers in the Northern Plains were more likely to convert grassland to cropland or retain land in crops rather than returning it to grass.
2) In the Northern Plains, about 1% of 1997 rangeland had been converted to crop production by 2007 (roughly 770,000 acres), while only 100,000 acres were converted from cropland to rangeland.
3) The Northern Plains accounted for 57% of rangeland to cropland conversion between 1997 and 2007.
4) In the United States, there was a net shift between 1997 and 2007 of roughly 10 million acres from cultivated cropland (about 3 percent of 1997 cropland) to hay or pasture.
5) In the Northern Plains, the net shift of cropland to hay and pasture was effectively zero.
6) The gross shift of roughly 3.5 million acres moving from cropland to hay or pasture was exactly offset by acreage moving from hay or pasture to cultivated crops.
7) Through the CRP, however, producers in the Northern Plains moved some land from cultivated crops to grass.
8) Between 1997 and 2007 they enrolled 3.6 million acres of cropland in the CRP, while 1.9 million acres were returned to crop production and 1.7 million acres previously in the CRP became hay, pasture, or range.
9) In a study area that includes 77 North Dakota and South Dakota counties, we use an econometric model to estimate that crop insurance, marketing loans, and disaster payments increased land in cultivated crops by 686,000 acres (the average effect between 1998 and 2007)—roughly 2.9% of cultivated cropland acreage. (This is an estimate of the net change in equilibrium acreage. The estimated effect varies over time with economic and policy conditions. The 2.9%- change is the average estimated effect between 1998 and 2007.)
10) The largest overall effect was from disaster assistance (1.2% rise in cultivated cropland; 292,000 acres), followed by crop insurance (1%; 235,000 acres) and marketing loan benefits (0.7%; 161,000 acres).
11) We estimate that roughly 60% of the increase in crop acreage came from hay or pasture (403,000 acres) while the remaining acreage came from range (181,000 acres) and CRP (102,000 acres).
12) The estimated rangeland reduction of 181,000 acres was 1.1% of rangeland acreage in the 77 counties considered in this study.
(Point number 10 may be the most significant identified by the USDA economists; with 1.2% increase in cropland because of the availability of disaster assistance, a 1% increase in cropland because of the availability of crop insurance, and a 0.7% increase in cropland because of marketing loan benefits.
(Many farm policy watchers would question the significance of these numbers, and argue they are not an indictment of the farm program, based on such small shifts. Shifts of crop land to urban development may be larger.
(Since the study terminates at 2007, it is impossible to know whether a larger shift of grassland to cropland was a result of those farm program elements or higher commodity prices. However in their conclusion, the researchers say crop insurance revenue guarantees on top of higher commodity prices would have a multiplying effect on the conversion of grassland to cropland.—Editor)
USDA economists studying the conversion of grassland to cropland have pointed to crop insurance, the marketing loan, and disaster programs as incentives for such a shift by land owners. However, those incentives are blamed for less than 3% of grassland in the Northern Plains being converted to cropland.
Source: The FarmGate