With direct payments evaporating with the expiration of the 2008 Farm Bill September 30th, does the federal government lose its big stick to force compliance with conservation programs? After all how can an expired benefit be withheld for not complying with required environmental programs, such as highly erodible lands, swampbuster, sodbuster, and wetland conservation initiatives? Or will crop insurance take the place of direct payments and become the enforcer?
For the past decade, direct payments have been distributed at $5-6 billion per year to farmers who operate nearly 7 acres out of 10 in the US, but will not be part of the Farm Bill that will replace the current law. While not every farming operation participates in the various environmental programs that carry penalties if not fulfilled, those that do are subject to losing direct payments on their cropland. The alternative could be replacing direct payments with crop insurance, says USDA economist Roger Claassen in his recent assessment of the future of environmental compliance. After all, crop insurance likely will be the only farm program left in the next farm bill, which will be extended to a majority of farming operations that are mandated to comply with various environmental programs.
About 100 million acres or 25% of US cropland is considered highly erodible and potentially subject to conservation compliance requirements. A 15 year study from 1982 to 1997 found that USDA conservation programs saved about 300 million tons of soil per year. More recently, commodity program payments, such as direct and counter-cyclical payments and marketing loan benefits, accounted for 64% of all payments subject to environmental compliance requirements.
Claassen found that 448,000 farms received direct payments, which represents 20% of farms and 283 million acres of cropland. 126,000 of those will still have to comply with the conservation programs on their farm because they also receive some level of conservation payment. 141,000 farms which operated 33 million acres of cropland received direct payments, but did not participate in crop insurance or receive conservation payments. Obviously, the expiration of direct payments would eliminate any incentive for conservation programming on those farms. Another 181,000 farms operating on 141 million acres received direct payments and also bought crop insurance. Since they did not receive conservation payments, they would be candidates for making crop insurance a compliance benefit for upholding their conservation requirements.