Farm program changes could affect environmental compliance incentives

Federal farm program payments help encourage good stewardship of natural resources through environmental compliance requirements. To maintain eligibility for most farm programs, farmers must follow an approved soil conservation plan on all highly erodible land used for crop production. Farmers who do not comply with these requirements, even on a small number of acres, risk losing some or all of their Federal farm commodity, conservation, and disaster payments, as well as access to Federal farm loan and loan guarantee programs. Since 2003, annual farm program payments subject to environmental compliance have fluctuated between $11 billion and $20 billion. Most of the variation can be attributed to countercyclical payments (CCP) and marketing loan benefits (MLB), which are triggered by low crop prices. Since 2007, high prices for most program crops have sharply reduced CCP and MLB payments from their 2005-06 levels. Direct payments have accounted for roughly half of the compliance incentive since 2008. If they are eliminated in the 2012 farm bill, farmers who do not receive conservation or disaster payments (the other major payments subject to environmental compliance) may have less incentive to continue meeting compliance requirements unless these payments are replaced by another type of commodity or insurance program subject to compliance. This chart appeared in the June 2012 issue of Amber Waves magazine.