Future changes in the Conservation Reserve Program
click image to zoom Recent weather has tightened the outlook for crops in the 2013/14 crop year, and price declines will probably be smaller than expected a few months ago. Contracts covering 2 million acres expire next September, with more than half of those acres in six states, Montana, Minnesota, Texas, North Dakota, Washington and Kansas. Farmers in Texas offered land equal to 92 percent of the land with contracts expiring in 2013. With the prolonged drought in Texas, the CRP is an attractive option for farmers trying to produce dryland crops. Even farmers with irrigation are facing significant challenges. Another year with a lot of land offered for the CRP seems likely for 2014. The ratio of land offered to land with contracts expiring was also relatively high in Kansas at 73 percent. In contrast the ratio for Minnesota and North Dakota were 25 percent and 28 percent respectively.
In the heart of the Corn Belt the ratio of land offered to land expiring was almost universally below 50 percent (Iowa 30%, Indiana 25%, Illinois 47%, Ohio 23%, and Missouri 45%). The amount of land offered in these states in 2014 will probably remain low with crop prices and land rents remaining high. The share of land offered in South Dakota was very near the bottom of the ranking at only 18 percent. In total there are nearly 1 million acres of land enrolled in the CRP in South Dakota.
So, what happens to the size of the CRP if the ratios recorded in the 2013 signup continue in 2014? Using the same ratios on a state-by-state basis, farmers would offer 1.15 million acres and 1.01 million would be accepted. This would result in a decline in the size of the CRP of a little less than 1 million acres, lowering the total to 24.3 million. If crop prices are significantly lower by the spring of 2014, the amount of land offered by farmers could be higher. If the drought persists that could also boost the amount of land offered. If these or other factor increase the amount of land offered by 20 percent, we would still see a decline in the size of the CRP by 770,000 acres.
click image to zoom By 2015, lower crop prices appear likely at this point, unless yields fall well short of trend levels again in 2014. Contracts covering 1.7 million acres expire in 2015, significantly less than in 2013 and 2014. The top six states account for 43 percent of the total land with contracts expiring in 2015 but Illinois and Iowa are both in that top six. Other states with a lot of land scheduled to come out of the CRP include Texas, Washington, Montana and Kansas. Again, assuming that farmers boost the share of land offered relative to the land with contracts expiring by 20 percent compared to the 2013 level, the amount offered is 1.15 million acres and 1.02 million acres accepted. The total size of the CRP declines by 650,000 acres to around 23.5 million.
The size of the CRP has been declining steadily in recent years. In 2006 enrollment totaled 36 million acres, more than 10 million acres higher than the level that will be in effect in fiscal 2014. Further declines are likely unless crop prices decline significantly. At least based on the assumptions in this analysis, the size of the CRP will decline to around 23.5 million acres in fiscal 2016. Crop prices, weather conditions, and changes in policy could all impact the size of the program over the next few years.
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