Should We Pay Farmers Not to Farm? a Case of the Conservation Reserve Program

Abstract

The Conservation Reserve Program (CRP) is the United States largest conservation initiative. The program retires over 30 million acres of "marginal" cropland. The programs objectives are to reduce sedimentation, improve water quality, foster wildlife habitat, provide income support for farmers, and protect the nation's long term capacity to produce food and fiber. Recently there have been many advocates to return the program land back to continuous production. It was the main purpose of this study to determine in the case that these lands were returned to production, would the producers assume a profit or loss. Field level data was taken on 106 different parcels in Western Texas County in Oklahoma. This data was analyzed for nutrient content and used to evaluate differences in CRP and non-CRP land. These differences, if any existed, were taken into account and enterprise budgets were formed for various farming practices. Profit and or loss was determined then a sensitivity analysis was put together on, price received, costs, yield, and farming operation. This analysis was used to determine points of profitability. It was found that many differences existed between CRP and non-CRP land; however the most surprising result was that there was no significant difference in organic matter. Profit was scare in all situations. Under the most profitable tillage practice the producer only saw positive returns 29.63% of the time.