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USDA studies conservation compliance under current farm program incentives

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USDA studies conservation compliance under current farm program incentives
Willmar Minnesota 2208 Trott Ave. SW / P.O. Box 839 56201

WILLMAR -- As Congress continues its work on formulating a new farm bill, one issue being watched closely by farmers and environmental groups is the role that conservation compliance will have under the new legislation.

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Under the current farm bill, producers who participate in most federal farm programs must implement soil conservation plans on highly erodible land and refrain from draining wetlands for agricultural production, or risk losing most federal assistance.

With speculation mounting that direct payments -- which annually have generated roughly $5 billion in subsidies -- will be either reduced or completely eliminated, a major incentive for farmers to control soil erosion or the draining of wetlands may no longer exist under the new farm bill.

Also entering into the discussion is the role that conservation compliance will play, if any, under the new farm bill as it relates to crop insurance, another major component of federal farm spending.

Between 2005 and 2010, federal subsidies paid 60 percent of crop insurance premiums -- an average annual expenditure of $4.1 billion. Yet under the current farm bill, farmers and landowners are not required to comply with the U.S. Department of Agriculture's conservation compliance provisions to receive federal subsidies for their crop insurance premiums.

Roger Claassen, a researcher with USDA's Economic Research Service, has studied the current farm bill's conservation compliance provisions and its impact on program participation.

Some of the main findings from Claassen's study include:

- In recent years, direct payments made up roughly half of the farm subsidies that could be withheld from producers who violate the conservation compliance provisions. Direct payments are an effective compliance incentive not only because of the substantial amount of dollars involved, but also because they entail about 71 percent of our nation's cropland. In addition, direct payment rates have remained constant and are issued regardless of crop production levels or prices.

- If direct payments end, conservation compliance incentives could be maintained in several ways. Some farms will continue to receive conservation and disaster payments, which are subject to the conservation compliance provisions. In addition, new commodity programs, which may be created as part of the new farm bill, could also help fill the gap.

- Extending compliance requirements to federally subsidized crop insurance could also help fill the gap. However, the extent to which crop insurance can fill the gap left by an end of direct payments will depend on the extent to which the premium subsidies go to farmers and landowners who also receive direct payments, particularly for the farms that contain highly erodible cropland or wetlands subject to compliance.

- An estimated 448,000 farms, or about 20 percent of all farms in the United States, received direct payments in 2010. However, those 448,000 farms accounted for 283 million acres of cropland or about 69 percent of the total cropland in the United States.

- Most environmentally sensitive land tends to be located in areas where crop insurance subsidies are smaller than direct payments. For example, 59 percent of the cropland that is highly erodible due to wind erosion is located in areas where direct payments exceed crop insurance subsidies. An even larger proportion of cropland that is highly erodible due to water erosion is located in these areas.

- Regionally, direct payments tend to be larger than crop insurance subsidies in the Corn Belt and the South. Crop insurance subsidies are relatively large in the Great Plains, particularly the Northern Plains, and along the Eastern Seaboard.

To view the entire findings of this study, titled "The Future of Environmental Compliance Incentives in U.S. Agriculture," visit USDA's Economic Research Service website at www.ers.usda.gov.

Minnesota corn supplies down 20 percent, soybeans down 17 percent

According to USDA's National Agricultural Statistics Service, Minnesota's supply of old-crop corn totaled 668 million bushels on March 1, down 20 percent from a year ago. Of the state's total corn supply, on-farm supplies accounted for 440 million bushels or down 27 percent from the previous year.

Old-crop soybean supplies in Minnesota totaled 134 million bushels on March 1, down 17 percent from one year ago. On-farm soybean supplies of 72 million bushels were down 19 percent from one year ago.

Minnesota wheat supplies totaled 39.7 million bushels on March 1, down 30 percent from a year ago. On-farm supplies, at 18 million bushels, accounted for 45 percent of the total.

Nationally, old-crop corn supplies totaled 6.01 billion bushels on March 1, down 8 percent from a year ago. Soybean supplies totaled 1.37 billion bushels, up 10 percent from last year's report. Wheat supplies totaled 1.2 billion bushels, down 16 percent from a year ago.

March corn and soybean prices move higher, milk prices decline

According to the Minnesota Agricultural Statistics Service, prices received by Minnesota corn farmers during March averaged $6.30 per bushel, up 25 cents from the February average price. In March 2011, Minnesota corn prices averaged $5.25 per bushel.

March soybean prices also increased to an average of $13 per bushel, up $1 from the previous month. Last March, soybean prices averaged $12.50 per bushel.

Minnesota milk prices during March averaged $18.40 per hundredweight, down 20 cents from the February average. One year ago, Minnesota milk prices averaged $20.90 per hundredweight.

Wes Nelson is executive director of the USDA Farm Service Agency in Kandiyohi County.

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