The many and varied resource concerns influenced by
agricultural production are often the result of small
contributions from many farms over vast areas, and "one-size-fits-all" solutions
are unlikely to be effective in addressing them. Policymakers
have a wide range of policy
instruments (see the Background chapter)
to address resource concerns. One tool, land
retirement, is and
will continue to be an important part of U.S. conservation
policy, yet many resource concernssuch
as nutrient and pesticide runoffcan
be more cost-effectively addressed on the 850 million
acres of working cropland and grazing land.
Programs directed at working-lands
conservation are growing. Much of the 17 percent increase
in funding authorized by the 2008 Farm Act goes toward
two programs that pay farmers for conservation efforts
on working lands—the Environmental Quality Incentives Program and the Conservation Stewardship
Program.
The Environmental Quality Incentives ProgramEQIP
EQIP was
established under the 1996
Federal Agriculture Improvement and Reform (FAIR)
Act, replacing the Agricultural Conservation Program.
EQIP's principal objective is to provide producers with
assistance that promotes production and environmental
quality as compatible goals, optimizes environmental
benefits, and helps farmers and ranchers meet Federal,
State, and local regulatory requirements.
EQIP provides producers with financial and technical
assistance for implementing and managing a wide range
of conservation practices consistent with crop and livestock
production. Sixty percent of overall EQIP funding is
targeted to natural resource concerns related to poultry
and livestock production. The remainder is directed toward
practices that address conservation priorities on working
cropland.
Farmers seeking to participate in EQIP complete an application
indicating which land will be enrolled, which resource
concerns will be addressed, and what practices will be
used. Enrollment decisions are made at the State or local
level. Each State or local Natural Resources Conservation
Service (NRCS) office ranks applications based on the
treatment of priority natural resource concerns; treatment
of multiple resource concerns; use of conservation practices
that provide long-term environmental enhancements; compliance
with Federal, State, local, or tribal regulatory requirements;
and the relative cost-effectiveness of the proposed conservation
practice. Applications receiving the highest environmental
benefit scores based on the ranking criteria are approved
for funding.
EQIP uses two types of financial assistance to encourage
implementation and management of conservation practices:
cost-share and incentive payments. Cost-sharing applies
to structural and vegetative practices and payments can
be up to 75 percent of installation costs, although a
50-percent cost-share is more typical. Examples of eligible
practices are grassed waterways, filter strips, waste
storage facilities, and fencing. Incentive payments encourage
producers to adopt land management practices they may
not have otherwise used. Eligible practices include nutrient
management, integrated pest management, irrigation water
management, and wildlife habitat management.
Key Changes in the 2008 Farm Act
The Food, Conservation, and Energy Act of 2008 (2008
Farm Act) made some changes to EQIP relating to:
- increased funding,
- eligibility requirements,
- overall payment limitations,
- payment terms for groups defined by USDA as "traditionally
underserved,"
- offer ranking procedures, and
- the ground and surface water conservation fund.
Increased funding. EQIP is slated to
receive the largest share of new conservation funding
under the 2008 Farm Act, a total of $1.15 billion. This
increase would bring EQIP spending to about $7.25 billion
for fiscal years (FY) 2008-12. Funding authorized
in the 2008 Farm Act increases from $1.2 billion in FY
2008 to $1.75 billion in FY 2012.
Eligibility requirements. The 2008 Farm
Act provides clarification regarding lands eligible for
EQIP participation. Eligible lands include cropland,
grassland, rangeland and pasture land, nonindustrial
private forestland, and other agricultural land (e.g.,
cropped woodland, marshes, incidental land that is part
of the agricultural operation, and agricultural land
used for the production of livestock) on which resource
issues could be addressed. Conservation practices related
to organic
production and transition to organic production are
also now eligible for funding. Organic practices are
subject to payment limitations of $20,000 annually and
$80,000 over 6 years.
Overall payment limitations. Aggregate
payment limitations are reduced from $450,000 to $300,000
for any individual or legal entity during the ensuing
6 years. However, the $450,000 cap established under
the 2002 Farm Act is maintained for projects of special
environmental significance.
Payment terms for groups defined by USDA as "traditionally
underserved." Payment terms are improved
and expanded for beginning, limited-resource, and
socially disadvantaged farmers and ranchers. In the
2002 Farm Act, beginning and limited-resource farmers
and ranchers benefited from a provision that provided
greater financial assistance (up to 90 percent of
the estimated cost of certain conservation practices)
than that provided to other farmers and ranchers
(up to 75 percent of the cost). The 2008 Farm Act
extends the higher payment rates to socially disadvantaged
producers as well, and establishes that the rates
for these three groups of farmers be increased no
less than 25 percent above otherwise applicable rates
(up to the 90-percent maximum rate). Another provision
eases potential liquidity constraints to conservation
program participation. EQIP payments are typically
made upon completion of the practice installation.
The 2008 Farm Act allows traditionally underserved
participants to qualify for advance payments of up
to 30 percent for purchasing materials or services.
Beginning and socially disadvantaged farmers also
benefit from the "Conservation
Access" provision, which requires that a total
of 10 percent of EQIP funds be initially set aside
to enroll these targeted individuals.
Offer ranking procedures. Changes in
EQIP's procedures for ranking contract offers under the
2008 Farm Act include consideration of how comprehensively
and completely a proposed conservation project would
address resource issues and whether the project would
improve or complete a conservation system. The legislation
encourages the grouping of "similar" contract offers
for ranking purposes.
Ground and surface water conservation fund. This
fund, established in 2002, is replaced by the Agricultural
Water Enhancement Program. The 2008 Farm
Act expands the program's purpose from ground and surface
water conservation to include improving water quality
on agricultural lands. In addition to signing contracts
with individuals, the Secretary of Agriculture may enter
into agreements with partners, including producer associations
or other groups of producers, State or local governments
and Indian tribes, to collectively address water quality
or quantity concerns on a regional basis.
Features maintained from the 2002 Farm Act. Several
changes enacted with the 2002 Farm Act are maintained,
including allocating 60 percent of funding for livestock-related
practices, relaxing the requirement to maximize environmental
benefits per dollar of program expenditure, and disallowing
the use of competitive bidding. The latter precludes
the Secretary of Agriculture from assigning higher priority
to an application based on a producer's offer to accept
a lower payment rate for installing a given practice,
when comparing contract offers that would provide similar
environmental values.
Economic Implications of 2008 Farm Act Changes
The changes made to EQIP have some implications for
the economic performance of the program.
Expanded funding for EQIP. The funding
increases authorized in the 2008 Farm Act will allow
more producers to enroll in EQIP but may not be sufficient
to enroll all producers who are interested in participating.
Historically, producer interest in enrolling in EQIP
has outweighed the available funding by a large margin.
Even though EQIP received a significant funding boost
in the 2002 Farm Act, so many producers applied that
in 2003, the offers exceeded the $691 million in funds
obligated that year by an estimated $3
billion. In 2007, $993 million was obligated in
EQIP but an estimated $865
million in offers remained unfunded due to budget
constraints.
$300,000 payment limitation. The reduction
in the limit on EQIP payments from $450,000 to $300,000
over 6 years could
reduce the attractiveness of EQIP to some producers.
However,
the sizes of EQIP payments typically made to individuals
or entities suggest that very few producers are likely
to be affected by a $300,000/6-year limit. Analysis of
EQIP administrative data suggests that less than 0.5
percent of those receiving payments would be directly
affected by the reduced limit. About three-quarters of
those getting payments over the 2004-07 period received
them in a single year, and the vast majorityabout
90 percentreceived $50,000 or less.
Improved payment terms for traditionally underserved
groups. Increases in payment rates for certain
farmer groups may increase participation of those
groups in EQIP. Higher rates reduce the cost to farmers
of investing in conservation improvements. Allowing
beginning and
socially disadvantaged farmers to be eligible for
higher cost share rates may encourage some farmers
to enroll in EQIP who otherwise might not have participated
because they faced financial constraints. Or some
participants may make additional conservation investments
because they are now less costly. Lastly, participants
who become eligible for the higher cost share rate
may make the same investments as they would have
without the higher rates, but shift a portion of
the costs to the Government.
Setting aside of funds for beginning and socially disadvantaged
farmers is another way of increasing enrollment. Given the
same selection criteria for all farmer groups, setting
aside funds (in EQIP) or acres (in CStP) for beginning
and socially disadvantaged farmers can increase participation
of those farmers if some eligible farmers' applications
are unlikely to be accepted without the set aside, and
the set-aside funds or acres exceeds the amount currently
claimed by eligible farmers.
EQIP contract data suggests a 5-percent set-aside of
EQIP funds may have little effect on participation, at
least for beginning farmers. Payments to beginning farmers
accounted for 12 percent of all EQIP payments in 2006.
This suggests the 5-percent set-aside funds would likely
go to beginning farmers who are able to participate in
EQIP even when funds are not set aside.
The 5-percent set-aside funds for beginning farmers
in EQIP may have more of an impact if administered at
the regional level. For example, payments to beginning
farmers in the Lake States region (including Michigan,
Minnesota, and Wisconsin) totaled less than 5 percent
of all EQIP payments in the region in 2006. Some beginning
farmers in this region who could not previously participate
in EQIP may be able to enroll with a regional 5-percent
set-aside. See a listing
of the States included in each region.
Continuation of ban on competitive bidding. In
the 2002 Farm Act, a change in EQIP bid assessment procedures
discontinued the option of competitive bidding, and the
2008 Farm Act does not restore the option. Disallowing
bidding likely reduced the overall level of environmental
benefits per dollar of program expenditure that could
be achieved in EQIP. ERS analysis of EQIP contract data
revealed that cost-sharing and incentive payments were
much lower than the maximum rates when bidding was allowed
in 1996-2002. During that period, the average bid on
cost-shared structural practices was 35 percent of practice
cost, compared with the 50-75-percent rates allowed.
For management practices, bids averaged 43 percent of
the maximum rate, which was established by practice and
by county (see Flexible
Conservation Measures on Working Land: What Challenges
Lie Ahead?).
Continuation of fund set-aside
for livestock practices. The continuing requirement
in the Farm Act that 60 percent of EQIP funds be
allocated to livestock-related practices could impact
the types of practices that get funded, particularly
if livestock-related practices would not have received
funding in the absence of the set-aside. EQIP has
always had a set aside, which makes it difficult
to discern if livestock-related practices would have
been funded in the absence of a constraint. Over
the 1997-2000 period when at least 50 percent of
EQIP funds had to be devoted to addressing concerns
arising from livestock production, at least 60 percent
of funds went to livestock-related practices. In
2002, the set aside was raised to 60 percent. Between
2004 and 2007, 65-68 percent of funds went to livestock-related
practices. While the 60-percent set-aside is specified
and achieved nationally, not all regions achieve
this allocation to livestock-related practices. The
Southern Plains, Mountain, Northeast, and Appalachia
regions allocated over 70 percent of funds to livestock-related
practices in 2007, while the Pacific and Delta regions
allocated less than 50 percent. See a listing
of the States included in each region.
The Conservation Stewardship ProgramCStP
The 2008 Farm Act replaced the Conservation
Security Program (CSP) with the Conservation Stewardship
Program (CStP). Existing contracts, entered into under
the old CSP will continue in force. Beginning in 2009,
USDA will begin entering into contracts under the new
CStP.
Producers can enroll cropland, grazing land, and (within
limits) forest land located on their farms. To participate
in the new CStP farmers and rancher must, at minimum:
(1) have already addressed at least one resource concern
throughout their farm and (2) agree to address at least
one additional priority resource concern (priorities
set by USDA) during the 5-year contract term. Resource
concerns can include water quality, air quality, soil
quality and other aspects of environmental quality.
Producers who have already addressed more resource concerns, or agree to address
more resource concerns during the contract term, are more likely to be selected
for enrollment.
The likelihood of enrollment
is also higher when environmental benefits are provided
at least cost, although producers cannot improve their
chances by offering to take lower payments.
Conservation Stewardship Program payments can compensate
producers for installing and adopting conservation
activities, improving or maintaining existing conservation
activities, or adopting resource-conserving crop rotations.
Payment amounts are to be based on out-of-pocket cost
of these activities, income forgone by producer, and
expected environmental benefits. Total CStP payments
to a single producer cannot exceed $200,000 during any
5-year period. Payments cannot be made for expenses associated
with animal-waste storage or treatment facilities or
related waste transport or transfer devices for animal
feeding operations.
To the extent that it can be done, the 2008 Farm Act
directs USDA to enroll 12.77 million acres per year in
CStP at an average cost of $18 per acre per year. Program
acreage is to be allocated to States based primarily
on each State's proportion of total national eligible
acres, but also taking into account conservation needs,
the degree to which CStP can help address these needs,
and equity in the distribution of funds. Five percent
of acres are to be made available to beginning farmers,
and another 5
percent to socially disadvantaged producers.
EQIP and CStPDifferent Approaches to Similar
Concerns
Both EQIP and CStP are designed to address similar
resource concerns on working lands, both are administered
by NRCS,
and in both, payment levels largely determine which eligible
producers are willing to participate. Another similarity
is that program managers review producers' proposals
and decide which ones to accept for program enrollment.
This step allows program managers to gather information
on potential environmental performance and benefits (and,
perhaps, potential to meet other program objectives)
and costs directly from farmersinformation that
can be critical where determining which proposals best
contribute to achieving program objectives. EQIP and
CStP are distinguished, however, by the details of program
design, including budget, eligibility, enrollment screens
(ranking criteria), and participation incentives (see
table below).
In combination, these programs provide a very flexible
set of incentives for conservation on working lands and
on livestock operations. These programs complement land
retirement by rounding out the conservation policy portfolio.
Many environmental problems, such as pesticide and nutrient
runoff, can be cost-effectively addressed on working
lands. Because land remains in production, specific environmental
benefits can often be achieved at a lower cost per acre
than through land retirement.
EQIP
and CStP designs |
Program
feature |
EQIP |
CStP |
Budget
|
A total of $7.25 billion is authorized
for 2008-12.
"Conservation
Access" provision requires that 5 percent
of EQIP funds be made available to enroll beginning
farmers and ranchers, and another 5 percent to socially
disadvantaged farmers and ranchers. |
To extent that it can be done,
the 2008 Farm Act directs USDA to enroll 12.77
million acres per year at an average cost of $18
per acre per year.
"Conservation
Access" provision requires 5 percent of
CStP acres be made available for beginning
farmers and another 5 percent to socially
disadvantaged producers. |
Eligibility |
Both crop and livestock production
(legislation requires at least 60 percent of payments
to livestock practices).
Emphasis on assisting livestock operations to
comply with Clean Water Act regulations.
No previous conservation effort required. Only
practices not started can be funded unless a waiver
is obtained at the time of application.
Conservation practices related to organic
production and transition are now eligible,
but payments to producers or entities are limited
to $20,000 annually and $80,000 over 6-year period. |
Cropland, grazing land, and (within
limits) forest land located on farms can be enrolled
Animal-waste storage or treatment facilities or
related waste transport or transfer devices are
not eligible.
Producers must, at minimum, have already addressed
at least one resource concern throughout their
farm. Producers must agree to address at least
one additional priority resource concern (priorities
set by USDA) during the 5-year contract term.
Requires Secretary to establish means for producers
to initiate organic
certification while participating in CStP.
Requires Secretary to ensure that outreach and
technical assistance are available to organic and specialty
crop producers and that program specifications
are appropriate for participation of these producers. |
Enrollment
screen or ranking |
Performance-based "offer index" based on potential environmental benefits
and contract costs. Requests for EQIP finding exceed available budget by at
least 3 to 1. |
Contract offers to be ranked for
program enrollment according to:
- level of existing conservation treatment on all
resource concerns present at time of CStP application,
measured as much as possible using conservation
measurement tools
- level of proposed treatment of priority resource
concerns, measured as much as possible by conservation
measurement tools
- number of priority resource concerns that would
be addressed to stewardship threshold
- extent to which other resource concerns would
be addressed
- extent to which environmental benefits are
provided at least cost (although producers cannot
improve their rank by offering to take lower
payment)
|
Participation
incentives
|
Payments are to compensate producers
for
installing or adopting conservation practices
Cost sharing (typically 50 percent) on structural
and vegetative practices; incentive payments for
management practices.
Payments are not subject to an annual limit, but
the sum of all EQIP payments to an individual or
entity cannot exceed $300,000 during a 6-year period
($450,000 for projects of special environmental
significance).
Beginning, limited-resource and socially disadvantaged
farmers and ranchers qualify for cost-share payments
at least 25 percent above otherwise applicable rates,
up to 90 percent.
|
Payments are to compensate producers for:
- installing and adopting additional conservation
activities
- improving, maintaining, and managing conservation
activities already in place
Payment amounts are to be based on:
- cost of installing, adopting, or maintaining
conservation activities
- income forgone by producer
- expected environmental benefits as determined
by conservation measurement tools.
Total CStP payments to any one person or legal
entity cannot exceed $200,000 during any 5-year
period. |
|