by Brian Doidge, OCPA Economist & Market Analyst

(Second of a series. This article deals with Title 2 - Conservation Programs; Title 1 - Commodity Programs were covered last issue.)

The Farm Security and Rural Investment Act of 2002 (FSRIA) was signed into law by President Bush on May 13, 2002, and consists of 470 pages covering 10 titles. Main features and new programs are outlined in the chart accompanying this article. All figures quoted are in $US.

Conservation Programs – Title 2 of the FSRIA – offers some models that may be of interest within the Environmental Stewardship ‘pillar’ of Canada’s new Agricultural Policy Framework, especially the concept of taxpayer funding assistance for environmental initiatives. Title 2 increases the emphasis on conservation on working lands by increasing funding to a total of $17.1 billion over the life of FSRIA.

The Conservation Reserve Program (CRP) provides annual rental payments and cost-share assistance to farmers for the establishment of long-term grass and trees on eligible highly erodible land. Maximum CRP acreage under contract is increased from 36 million to 39.2 million acres. Farmers submit a bid for an annual rental payment/acre on highly erodible land that will be taken out of production and placed into grass or trees under a conservation-use contract for a minimum of 10 years and a maximum of 15 years. In order to qualify under the program, highly erodible land must have been cropped in 4 of the last 6 years prior to 2002. Eligible conservation uses include:

• permanent sod grass waterways, riparian buffers and filter strips
• contour grass strips (as part of an approved conservation plan)
• marginal pastureland near riparian areas devoted to approved vegetation
• conversion to wetlands
• establishment of wildlife habitat.

The Wetlands Reserve Program permits the USDA to purchase 30-year or permanent easements and provide cost-sharing to farmers who restore wetlands on previously worked agricultural lands. Maximum acreage cap is increased to 2.275 million acres with a requirement that 250,000 acres be enrolled each calendar year. Restoring wetlands wildlife habitat is a priority. As a disincentive, FSRIA continues provisions that deny farm program benefits to producers who drain wetland to make it ready for crop production (swampbuster provision), just as benefits are also denied to producers who bring previously unworked, highly erodible land into production (sodbuster provision).

The Grasslands Reserve Program is a new program ($254 million) to enroll up to 2 million acres of virgin and improved pastureland into 10,15, 20 or 30-year set-aside contracts (maximum 40% of lands enrolled) and 30-year and permanent easements (maximum 60% of lands enrolled into the program). Tracts eligible must be at least 40 contiguous acres. Annual rental payments for contracts will be 75% of grazing value. Permanent easements are purchased at fair market value less grazing value. 75% cost-sharing of restoration costs is available on restored grasslands.

The Farmland Protection Program (FPP) has been bolstered by a 20-fold increase in funding to $980 million. Since the 1996 Freedom to Farm legislation, FPP has provided $53.4 million to protect 108,000 acres. The FSRIA dramatically enhances both funding and eligible lands. FPP provides funding to state, local and tribal governments, and nonprofit organizations operated for conservation purposes (i.e., Ducks Unlimited ??) to help purchase easements against development of productive farmland. Eligible land now includes land of historical and archaeological interest, and there is no acreage limit.

By far the largest share of funding under Title 2 goes toward the Environmental Quality Incentives Program (EQIP). Using $9 billion, EQIP provides technical assistance, cost-sharing and incentive payments to assist crop and livestock producers making environmental and conservation improvements on their farms. Phased up over the period 2002 - 2007 to provide $1.3 billion annually in mandated spending, funds are split 60:40 between livestock and crop producers. To be eligible for 75% cost-sharing contracts, producers must prepare a conservation plan detailing intended practices, environmental purposes and benefits. Confined livestock feeding operations must prepare a comprehensive nutrient management plan. (Certainly many Ontario producers would welcome a similar program to provide 75% of costs for nutrient management plan initiatives as well!) Evaluation of contract offers is based on use of cost-effective conservation practices, use of practices in line with national priorities, and optimization of environmental benefits. Successful contracts are 1 to 10 years in length. There is no annual payment limitation but the sum of all EQIP payments cannot exceed $450,000 to an individual or entity during fiscal years 2002-2007.

Within EQIP, there are two programs of major interest to Ontario, especially in light of: a) the O’Connor report on the ‘Walkerton’ water quality issue, and b) Canada’s internal debate about whether to sign the Kyoto Agreement requiring carbon emissions reductions:

1) $600 million is allocated over the period 2002 - 2007 under the Ground and Surface Water Conservation Program to provide 50% cost-sharing for water quality and conservation initiatives including more efficient irrigation systems.

2) As for carbon emissions reductions, carbon credit trading and carbon sequestration, a new Conservation Innovation Grants Program can be used to “provide grants to stimulate innovative approaches to leveraging Federal investment in environmental enhancement and protection. Grants are to be awarded on a competitive basis to governmental and non-governmental organizations and persons for innovative projects involving producers, such as market-based pollution credit trading, adoption of best management practices, and carbon sequestration.”

In Canada, government appears to hold the idea that producers should/will be forced to undertake environmental stewardship initiatives, mostly at their own expense, in order to serve the common good. Compare that approach to the newest ‘slush fund’ south of the border, the $2 billion Conservation Security Program (CSP). Senator Tom Harkin (Dem.-Iowa) is up for re-election in November 2002 and is considered vulnerable. As Chair of the Senate Committee on Agriculture, Harkin is regarded as one of the prime fathers of the FSRIA. Is it only coincidence that 75% of Iowa farmers (the highest percentage in the U.S.) will benefit from FSRIA? Is it merely happenstance that average annual government support payments on a typical 1000-acre Iowa farm will increase from $74,000 to $84,000 under FSRIA? Regardless, Harkin takes credit for pushing through the $2 billion CSP that is designed to provide an extemely broad range of opportunities for payments related to stewardship initiatives.

The Congressional summary of the FSRIA says that the “CSP is a new national incentive payment program for maintaining and increasing farm and ranch stewardship practices.” Payments are made to producers for implementing or merely maintaining a wide range of management, vegetative and land-based practices that address environmental concerns such as soil, water or wildlife. All crop and grazing land is eligible, and so is “forestland that is an incidental part of the agricultural operation”. A producer could receive a payment for his bush simply by continuing to do nothing with it. In addition to 75% cost-sharing for adoption or maintenance of conservation practices, annual payments are made under renewable 5-10 year contracts at one of 3 rates which are percentages of the national average land rental for the specific land use:

• 5% for Tier 1 efforts which address one environmental concern on part of a farm operation
• 10% for Tier 2 efforts which address one environmental concern on all of a farm operation
• 15% for Tier 3 efforts which address all environmental concerns on all of a farm operation.

There are a number of other minor conservation programs, all with funding and payments attached, that a U.S. producer can access. One of interest to us might be the Great Lakes Basin Program for Erosion and Sediment Control. This program authorizes $5 million annually for soil and sediment control through project demonstration grants, technical assistance and education programs to improve water quality in the Great Lakes Basin.

Discussion of the U.S. Farm Bill will be continued in the October issue of Ontario Corn Producer.

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