The Conservation Reserve Program and future use of enrolled land in Montana

Abstract

The Conservation Reserve Program (CRP), as authorized by the Food Security Act of 1985 is a voluntary cropland retirement program which relies primarily upon positive economic incentives to farm operators in order to entice them to convert cropland considered highly erodible or otherwise environmentally sensitive into a conserving use for a ten-year period. Through 1989, Montana farm operators enrolled nearly 2.7 million acres of cropland into the CRP. The first CRP contracts were entered into in 1986 and thus will expire in 1995. Under current policy, once the ten year period is over, cropland enrolled in the CRP can be returned to annual cropping, can be used in some alternative commercial use such as haying or grazing, or can remain in a conserving use. There is much concern in Montana and other states over how the future use of these acres could affect commodity prices, farm incomes, government outlays, rural economic activity, and environment quality. This study examines the factors to be used by individual Montana CRP contract holders upon contract expiration to decide the disposition of their CRP land among the alternative uses. A firm level mean-variance decision model is used to incorporate the risk involved with each alternative. The model also considers any one-time start-up costs that may be incurred to convert CRP acres into an alternative use. Test results using survey data from Montana contract holders suggest that very few CRP acres in Montana will remain in a conserving use. Most respondents indicated that they plan to either return all of their CRP acreage to annual cropping, or will hay/graze all of the acreage. The results suggest that the greater the percentage of income derived from range livestock, the more likely the CRP land will be hayed or grazed. Similarly, the greater the percentage of income derived from cropping, the more likely the CRP land will be returned to annual cropping. The evidence is that more CRP land will be hayed or grazed on operations that currently have haying/grazing activities, or that have physical attributes to facilitate haying/grazing activities.