Agricultural Conservation: Farm Program Payments Are an Important
Factor in Landowners' Decisions to Convert Grassland to Cropland
(10-SEP-07, GAO-07-1054).
The nation's remaining grassland has several important benefits,
such as providing land for grazing and wildlife habitat for many
at-risk species. However, over the past 3 centuries about half of
the grassland has been converted to other uses, principally
cropland. In addition to losing important grassland values, such
conversions may result in increased spending on federal farm
programs, such as crop insurance, especially in marginal areas.
GAO examined (1) the extent of grassland conversions to cropland
and the cost of farm program payments for these newly converted
cropland acres; (2) the relative importance of farm program
payments versus other factors in producers' decisions to convert
grassland to cropland; and (3) any impact the Sodbuster
conservation provision--which places soil erosion standards on
certain converted land--has had on limiting grassland
conversions.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-1054
ACCNO: A76147
TITLE: Agricultural Conservation: Farm Program Payments Are an
Important Factor in Landowners' Decisions to Convert Grassland to
Cropland
DATE: 09/10/2007
SUBJECT: Agricultural production
Agricultural programs
Conservation
Cost analysis
Crop insurance
Economic analysis
Land management
Land use
Soil conservation
Soil erosion
USDA Conservation Reserve Program
USDA National Resources Inventory
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GAO-07-1054
* [1]Results in Brief
* [2]Background
* [3]Available Data Show Conversion of Native Grassland to Cropla
* [4]Available Sources of Information Indicate That Grasslands De
* [5]Crop Insurance and Crop Disaster Assistance Costs Were Signi
* [6]Farm Program Payments, Rising Crop Prices, and the Adoption
* [7]Rising Crop Prices and Advanced Crop Production Technologies
* [8]Farm Program Payments Provide Incentives to Convert Native G
* [9]Incentives to Convert Grassland May Work at Cross Purposes w
* [10]Sodbuster Has Had Little Impact on Native Grassland Conversi
* [11]Much of the Native Grassland Converted in Recent Years Was N
* [12]Even When Planned Conversions Are Subject to Sodbuster, Prod
* [13]USDA and Some Stakeholder Organizations Have Offered a Propo
* [14]Conclusions
* [15]Recommendations for Executive Action
* [16]Agency Comments and Our Evaluation
* [17]Appendix I: Objectives, Scope, and Methodology
* [18]Appendix II: National Resources Inventory Data on Net Change
* [19]Appendix III: Census of Agriculture Data on Net Changes in U
* [20]Appendix IV: Partial Budget Analysis for a Proposed Conversi
* [21]Base Plan Scenario--Cow-Calf Grazing
* [22]Alternative Scenario--Corn/Soybean/Spring Wheat Cropping
Rota
* [23]Partial Budget Analysis
* [24]Appendix V: Summaries of Economic Studies Examining the Impa
* [25]Appendix VI: GAO Contact and Staff Acknowledgments
* [26]GAO Contact
* [27]Staff Acknowledgments
* [28]Related GAO Products
* [29]Order by Mail or Phone
Report to Congressional Requesters
United States Government Accountability Office
GAO
September 2007
AGRICULTURAL CONSERVATION
Farm Program Payments Are an Important Factor in Landowners' Decisions to
Convert Grassland to Cropland
GAO-07-1054
Contents
Letter 1
Results in Brief 3
Background 6
Available Data Show Conversion of Native Grassland to Cropland Continues
and These Conversions Add to Farm Program Costs 12
Farm Program Payments, Rising Crop Prices, and the Adoption of New Farming
Technologies Provide Incentives to Expand Crop Production on Native
Grasslands 20
Sodbuster Has Had Little Impact on Native Grassland Conversions 26
Conclusions 30
Recommendations for Executive Action 30
Agency Comments and Our Evaluation 31
Appendix I Objectives, Scope, and Methodology 33
Appendix II National Resources Inventory Data on Net Changes in U.S. Land
Use, 1982-2003 37
Appendix III Census of Agriculture Data on Net Changes in Uses of Land in
Farms for the United States and Selected States 39
Appendix IV Partial Budget Analysis for a Proposed Conversion of Native
Grassland to Cropland in Central South Dakota, 2003-2007 43
Appendix V Summaries of Economic Studies Examining the Impact of Farm
Program Payments 58
Appendix VI GAO Contact and Staff Acknowledgments 63
Related GAO Products 64
Tables
Table 1: Conversions of Rangeland and Pastureland to Cropland in Selected
Crop Production Regions, 1982-1997 and 1997-2003 14
Table 2: Conversions of Grassland That Had No Prior Cropping History to
Cropland in Montana, North Dakota, and South Dakota, 2005 and 2006 15
Table 3: Comparison of Net Crop Insurance Payments in South Dakota for the
16 Highest Conversion Counties versus Other Counties 18
Table 4: Comparison of Crop Disaster Assistance Payments in South Dakota
for the 16 Highest Conversion Counties versus Other Counties 19
Table 5: Estimated Net Change in Income for a Shift to Crop Production
from a Cow-Calf Grazing Operation on a 160-Acre Tract in Central South
Dakota, 2003-2007 23
Table 6: Local NRCS Officials' Responses to GAO Survey Question on the
Effectiveness of Sodbuster in Limiting the Conversion of Native Grassland
to Cropland 27
Table 7: Net Changes in Rangeland, Pastureland, and Other Land Types,
1982-2003 38
Table 8: Net Changes in Uses of Land in U.S. Farms, 1978-1992 and
1997-2002 40
Table 9: Net Changes in Uses of Land in Farms in States with Large Amounts
of Rangeland and Pastureland, 1978-1992 and 1997-2002 40
Table 10: Partial Budget Analysis for a Proposed 2003 Change from a
Cow-Calf Enterprise to a Corn/Soybean/Wheat Cropping Enterprise in Central
South Dakota, 2003-2006 50
Table 11: Partial Budget Analysis for a Proposed 2003 Change from a
Cow-Calf Enterprise to a Corn/Soybean/Wheat Cropping Enterprise in Central
South Dakota, 2007 56
Table 12: Economic Studies That Analyze the Impact of Federal Farm Program
Payments on Either Producers' Land Use Decisions or Farm Profitability and
Risk 58
Figures
Figure 1: U.S. Grasslands before European Settlement 7
Figure 2: Process to Determine Sodbuster's Applicability 11
Abbreviations
CRP Conservation Reserve Program
ERS Economic Research Service
FSA Farm Service Agency
FWS U.S. Fish and Wildlife Service
HEL highly erodible land
NASS National Agricultural Statistics Service
NRCS Natural Resources Conservation Service
NRI National Resources Inventory
RMA Risk Management Agency
USDA U.S. Department of Agriculture
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wish to reproduce this material separately.
United States Government Accountability Office
Washington, DC 20548
September 10, 2007
The Honorable Tom Harkin
Chairman
Committee on Agriculture, Nutrition, and Forestry
United States Senate
The Honorable Collin C. Peterson
Chairman
Committee on Agriculture
House of Representatives
Before the European settlement of North America, grasslands occupied
approximately 1 billion acres of the contiguous United States--about half
of the land--mostly west of the Mississippi River. Over the last 3
centuries, about half of this presettlement, or "native," grassland was
converted to other uses, and in some states, such as Iowa, almost all the
native grassland has been converted. The most common use to which
grassland has been converted is cropland for the production of crops such
as corn and wheat.1 This cropland produces food, feed, and fiber--and now,
with the rising demand for ethanol and other renewable fuels, energy--and
can yield relatively high financial returns to landowners and agricultural
producers. However, grassland is also a valuable resource, providing land
for livestock grazing; recreational opportunities, such as hunting and
fishing; and environmental benefits, such as reducing soil erosion,
improving water quality, increasing carbon sequestration, and providing
wildlife habitat. In particular, some grassland provides habitat for
threatened and endangered and other at-risk species. Converting grassland
to cropland reduces or eliminates these benefits, and can result in
additional spending on federal farm programs. Wildlife, environmental, and
conservation groups, as well as certain cattle industry interests, have
expressed concerns that the financial incentives these farm programs
provide are a significant factor in landowner decisions to convert
grassland to cropland.
1According to U.S. Department of Agriculture's (USDA) National Resources
Inventory, cropland includes areas used for the production of adapted
crops for harvest; rangeland is composed principally of native grasses or
other native vegetation suitable for grazing; and pastureland is land that
is managed for introduced forage plants for grazing. The USDA definitions
of cropland, rangeland, and pastureland are discussed in appendix II. For
the purposes of this report, native grassland generally refers to
rangeland unless otherwise specified.
The federal farm programs include a variety of income and price support
programs for specific commodities, such as corn, soybeans, and wheat; crop
insurance; and ad hoc disaster assistance programs. For the purposes of
this report, farm program "payments" include commodity-related payments,
crop insurance subsidies, and other benefits. The U.S. Department of
Agriculture (USDA) administers the farm programs. In recent years, farm
program payments have averaged about $20 billion annually.
The conservation compliance provisions of the Food Security Act of 1985,
as amended, condition the receipt of farm program payments on a producer's
efforts to control soil erosion on highly erodible land and protect
wetlands. One of these provisions, known as Sodbuster, requires producers
to apply a soil conservation system that does not allow a substantial
increase in soil erosion on land converted from native grassland if the
land was not cropped before December 23, 1985, and was determined by USDA
to be highly erodible land. In addition, USDA conservation programs
provide financial incentives for taking conservation actions on working
land or for retiring it from production. Several of these programs,
including the Grassland Reserve Program and Conservation Reserve Program
(CRP), promote the conservation of grassland. Under the Grassland Reserve
Program, USDA offers easements and rental agreements to landowners to
assist them in protecting, conserving, and restoring eligible
grassland--such as important habitat for wildlife. Under CRP, USDA
provides about $1.8 billion in annual rental payments to landowners to
retire environmentally sensitive cropland from production and establish
permanent vegetative cover on this land.
In November 2006, we identified the need for better oversight of farm
program payments.2 We specifically highlighted that USDA support programs
may have unintended consequences, including incentives for producers to
grow crops on land prone to drought or erosion. Without better oversight
to ensure that farm program funds are spent as economically, efficiently,
and effectively as possible, we pointed out that USDA has little assurance
that these funds benefit the agricultural sector as intended.
2GAO, Suggested Areas for Oversight for the 110th Congress,
[30]GAO-07-235R (Washington, D.C.: Nov. 17, 2006).
In this context, you asked us to determine (1) the extent of grassland
conversions to cropland, and the cost of farm program payments related to
these newly converted cropland acres; (2) the relative importance of farm
program payments versus other factors in producers' decisions to convert
grassland to cropland; and (3) any impact the Sodbuster provision has had
on limiting grassland conversions.
In conducting our work, we spoke with and reviewed documents provided by
officials in USDA headquarters and field locations; the U.S. Fish and
Wildlife Service (FWS); farm, wildlife, conservation, and environmental
organizations; state governments; and land grant universities. To
determine the extent of grassland conversions to cropland, we examined
land use data from (1) USDA's National Resources Inventory; (2) USDA's
Census of Agriculture; (3) USDA state offices in Montana, North Dakota,
and South Dakota; and (4) a collaborative study by Ducks Unlimited, Inc.,
a private advocacy group supporting the protection and restoration of
wetlands and waterfowl habitat, in conjunction with FWS; the South Dakota
Department of Game, Fish and Parks; The Nature Conservancy; and the
University of Montana. We also reviewed other relevant studies of
grassland conversions to cropland. To determine the cost of farm program
payments on converted land, we analyzed USDA data on crop insurance and
disaster assistance payments. To determine the relative importance of the
availability of farm program payments in producers' decisions to convert
grassland to cropland, we analyzed payments per cropland acre in counties
with relatively high conversion rates of grassland to cropland. We also
analyzed farm-level financial information for a South Dakota county that
has had numerous conversions. To determine the impact the Sodbuster
provision has had on grassland conversions, we examined USDA land use data
and conducted interviews with USDA field officials in selected counties
with relatively high rates of conversions in Montana, Nebraska, North
Dakota, and South Dakota to obtain their views of the impact of Sodbuster
on conversion decisions. A more detailed description of our scope and
methodology is presented in appendix I. We performed our work between
October 2006 and August 2007 in accordance with generally accepted
government auditing standards.
Results in Brief
No comprehensive and current source of information exists on the extent of
grassland conversions to cropland or the amount of farm program payments
related to this newly converted cropland. As a result, policymakers do not
have current information on the extent of conversions for all areas where
conversions may have occurred in recent years. Although limited, available
data show a decline in private grassland nationwide and continuing
conversion of native grassland to cropland in some areas of the
country--particularly the Northern Plains--and that these conversions have
added to farm program costs. For example, USDA's National Resources
Inventory data indicate that the nation's private grassland decreased by
almost 25 million acres from 1982 through 2003. While some conversions are
attributable to development and other land uses, the leading type of
conversion has been to cropland. Our analysis found that crop insurance
payments to producers were significantly higher per acre in South Dakota
counties with relatively high rates of conversion, adding to program
costs. For example, from 1997 through 2006, the 16 South Dakota counties
with the highest number of grassland conversions to cropland had an
average annual net crop insurance payment of over $13 per acre, while the
average payment for all other South Dakota counties was less than $7 per
acre. According to USDA officials, this difference may be explained by the
fact that the counties with the highest number of conversions are in areas
of the state that are more prone to drought and crop losses.
Farm program payments are an important factor in producers' decisions to
convert grassland to cropland, but rising crop prices and new farming
technologies are also important factors in these conversions. From
September 2006 to January 2007, the price of corn increased by over 66
percent, largely because of the growing demand for ethanol, a corn-based
renewable fuel. This demand is expected to continue to increase, and corn
prices are expected to be relatively high for several years. Genetically
modified crops, such as herbicide-resistant soybeans, as well as new
farming techniques, such as no-till planting, contribute to conversion
decisions as well. These developments have increased the profitability of
crop production in some areas that heretofore were considered marginally
suitable or generally unsuitable for crop production. Our analysis of the
economic effects on a farm, if it were to convert native grassland from
grazing to cropping, showed increased income in 3 of the 5 years covered
from 2003 through 2007. Without farm program payments, income would have
increased only in 1 year. Other studies have confirmed a relationship
between farm program payments and conversions. The studies we reviewed
generally found that farm program payments provide significant incentive
to convert grassland to cropland because they increased the expected
profitability of farming while lowering the associated risks. For example,
a 2006 USDA study found that increases in crop insurance subsidies
motivated producers to expand cropland in the contiguous 48 states by an
estimated 2.5 million acres in the mid-1990s. Moreover, farm program
payments may work at cross purposes with payments made under conservation
programs intended to protect grassland or to convert cropland to grassland
or another conserving use. For example, between 1982 and 1997, 1.69
million acres of cropland in South Dakota were enrolled in the CRP, which
provides incentives to farmers to convert cropland to grassland, at a cost
to the government of about $633 million. However, during the same period,
1.82 million acres of grassland in South Dakota were converted to
cropland.
Sodbuster has had little impact on slowing grassland conversions because,
in part, much of the converted native grassland in recent years has not
been subject to the Sodbuster provision, which applies only to highly
erodible land. For example, according to USDA's National Resources
Inventory, an estimated 59 percent of the rangeland converted to cropland
between 1997 and 2003 in the Northern Plains was classified as non-highly
erodible and therefore was not subject to the Sodbuster provision.
Similarly, in reviewing records for selected high conversion counties in
Nebraska, we found that over half of the land parcels converted from 2003
through 2006 were classified as non-highly erodible. Even when converted
grassland is classified as highly erodible and subject to Sodbuster, the
potential profits from cropping the land usually outweigh the perceived
costs associated with controlling soil erosion. According to USDA
officials, the cost of implementing and maintaining the conservation
practices needed to comply with Sodbuster's soil erosion control standards
generally does little to discourage conversions, especially when the price
of corn and other crops is high. Further, these officials said that new
technology such as herbicide-resistant crops and no-till planting has
reduced the cost of complying with Sodbuster and made farming highly
erodible land economically feasible. For the 2007 farm bill, USDA has
offered a proposal known as Sod Saver that, according to USDA, would
discourage further grassland conversion. In proposing Sod Saver, USDA
recognized that properly managed grasslands provide environmental benefits
such as the protection of wildlife habitat. Under this proposal, certain
grassland--specifically rangeland and native grassland not cropped for the
6 years preceding the effective date of the 2007 farm bill--converted to
cropland would be permanently ineligible for farm program payments. The
Sod Saver proposal is generally supported by wildlife, environmental, and
conservation groups, as well as certain cattle industry interests.
However, several farm, crop, and livestock organizations maintain that the
proposal would reduce the amount of farmable land available for beginning
farmers, and would constrain farmers' ability to adapt to changing market
conditions related to the growing demand for crops to produce food and
renewable fuels.
In light of these findings, we are recommending that USDA (1) track
annually native grassland conversion to cropland to develop a
comprehensive and current source of information in those geographic areas
where such conversions can occur and (2) study the extent to which farm
program payments and conservation programs, such as the CRP, may be
working at cross purposes and report its findings to the Secretary of
Agriculture and the Congress.
We provided a draft of this report to USDA for review and comment. USDA
provided oral comments through the Chief, NRCS, on September 5, 2007,
indicating general agreement with the report's findings and
recommendations. USDA also said it wanted to ensure that GAO was aware
that with few exceptions, the crop insurance program has strict criteria
on where converted land may be insured. Although USDA has these criteria,
our work found that it does not have a method and the information needed
to enforce them. USDA also provided us with suggested technical
corrections, which we incorporated into this report as appropriate.
Background
Before the European settlement of North America, grasslands occupied
approximately 1 billion acres of the contiguous United States--about half
of the land--mostly west of the Mississippi River, as shown in figure 1.
Figure 1: U.S. Grasslands before European Settlement
Over the last 3 centuries, about half of this presettlement, or "native,"
grassland was converted to other uses, and almost all the native grassland
has been converted in some states, such as Iowa and Minnesota. While most
of the existing privately owned grasslands are between the Mississippi
River and the Rocky Mountains, the grasslands west of the Rocky Mountains
are largely under federal management.
The land uses to which native grasslands have been converted include
pastureland, developed land, and cropland. Historically, cropland--land
used for the production of crops such as corn and wheat--has been the most
common use to which native grassland has been converted. Cropland--which
produces food, feed, fiber, and now energy, especially ethanol--can yield
relatively high financial returns to crop producers and landowners, and
these returns generally increase economic activity in rural communities.
In 2006, the value of U.S. crop production was $121 billion (43 percent of
the value of U.S. agricultural production). As the United States shifts to
more renewable fuels, increasing amounts of crops, especially corn, are
being used to produce energy. The use of corn to produce ethanol is
projected to double between 2006 and 2008 and continue to increase rapidly
for several years. Furthermore, crop exports contribute to the U.S.
balance of trade. The United States is the world's leading exporter of
several major crops including corn, cotton, soybeans, and wheat. Finally,
crop production contributes to local economies in rural counties,
affecting demand for farm inputs--seed, fertilizer, pesticides,
herbicides, farm machinery, and labor--as well as grain marketing and
transportation companies.
However, the grassland that cropland displaces also has many economic as
well as environmental benefits. Grassland provides forage for grazing
livestock; provides recreational opportunities, such as for hunting and
fishing; reduces soil erosion; improves water quality; and aids carbon
sequestration, which reduces the amount of carbon dioxide, a greenhouse
gas, in the atmosphere. Although these benefits generally result from both
pastureland and native grassland, those concerned about the continued loss
of grassland have placed a very high priority on preserving the remaining
native grassland for the following reasons:
o Conservation of native grassland contributes to the maintenance
of biological diversity. More specifically, native grassland
provides habitat for wildlife and native species, including native
grassland bird species, some of which are declining. The
conversion of native grassland to other uses, including introduced
grasses, can change the structure and function of habitat such
that it no longer supports native wildlife species. For example,
the loss of native grassland in the Texas coastal prairie
eliminated habitat that supported the Attwater's prairie chicken,
a federally endangered species native to this area. In addition,
research in North Dakota by U. S. Geological Survey wildlife
biologists found significantly higher counts of certain grassland
bird species in native grassland than in other grassland.
Furthermore, the fragmentation of remaining native grasslands may
reduce their habitat value and result in them not being large
enough to support their natural biodiversity.
o Once converted, restoring native grassland is difficult and
expensive, and it is questionable whether native habitat can ever
be fully restored. In general, land that is converted back to
native grassland does not regain the ecological function of
undisturbed native grassland. Furthermore, FWS estimates that the
cost of restoring native grassland in eastern South Dakota is
about $200 per acre, a substantial amount relative to the 2006
market value of native grassland in that area, which ranged from
an average of $751 per acre in northeast South Dakota to $1,055
per acre in east central South Dakota.
Federal farm programs provide payments that can increase the
profitability of crop production and may create incentives for
conversions. Among these programs are the federal crop insurance
program, crop disaster assistance programs, and the marketing
assistance loan program.3
The federal crop insurance program protects crop producers from
production risks associated with adverse weather as well as price
risks associated with commodity market fluctuations.4 USDA's Risk
Management Agency (RMA) administers the program in partnership
with private insurance companies, which share a percentage of the
risk of loss and the opportunity for gain associated with each
insurance policy written. RMA pays companies a percentage of the
premium on policies sold to cover the administrative costs of
selling and servicing these policies. In turn, insurance companies
use this money to pay commissions to their agents, who sell the
policies, and fees to adjusters when claims are filed. RMA absorbs
a large percentage of the crop insurance program's losses--the
difference between premiums collected and indemnity payments5--and
subsidizes a portion of the premium paid by participating
producers.
3The marketing assistance loan program provides benefits to producers of
major crops when market prices are low. We did not analyze the cost of
marketing assistance loan payments. According to spending forecasts,
marketing assistance loan payments are predicted to be zero for corn,
soybeans, and wheat through 2011 because prices of these crops are
expected to be above the levels that trigger payments.
4Producers who grow a crop that is currently ineligible for crop insurance
may be eligible for a direct payment under USDA's Farm Service Agency's
Noninsured Assistance Program.
5Producers receive indemnity payments if they realize a qualifying crop
loss under the crop insurance program.
Crop disaster assistance programs--ad hoc programs enacted by the
Congress and administered by USDA's Farm Service Agency
(FSA)--provide payments to producers to compensate for losses
sustained when planting is prevented or crop yields are abnormally
low because of adverse weather and related conditions. From 1998
through 2004, ad hoc disaster assistance legislation was enacted
and crop disaster assistance payments were made for each crop
year. These payments were made to both producers with crop
insurance and those without insurance. A May 2007 supplemental
spending bill,6 which authorized crop disaster assistance payments
for crop year 2005, 2006, and 2007 losses, prohibited payments to
a producer who either waived crop insurance or did not participate
in the Noninsured Assistance Program in the year of the loss.
The conservation compliance provisions of the Food Security Act of
1985,7 as amended, condition the receipt of farm program payments
on the producer's efforts to control excessive soil erosion on
highly erodible land and protect wetlands. One of these
provisions, known as Sodbuster, requires producers to apply a soil
conservation system that meets the required level of protection
that allows for no substantial increase in soil erosion on land
converted from native vegetation if the land was not cropped
before December 23, 1985, and is or was determined by USDA to be
highly erodible land.8 A producer applying for certain farm
program payments certifies with FSA that he or she will comply
with conservation provisions. If the land in question was not
cropped before December 23, 1985, and USDA's Natural Resources
Conservation Service (NRCS) has not previously determined whether
or not the land is highly erodible land, FSA refers the producer's
application to NRCS to conduct the determination. If NRCS
determines, or has previously determined, that the land is highly
erodible, Sodbuster applies and the producer must maintain a
conservation system that will not permit a substantial increase in
soil erosion. Under NRCS's procedures, this producer must use a
conservation system that controls erosion to a greater extent than
is required for highly erodible land that was cropped before
December 23, 1985.9 Figure 2 illustrates when a landowner must
apply a conservation system, as required by Sodbuster, to control
erosion on newly converted cropland.
6Pub. L. No. 110-28, tit. IX, S 9001, 121 Stat. 112 (2007).
7Pub. L. No. 99-198, 99 Stat. 1354 (1985) (codified as amended in
scattered sections of titles 7 and 16 of U.S.C.).
8The cropland must have been converted for use in producing annually
tilled agricultural commodity crops in order to come under the protections
provided by Sodbuster.
Figure 2: Process to Determine Sodbuster's Applicability
9A conservation system is a combination of one or more conservation
practices that are approved by NRCS. These practices include structural
measures, such as terraces, or management techniques, such as conservation
tillage, used to enhance, protect, or manage natural resources, including
soil.
Available Data Show Conversion of Native Grassland to Cropland Continues, and
These Conversions Add to Farm Program Costs
Over the last 25 years, some areas, particularly in the Northern Plains,
experienced conversions of native grassland to cropland, and these
conversions have added to farm program costs. While there is no
comprehensive and current source of information on the extent of native
grassland conversions to cropland or the amount of farm program payments
made in relation to this newly converted cropland, available sources
provide some information on conversions and related costs. Nationwide,
total private grassland declined by almost 25 million acres from 1982
through 2003. In addition, conversions of native grassland to cropland
continue in the Northern Plains, particularly in areas of North Dakota and
South Dakota. Analysis of county-level data indicates that South Dakota
counties with relatively high rates of conversions had high crop insurance
and crop disaster assistance program costs.
Available Sources of Information Indicate That Grasslands Decreased, and Native
Grassland Conversions to Cropland Were Highest in the Northern Plains
Available information on the extent and location of grassland conversions
to cropland is not comprehensive and current. For example, data on
conversions of grassland to cropland are not available at the state or
county level for the most recent years (except in three states--Montana,
North Dakota, and South Dakota--where data are being collected on an
informal basis to provide information to FWS and Ducks Unlimited on
wildlife habitat loss). In addition, the most recent national and regional
data are current only through 2003. As a result of these limitations,
policymakers do not have current information on the extent of conversions
at relevant landscape levels for all areas across the country where
conversions may have occurred in recent years. For example, except for the
above three states, information is not available on conversions within
local areas where further loss of native grassland may affect wildlife
populations. Such information--particularly for native grasslands, which
are difficult to restore--is important in assessing the need for and the
results of policy changes. Moreover, among the available sources of
grasslands data, differences in grassland definitions complicate
characterization of conversions to cropland and trends in the amount of
grasslands. Despite these limitations, available sources provide some
information on conversions. Specifically:
NRCS's National Resources Inventory (NRI). The NRI is a periodic
statistical survey of land use and natural resource conditions and trends
on nonfederal lands.10 According to the NRI, from 1982 to 2003 in the 48
contiguous states, rangeland and pastureland declined by about 10.4
million acres (about 2.5 percent) and 14.1 million acres (about 10.8
percent), respectively, making the total decline in grassland about 24.5
million acres. Most of the decline in rangeland occurred between 1982 and
1992. These net changes do not indicate the number of acres converted from
rangeland and pastureland to cropland. For example, some of the decline in
rangeland was due to conversions to non-cropland uses, such as developed
land. Appendix II has additional NRI data on net changes in grassland and
other land-use categories.
10All NRI numbers in this report are statistical estimates.
The NRI also provides information on conversions of rangeland and
pastureland to cropland. As shown in table 1, for selected USDA crop
production regions, the highest conversions of rangeland to cropland were
in the Northern Plains, where 2.61 million acres (about 3.5 percent) and
590,000 acres (about 0.8 percent) were converted during 1982 through 1997
and 1997 through 2003, respectively. The annual rangeland conversion rates
declined from the 1982 through 1997 time frame to the 1997 through 2003
time frame for each of the three regions that had rangeland. Regarding
conversions of pastureland to cropland, the highest amounts were in the
Corn Belt, where 4.48 million acres (about 17.6 percent) and 1.66 million
acres (about 8 percent) were converted during 1982 through 1997 and 1997
through 2003, respectively.
Table 1: Conversions of Rangeland and Pastureland to Cropland in Selected
Crop Production Regions, 1982-1997 and 1997-2003
acres in millions with margins of error
Rangeland to Rangeland to Pastureland to Pastureland to
cropland, cropland, cropland, cropland,
Region 1982-1997 1997-2003 1982-1997 1997-2003
Northern 2.61(2.19-3.03) 0.59(0.47-0.71) 1.80 0.77(0.62-0.92)
Plainsa (1.57-2.03)
Southern 1.17(0.98-1.36) 0.29(0.15-0.43) 0.94 0.42(0.28-0.56)
Plainsb (0.70-1.18)
Mountain 2.04(1.63-2.45) 0.58(0.27-0.89) 0.99 0.80(0.55-1.05)
Statesc (0.76-1.22)
Lake d d 1.98 0.96(0.80-1.12)
Statesd (1.80-2.16)
Corn Belte e e 4.48 1.66(1.46-1.86)
(4.21-4.75)
Source: NRCS's NRI data.
Note: These regions have large amounts of cropland and have or previously
had large amounts of native grassland as well.
aThe Northern Plains states are Kansas, Nebraska, North Dakota, and South
Dakota.
bThe Southern Plains states are Oklahoma and Texas.
cThe Mountain States are Arizona, Colorado, Idaho, Montana, Nevada, New
Mexico, Utah, and Wyoming.
dThe Lake States are Michigan, Minnesota, and Wisconsin. None of these
states had measurable rangeland in 1982 or 1997.
eThe Corn Belt States are Illinois, Indiana, Iowa, Missouri, and Ohio.
Among these states, only Missouri had measurable rangeland in 1982 or
1997. Specifically, Missouri had about 143,000 and 88,000 acres of
rangeland in 1982 and 1997, respectively.
National Agricultural Statistics Service's (NASS) Census of Agriculture.
The Census of Agriculture, conducted every 5 years by NASS, is a census of
U.S. farms and ranches and is another source of national data on changes
in the amount of private grasslands on farms. The Census of Agriculture
does not use the NRI definitions of rangeland and pastureland, and unlike
the NRI, the Census of Agriculture combines rangeland and pastureland
grasslands into a single category. Also, unlike the NRI, the Census of
Agriculture provides data only on net changes and does not provide
information on conversions of grassland to cropland. According to the
Census of Agriculture, rangeland and pastureland declined by 21.9 million
acres (about 5.1 percent) between 1978 and 1992 and 2.9 million acres
(about 0.7 percent) between 1997 and 2002. Appendix III provides
additional information from the Census of Agriculture on changes in land
use for the United States and selected states.
FSA data for Montana, North Dakota, and South Dakota. In recent years, to
provide information to FWS and Ducks Unlimited on the amount and location
of native grassland converted to cropland, FSA state and county offices in
Montana, North Dakota, and South Dakota voluntarily collected county-level
data on conversions of grassland that had no prior cropping history.11 The
FSA offices collected this information through existing annual acreage
reports. These data showed that within North Dakota and South Dakota,
conversions have been highest in counties in the western part of the
Prairie Pothole Region, an area of many small, isolated wetlands where the
remaining native grassland provides important wildlife habitat. Table 2
shows the available data on acres converted in 2005 and 2006.
Table 2: Conversions of Grassland That Had No Prior Cropping History to
Cropland in Montana, North Dakota, and South Dakota, 2005 and 2006
in acres
State 2005 2006
Montana 10,373 6,245
North Dakota a 20,592
South Dakota 54,404 47,167
Source: GAO's analysis of FSA's data.
aAccording to FSA officials in North Dakota, consistent data are not
available for 2005 because county offices did not use consistent data
collection methods in that year.
Ducks Unlimited Study.12 A recent Ducks Unlimited study provided
additional information regarding the extent of native grassland
conversions to cropland in the western part of the Prairie Pothole Region
in North Dakota and South Dakota. The researchers analyzed conversions
from 1984 through 2003, examining satellite imagery from this period and
performing field checks to identify native grassland. The study found that
from 1984 through 2003, an estimated 144,000 acres were converted from
native grassland to cropland. The highest conversions were in central
South Dakota. The study concluded that the annual conversion rates--which
ranged from 0.32 percent to 0.95 percent across the study areas--were
relatively low but that the acreage converted was significant from a
biological and economic perspective.
11FSA state officials in these states instructed county offices on the
procedures to use in collecting data on conversions of grassland that had
no cropping history to cropland, and they believe county offices used
consistent procedures. However, they have not confirmed that the county
offices used these procedures. As a result, some counties may have
overreported or underreported the number of acres converted. In addition,
it is possible that some of the converted land identified as previously
uncropped grassland had been converted to cropland before FSA began
keeping crop history records, was later returned to grassland, and then
was again converted to cropland.
12Scott Stephens, Johanna Walker, Darin Blunck, Aneetha Jayaraman, and
Dave Naugle, Grassland Conversion in the Missouri Coteau of North and
South Dakota 1984-2003, Ducks Unlimited (forthcoming). Information from
this report was presented as "Grassland Conversion and Risk Models for the
Missouri Coteau: Tools for Staying Ahead of the Plow," at the annual
conference of the South Dakota Wildlife Society, Oacoma, South Dakota,
March, 2007.
Although states other than Montana, North Dakota, and South Dakota may
have experienced conversions in recent years, we did not find any other
systematic efforts to collect state or local conversions data. However, we
were able to obtain some quantitative information that provides some
indication of recent conversions in Nebraska. While data on the number of
acres converted were not available, NRCS state and county officials in
Nebraska provided data for 26 of the state's 93 counties on the number of
land tracts on which producers had informed USDA of their intention to
convert grassland to cropland.13 The data show that USDA was informed of
nearly 5,200 planned conversions during 2003 through 2006, with the
highest county having 678 planned conversions. According to FSA, NRCS, and
state wildlife agency officials in Nebraska, many producers were motivated
to convert by an interest in gaining irrigation water rights before
moratoriums on these rights took effect in certain areas of the state.
Some of these officials believe this motivation--and thus the number of
conversions--may decline if existing moratoriums on water rights are not
modified and new moratoriums are not announced.
Crop Insurance and Crop Disaster Assistance Costs Were Significantly Higher in
Counties That Had Higher Conversion Rates
Converting grassland to cropland, and thus bringing more land into
production, has the potential to increase government costs because this
new cropland is eligible for crop insurance, crop disaster assistance, and
marketing assistance loan payments, and could become eligible for direct
and countercyclical payments if an update of crop base acres is allowed in
the future. However, only limited data are available on government costs
associated with grassland converted to cropland because USDA has little
information on the location of converted land tracts and generally does
not track farm program payments to specific tracts. As such, we analyzed
county crop insurance and disaster assistance payments data in relation to
2005 and 2006 data on conversions of grassland to cropland for South
Dakota counties.14 The South Dakota counties that had the most conversions
of grassland with no cropping history to cropland also had significantly
higher crop insurance and crop disaster assistance costs than other
counties. Specifically, we found:
Crop insurance. Our analysis of RMA's crop insurance data indicates that
conversions of grassland with no cropping history added disproportionately
to government costs for crop insurance in South Dakota. Table 3 shows the
net crop insurance payments received by producers in the 16 South Dakota
counties with the highest rates of conversions in 2005 and 2006 in
comparison with the net payments received by producers in the state's
other counties. The 16 highest conversion counties had net crop insurance
payments that averaged $13.03 per acre from 1997 to 2006, almost twice as
much as the $6.66 per acre net payment received in South Dakota's
remaining 50 counties. Also illustrated in the table is the contrast
between the net payments in the 16 highest conversion counties and 7
historically cropped counties in southeast South Dakota that had a
negative net crop insurance benefit during this period--that is, crop
producers in these counties collectively paid more into the crop insurance
program as premiums and other fees than they received from the program as
indemnity payments.15
13These counties are in a contiguous area that runs from southwest to
northeast across Nebraska. NRCS officials believed conversion rates were
relatively high in the counties of this area. According to FSA and NRCS
officials in Nebraska, producers almost always carry out these planned
conversions.
14We selected South Dakota counties because conversion data were available
by county for 2005 and 2006 and conversions have received considerable
attention in the state. In conducting this analysis, we assumed that the
counties with the highest number of converted acres in 2005 and 2006 were
also the counties with the highest conversion rates in previous years.
15In addition, we separated the 66 South Dakota counties into three groups
based on the number of acres converted and found that the 22 counties with
the highest number of converted acres had net crop insurance benefits of
about $600 million from 1997 to 2006, while the 22 counties with the
lowest number of conversions had net benefits of about $100 million for
the same time period.
Table 3: Comparison of Net Crop Insurance Payments in South Dakota for the
16 Highest Conversion Counties versus Other Counties
Crop years 1989 to
Crop years 1997 to 2006 2006
Area Crop Per
Total Per acre Total acre
16 counties with Corn $255,520,183 $22.78 $280,392,006 $18.62
the highest
conversions
All 485,522,546 13.03 550,751,456 10.30
cropsa
50 other counties Corn 231,662,594 8.27 290,214,231 7.11
All 532,176,375 6.66 672,826,085 5.67
cropsa
7 selected Corn (3,562,466) (0.45) 5,135,553 0.42
historically
cropped countiesb
All (3,059,947) (0.19) 11,805,739 0.49
cropsa
State totals Corn $487,182,777 $12.42 $570,606,237 $10.21
All $1,017,698,921 $8.68 $1,223,577,541 $7.11
cropsa
Source: GAO's analysis of RMA's data.
Note: Net crop insurance payments are the indemnity payments that
producers received less the premiums and administrative fees that
producers pay. We did not include government costs resulting from (1)
payments to insurance companies for underwriting gains and administrative
and overhead expenses and (2) the cost of RMA operating expenses in this
analysis because county-level data on these costs were not available.
aIncludes all crops except forage production and forage seeding.
bThese counties have not had large increases in crop production in recent
years and are located in two adjacent NRCS major land resource areas.
Crop disaster assistance payments. Similar to our crop insurance analysis,
our analysis of FSA crop disaster assistance payments data indicates that
conversions of grassland with no cropping history add disproportionately
to government costs for disaster assistance payments in South Dakota.16
Table 4 shows the crop disaster assistance payments received by producers
in the 16 South Dakota counties with the highest conversion rates in
comparison with the payments received by producers in other South Dakota
counties. From 1998 to 2004, crop disaster assistance payments in the 16
highest conversion counties totaled more than $195 million (40 percent of
the state total), compared with approximately $292 million for the other
50 South Dakota counties, including about $16 million in 7 historically
cropped counties in southeast South Dakota.
16Crop disaster assistance payments are approved by the Congress on an ad
hoc basis, and therefore these payments do not necessarily add to
government costs every year. However, ad hoc crop disaster assistance
payments have been available for nearly every crop year since 1988.
Table 4: Comparison of Crop Disaster Assistance Payments in South Dakota
for the 16 Highest Conversion Counties versus Other Counties
7 selected
16 counties with the highest historically
Crop conversions (as a percentage All 50 other cropped
years of state totals) counties countiesa State totals
1998 $8,534,884 (38%) $13,710,472 $393,778 $22,245,356
1999 16,063,451 (40%) 24,502,868 4,969,368 40,566,319
2000 23,266,266 (45%) 28,741,631 1,992,956 52,007,897
2001 12,480,417 (34%) 24,474,570 2,782,104 36,954,987
2002 74,432,452 (42%) 104,322,913 2,716,984 178,755,365
2003 43,800,987 (46%) 50,521,907 2,796,699 94,322,894
2004 16,744,315 (27%) 45,360,495 784,346 62,104,810
Total $195,322,772 (40%) $291,634,856 $16,436,235 $486,957,628
Source: GAO's analysis of FSA's data.
Notes: (1) These crop disaster assistance payments include payments for
losses of major cultivated crops, such as corn, soybeans, and wheat, as
well as fruits and vegetables, such as melons, apples, cabbage, and beets.
In addition, some payments were made for grass losses. However, according
to an FSA official, these payments were not for grazing losses. (2) In
analyzing crop disaster assistance payments, we did not calculate payments
per acre because data on the number of acres that potentially were
eligible for these payments were not available.
aThese counties have not had large increases in crop production in recent
years and are located in two adjacent NRCS major land resource areas.
According to USDA officials, a possible reason for the relatively high
crop insurance and disaster assistance payments in South Dakota counties
with the highest conversion rates is that these counties are in areas that
are more prone to drought and crop losses than other major crop-producing
counties. Drought has been the largest cause of crop insurance indemnity
payments nationwide from 1989 to 2004, accounting for about 40 percent of
the primary causes of total indemnity payments.
Our 2005 report on crop insurance explains why areas that are prone to
frequent or severe crop losses may have relatively high crop insurance
costs.17 The crop insurance program has high premium subsidies to
encourage participation. Premium subsidies are calculated as a percentage
of the total premium and can be as high as 67 percent. The subsidies
shield producers from the full cost of growing crops in these areas.
Because premiums are higher in areas that are prone to frequent or severe
crop losses than in the major crop-producing counties, premium subsidies
have the effect of causing crop insurance costs to be higher in these
areas.
17GAO, Crop Insurance: Actions Needed to Reduce Program's Vulnerability to
Fraud, Waste, and Abuse, [31]GAO-05-528 (Washington, D.C.: Sept. 30,
2005).
Farm Program Payments, Rising Crop Prices, and the Adoption of New Farming
Technologies Provide Incentives to Expand Crop Production on Native Grasslands
Federal farm program payments are an important factor in producers'
decisions to convert native grassland to cropland, but rising crop prices
and advances in crop production technology are also important factors in
these conversions. Specifically, increased crop prices, due largely to
rising ethanol demand, are important in producers' decisions. In addition,
the adoption of genetically modified crops as well as new farming
techniques have made cropping more profitable on land previously
considered to be marginally suitable or generally unsuitable for crop
production. Regarding farm program payments, our analysis of crop
production costs and returns and our review of economic studies indicate
that these payments are an important factor in producers' conversion
decisions. Moreover, the incentives farm programs provide to convert
grassland to cropland appear to be inconsistent with USDA conservation
programs that encourage producers to either maintain grassland or convert
cropland to grassland or another conserving use.
Rising Crop Prices and Advanced Crop Production Technologies Are Important
Factors in Decisions to Convert Native Grassland to Cropland
Increasing demand for crops used to produce ethanol and other renewable
fuels has caused crop prices to increase, increasing the profitability of
crop production and providing incentives for conversions. For example, the
price of a March 2007 corn futures contract on the Chicago Board of Trade
rose from $2.50 per bushel in September 2006 to $4.16 per bushel in
January 2007, an increase of more than 66 percent. A May 2007 USDA study
stated that the increased demand for renewable fuels would result in
continued expansion of crop acreage and bring new land into crop
production, particularly in the Corn Belt and the Northern Plains.18
Furthermore, a June 2007 NASS report announced that corn growers had
planted 92.9 million acres of corn in 2007, 14.6 million acres more than
were planted in 2006 and the highest total since 1944.19 NASS stated that
this increased corn acreage was partially offset by reduced soybean
acreage in the plains and the Corn Belt. USDA and agricultural experts
expect this demand to continue to increase, and corn and other crop prices
are expected to be relatively high for several years. NRCS and FSA
officials in states and counties with the highest conversions of grassland
to cropland confirmed that crop prices strongly influence producers'
conversion decisions.
18USDA Economic Research Service and Office of the Chief Economist, An
Analysis of the Effects of an Expansion in Biofuel Demand on U.S.
Agriculture, (Washington, D.C., May 2007).
19USDA National Agricultural Statistics Service, Acreage, June 29, 2007.
In addition, the availability of advanced crop production technologies,
including genetically modified crops, such as herbicide-resistant
soybeans, and new farming techniques, such as no-till planting, contribute
to producers' decisions to convert native grassland to cropland. For
example, herbicide-resistant soybeans became available to farmers for the
first time in 1996, and, according to USDA, usage nationwide expanded to
over 40 percent of soybean acreage in 1998 and then to 87 percent by 2005
(95 percent in South Dakota). The use of these soybean varieties makes
weed control easier and has, in turn, made no-till planting--a
conservation practice that reduces soil erosion and conserves moisture
while also cutting fuel and labor costs--more feasible. These developments
have reduced the cost of production and made it more profitable to produce
high-value crops, especially corn and soybeans, in some areas that
historically were considered marginally suitable or generally unsuitable
for crop production. FSA and NRCS officials confirmed that advanced crop
production technologies strongly influence producers' conversion
decisions.
Farm Program Payments Provide Incentives to Convert Native Grassland to Cropland
by Increasing Producers' Income and Reducing Their Financial Risks
Farm program payments, including crop insurance, crop disaster assistance,
and marketing assistance loan payments, are important factors in
producers' decisions to convert native grassland to cropland because they
reduce producers' financial risks and, in many cases, increase producers'
profits over maintaining grassland. To evaluate the impact of farm program
payments and other factors in producers' conversion decisions, we prepared
a partial budget analysis for a hypothetical 160-acre tract in a South
Dakota county--located in the Prairie Pothole Region--that was among the
state's highest counties in conversions of grassland that had no cropping
history in 2005 and 2006. A partial budget analysis evaluates the economic
effects of making an adjustment to part of the farm operation, such as
changing what is produced or buying new machinery. Specifically, we
compared the estimated costs and returns for 2003 through 2007 from 160
acres of native grassland--used for grazing as part of a cow-calf
operation--to the costs and returns if the same land had been converted to
cropland in 2003 and used to produce corn, soybeans, and spring wheat
through 2007. This period exhibited a variety of yield and price scenarios
as well as farm program payments and thus may illustrate how the
significance of farm program payments can change from year to year.
We found that for certain years, high crop prices as well as farm program
payments would provide economic incentives for a producer to convert
native grassland used for grazing in a cow-calf operation to a cropping
operation. In 3 of the 5 years, the conversion from grazing to cropping
would have resulted in increased income. In the other 2 years, the
conversion would have resulted in reduced income largely because cattle
prices were high relative to crop prices and farm program payments were
lower than in the other years. Without any farm program payments, income
would have increased only in 2007, but in view of projections that crop
prices will remain relatively high, this increase in income without farm
program payments may continue for several years.20 However, even with high
crop prices, farm program payments from crop insurance and crop disaster
assistance likely will continue to be a relevant factor in conversion
decisions because of the need for protection against adverse crop
production risks, such as drought. Table 5 shows the net change in income
from shifting to crop production from a cow-calf operation on a 160-acre
parcel of land, with and without farm program payments (crop insurance,
crop disaster assistance, and marketing assistance loan payments).21 The
table also shows corn prices and yields as well as calf and cow prices
during this period.
20To estimate crop prices for the 2007 crop enterprise, we used regional
average crop prices for January to July 2007.
21Since this land had not been in crop production previously, under
current legislation it would not be eligible for counter-cyclical payments
or direct payments.
Table 5: Estimated Net Change in Income for a Shift to Crop Production
from a Cow-Calf Grazing Operation on a 160-Acre Tract in Central South
Dakota, 2003-2007
Factors 2003 2004 2005 2006 2007
Net change in
incomea
With farm
program
payments (crop
insurance, crop
disaster
assistance, and
marketing
assistance loan
payments) $3,761.20 ($3,602.75) ($4,834.66) $2,366.35 $2,099.47
Without farm
program
payments (crop
insurance, crop
disaster
assistance, and
marketing
assistance loan
payments) ($8,499.29) ($6,631.58) ($7,634.62) ($6,729.35) $2,099.47
Selected prices
and yields
Corn price ($
per bushel)b $2.36 $1.64 $1.76 $3.37 $3.52
Corn yield
(bushels per
acre)c 37.1 84.4 81.2 41.5 69.0
Calf price ($
per 100
pounds)d $111.38 $121.59 $136.85 $113.16 $124.48
Cow price ($
per head)e $616.50 $750.83 $839.27 $797.55 $769.00
Source: GAO's analysis using data from South Dakota State University,
NRCS, NASS, RMA, FSA, and Drovers' Inc.
Notes: (1) We assumed a decision was made to convert to crop production in
2003 and carried forward through 2007. (2) The net change in income is the
result of comparing the alternate income streams from cropping (corn,
soybeans, and spring wheat) versus grazing (cow-calf operation). (3) Both
herd liquidation and conversion costs were amortized over a 5-year period
from 2003 to 2007 at a 6 percent rate of interest.
aWhile the 2003 to 2006 results are retrospective, the 2007 crop had not
been harvested as of July 2007. On the basis of July 2007 crop prices and
USDA estimates, we assumed no marketing assistance loan payments would be
made for 2007. We did not include any crop insurance or disaster
assistance payments for 2007, although such payments may be made in the
future.
bCorn prices for 2003 through 2006 are yearly averages of weekly cash
prices in central South Dakota from the South Dakota State University
extension grain marketing service. Corn prices for 2007 are average weekly
cash prices for the Central South Dakota region from January to July 2007,
from South Dakota State University extension service.
cCorn yields for 2007 are a moving average of NASS county yields, adjusted
for soil productivity.
dFor 2003 through 2006, calf prices are November South Dakota stocker
cattle prices, monthly average, obtained from South Dakota State
University's "Cattle Market Review," June 22, 2007, for 500 to 600 pound
steers. For 2007, calf prices are average monthly prices for the first 6
months of 2007, January through June.
eCow prices are bred female prices for "young and middle aged" bred cows
from the central region of the United States which includes South Dakota,
obtained from Drovers. For 2007, bred female prices are average monthly
prices for the first 5 months of 2007, January through May.
We did not attempt to evaluate the social, environmental, and wildlife
habitat costs and benefits of this conversion. Furthermore, although crop
prices are projected to continue to rise over the next several years, the
likelihood of prices remaining at such high levels, especially in
conjunction with high levels of production, may not materialize. In the
absence of data on future weather patterns, yields, and commodity prices,
we did not project future rates of return. Moreover, we did not project
future rates of conversion because we cannot speculate on many of the
factors that enter into producers' land use decisions, such as their
aversion to risk in the presence of significant potential crop yield
variability, although the stabilizing effect of crop insurance would tend
to lessen risk concerns, especially compared to livestock grazing.
Nevertheless, this analysis demonstrates that there have been economic
incentives for producers, at least in the short run, to shift into crop
production on native grassland. It also illustrates the importance of farm
program payments in years of lower crop prices or yields. Appendix IV
provides more information on our partial budget analysis.
In addition to our partial budget analysis, several economic studies we
reviewed found that farm program payments influence producers' conversion
decisions because they increase the expected profitability of cropping
land while lowering the risks. For example, a study by USDA's Economic
Research Service (ERS) found that increased crop insurance subsidies in
the mid-1990s encouraged producers to expand crop production in the
contiguous 48 states by an estimated 2.5 million acres, with most of the
land coming from pastureland and other grassland. Another recent paper, by
Iowa State University agricultural economists, concluded that the
reduction in risk by crop insurance and commodity programs creates
incentives for farmers and landlords to focus on growing the commodities
supported by these programs. In addition, some of the economic studies we
reviewed raised the possibility that land value appreciation due to farm
program payments may be another economic incentive for farmers to convert
native grassland to cropland. Since the value of agricultural land
depends, in part, upon expected future earnings from farming, purchasers
of land will pay a higher price for land that is expected to provide a
future stream of farm program payments. For example, ERS reported that the
effect of farm program payments on land values varies widely throughout
the United States but that increases are highest in the Northern Plains.
For more detailed summaries of these and other studies that we examined,
see appendix V.
Most of the FSA and NRCS state and local officials in Montana, Nebraska,
North Dakota, and South Dakota confirmed that farm program payments,
specifically crop insurance, crop disaster assistance, and marketing
assistance loan payments are important--although not always the most
important--factors in producers' conversion decisions. In particular,
among the farm programs, the officials noted the importance of crop
insurance because it reduces the risk of growing crops. Nearly all of
these officials believed that farm program payments play a greater role in
producer decisions when crop prices are lower. For example, several
officials noted that a reduction in program payments would have had a more
pronounced effect in reducing crop conversions 2 years ago, before the
prospect of increased demand for ethanol contributed to higher corn
prices.
Incentives to Convert Grassland May Work at Cross Purposes with USDA
Conservation Programs
The incentives provided by farm program payments appear to be inconsistent
with USDA conservation programs, such as the Wetlands Reserve Program,22
the Grassland Reserve Program,23 and CRP. These conservation programs,
among other things, pay producers and landowners to either maintain
grassland or convert cropland to grassland or another conserving use.
However, these programs appear to be at odds with farm programs that
provide incentives for conversions of grassland to cropland. For example,
NRI data on South Dakota CRP enrollments--which represent conversions of
cropland to grassland--and conversions of grassland to cropland illustrate
this apparent inconsistency. From 1982 through 1997, 1.69 million acres of
cropland in South Dakota were enrolled in CRP--with almost all of this
acreage planted in grasses--at a total government cost of about $633
million. However, during the same period, 1.82 million acres of grassland
in South Dakota were converted to cropland. About half of this acreage had
been rangeland, generally supporting native grasses and vegetation, and
the other half pastureland. Other states had similar patterns during this
period. For example, North Dakota had CRP enrollments of 2.8 million
acres, CRP costs of about $973 million, and grassland conversions to
cropland of 1.16 million acres. Montana had CRP enrollments of 2.7 million
acres, CRP costs of about $957 million, and conversions to cropland of
1.35 million acres.
22The Wetlands Reserve Program was authorized by the Food, Agriculture,
Conservation, and Trade Act of 1990 (1990 Farm Bill), Pub. L. No. 101-624,
104 Stat. 3359, to assist landowners in restoring and protecting wetlands.
Producers enrolling in the program must agree to implement approved
wetland restoration and protection plans. In return, participating
producers receive payments based on the fair market value of the land
covered by the easement. The 2002 Farm Bill reauthorized the program with
mandatory funding through fiscal year 2007 and set a maximum enrollment
ceiling of 2.275 million acres.
23The Grassland Reserve Program was authorized in the 2002 Farm Bill,
which authorized enrollment of up to 2 million acres of restored or
improved grassland, rangeland, and pastureland under temporary and
permanent easements or rental agreements of at least 10 years. A total of
$254 million in mandatory funding between fiscal years 2003 and 2007 was
provided. The 2002 Farm Bill also provided cost sharing payments at 75
percent to restore disturbed grasslands and 90 percent to protect virgin
grasslands.
Sodbuster Has Had Little Impact on Native Grassland Conversions
Sodbuster has had little impact in limiting the conversion of native
grassland to cropland, in part because much of the native grassland
converted in recent years is not highly erodible and therefore not subject
to Sodbuster. According to USDA officials, even in most cases where
Sodbuster applies, the costs associated with Sodbuster compliance have not
been enough to deter producers from converting the land. USDA and some
stakeholder organizations have suggested a proposal known as Sod Saver
that would discourage native grassland conversions by making converted
land ineligible for farm program payments.
Much of the Native Grassland Converted in Recent Years Was Not Subject to
Sodbuster
Much of the native grassland converted to cropland in recent years is
classified as non-highly erodible land and thus is not subject to
Sodbuster. NRI data on the percentage of rangeland converted to cropland
and classified as highly erodible provide an approximation of the
percentage of conversions that are subject to Sodbuster. According to NRI
data, between 1997 and 2003, an estimated 59 percent of the rangeland
converted to cropland in the Northern Plains production
region--encompassing Kansas, Nebraska, North Dakota, and South Dakota--was
classified as non-highly erodible. In the Southern Plains and the Mountain
regions, which also have large amounts of rangeland, NRI data for this
period indicate an estimated 43 percent and 47 percent, respectively, of
the rangeland acres that producers converted were classified as non-highly
erodible. In addition, according to our analysis of NRCS records for
selected Nebraska counties that have had relatively high conversion rates,
slightly over half of the land parcels converted in those counties between
2003 and 2006 were classified as non-highly erodible. Because non-highly
erodible land is not subject to Sodbuster, producers who convert such land
do not have to bear the cost of applying conservation systems in order to
maintain farm program benefits.
Even When Planned Conversions Are Subject to Sodbuster, Producers Are Not
Usually Deterred
According to FSA and NRCS officials, even when native grassland that is to
be converted is classified as highly erodible, producers generally
perceive that the potential profits from cropping the land outweigh the
potential costs of controlling soil erosion as required by Sodbuster. As
such, officials in Montana, Nebraska, North Dakota, and South Dakota
counties that have had relatively high conversion rates said that the
costs associated with meeting Sodbuster's soil erosion standards usually
do not discourage native grassland conversion, especially when crop prices
are high and crop production is profitable. Specifically, these officials
said Sodbuster rarely or never deterred conversions. According to these
officials, the cost of complying with Sodbuster has been reduced by new
crop production technologies. For example, almost all of the officials
cited no-till planting as a low-cost management practice that controls
soil erosion sufficiently to meet Sodbuster requirements and added that
the development of herbicide-resistant crops has facilitated producers'
adoption of no-till planting by making it easier to control weeds without
using tillage.
The views expressed by the officials we spoke with are generally
consistent with the responses of local NRCS officials to our 2002 survey,
in which we asked them to rate the effectiveness of Sodbuster in limiting
the conversion of native grassland.24 The survey results for four states
with relatively high rates of conversions--Montana, Nebraska, North
Dakota, and South Dakota--are shown in table 6. As indicated in the table,
the majority of officials in three of these states--Montana, Nebraska, and
South Dakota--responded that Sodbuster was slightly or not effective in
limiting native grassland conversion. Nearly 44 percent of officials in
North Dakota provided a similar response.
Table 6: Local NRCS Officials' Responses to GAO Survey Question on the
Effectiveness of Sodbuster in Limiting the Conversion of Native Grassland
to Cropland
percent
Extremely Very Moderately Somewhat Slightly or not
State effective effective effective effective effective
Montana 0 11.9 7.1 28.6 52.4
Nebraska 0 4.1 11.0 15.1 69.9
North
Dakota 0 16.7 18.8 20.8 43.8
South
Dakota 1.9 7.7 13.5 17.3 59.6
Source: GAO survey results.
24This survey was done in conjunction with our work on Agricultural
Conservation: USDA Needs to Better Ensure Protection of Highly Erodible
Cropland and Wetlands, [32]GAO-03-418 (Washington, D.C.: Apr. 21, 2003).
See also the special publication, Agricultural Conservation: Survey
Results on USDA's Implementation of Food Security Act Compliance
Provisions ( [33]GAO-03-492SP , Apr. 21, 2003), which includes survey
results stratified by state.
USDA and Some Stakeholder Organizations Have Offered a Proposal to Discourage
Grassland Conversions
To discourage future conversions, USDA and some stakeholder organizations
have suggested a proposal known as Sod Saver that would make certain
grassland--primarily native grassland--ineligible for farm program
payments if it is converted to cropland. USDA's proposed legislative
language--issued in April 2007--applies to rangeland and native grassland
not used for crop production at any time during the previous 6 years
preceding the effective date of the 2007 farm bill. If such land is
converted to crop production, it would be permanently ineligible for a
wide range of farm program payments, including direct and countercyclical,
marketing assistance loan, conservation, disaster assistance, and crop
insurance payments. According to USDA's proposal, Sod Saver is needed
because, among other things, grasslands provide important ecological
functions and the rate of conversion to cropland could increase greatly
over the next several years as increased production of biofuels boosts the
demand for corn and other crops.
Most NRCS state and local officials we spoke with suggested that barring
newly converted cropland from farm program payments, as called for under
Sod Saver, would be a deterrent to new conversions in their counties.
However, FSA state and local officials we interviewed were less certain
than the NRCS officials about Sod Saver's potential impact. While
generally acknowledging that barring farm program payments would affect
some conversion decisions, these officials placed more emphasis on the
impact of crop prices and advanced production technologies. Officials from
both agencies agreed that Sod Saver's impact would be less when crop
prices are high than when they are low.
Certain farm, crop, and livestock organizations have expressed opposition
to USDA's Sod Saver proposal. These organizations include the American
Farm Bureau Federation, National Association of Wheat Growers, National
Corn Association, National Cotton Council, National Pork Producers
Council, United Egg Producers, and USA Rice Federation. For example, a
crop organization official we interviewed said that advances in crop
production technology continue to make more land suitable for cropping and
that it would be inequitable for some crop producers to receive farm
program payments on their cropland while others could not. In a May 15,
2007, letter, organizations opposed to the Sod Saver proposal expressed
their concerns. Among other things, they said
o Sod Saver would constrain farmers' ability to adapt to changing
market conditions related to the growing demand for crops to
produce food and renewable fuels.
o Sod Saver would reduce the amount of farmable land available for
beginning farmers.
o Current information on the extent of conversions is insufficient
to justify the Sod Saver proposal.
o Existing policy--referring to the current conservation
compliance provisions, including Sodbuster--is effectively
controlling soil erosion on highly erodible land.
On the other hand, the Sod Saver approach is supported by a number
of wildlife, environmental, and conservation organizations, as
well as certain cattle industry interests. These organizations
include, Ducks Unlimited, Pheasants Forever, the North Dakota and
South Dakota chapters of the Wildlife Society, and the South
Dakota Cattlemen's Association. In particular, wildlife
organizations have emphasized that Sod Saver would help maintain
native grassland habitat that is important for waterfowl and
grassland birds, especially in Prairie Pothole Region areas of
Montana, North Dakota, and South Dakota. In addition, a cattle
industry official we spoke with expressed concern that farm
program payments encourage conversions and subsidize crop
production, putting cattle producers at a disadvantage relative to
crop producers in the competition for land. In a May 29, 2007,
letter, a coalition of representatives from Montana, North Dakota,
and South Dakota wildlife organizations and agencies responded to
arguments against the Sod Saver proposal. Among other things, they
said
o Sod Saver would not prevent farmers from responding to market
signals because it would allow conversions to cropland.
o Beginning farmers would not have good prospects for success if
they grew crops on marginal lands that have not been cropped
previously, and beginning ranchers would benefit from Sod Saver
because it would result in more grassland being available to them.
o Available FSA and NRCS data and anecdotal information about
conversions are sufficient to justify the Sod Saver proposal.
o Soil erosion is still a significant problem in North Dakota and
South Dakota, and the conservation compliance provisions,
including Sodbuster, do not prevent the conversion of native
grassland to cropland.
Conclusions
In the absence of more comprehensive and current data,
policymakers and stakeholders cannot fully understand the extent
of conversions of native grassland to cropland or how farm program
payments and other factors influence producers' conversion
decisions. More complete information, especially at the county or
local level, would enable stakeholders to identify where
conversions are occurring and the environmental implications. In
addition, having this information would be a first step in
assessing the additional farm program costs that result from
conversions. Such knowledge can help in developing policies
balancing the environmental and economic benefits of grasslands
against the rising demand for food, feed, fiber, and fuel from
renewable sources. In developing the means to collect such
information, USDA could draw on the experiences of FSA state and
county offices in Montana, North Dakota, and South Dakota, which
have incorporated the collection of conversions data into their
annual acreage reporting process. In addition, the dynamic between
USDA farm program payments and conservation programs needs to be
better understood. Available data suggest that USDA's programs
that increase the profitability of cropping and its programs that
encourage conservation of rural land may be working at cross
purposes with one another. Specifically, some conservation
programs, such as CRP, provide incentives for conversions of
cropland to grassland, while farm program payments may have the
unintended consequence of providing incentives for conversions of
grassland to cropland. Such apparent inconsistency undermines
USDA's conservation goals and the most effective use of funds.
While we have identified possible cases where USDA's farm program
payments work at cross purposes with its conservation programs,
there could be others. Any such inconsistencies should be
identified and examined in order to better inform the Congress of
opportunities to improve the effectiveness and efficiency of these
programs.
Recommendations for Executive Action
To provide policymakers and stakeholders with more comprehensive
and current information on the extent of native grassland
conversions to cropland, the associated farm program costs of
these conversions, and their impact on natural resources, we
recommend that USDA annually track native grassland conversions to
cropland in those geographic areas where such conversions can
occur.
To better understand the extent to which farm programs, such as
crop insurance, and conservation programs, such as the
Conservation Reserve Program, may be working at cross purposes, we
recommend that the Secretary of Agriculture direct the
Administrator of the Economic Research Service, the Administrator
of the Farm Service Agency, and the Chief of the Natural Resources
Conservation Service to jointly study this issue and report their
findings to the Secretary and the Congress.
Agency Comments and Our Evaluation
We provided a draft of this report to USDA for review and comment.
USDA provided oral comments through the Chief, NRCS, on September
5, 2007, indicating general agreement with the report's findings
and recommendations. USDA also said it wanted to ensure that GAO
was aware that with few exceptions, the crop insurance program has
strict criteria on where converted land may be insured. USDA noted
that land generally must have a history of being cropped in at
least 1 of the 3 previous crop years in order to be eligible for
crop insurance coverage, unless such acreage was not cropped
because it was enrolled in another USDA program. Thus, newly
converted grassland that has not been cropped in the previous 3
crop years or enrolled in another program is only insurable by
written agreement as approved by USDA's Risk Management Agency.
According to USDA, written agreements go through an underwriting
process that is much more restrictive than for standard policies,
resulting in reduced coverage and possible denial of coverage. For
example, the insurance guarantee is generally based on the percent
of the average county yield. If the expected yield for the
converted acreage is less than 50 percent of the county average,
the request for insurance is generally denied. In addition, USDA
said certain types of coverage, such as prevented planting
coverage, are not available for any written agreement approved for
newly converted land.
We recognize that USDA has criteria on where converted land may be
insured. However, our work found that RMA does not have a method
and the information needed to enforce its policy that land must
have been cropped in at least 1 of the 3 previous crop years to be
eligible for crop insurance coverage. Specifically, according to
RMA officials we interviewed, RMA has limited ability to enforce
these restrictions on insurance coverage because it lacks
necessary information on land parcels' location and cropping
history. Thus, the restrictions may not prevent ineligible
converted land from being covered. Moreover, even if RMA were able
to enforce these restrictions, the converted land would be
eligible for crop insurance coverage in the year after the
conversion.
USDA also provided technical corrections, which we have
incorporated into the report as appropriate.
As arranged with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 30 days from its issue date. At that time we will send
copies of this report to appropriate congressional committees; the
Secretary of Agriculture; the Director, Office of Management and
Budget; and other interested parties. In addition, this report
will be available at no charge on GAO's Web site at
[34]http://www.gao.gov .
If you or your staff have any questions about this report, please
contact me at (202) 512-3841 or [email protected]. Contact points
for our Offices of Congressional Relations and Public Affairs may
be found on the last page of this report. Key contributors to this
report are listed in appendix VI.
Lisa Shames
Director, Natural Resources and Environment
Appendix I: Objectives, Scope, and Methodology
At the request of the Chairman, Senate Committee on Agriculture,
Nutrition, and Forestry, and the Chairman, House Committee on
Agriculture, we reviewed issues related to grassland conversions.
Specifically, we determined (1) the extent of grassland
conversions to cropland and the cost of farm program payments
related to these newly converted cropland acres, (2) the relative
importance of farm program payments versus other factors in
producers' decisions to convert grassland to cropland, and (3) any
impact the Sodbuster provision has had on limiting grassland
conversions.
To determine the extent of grassland conversions to cropland, we
examined land use data for 1982 through 2003 from the Natural
Resources Conservation Service's (NRCS) National Resources
Inventory (NRI).1 We supplemented this information with land use
data gathered by the U.S. Department of Agriculture's (USDA)
National Agricultural Statistics Service (NASS).2 In addition, we
analyzed data gathered by USDA's Farm Service Agency (FSA) state
and county offices in Montana, North Dakota, and South Dakota on
acres converted from grassland with no cropping history to
cropland for 2005 and 2006. We also reviewed a collaborative study
on conversions of native grassland to cropland in the Prairie
Pothole Region prepared by Ducks Unlimited, Inc., a private
advocacy group supporting the protection and restoration of
wetlands and waterfowl habitat, in conjunction with the U.S. Fish
and Wildlife Service (FWS); the South Dakota Department of Game,
Fish and Parks; The Nature Conservancy; and the University of
Montana.3 In addition, we reviewed other relevant studies of
grassland conversions to cropland, including a 2001 study4 by
Texas A&M University and other researchers and a 1999 study by
University of Wisconsin researchers.5 We interviewed USDA
officials from the Economic Research Service (ERS), FSA, NASS,
NRCS, and the Risk Management Agency (RMA). We also interviewed
FWS state officials in Colorado, Montana, Nebraska, North Dakota,
South Dakota, and Texas; state government officials; and officials
at land grant universities, including Iowa State University,
Kansas State University, North Dakota State University, South
Dakota State University, and Texas A&M University. To determine
the cost of farm program payments on converted land, we
interviewed ERS and FSA officials and analyzed RMA crop insurance
and FSA disaster assistance payments data. Specifically, we
analyzed crop insurance and crop disaster assistance payments data
in relation to 2005 and 2006 data on conversions of grassland that
had no prior cropping history to cropland for all South Dakota
counties. We selected South Dakota counties because conversion
data were available by county for 2005 and 2006, and conversions
have received considerable attention in the state. In conducting
our analysis, we assumed that the counties with the most acres
converted during those years were indicative of the counties with
the most conversions during 1997 through 2006.
1The NRI, conducted by NRCS in cooperation with Iowa State University's
Center for Survey Statistics and Methodology, is a statistical survey of
land use and natural resource conditions and trends on U.S. nonfederal
lands.
2NASS conducts yearly surveys to gather data on aspects of U.S.
agriculture production. NASS also administers the Census of Agriculture, a
comprehensive census of U.S. agriculture producers that is conducted every
5 years.
3Scott Stephens, Johanna Walker, Darin Blunck, Aneetha Jayaraman, and Dave
Naugle. Grassland Conversion in the Missouri Coteau of North and South
Dakota 1984-2003, Ducks Unlimited (forthcoming). Information from this
report was presented as "Grassland Conversion and Risk Models for the
Missouri Coteau: Tools for Staying Ahead of the Plow," at the annual
conference of the South Dakota Wildlife Society, Oacoma, South Dakota,
March, 2007.
To determine the relative importance of the availability of farm
program payments in producers' decisions to convert grassland to
cropland, we identified and reviewed studies that directly
examined the economic incentives of farm program payments on a
producer's decision to convert grasslands to cropland, as well as
related studies that examine the effects of farm program payments
on farm profitability and risk. To evaluate how factors such as
conversion costs, expected crop prices, crop production costs and
technology, and farm program payments affect conversion decisions,
we analyzed farm-level budget data for a hypothetical 160 acres in
a South Dakota county that had a relatively high conversion rate
during 2005 and 2006. The methodology for conducting this analysis
was reviewed by ERS, NRCS, and land grant university agricultural
economists and is discussed in appendix IV. In addition, we
interviewed FSA and NRCS officials in Montana, Nebraska, North
Dakota, and South Dakota to obtain their views of the importance
of farm program payments and other factors in producers' decisions
to convert native grassland to cropland.
4Richard Conner, Andrew Seidl, Larry Van Tassell, and Neal Wilkins,
"United States Grasslands and Related Resources: An Economic and
Biological Trends Assessment," a special report prepared with financial
support from the National Cattlemen's Beef Association, The Nature
Conservancy, and Ducks Unlimited, 2001.
5N. Ramankutty and J. E. Foley, "Estimating historical changes in land
cover: North American croplands from 1850 to 1992," Global Ecology and
Biogeography, 8: 381-396 (1999).
To determine the impact the Sodbuster provision has had on
grassland conversions, we examined NRI land use data for 1982
through 1997 and 1997 through 2003 showing conversions of
rangeland to highly erodible and non-highly erodible cropland by
USDA crop production regions. We supplemented these data by
analyzing available NRCS data on whether land that producers
intended to convert was highly erodible for selected Nebraska
counties.6 We selected these counties because the Nebraska NRCS
state office had identified them as being in areas that recently
had relatively high conversion rates. In addition, we conducted
interviews with FSA and NRCS officials in Montana, Nebraska, North
Dakota, and South Dakota to obtain their views of the impact of
Sodbuster on producers' conversion decisions. We compared
information obtained in these interviews with comments on
Sodbuster's effectiveness submitted by NRCS field office officials
in response to GAO's nationwide 2002 survey on conservation
compliance issues.7 We also interviewed FWS officials in Colorado,
Montana, Nebraska, North Dakota, South Dakota, and Texas, as well
as officials from industry stakeholder organizations, including
the South Dakota Corn Growers Association, South Dakota Soybean
Association, South Dakota Cattlemen's Association, and Montana
Grain Growers Association, to obtain their views on Sodbuster's
effectiveness and proposed legislative changes to reduce
conversions. Finally, to identify proposed legislation that could
affect payments that producers receive on newly converted land, we
reviewed USDA's 2007 farm bill proposals and position papers
submitted by environmental, conservation, and commodity groups,
including Ducks Unlimited, Pheasants Forever, the North Dakota and
South Dakota Chapters of The Wildlife Society, the North Dakota
Game and Fish Department, the American Farm Bureau Federation, the
National Corn Growers Association, the National Pork Producers
Council, and the National Association of Wheat Growers.
6To qualify for farm program payments, a producer must certify compliance
with conservation provisions. To qualify under Sodbuster provisions, a
producer seeking to convert previously uncropped land to cropland notifies
FSA of that intention. FSA then requests a determination for highly
erodible land. According to FSA and NRCS officials, after informing USDA
of their intention to convert land, producers seldom decide not to carry
out the conversion.
7This survey was conducted in conjunction with our work on [35]GAO-03-418
. Specifically, in September 2002, we surveyed staff--usually the district
conservationist--responsible for the conservation compliance reviews in
each of NRCS's 2,549 field offices that conducted compliance reviews
during the period 1998 through 2001 to obtain information on their
understanding and implementation of conservation provisions, and their
views on the effectiveness of these provisions.
We performed our work between October 2006 and August 2007 in
accordance with generally accepted government auditing standards.
We performed data reliability assessments for (1) FSA state office
data on conversions of grassland that had no prior cropping
history to cropland in Montana, North Dakota, and South Dakota,
(2) crop insurance data from RMA's Summary of Business database,
and (3) FSA disaster assistance payments data. We determined that
data from each of these sources were sufficiently reliable. For
the data obtained from the other sources noted above, we did not
independently verify the data, but we discussed with these
sources, as appropriate, the measures they take to ensure the
accuracy of these data. For the purposes for which the data were
used in this report, these measures seemed reasonable.
Appendix II: National Resources Inventory Data on Net Changes in
U.S. Land Use, 1982-2003
The U.S. Department of Agriculture's Natural Resource Conservation
Service's National Resources Inventory is a statistical survey of
natural resource conditions and trends on nonfederal land in the
United States. Nonfederal lands include privately owned lands,
tribal and trust lands, and lands controlled by state and local
governments. The NRI provides data on net changes in rangeland,
pastureland, and other land types over time, as well as on
conversions of rangeland and pastureland to cropland over time.1
Table 7 shows the net changes in cropland, Conservation Reserve
Program (CRP) land, rangeland, pastureland, and developed land,
from 1982 to 2003 for the 48 contiguous states. The changes
illustrated in the table are net changes, which do not indicate
the number of acres converted from rangeland and pastureland to
cropland.
1Rangeland is a USDA land cover/use category on which the plant cover is
composed principally of native grasses, grasslike plants, forbs or shrubs
suitable for grazing, and introduced forage species that are managed like
rangeland, with little or no chemicals or fertilizer being applied.
Grasslands, savannas, many wetlands, some deserts, and tundra are
considered to be rangeland. Pastureland is a USDA land cover/use category
of land managed primarily for the production of introduced forage plants
for livestock grazing. Management of pastureland usually consists of
treatments such as fertilization, weed control, reseeding or renovation,
and control of grazing. Cropland is a USDA land cover/use category that
includes areas used for the production of adapted crops for harvest. Two
subcategories of cropland are recognized: cultivated and noncultivated.
Cultivated land comprises land in row crops or close-grown crops and also
other cultivated cropland, for example, hayland or pastureland that is in
a rotation with row or close-grown crops. Noncultivated cropland includes
permanent hayland and horticultural cropland.
Table 7: Net Changes in Rangeland, Pastureland, and Other Land Types,
1982-2003
acres in millions with margins of error
Year Cropland CRP land Rangeland Pastureland Developed land
1982 419.9 0(NA) 415.5(412.0-419.0) 131.1 72.9(72.1-73.7)
(417.8-422.0) (129.7-132.5)
1992 381.3 34.0(33.8-34.2) 406.8(403.5-410.1) 125.2 86.5(85.5-87.5)
(379.3-383.3) (123.9-126.5)
1997 376.4 32.7(32.7-32.7) 404.9(401.6-408.2) 119.5 97.6(96.6-98.6)
(374.4-378.4) (118.3-120.7)
2003 367.9 31.5(31.2-31.8) 405.1(401.6-408.6) 117.0 108.1(106.7-109.5)
(365.5-370.3) (115.2-118.8)
Change,1982-2003 -52 31.5 -10.4 -14.1 35.2
Source: GAO's analysis of NRCS's NRI data.
Notes: (1) The amounts in parentheses represent the two-sided 95 percent
confidence interval. (2) This table does not include other land-use
categories, which did not have large changes during this period. These
land-use categories are forest land, water areas, and other rural areas.
Appendix III: Census of Agriculture Data on Net Changes in Uses of Land in
Farms for the United States and Selected States
The Census of Agriculture, conducted every 5 years by USDA's National
Agricultural Statistics Service, is a census of agricultural producers.1
It gathers information about the nation's agricultural production and
provides agricultural data for every state and county in the United
States.
Tables 8 and 9 show net changes in uses of land in farms between the years
1978 and 1992, and 1997 and 2002, as reported by the Census of
Agriculture. Table 8 shows net changes in land use at the national level,
while table 9 shows changes in land use for states that--according to
USDA's National Resources Inventory--have large amounts of rangeland and
cropland. Data for 1978 to 1992 are not comparable to data for 1997 to
2002 and are listed separately in the tables. This is because a different
methodology was used for the latter time frame to more completely capture
all relevant producers.
In tables 8 and 9, "Total cropland" includes cropland harvested, cropland
used only for pasture or grazing, idle cropland,2 cropland on which all
crops failed or were abandoned, and cropland cultivated in summer fallow.
"Pastureland and rangeland" includes all grazable land that does not
qualify as cropland pasture or woodland pasture. Pastureland and rangeland
includes both native grassland and grassland composed of introduced
grasses. Finally, "Total land in farms" consists primarily of agricultural
land used for crops, pasture, or grazing.
1Between 1840 and 1996, the U.S. Department of Commerce, Bureau of the
Census was responsible for collecting Census of Agriculture data. The
Census of Agriculture Act, Pub. L. No. 105-113, 111 Stat. 2274 (1997),
transferred the responsibility for the Census of Agriculture from the
Bureau of the Census to the Secretary of Agriculture who subsequently
delegated that responsibility to the Administrator of NASS.
2Idle cropland includes Conservation Reserve Program land unless the land
was used for haying or grazing.
Table 8: Net Changes in Uses of Land in U.S. Farms, 1978-1992 and
1997-2002
acres in millions
Pastureland and Total land in
Year Total cropland rangelanda farms
1978 453.6 431.0 1011.5
1982 445.1 416.0 983.5
1987 442.9 408.4 961.8
1992 435.0 409.1 943.0
Change in
acres,1978-1992 -18.6 -21.9 -68.5
1997 444.9 396.6 952.5
2002 433.9 393.7 936.1
Change in acres,
1997-2002 -11.0 -2.9 -16.5
Source: GAO's analysis of NASS's Census of Agriculture data.
aThe full name of this category is Pastureland and rangeland, other than
cropland and woodland pastured.
Table 9: Net Changes in Uses of Land in Farms in States with Large Amounts
of Rangeland and Pastureland, 1978-1992 and 1997-2002
acres in
millions
Total Pastureland and Total land
State Year cropland rangeland in farms
Colorado 1978 10.6 22.7 35.3
1992 10.9 21.3 34.0
Change in acres, 0.3 -1.4 -1.3
1978-1992
1997 10.8 19.4 32.3
2002 11.5 17.3 31.1
Change in acres, 0.7 -2.1 -1.3
1997-2002
Kansas 1978 29.8 15.5 47.5
1992 31.1 13.8 46.7
Change in acres, 1.3 -1.8 -0.8
1978-1992
1997 31.1 13.6 46.7
2002 29.5 15.5 47.2
Change in acres, -1.5 1.9 0.6
1997-2002
Montana 1978 16.2 42.4 61.7
1992 17.5 39.3 59.6
Change in acres, 1.3 -3.1 -2.0
1978-1992
1997 18.2 37.2 58.4
2002 18.3 38.2 59.6
Change in acres, 0.8 1.1 1.2
1997-2002
Nebraska 1978 22.3 22.1 46.1
1992 22.4 20.6 44.4
Change in acres, 0.1 -1.6 -1.7
1978-1992
1997 22.6 21.6 45.9
2002 22.5 21.9 45.9
Change in acres, -0.1 0.3 0.05
1997-2002
New Mexico 1978 2.3 42.5 47.9
1992 2.3 42.0 46.8
Change in acres, -0.004 -0.5 -1.1
1978-1992
1997 2.3 41.0 46.2
2002 2.6 39.1 44.8
Change in acres, 0.3 -1.8 -1.4
1997-2002
North Dakota 1978 28.6 10.8 41.7
1992 27.5 10.3 39.4
Change in acres, -1.1 -0.5 -2.3
1978-1992
1997 27.4 10.3 39.7
2002 26.5 11.0 39.3
Change in acres, -0.9 0.7 -0.4
1997-2002
Oklahoma 1978 14.4 16.5 33.7
1992 14.5 15.1 32.1
Change in acres, 0.2 -1.5 -1.6
1978-1992
1997 15.5 15.5 34.1
2002 14.8 15.7 33.7
Change in acres, -0.6 0.2 -0.4
1997-2002
South Dakota 1978 18.7 24.2 44.4
1992 19.6 23.9 44.8
Change in acres, 0.8 -0.2 0.4
1978-1992
1997 19.7 23.0 44.1
2002 20.3 22.0 43.8
Change in acres, 0.6 -1.0 -0.4
1997-2002
Texas 1978 39.4 87.3 135.6
1992 36.4 87.8 130.9
Change in acres, -3.0 0.5 -4.7
1978-1992
1997 39.1 86.9 134.0
2002 38.7 83.4 129.9
Change in acres, -0.4 -3.5 -4.1
1997-2002
Wyoming 1978 2.7 30.1 33.6
1992 2.8 28.9 32.9
Change in acres, 0.1 -1.2 -0.8
1978-1992
1997 3.0 30.2 34.3
2002 3.0 30.2 34.4
Change in acres, 0.0 0.1 0.1
1997-2002
Source: GAO's analysis of NASS's Census of Agriculture data.
Appendix IV: Partial Budget Analysis for a Proposed Conversion of Native
Grassland to Cropland in Central South Dakota, 2003-2007
To assess the economic incentives to convert native grassland to cropland
at the farm level, we used a partial budget analysis and a "constructed"
farm scenario for a 160-acre tract in Hand County, South Dakota--a central
South Dakota county that was relatively high in 2005 and 2006 conversions
of grassland that had no cropping history. A partial budget can be used by
a farmer or rancher to evaluate the economic effects of making an
adjustment to a part of the farm operation, such as switching to an
alternative farm enterprise or buying new machinery. While not including
all farm costs and revenues of the enterprise, a partial budget1 estimates
the net change in income that results when shifting from a base plan to an
alternative scenario.2
Livestock grazing enterprises, in particular cow-calf operations, have
historically been typical farm enterprises in South Dakota. In recent
years, however, some of the land that was used for grazing has been
converted to crop production. To analyze the role of farm program payments
in these conversions, we developed a partial budget to compare the
estimated costs and returns for 2003 through 2007 from 160 acres of native
grassland--used for grazing as part of a cow-calf operation--to the costs
and returns that would have resulted if the 160 acres had been converted
to cropland in 2003 and used to produce corn, soybeans, and wheat through
2007. We assumed that the farm operation initially consisted of both a
cropping enterprise and a cow-calf enterprise. Therefore, the farmer
already had certain fixed capital equipment for both of these enterprises,
such as tractors and harvesting equipment. In the base plan, the producer
had a 160-acre parcel of native grassland that was part of a larger
cow-calf grazing enterprise.
We analyzed cow-calf and crop budgets (1) prospectively for the current
2007 crop year and (2) retrospectively for crop years 2003 through 2006 to
specifically evaluate the effects of past farm program payments on costs
and returns. During these years, crop and calf prices varied and central
South Dakota experienced a range of weather conditions that affected crop
and forage production. These changes in price and production make these
years illustrative for analysis of the effect farm program payments can
have on farm enterprises.
1Michael D. Boehlje and Vernon R. Eidman, Farm Management, John Wiley &
Sons, New York, 1984, pp. 237-242.
2Specifically, a partial budget analysis examines the additional returns
that would result from adopting an alternative plan plus the decreased
costs from no longer using a base plan, minus the sum of the additional
costs of the alternative plan plus the reduced returns from the base plan.
The partial budget only considers the direct private costs and benefits to
the farmer and does not include the social costs and benefits to society
that a change would bring about, such as to the environment or wildlife
habitat.
We found that for certain years, high crop prices as well as farm program
payments would provide economic incentives for a producer to convert
native grassland used for grazing in a cow-calf operation to an
alternative cropping operation. In 3 of the 5 years, the conversion from
grazing to cropping would have resulted in increased income. In the other
2 years, 2004 and 2005, when cattle prices and returns were high relative
to crop prices and returns and total farm program payments were lower, it
would have been more profitable not to convert and continue the cow-calf
operation. Without any farm program payments, income would have increased
only in 2007, but in view of projections that crop prices will remain
relatively high, this increase in income without farm program payments may
continue for several years. However, even with high crop prices, farm
program payments for crop insurance and crop disaster assistance will
continue to be an important factor in conversion decisions because of the
need for protection against adverse crop production risks, such as
drought.
Base Plan Scenario--Cow-Calf Grazing
For the base plan or cow-calf section of the analysis, we used production
and price data from South Dakota State University's cow-calf budget tool3
as well as expert opinion from South Dakota State University livestock
extension economists and USDA Natural Resources Conservation Service
officials in South Dakota. We assumed that Hand County, South Dakota, in a
normal year of precipitation, would support one cow-calf pair for every 8
acres of native grassland. Since South Dakota experienced varied weather
conditions--including drought--during 2003 through 2007, we adjusted our
cow-calf model to incorporate changes in the number of pounds of calves
and cows sold to account for changes in the amount of forage available for
grazing on the 160 acres. These adjustments were based on NRCS rangeland
forage production values for favorable, normal, and unfavorable years.4 On
the basis of South Dakota NRCS officials' expert opinion, we assumed that
a 20 percent deviation in annual rainfall above or below the 30-year
average during 1976 through 2006 would be either favorable or unfavorable,
respectively. Using this definition, 2003 forage production values were
normal, 2004 were favorable, 2005 were normal, and 2006 were unfavorable.
We assumed 2007 forage production values were normal based on South Dakota
NRCS officials' observations as of July 2007.
3South Dakota State University, Department of Economics, Extension,
Management Tools and Links, Livestock Budgets, Beef Cow Unit, Feeder Calf
Sold, (B1CC). [36]http://econ.sdstate.edu/Extension/Tools/budgets.htm .
4These rangeland production values are from the NRCS Web Soil Survey.
[37]www.websoilsurvey.nrcs.usda.gov/app/ .
In estimating cow-calf returns, we used calf prices from South Dakota
State University's stocker cattle prices (500 to 600 pounds), monthly
average prices, for November. For cull cow prices, we used the Sioux Falls
price of slaughter cows for November 2003 through 2006; for 2007, we used
an average of the first 5 months of the year. For additional income due to
herd liquidation, we obtained yearly average "Bred Female" prices, Central
Region, for "young and middle-aged cows" from Drovers for 2003 through
2006 and the first 5 months of 2007.5 For corn feed costs, we calculated
an average price for each year, 2003 through 2006, based on weekly Central
South Dakota cash corn prices from South Dakota State University's
extension service; for 2007, we calculated an average of these weekly
prices from January to July. For hay alfalfa prices, we used USDA National
Agricultural Statistics Service yearly average prices for 2003 through
2006, and for 2007, an average monthly price based on the first 5 months
of this year. Regarding "other" costs, we reduced all direct costs in the
cow-calf spreadsheet before 2005 by 10 percent, with the exception of
"Veterinary and Drug," which we reduced by 15 percent, and kept all the
later years the same as in the budget tool spreadsheet.6
Alternative Scenario--Corn/Soybean/Spring Wheat Cropping Rotation
For the alternative scenario--the crop portion of the partial budget
analysis, we assumed a corn/soybean/spring wheat crop rotation on the
160-acre parcel for a farm in Hand County, South Dakota. We assumed this
particular crop rotation based on those crops having the highest acreages
according to NASS statistics and consultations with South Dakota State
University crop extension experts. We first looked retrospectively at the
time period from 2003 through 2006 to see the effects of prices, yields,
and farm payments on costs and returns. We then used preliminary data for
crop prices and average historical yield data to examine potential returns
for crop year 2007.7
5Drovers is a monthly magazine and online livestock information service
that provides business management and marketing information for all
segments of the beef industry, including the female market, fed-cattle
markets, and stocker/feeder prices.
6These "other costs," such as veterinary and medicine, were obtained from
a South Dakota State University Extension area farm management specialist.
For 2003 through 2007, we adjusted all yield data to reflect the fact that
this newly converted land may represent "marginal" or less productive land
than the land that was already in crop production. To do this, we
consulted with NRCS officials in central South Dakota to obtain
information on the soil types that were most often being converted.8 On
the basis of this information, we then adjusted the county average crop
yields for corn, soybeans, and spring wheat to estimate a likely yield for
a newly converted parcel of native grassland for a particular year. On
average, these estimated yields were about 17 percent lower than the
county average yields. We used these adjusted yields in our calculation of
gross income from corn, soybeans, and spring wheat in our partial budget
analysis. In addition, because documentation on the soil types most often
being converted was not available and to determine how sensitive our
results were to these adjusted crop yields, we also estimated gross
returns from crop production in our partial budget analysis using
unadjusted NASS county average crop yields for 2003 through 2006. For
2007, we estimated an unadjusted 3-year moving county average for corn and
soybeans, and for spring wheat, we used the South Dakota NASS yield
projection as of July 2007.
We obtained the remaining data on prices and costs for the crop analysis
from extension specialists and agricultural economists in central South
Dakota and at South Dakota State University.9 For instance, we obtained
most of the cost data for the crop budgets from an area farm management
specialist in the Department of Economics at South Dakota State
University. For price data, we used yearly average central South Dakota
cash prices for corn, soybeans, and spring wheat for 2003 through 2006
from South Dakota State University's extension grain marketing specialist.
For 2007 price data, we used the most recent statewide average cash price,
as of July 13, for South Dakota for corn, soybeans, and spring wheat. For
2003 through 2006 loan deficiency payments, we used Hand County average
yearly loan deficiency payments for this period from the USDA Farm Service
Agency's South Dakota state office.10 For crop insurance payments to
farmers, we used crop insurance indemnity payments per acre in Hand
County, South Dakota as estimated by a USDA Risk Management Agency
official. For crop disaster assistance payments, we used data from FSA on
crop disaster assistance payments by county to estimate an average crop
disaster assistance payment per acre for Hand County for 2003, the only
year when these payments were significant.11 Because crop insurance
indemnity and crop disaster assistance payments generally are related to
the same crop losses, we used RMA crop insurance indemnity payments data
in making this estimate. Specifically, we applied the proportion of the
amount of crop insurance indemnities that were paid to each crop (i.e.,
corn, soybeans, and spring wheat) to the total crop disaster assistance
payments in the county for 2003 to estimate the crop disaster assistance
payment for each crop.
7Also, since the 2007 crop has not been harvested, we assumed a 3-year
moving average county yield from NASS statistics, adjusted by expert
opinion from our interviews with South Dakota soil scientists.
8Per our discussions with NRCS officials concerning Hand County, South
Dakota, the soil types most likely to be converted were: ErB (Eakin-Raber
Complex-Undulating), HkB (Houdek-Prosper Loams, Undulating), RaB (Raber
Loams, Undulating), ReB (Raber-Eakin Complex, Undulating), WmB (Glenham
Loam, Undulating), WpB (Glenham-Cavo, Undulating), and WzC (Glenham-Java,
Rolling).
9For the cost estimates, we assumed that the cropping enterprise used
no-till treatment rather than conventional tillage.
In addition to income from crop production, the producer's additional
returns in the first year of conversion would be from the sale or
liquidation of the herd that had grazed on the 160-acre parcel.
Specifically, we assumed the conversion takes place in 2003, and the herd
liquidation in a normal year would consist of about 20 bred females that
previously grazed on the land, of which 10 would be sold in the bred
female market and 10 in the cull cow market since the cow herd would be
composed of various ages. In order not to disproportionately influence any
one year's returns from the herd liquidation, the proceeds were amortized
over a 5-year period, from 2003 to 2007, at an interest rate of 6 percent,
resulting in annual revenue of about $3,125. Similarly, as part of the
conversion, we also assumed conversion costs for the 160-acre parcel of
land, consisting of about $3,200 for herbicide treatment, would be
amortized over this period, resulting in an annual cost of about $760.
According to NRCS officials, rock removal can also add to conversion
costs, but these costs are highly variable because the amount of rocks on
native grass and the methods used in removing them varies. Thus, we did
not include rock removal in our partial budget analysis.
10Land newly converted into cropland would only qualify for marketing
assistance benefits, such as loan deficiency payments, and would not be
eligible for countercyclical payments or direct payments since the land
would not have a cropping history.
11May 2007 supplemental appropriation legislation authorized crop disaster
assistance payments for crop years 2005, 2006, and early 2007. Producers
can receive a disaster assistance payment for only one of the 3 years.
Because these payments had not been made as of July 2007, we did not
include estimates of them in our analysis.
As noted, we assumed the conversion to cropland occurred in 2003. The use
of another year for the conversion would have some effect on the results.
For example, if the conversion had occurred in 2004, a year of relatively
high cattle prices and better forage available for grazing, the revenue
from the cow liquidation would have been greater. In that year, the
amortized annual value from the sale of the cow herd would have been
$4,284, about $1,158 greater than in 2003. Thus, the annual net change in
income resulting from the conversion to cropland would have been about
$1,158 higher.
Partial Budget Analysis
After creating the base plan and alternative scenario and collecting the
appropriate data for the 5 years, we then used these data in the partial
budget to analyze the role of farm program payments in conversion
decisions and determine which option, the cow-calf enterprise or the
cropping enterprise, would provide higher returns over costs.
Specifically, as table 10 shows, the alternative scenario--conversion to
cropland--would result in additional returns from crop production, farm
program payments, and the sale of the cow herd (Section 1), reduced costs
from no longer having the present cow-calf enterprise (Section 2),
additional costs from crop production (including conversion costs)
(Section 3), and reduced returns from the cow-calf enterprise (Section 4).
Therefore, in the partial budget analysis, the net change in income for
the producer would be the total benefits of the proposed change (Sections
1 and 2) minus the total costs (Sections 3 and 4).
The partial budget results for crop years 2003 through 2006 are shown in
table 10. For each year, we estimated the net change in income using crop
yields adjusted for soil productivity. As noted earlier, we also estimated
these income changes using unadjusted NASS county average crop yields. In
2003, the sum of gross revenue from the sale of crops produced, farm
program payments (crop insurance, crop disaster assistance, and loan
deficiency payments), and the amortized proceeds from the liquidation of
the cow herd would have resulted in a positive change in net income of
$3,761 in favor of the alternative scenario, crop production using the
adjusted crop yields. Although 2003 cash corn prices were at relatively
average historical levels, $2.36 per bushel, and soybean prices were high,
averaging about $7.70 per bushel, yields were at very low levels resulting
in relatively low crop revenue. However, farm program payments would have
offset this low crop revenue, contributing approximately $12,300 on the
160-acre tract. Without these farm program payments, net income from the
base plan, the cow-calf enterprise, would have been about $8,500 greater
than crop production in this year. Using the unadjusted county average,
crop yields would have produced a net change in income of about $6,824 in
favor of the cropping alternative.
For 2004, we estimate net income of about $3,602 in favor of remaining
with the base plan, the cow-calf enterprise. Although crop yields were
relatively high in 2004, corn and soybean prices were much lower than the
previous year, at $1.64 and $5.49, respectively. Also, the total of crop
insurance, crop disaster assistance, and loan deficiency payments for this
year were almost $9,000 lower than in 2003. Although loan deficiency
payments were higher due to the lower crop prices, crop insurance benefits
were lower due to the higher crop yields, and crop disaster assistance
payments would not have been made because, as provided in the legislation,
the producer could only receive a crop disaster assistance payment for
2003 or 2004 and could not receive a payment for both years. Moreover,
2004 cow-calf returns were relatively high, as calf prices had increased
over 2003, going from an average of $111 to $122 per hundredweight. In
addition, we estimate higher returns to the cow-calf enterprise in this
year due to more favorable weather for forage production and lower prices
for feedstuffs. Furthermore, direct costs of production for the cow-calf
enterprise (about $6,500) were about one-third that of the costs of
production for the cropping enterprise (about $19,500). However, using
unadjusted county average yields to estimate gross revenue causes the
alternative scenario, conversion to cropland, to be higher in net income,
but only by about $1,375.
Similarly, for 2005, we estimate that net income from the alternative
scenario, crop production, with yields adjusted for soil productivity
would have been about $4,835 less than the base plan, the cow-calf
enterprise. The net change in income using the unadjusted county average
crop yields would have been higher for the alternative scenario by about
$90. In 2005, crop yields were similar to those in 2004, but crop prices
were again quite low. At the same time, calf prices were at historically
high levels--$137 per hundredweight. Feedstuff costs, due to the low corn
prices, were relatively low, and the costs of production for cropping were
over three times greater than costs for the cow-calf enterprise. Also, in
2005, while some loan deficiency payments ($2,175 for the 160-acre parcel)
were received, crop insurance payments, about $625 for the parcel, were
much lower than the previous year, and no crop disaster assistance
payments had been received as of July 2007.
For 2006, we estimate an increase net income of about $2,366 in favor of
the alternative scenario, crop production. Although crop yields were very
low due to drought, crop prices increased. Average cash corn prices for
Central South Dakota jumped from $1.76 per bushel in 2005 to $3.37 per
bushel in 2006. More importantly, however, due to the low yields that
year, the producer would have received about $8,995 on the 160-acre parcel
from crop insurance payments.12 At the same time, cow-calf returns
decreased because of decreases in calf and cow prices and unfavorable
conditions for forage production because of the drought. This reduced
forage production would result in lower calf weights and higher feed costs
for the cow-calf enterprise. Using the unadjusted NASS county average crop
yields would have increased the net income change to about $6,069.
Table 10: Partial Budget Analysis for a Proposed 2003 Change from a
Cow-Calf Enterprise to a Corn/Soybean/Wheat Cropping Enterprise in Central
South Dakota, 2003-2006
Partial budget, 2003
Amount of change
County average crop
Adjusted crop yields yields
Section 1
Additional returns from proposed
change
Corn $4,666.73 $5,610.14
Soybeans 4,063.06 4,883.88
Spring wheat 6,120.97 7,349.00
Loan deficiency payment 351.14 421.71
Crop insurance payment 7,895.33 7,895.33
Disaster assistance payment 4,014.02 4,014.02
Liquidation of cow herd 3,125.23 3,125.23
(amortized)
Subtotal additional returns $30,236.49 $33,299.32
Section 2
Reduced costs from proposed
change
Reduced costs from cow-calf $5,473.62 $5,473.62
operation
Subtotal reduced costs $5,473.62 $5,473.62
Section 3
Additional costs of proposed
change
Corn $7,330.88 $7,330.88
Soybeans 4,770.35 4,770.35
Spring wheat 5,039.52 5,039.52
Herbicide treatment for 759.67 759.67
conversion (amortized)
Subtotal additional costs $17,900.42 $17,900.42
Section 4
Reduced returns from proposed
change
Sale of calves and cull cows in $14,048.49 $14,048.49
a year with normal forage
production
Subtotal reduced returns $14,048.49 $14,048.49
Net change in income, 2003 $3,761.20 $6,824.03
Partial budget, 2004
Amount of change
County average crop
Adjusted crop yields yields
Section 1
Additional returns from proposed
change
Corn $7,377.57 $8,863.58
Soybeans 7,373.95 8,866.30
Spring wheat 8,029.96 9,662.22
Loan deficiency payment 1,817.32 2,184.39
Crop insurance payment 1,211.51 1,211.51
Disaster assistance payment -- --
Liquidation of cow herd 3,125.23 3,125.23
(amortized)
Subtotal additional returns $28,935.54 $33,913.23
Section 2
Reduced costs from proposed
change
Reduced costs from cow-calf $6,570.14 $6,570.14
operation
Subtotal reduced costs $6,570.14 $6,570.14
Section 3
Additional costs of proposed
change
Corn $8,568.51 $8,568.51
Soybeans 4,796.47 4,796.47
Spring wheat 6,163.61 6,163.61
Herbicide treatment for 759.67 759.67
conversion (amortized)
Subtotal additional costs $20,288.26 $20,288.26
Section 4
Reduced returns from proposed
change
Sale of calves and cull cows in $18,820.18 $18,820.18
a year with favorable forage
production
Subtotal reduced returns $18,820.18 $18,820.18
Net change in income, 2004 ($3,602.75) $1,374.94
Partial budget, 2005
Amount of change
County average crop
Adjusted crop yields yields
Section 1
Additional returns from proposed
change
Corn $7,617.21 $9,155.66
Soybeans 7,416.70 8,927.00
Spring wheat 7,079.57 8,516.01
Loan deficiency payment 2,174.75 2,614.15
Crop insurance payment 625.21 625.21
Disaster assistance payment -- --
Liquidation of cow herd 3,125.23 3,125.23
(amortized)
Subtotal additional returns $28,038.66 $32,963.26
Section 2
Reduced costs from proposed
change
Reduced costs from cow-calf $5,737.80 $5,737.80
operation
Subtotal reduced costs $5,737.80 $5,737.80
Section 3
Additional costs of proposed
change
Corn $9,187.85 $9,187.85
Soybeans 5,344.39 5,344.39
Spring wheat 6,459.43 6,459.43
Herbicide treatment for 759.67 759.67
conversion (amortized)
Subtotal additional costs $21,751.34 $21,751.34
Section 4
Reduced returns from proposed
change
Sale of calves and cull cows in $16,859.78 $16,859.78
a year with normal forage
production
Subtotal reduced returns $16,859.78 $16,859.78
Net change in income, 2005 ($4,834.66) $89.94
Partial budget, 2006
Amount of change
County average crop
Adjusted crop yields yields
Section 1
Additional returns from proposed
change
Corn $7,454.27 $8,963.09
Soybeans 5,632.64 6,752.58
Spring wheat 5,197.82 6,252.09
Loan deficiency payment 100.26 120.19
Crop insurance payment 8,995.44 8,995.44
Disaster assistance payment -- --
Liquidation of cow herd $3,125.23 $3,125.23
(amortized)
Subtotal additional returns $30,505.65 $34,208.62
Section 2
Reduced costs from proposed
change
Reduced costs from cow-calf $4,609.36 $4,609.36
operation
Subtotal reduced costs $4,609.36 $4,609.36
Section 3
Additional costs of proposed
change
Corn $9,707.00 $9,707.00
Soybeans 5,617.82 5,617.82
Spring wheat 7,043.06 7,043.06
Herbicide treatment for 759.67 759.67
conversion (amortized)
Subtotal additional costs $23,127.55 $23,127.55
Section 4
Reduced returns from proposed
change
Sale of calves and cull cows in $9,621.12 $9,621.12
a year with unfavorable forage
production
Subtotal reduced returns $9,621.12 $9,621.12
Net change in income, 2006 $2,366.35 $6,069.31
Source: GAO's analysis based on data provided by and consultations with
South Dakota State University, FSA, NASS, NRCS, and RMA. Partial budget
template used by permission of the Agricultural Economics Department,
University of Missouri.
Notes: (1) We calculated returns and costs assuming conversion of native
grassland to cropland on a "constructed" farm in Hand County, South Dakota
that produced a rotation of corn, soybeans, and spring wheat. (2) For the
crop enterprise, we used regional average crop prices; NASS county average
crop yields, both adjusted and unadjusted for soil productivity; central
South Dakota region crop production cost data; and county average crop
insurance, and crop disaster assistance, and loan deficiency payments. We
used assumptions and data provided by agricultural economists,
agronomists, and soil scientists from South Dakota State University and
NASS to estimate yields and conversion costs. Farm program payments data
were provided by FSA and RMA officials. (3) Data and assumptions for the
cow-calf enterprise are from South Dakota State University extension
service in the central and eastern regions and NRCS officials in South
Dakota. We did not include in our analysis the benefits from any livestock
disaster assistance payments, although we realize there were such payments
in 2004. For feed prices, we used average weekly cash corn prices for the
Central region of South Dakota, from the South Dakota State University
extension service and yearly NASS prices for alfalfa hay. (4) The dashes
indicate that we did not include a crop disaster assistance payment for
2004, 2005, or 2006.
12Crop disaster assistance payments, which likely will be made for the
2006 crop year, are not included in this analysis.
We also estimated the income effects of converting native grassland to
crop production prospectively for the current 2007 crop year. As table 11
shows for 2007, we estimate that the net change in income for the
alternative scenario, crop production, would be about $2,099. Also, in
this high price year for crops, the value of production from the cropping
enterprise would be about $15,000 more than from the cow-calf enterprise.
An important factor for the cow-calf enterprise during this year would be
the adjustment to much higher feed prices, which along with lower calf
prices, would lead to lower cow-calf returns in 2007. On the crop side,
because 2007 crop prices are forecast to stay above the marketing loan
rates, we assumed no loan deficiency payments would be received for this
year. In addition, we did not include any crop insurance or disaster
assistance payments for 2007, although such payments may be made in the
future. Despite the absence of farm program payments, the partial budget
demonstrates that in this high crop price year crop production would have
been more profitable than using the land for grazing cattle. Using the
unadjusted 2007 projected county average yields would increase the net
income resulting from the conversion to cropland to about $8,290.
Table 11: Partial Budget Analysis for a Proposed 2003 Change from a
Cow-Calf Enterprise to a Corn/Soybean/Wheat Cropping Enterprise in Central
South Dakota, 2007
Partial budget, 2007
Amount of change
Adjusted crop Projected and average
yields crop yields
Section 1
Additional returns from proposed
change
Corn $12,951.13 $15,566.50
Soybeans 8,335.76 10,018.18
Spring wheat 9,382.80 11,276.15
Loan deficiency payment -- --
Crop insurance payment -- --
Disaster assistance payment -- --
Liquidation of cow herd (amortized) 3,125.23 3,125.23
Subtotal additional returns $33,794.92 $39,986.06
Section 2
Reduced costs from proposed change
Reduced costs from cow-calf operation $7,187.80 $7,187.80
Subtotal reduced costs $7,187.80 $7,187.80
Section 3
Additional costs of proposed change
Corn $9,726.18 $9,726.18
Soybeans 5,573.05 5,573.05
Spring wheat 7,324.49 7,324.49
Herbicide treatment for conversion 759.67 759.67
(amortized)
Subtotal additional costs $23,383.39 $23,383.39
Section 4
Reduced returns from proposed change
Sale of calves and cull cows in a
year with unfavorable forage
production $15,499.86 $15,499.86
Subtotal reduced returns $15,499.86 $15,499.86
Net change in income, 2007 $2,099.47 $8,290.61
Source: GAO's analysis based on data provided by and consultations with
South Dakota State University extension service, NASS, and NRCS. Partial
budget template used by permission of the Agricultural Economics
Department, University of Missouri.
Notes: (1) We calculated returns and costs assuming conversion of native
grassland to cropland on a "constructed" farm in Hand County, South
Dakota, that produced a rotation of corn, soybeans, and spring wheat. (2)
For the crop enterprise, we used regional average crop prices for January
to July 2007; a 3-year moving average of NASS county average crop yields,
adjusted and unadjusted for soil productivity for corn and soybeans and a
projected 2007 South Dakota yield for spring wheat, adjusted and
unadjusted for soil productivity; and central South Dakota regional crop
production cost data. We used assumptions and data provided by NRCS
officials to estimate conversion costs. (3) Data and assumptions for the
cow-calf enterprise are from South Dakota State University extension
service in the central and eastern regions and NRCS officials in South
Dakota. For 2007, we used 2007 average weekly cash corn prices for the
central region of South Dakota from January to July from the South Dakota
State University extension service and January to June average monthly
NASS prices for alfalfa hay. (4) The dashes indicate that no loan
deficiency payments would be received for 2007 and that we did not include
any crop insurance or disaster assistance payments for this year, although
such payments may be made in the future.
In summary, if South Dakota corn, soybean, and wheat prices stay at
relatively high levels, as forecast by USDA national price projections,
incentives for conversion should continue in the near future.13 In
addition, as the retrospective analysis suggests, farm program payments,
especially crop insurance and crop disaster assistance payments, lower the
risk of negative returns in years with low crop yields.
13USDA Agricultural Projections to 2016, Interagency Agricultural
Projections Committee, Long Term Projections Report OCE-2007-1,
(Washington, D.C., February 2007).
Appendix V: Summaries of Economic Studies Examining the Impact of Farm
Program Payments
We identified and reviewed 15 studies that analyze the potential economic
impacts of federal farm program payments on either producers' land use
decisions or farm profitability and risk. The impact of farm program
payments on farm profitability and risk is closely related to land use
decisions. Table 12 summarizes the 15 studies, including the purpose and
results associated with each.
Table 12: Economic Studies That Analyze the Impact of Federal Farm Program
Payments on Either Producers' Land Use Decisions or Farm Profitability and
Risk
Purpose of the Related findings
Economic study study Year and conclusions
Janssen, Larry, Burton Pflueger, and To report on 2007 Land values in
Terry Ahrendt. South Dakota current South Dakota have
Agricultural Land Market Trends, agricultural land doubled since 2002
1991-2007. South Dakota State values and cash and tripled since
University Agricultural Experiment rental rates by 1996. During this
Station, USDA. land use in time, farm
different regions commodity payments
in South Dakota. increased from
$230 million to
more than $700
million a year. In
addition to
commodity
payments, interest
rates, technology,
and ethanol demand
have also been
factors in
increasing land
values. However,
farmland values
have become more
dependent on farm
program payments.
Shaik, Saleem, Joseph Atwood, and To examine the 2006 The proportion of
Glenn Helmbers. "Farm Programs and contribution of land values
Agricultural Land Values: The Case of expected farm attributable to
Southern Agriculture." Paper returns and farm farm program
presented to the Southern program payments payments has
Agricultural Economics Association in 12 southern increased from
Annual Meetings, Orlando, Florida, states. about 14 percent
February 2006. in the early
1980's to 67
percent in the
southern United
States from 2002
to 2004.
U.S. Department of Agriculture. To examine the 2006 Land moving
Economic Research Service. relationship between cultivated
Environmental Effects of Agricultural between cropland and less
Land-Use Change: The Role of agricultural land intensive
Economics and Policy. Economic use changes, soil agricultural uses
Research Report Number 25, productivity, and is less productive
Washington, D.C., August 2006. environmental and more
sensitivity and vulnerable to
the effects of erosion and
increased crop nutrient runoff
insurance than other
subsidies on land cultivated land.
use. Producers tend to
keep highly
productive land in
cultivation
regardless of
changing economic
conditions. But
economic
conditions, such
as changing
commodity prices
or production
costs, encourage
farmers to expand
production to less
productive land or
to shift less
productive
croplands to other
uses. Agricultural
and conservation
policies also
affect land use.
These land use
changes affect
environmental
quality,
particularly when
affected
lower-quality
lands are
environmentally
sensitive. Crop
insurance raises
incentives to
expand crops to
less productive
land. Increased
crop insurance
subsidies in the
mid-1990s
motivated
producers to
expand cropland in
the contiguous 48
states by an
estimated 2.5
million acres,
with most of the
land coming from
pastureland and
other grassland.
Due to this
land-use change,
annual wind and
water erosion
estimates
increased by 1.4
and 0.9 percent,
respectively, as
of 1997.
U.S. Department of Agriculture. To describe 2006 Previous research
Economic Research Service. patterns and has shown that
Agricultural Resources and trends in land, capitalization of
Environmental Indicators, 2006 water, and expected farm
Edition. Economic Information biological program payments
Bulletin 16, Washington, D.C., July resources; report increases cropland
2006. on the condition values. The effect
of natural and of farm program
other resources payments on
used in the cropland values
agricultural varies widely
sector; and throughout the
describe public United States, but
policies and increases are
programs as well highest in the
as economic Northern Plains.
factors that
affect resource
use, conservation,
and environmental
quality in
agriculture.
Janssen, Larry, and Yonas Hamda. To examine the 2005 Statewide, federal
Federal Farm Program Payments (1990 - economic impact of farm program
2001): An Analysis of Changing federal farm payments averaged
Dependency and the Distribution of program payments 36 percent of net
Farm Payments in South Dakota. in South Dakota at farm income from
Selected paper 136474 presented to the state and 1990 to 1995 and
the American Agricultural Economics local levels from almost 54 percent
Association Annual Meetings, 1996 to 2001. from 1996 to 2001.
Providence, Rhode Island, July 2005. The lowest
dependency rate of
net farm income on
payments was in
the most
cropland-intensive
East
Central/Southeast
region, while the
highest dependency
rate was in the
Western region,
which was the only
region with
payments exceeding
net farm income in
most years
examined. The
dependency rate of
farm income on
payments increased
considerably in
all regions from
the 1990-1995 time
period to the
1996-2001 period.
Babcock, Bruce, and Chad Hart. To examine how 2004 The reduction in
"Risk-Free Farming?" Iowa Ag Review, farm programs and risk that crop
vol. 10. no. 1 (Winter 2004), 1-3,11. crop insurance farmers obtain
affect revenue. from crop
insurance and
commodity programs
has largely
resulted in
risk-free crop
production. In
addition, the
article states
that farm programs
create incentives
for farmers and
landlords to focus
on growing the
commodities that
are supported by
these programs.
Goodwin, Barry, Ashok Mishra, and To examine the 2004 Farm program
Francois Ortolo-Magne. "Landowners' distribution of subsidies have a
Riches: The Distribution of farm program significant impact
Agricultural Subsidies." (Madison, payments and how on farm land
Wisconsin: University of Wisconsin, landowners may values. Among the
February 2004). benefit from these types of payments
[38]www.busc.wisc.edu/Realestate/pdf/ payments. studied, loan
Landownersriches.pdf (downloaded June deficiency
21, 2007). payments appear to
have the largest
effect. Long-term
payments not
directly related
to production had
relatively little
impact.
Gray, Allan, Michael Boehlje, Brent To examine the 2004 Federal farm
Gloy, and Stephen Slinksy. "How U.S. economic impact of program payments
Farm Programs and Crop Revenue federal farm influence land use
Insurance Affect Returns to Farm program and crop decisions because
Land," Review of Agricultural insurance payments they increase the
Economics, vol. 26, no. 2 (2004), pp. on a typical expected returns
238-253. Northwest Indiana to farming while
corn/soybean farm. lowering the
associated risk.
Also, crop revenue
insurance enhanced
the impact of
other farm
programs by
substantially
increasing the
attractiveness of
farming for the
most risk-averse
producers.
Smith, Katherine. "The Growing To examine various 2004 The use of
Prevalence of Emergency, Disaster, federal disaster emergency,
and Other Ad Hoc Farm Program assistance disaster, and
Payments: Implications for programs to other ad hoc
Agri-Environmental and Conservation determine sources of income
Programs," Agricultural and Resource potential reasons support to
Economics Review, vol. 30, no.1 for the rise in ad American farmers
(2004): 1-7. hoc disaster escalated
payments and their dramatically
impact on between 1991 and
agri-environmental 2002, increasing
and conservation year-to-year
programs. uncertainty about
the magnitude and
distribution of
farm program
benefits. Ad hoc
payments have the
potential to
substitute for or
conflict with
agri-environmental
and conservation
program goals.
Crop disaster
payments mitigate
risk for
risk-averse
producers, thus
increasing risky
production, which,
in turn, could
lead to more
natural and
market-based
losses. This could
increase the need
for additional
crop insurance and
disaster payments.
Goodwin, Barry, and Vincent Smith, To examine the 2003 The Conservation
"An Ex Post Evaluation of the impact of federal Reserve Program
Conservation Reserve, Federal Crop farm programs on significantly
Insurance, and Other Government soil erosion. reduced soil
Programs: Program Participation and erosion in areas
Soil Erosion," Journal of where producers
Agricultural and Resource Economics, have participated.
vol. 28, no. 2 (2003): 201-216. While federal crop
insurance and
disaster relief
programs appear to
have had little
impact on soil
erosion, income
supports that have
encouraged
production have
had substantial
effects. In
particular, about
half of the
reduction in soil
erosion
attributable to
CRP enrollment was
offset by
increased erosion
induced by
increases in
income-supporting
federal programs.
Federal Reserve Bank of St. Louis. To examine the 2003 The report cites
Political Allocation of U.S. impact of earlier studies
Agriculture Disaster Payments in the political finding that crop
1990s. Working paper 2003-005C (St. influence on the disaster payments
Louis, Missouri, 2003). allocation of crop create an
disaster payments, incentive for
in addition to the producers to
effectiveness of continue farming
legislation aimed in high-risk
at promoting more areas, therefore
efficient disaster continuing the
payments systems, likelihood of
such as crop losses and the
insurance, over need for
direct payments. assistance. Also,
because individual
production
histories are not
always available,
county averages
are often used to
determine disaster
payments, and
producers farming
less than the
county average
receive payments
exceeding their
actual losses.
Finally, disaster
payments do not
have predictable
annual costs.
Young, C. Edwin, Monte Vandeveer, and To examine the 2001 The presence of
Randal Schnepf. "Production and Price impact of federal subsidized crop
Impacts of U.S. Crop Insurance crop insurance on insurance adds an
Programs," American Journal of farmers' crop estimated 960,000
Agricultural Economics, vol. 83, no. decision making. acres to the
5 (2001), 1196-1203. annual planting of
grain, soybean,
cotton, and five
other row crops
for the years
2001-2010, with
more than half of
these plantings
occurring in the
Great Plains. To
the extent that
subsidized crop
insurance leads to
expanded acreage
and higher
production, market
returns to
producers will be
reduced for the
major crops. This
reduction
partially offsets
the subsidy
benefits of the
insurance.
Claassen, Roger, and Abebayehu To examine the 1999 Conversion
Tegene, "Agricultural Land Use impact of certain probabilities
Choice: A Discrete Choice Approach," economic and land depend on the
Agricultural and Resource Economics quality factors on relative returns
Review (1999), 26-36. land use choices from crop
between crop production and
production and pasture,
pasture or CRP in government policy
the Corn Belt (CRP), and land
between 1980 and quality. In
1987. general it is
found that
landowners are
less inclined to
remove land from
crop production
than to convert
land to crop
production. Corn
Belt landowners
appear to be
generally less
inclined to remove
land from crop
production than to
convert land to
crop production
for land that was
not eligible for
the CRP. This is
true even for
low-quality land
that was not
eligible for the
CRP. The asymmetry
found here is
consistent with a
long-term trend
toward increasing
cropland acreage
in the Corn Belt.
CRP eligibility
significantly
increased the
probability of
converting land
away from crop
production.
Atwood, Joseph, Myles Watts, and Alan To examine the 1996 Price support
Baquet. "An Examination of the economic impact of programs and crop
Effects of Price Supports and Federal federal farm insurance are
Crop Insurance upon the Economic program and crop substitutes in
Growth, Capital Structure, and insurance payments reducing producer
Financial Survival of Wheat Growers on wheat producers risk because the
in the Northern High Plains," in High Plains availability of
American Journal of Agricultural states, such as crop insurance led
Economics, vol. 78, no. 1 (February Montana. to little change
1996), 212-214. in farm viability
if price supports
were available.
Moreover, the
availability of
crop insurance in
a setting with
price supports
allows producers
to service higher
levels of debt
with no increase
in risk.
Heimlich, Ralph. "Agricultural To examine the 1986 For some newly
Programs and Cropland Conversion, implications of converted highly
1975-1981," Land Economics, vol. 62, legislation to erodible cropland,
no. 2 (May 1986), 174-181. reduce the price support and
conversion of farm credit
rangeland and program subsidies
other land to would make the
cropland. difference between
crop production
revenues and
variable costs
positive. Farm
programs would
provide a subsidy
for conversion of
highly erodible
land to cropland,
averaging about
$17 per acre.
Source: GAO's analysis of the studies cited.
Appendix VI: GAO Contact and Staff Acknowledgments
GAO Contact
Lisa Shames, (202) 512-3841 or [email protected]
Staff Acknowledgments
In addition to the contact named above, James R. Jones, Jr. (Assistant
Director), Kevin S. Bray, Gary T. Brown, Barbara J. El Osta, Chad M.
Gorman, Grant M. Mallie, Lynn M. Musser, Alison D. O'Neill, Susan E.
Offutt, and Steve C. Rossman made key contributions to this report. Also
contributing to this report were Muriel C. Brown and Kim M. Raheb.
Related GAO Products
Agricultural Conservation: USDA Should Improve Its Management of Key
Conservation Programs to Ensure Payments Promote Environmental Goals.
[39]GAO-07-370T . Washington, D.C.: January 17, 2007.
Suggested Areas for Oversight for the 110th Congress. [40]GAO-07-235R .
Washington, D.C.: November 17, 2006.
USDA Conservation Programs: Stakeholder Views on Participation and
Coordination to Benefit Threatened and Endangered Species and Their
Habitats. [41]GAO-07-35 . Washington, D.C.: November 15, 2006.
Agricultural Conservation: USDA Should Improve Its Process for Allocating
Funds to States for the Environmental Quality Incentives Program.
[42]GAO-06-969 . September 22, 2006.
Conservation Security Program: Despite Cost Controls, Improved USDA
Management Is Needed to Ensure Proper Payments and Reduce Duplication with
Other Programs. [43]GAO-06-312 . Washington, D.C.: April 28, 2006.
Agricultural Conservation: USDA Should Improve Its Methods for Estimating
Technical Assistance Costs. [44]GAO-05-58 . Washington, D.C.: November 30,
2004.
Agricultural Conservation: USDA Needs to Better Ensure Protection of
Highly Erodible Cropland and Wetlands. [45]GAO-03-418 . Washington, D.C.:
April 21, 2003.
Agricultural Conservation: State Advisory Committees' Views on How USDA
Programs Could Better Address Environmental Concerns. [46]GAO-02-295 .
Washington, D.C.: February 22, 2002.
Environmental Protection: Federal Incentives Could Help Promote Land Use
That Protects Air and Water Quality. [47]GAO-02-12 . Washington, D.C.:
October 31, 2001.
(360771)
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Highlights of [55]GAO-07-1054 , a report to congressional requesters
September 2007
AGRICULTURAL CONSERVATION
Farm Program Payments Are an Important Factor in Landowners' Decisions to
Convert Grassland to Cropland
The nation's remaining grassland has several important benefits, such as
providing land for grazing and wildlife habitat for many at-risk species.
However, over the past 3 centuries about half of the grassland has been
converted to other uses, principally cropland. In addition to losing
important grassland values, such conversions may result in increased
spending on federal farm programs, such as crop insurance, especially in
marginal areas. GAO examined (1) the extent of grassland conversions to
cropland and the cost of farm program payments for these newly converted
cropland acres; (2) the relative importance of farm program payments
versus other factors in producers' decisions to convert grassland to
cropland; and (3) any impact the Sodbuster conservation provision--which
places soil erosion standards on certain converted land--has had on
limiting grassland conversions.
[56]What GAO Recommends
GAO recommends that the U.S. Department of Agriculture (USDA) (1) track
the annual conversion of native grassland to cropland to provide
policymakers with more comprehensive and current information on such
conversions and (2) study the extent to which farm program payments and
conservation programs may be working at cross purposes and report findings
to the Congress. USDA agreed with GAO's findings and recommendations.
No comprehensive and current source of information exists on the
conversion of grassland to cropland or on the resulting farm program
payments for newly converted land. However, the data that are available
show a decline in private grassland nationwide, continuing conversion of
native grassland to cropland in some areas of the country, and that
certain farm program payments made to producers in South Dakota counties
with relatively high rates of conversion were significantly higher than
payments in other counties. According to USDA's National Resources
Inventory, the nation's privately owned grassland decreased by almost 25
million acres between 1982 and 2003. While some conversions are
attributable to development and other land uses, the leading type of
conversion has been to cropland. Our analysis of South Dakota counties
found that between 1997 and 2006, the average annual net crop insurance
payment per acre for the 16 counties with the highest rates of conversion
was nearly twice as high as the average payment for all other counties in
the state.
Farm program payments are an important factor in producers' decisions on
whether to convert grassland to cropland. Certainly other factors,
including rising crop prices--largely spurred by increased ethanol
demand--and the emergence of genetically modified crops and new farming
techniques that make cropping on heretofore unsuitable land possible are
also important in producers' decisions. Specifically, our analysis found
that farm program payments are an important factor in conversions. Several
economic studies have reached the same conclusion. For example, a 2006
USDA study found that increases in crop insurance subsidies motivated
producers to expand cropland in the contiguous 48 states by an estimated
2.5 million acres in the mid-1990s. Moreover, farm program payments and
conservation programs may be working at cross purposes with one another.
For example, from 1982 to 1997, 1.69 million acres of cropland in South
Dakota were enrolled in the Conservation Reserve Program, while during the
same period, 1.82 million acres of grassland in South Dakota were
converted to cropland.
The Sodbuster conservation provision has had little impact on conversions.
For certain cropland converted from native grassland and classified as
highly erodible, Sodbuster requires that producers apply a soil
conservation system that does not allow a substantial increase in erosion
as a condition to receiving certain farm program payments. However, much
of the native grassland converted in recent years is not highly erodible
and therefore is not subject to Sodbuster. In addition, according to
county-level USDA officials, the cost of controlling soil erosion relative
to potential profits from cultivating the land provides little
disincentive to conversion. USDA has proposed legislation to make newly
converted native grassland ineligible for program benefits.
References
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33. http://www.gao.gov/cgi-bin/getrpt?GAO-03-492SP
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35. http://www.gao.gov/cgi-bin/getrpt?GAO-03-418
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38. http://www.busc.wisc.edu/Realestate/pdf/
39. http://www.gao.gov/cgi-bin/getrpt?GAO-07-370T
40. http://www.gao.gov/cgi-bin/getrpt?GAO-07-235R
41. http://www.gao.gov/cgi-bin/getrpt?GAO-07-35
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43. http://www.gao.gov/cgi-bin/getrpt?GAO-06-312
44. http://www.gao.gov/cgi-bin/getrpt?GAO-05-58
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46. http://www.gao.gov/cgi-bin/getrpt?GAO-02-295
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51. mailto:[email protected]
52. mailto:[email protected]
53. mailto:[email protected]
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55. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1054
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