Farm Management Minute: Time to re-visit CRP?
Unless there is a sudden rally in grain prices, average yields at current prices will likely produce little, if any, profits in 2015. I realize ag producers are totally focused on harvesting their crops and working with their livestock but now is a good time to explore new ways of enhancing revenue. USDA Secretary of Agriculture Vilsack recently announced a general sign-up for the Conservation Reserve Program will take place from December 1st, 2015 until February 26th, 2016.
Most of you can recall that the CRP program was established with the 1985 farm bill and authorized up to 45 million acres for enrollment. Over its 30-year history, the number of acres enrolled peaked at 37 million in 2007 and there are about 25 million acres currently in the program. The 2014 Farm Bill extended the CRP program; however, the acres are capped at 27.5 million in 2014 and gradually decrease to 24 million in both 2017 & 2018. It should be noted that no acreage limits are imposed on CCRP (Continuous Conservation Reserve Program) or CREP (Conservation Reserve Enhancement Program).
The history of CRP enrollment in South Dakota reflects the national trend with acres peaking at 1.6 million in 2007 but dropping down to approximately 900,000 in 2014 due to highly-profitable returns in grain farming. Although profits in the grain sector have greatly diminished, cattle prices have reached historically-high levels the last couple of years and former CRP acres are now being converted to pasture/range land.
As with any business, a certain amount of diversification is a prudent way to manage risk especially given the unpredictable nature of agriculture. This article is meant to provoke some thought as to whether your operation might benefit from enrolling some of your marginal land in the CRP program. In my opinion, the biggest disadvantage of the CRP program is the 10-year commitment; however, that is also the primary benefit as it provides a low-risk, stable revenue stream. The other potential threat to farmers is if the CRP payment rate meets or exceeds the local cash rent market thereby promoting a highly-competitive environment for crop and pasture ground. These are just a few of the items to consider as many operators are most likely thinking ahead to next year’s cropping plans.
The South Dakota Center Farm Ranch/Management assists farm operators with compiling and analyzing overall profitability. If you would like more information about enrolling in our program, please contact me at either 1-605-299-6760 or Kathy.Meland@mitchelltech.edu.