4th Quarter 2004 A publication of the CHOICES American Agricultural The magazine of food, farm, and resource issues Economics Association History and Outlook for Farm Bill Conservation Programs Zachary Cain and Stephen Lovejoy

Over the last 70 years, the United States Congress has The Agricultural Adjustment Act began a time-hon- taken on the task of determining how federal dollars will ored tradition in American agriculture: the notion that it is be invested in agriculture through farm bills.1 The focus of necessary to control supply in order for farmers to receive a this paper is to determine how conservation programs have fair price for their goods. The act attempted to do this by arisen and evolved and to speculate about future direction. setting price supports, or parity prices, to guarantee that Conservation programs have taken a variety of forms since prices did not fall below a set level. This price support was 1933, usually as vehicles for rural investment, income sup- available to producers who participated in voluntary pro- port, and supply control. It was not until the mid-1980s duction reduction programs, such as acreage set aside. In that conservation programs were truly rooted in protecting reality, the program was hardly voluntary—those who did natural resources. Several important environmental gains not participate were subject to the uncertainty of low have been made over the last 70 years, and the future of prices on the open market. The program was financed by conservation programs looks even more promising. levying a processing tax on the commodities. This tax was often passed straight to the consumer, who ended up pay- 1930s—Depression ing more for food and fiber products. In 1936 this tax was The Great Depression of 1929 ushered in hard times for declared unconstitutional on the grounds that Congress all Americans, especially farmers. One out of four Ameri- had passed a tax that was beneficial to one segment of the cans resided on farms at the time; today that figure is less nation—the farmer—while causing detriment to everyone than one out of 50. Between 1929 and 1932 gross farm else. income dropped 52%. In 1933 rural incomes were 40% of This setback ultimately led to the first conservation urban incomes, and there was 30% unemployment in initiatives. Congress needed to infuse cash into rural areas urban areas (Doering, 1997). When FDR was elected in while controlling supply to achieve higher commodity 1933, he promised “definite efforts to raise the values of prices, ultimately in hope of reducing the dependency of agricultural products” (Hurt, 2002). His administration, the American farmer on government subsidies. The Soil

under the leadership of Secretary of Agriculture Henry A. Conservation Act of 1935 (PL 74-46) established the Soil Wallace, produced the first farm bill: the 1933 Agricul- Conservation Service and made funding available for tural Adjustment Act (PL 73-10). Wallace understood farmers who established soil conservation practices. This the financial crisis that faced rural Americans; the best way mode of bringing cash to farmers had not been challenged to get cash to rural, predominantly agricultural focused in court, so it became the basis of economic relief in the areas was via farm programs. Direct payments were not an next farm bill: the 1936 Soil Conservation and Domestic option at this point in history; governments giving money Allotment Act (PL 74-461). Congress entitled the bill “an directly to individuals would have been seen as socialistic. Act to provide for the protection of land resources against soil erosion and for other purposes.” These other purposes were to raise the purchasing power of the American 1. “Farm bill” is used throughout this manuscript as a farmer. Soil conservation was a justifiable public expendi- common method for referring to Acts of Congress per- ture; Americans had seen how the Dust Bowl had driven taining to agricultural programs. farmers out of the Great Plains. Economic and social pol-

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4th Quarter 2004 CHOICES 37 icy analysts saw that conservation was producers (tenants and sharecrop- Table 1. Conservation expenditures. in the public interest, and therefore pers). The 1938 Act also laid the Year 1937 1999 the public should contribute to the groundwork for soil conservation dis- Financial $5,041,700,000 $231,383,000 farmer’s costs (Helms, 2003). Soil tricts at the county level. assistance conservation had also gained a formi- By providing rural Americans Technical $261,863,000 $799,578,000 dable ally in “Big” Hugh Bennett, the with conservation funding in the late assistance first director of the Soil Conservation 1930s, the administration was able to Land $17,655,000 $1,711,163,000 Service. Bennett used his supreme increase the quality of life and eco- reserve showmanship and scientific knowl- nomic security that was shattered by Total $5,321,218,000 $2,742,124,000 edge to rally Congress and the Amer- the Great Depression. Table 1 pro- Note. Adapted from Doering (2000). ican public to the need for soil vides a comparison between conser- conservation. vation expenditures in 1937 and pluses and less for conservation. The Financial assistance for conserva- 1999 in 2000 constant dollars. (PL 70- tion in the 1936 Act was called the 540) created the Soil Bank, which Agricultural Conservation Program 1940s—Wartime took 29 million acres out of produc- tion. By transferring these acres into (ACP). The ACP sought to reduce World War II brought a hungry conserving practices, the govern- commodity surplus by paying farm- world market to American producers. ment could decrease surplus supply ers to replace seven soil-depleting High demand led to higher prices, as well as deal with (as stated in the crops with soil-conserving crops. The and the government developed great act) “the stifling effects of erosion seven soil-depleting crops included surpluses to ensure national security. that threatened the welfare of every corn, cotton, wheat, and other com- Conservation was put on the back American and disrupted markets and mercial crops the USDA believed to burner as producers scrambled to commerce on the whole.” These acres be in surplus. By planting a grass, cash in on high prices. This was a were to be diverted into soil, water, legume, or cover crop in place of one period of turf wars, where the Soil forest, and wildlife conservation pro- of these soil-depleting crops, the gov- Conservation Service, land-grant col- grams in exchange for government ernment would pay the farmer for leges, Farm Bureau, extension, the rental payments for 10 years. participating in soil-conserving prac- Department of the Interior, and oth- The Soil Bank was made up of tices out of the general revenue fund ers attempted to shape their roles in two specific programs: the acreage instead of assessing a special tax. conservation programs. There devel- reserve and conservation reserve. The Although this program provided oped under Bennett a sense that SCS, acreage reserve program made farm- a constitutional way to get cash to as the keeper of the conservation ers refrain from planting surplus farmers, it failed to reduce sur- flame, had the mandate and mission commodities (corn, wheat, cotton, pluses—surpluses actually grew. This to plan and execute a national pro- rice, peanuts, and several varieties of can be attributed to farmers enrolling gram of soil and water conservation. tobacco) or plow down the crops their poorest ground into conserva- Conservation was defined as what the they had already planted. The con- tion programs while using their guar- SCS decided to do. After World War servation reserve program called for a anteed income via government II, the SCS was project oriented, three-year contract wherein the gov- payments to increase yields with fer- conducting activities like the Small ernment would pay for land tilizers, machinery, and other tech- Watershed Program and Great Plains improvements that increased soil, nology on their best ground. The Conservation Program. These were water, forestry, and wildlife quality if 1938 Agricultural Adjustment Act seen as public works programs that the farmer would agree not to harvest sought to decrease these surpluses by usually were funded to benefit the or graze contracted land. This act using acreage allotments and the home district of some congressional also stated that newly irrigated or development of the ever normal gra- representative (Doering, 1997). nary to handle excess supply, to no drained farmland could not be used avail. The act did continue to build 1950s—Dealing with Surpluses to produce these surplus commodi- on conservation policy by increasing ties, as well as providing matching The war ended, demand shrank, and payments to participants and setting funds to the state for reforestation of rules for how those payments should surpluses grew. Farm bills in 1949 private lands. Land retirement pro- be divided between landowners and and 1954 did little to control sur- grams had several objectives: reduc-

38 CHOICES 4th Quarter 2004 ing erosion, supporting farm ment program, giving the Secretary of 1973 (PL 93-86) authorized long- incomes, and reducing commodity of Agriculture authority to make 5- term contracts (up to 25 years) for price support payments by reducing to 10-year contracts with producers the Rural Environment Conservation the supply and thereby raising mar- who agreed to convert cropland into Program and Water Bank Program. ket prices (Helms, 2003). This uses that would conserve water, soil, There was a push in conservation to period started a trend that would be wildlife, or forest resources, establish increase the “natural beauty” of rural followed until the early 1980s—the or protect open spaces, natural America. The language used in the idea that the biggest problem with beauty, or wildlife or recreational Food and Agriculture Act of 1977 soil loss was lost productivity. Several resources, or prevent air or water pol- (PL 95-113) shows the USDA was important lessons would be learned lution. Payments could not exceed starting to take a harder look at about land retirement programs by 40% of the value of the crop that sources and solutions for point and the failures of the Soil Bank, such as would have been planted on that nonpoint farm pollution, including limiting retirement on a per-county land. animal wastes. The administration basis so as not to devastate local began looking not only at water pol- economies and the importance of a 1970s—Fence Row to Fence Row lution from sediment runoff but also bid system rather than fixed pay- The Russians were running out of the overall quality of water supplies ments. The acreage reserve ended in food and the Secretary of Agriculture in rural America. This also led to 1958 under criticism of its high cost told farmers to “plant fence row to increased targeting, putting money and failure to reduce production fence row” in order to produce where it was deemed most beneficial (Bowers, Rasmussen, & Baker, enough crops to meet world demand. for water quality instead of in the 1984). The Russian grain purchases ensured hands of any and all farmers. that prices and demand were high. 1960s—Targeting Surplus American farmers were more than 1980s—Conservation Policy that Commodities willing to answer the call to produce has Conservation Implications Surpluses were still the norm in the more. In retrospect, this attitude was The farm policy of the 1980s shows a 1960s, and the government contin- very detrimental to the gains that change in environmental concern. ued the fight for supply control. conservation programs had made Until this time, two major themes Conservation payments through the during the previous 40 years. Farmers had dominated the conservation ACP were being used for lime and tilled up their conservation acreage debate: first, reducing high levels of drainage, which improved soil qual- and went back to their old ways. A erosion; second, providing water to ity and increased yields. In 1962, 1977 Congressional study found that agriculture in quantities and qualities 38% of funds were spent on fertilizer 26% of farmers in the Great Plains that enhanced production (Zinn, and lime. These major outlays were Conservation Program had plowed 2001). Increased public awareness starting to be questioned as a driving up their newly established grasslands about the deleterious effects farming force behind producing further sur- for wheat production after their con- had on not only soil quality, but also pluses. Farm productivity grew by tracts had expired (Doering, 1997). water, air, and wildlife, came to life. 49% between 1950 and 1970. The This emphasizes the difficulty of Conservation programs started to Emergency Feed Grain Act of 1961 maintaining long-term conservation focus on conservation, not supply (PL 87-5) attempted to take addi- practices, especially in land retire- control or rural development. This tional corn and grain sorghum out of ment programs. swing in motives can be attributed to production by paying farmers to The the demands of the environmental replace production acreage with con- (PL 91-524) offered further pay- lobby, who found it was easier to servation areas. Designed only for ments to farmers who were willing to make environmental changes in agri- 1961, this program continued for let fishermen, hunters, and trappers culture through farm bills than several years. Subsequent acts of the onto their conservation acreage. The through environmental legislation 1960s redefined the set-aside acreage Water Bank of 1970 was established (Doering, 1999). The 1985 Farm Bill program, changing contract lengths to protect the breeding grounds of was the first to have a specific title and program capacities. The 1965 migratory waterfowl. The Agricul- devoted to conservation. The true Act established a cropland adjust- ture and Consumer Protection Act breakthrough of the 1985 Bill can be

4th Quarter 2004 CHOICES 39 found in the change in the language reduced from 21 to less than 2 tons gram. The ACP, which was once the it uses to describe the importance of per acre per year. Even though the dominant conservation program, was soil conservation for reasons other new CRP program was rooted in cash starved out of existence. A new than productivity gains. It added new resource conservation, it was still program, Wildlife Habitat Incen- programs: Sodbuster, Swampbuster, more of the same—supply control tives Program (WHIP), was estab- Conservation Compliance, and the and income support. The programs lished to help induce wildlife habitat Conservation Reserve Program implemented by this farm bill had reclamation from production acre- (CRP). the potential to make great impacts age. Conservation compliance lost its Conservation compliance set in conservation, but it would take the teeth through the farm lobby process; high penalties, such as loss of price- SCS a few years to put the actual many farmers deemed it too intrusive support programs, government crop infrastructure together to make these on their activities. In 1994, the Soil insurance, FHA loans, CCC storage programs a reality. Conservation Service was renamed loans, and CRP payments, for own- Natural Resources Conservation Ser- ers of highly erodible land (HEL) 1990s—Keep Conservation vice (NRCS). that did not develop and implement Rolling The language of the 1996 Bill a farm conservation plan before Farm bills passed during the 1990s began to reflect a change from “tar- 1995. Sodbuster required complete continued the advancements in con- geting the ACP program to specific implementation of a conservation servation that were made in 1985. practices in all counties” to targeting plan before new HEL could be culti- 1990 witnessed the establishment of EQIP to “maximize environmental vated for the first time. Failure to the Wetland Reserve Program (1 mil- benefits per dollar expended” with comply led to loss of all farm pro- lion acres) and the Ag Water Quality less regard to making certain all gram benefits until conservation Protection Program (10 million counties participated. Programs were plans were fully implemented. acres). The Food, Agriculture, Con- targeted to special “conservation pri- Swampbuster prevented conversion servation, and Trade Act of 1990 ority areas,” which functioned to of wetland areas into production (PL 101-624) addressed ground restrict the flow of conservation dol- (Napier, 1990). These programs were water pollution, water quality, and lars away from the general farming actually enforced early on, causing a sustainable agriculture, and allowed public into areas deemed environ- political uproar and turning neigh- for the use of easements, as well as mentally critical. This began an bors and SCS employees into “soil amending existing programs. This applicant process known as “bid cops.” The majority of funding went period also highlighted the impor- down,” because landowners usually to putting 36.4 million acres into the tance of natural systems larger than had to accept a lower-than-maximum CRP. The CRP was intended to con- individual farms: landscapes, water- cost-share rate to be accepted into the serve not only highly erosive lands sheds, and ecosystems (Zinn, 2001). program in order to satisfy the pro- (like soil banks had done in the past) The 1996 program extended gram’s environmental objectives but also conservation of other biolog- CRP sign-ups and formed a new (Helms, 2003). Although focusing ically sensitive and important areas. structural, vegetative, and land man- upon maximizing environmental In essence, the public rented the land agement conservation program EQIP benefits was an ambitious step for- from the farmers to ensure it was (Environmental Quality Incentives ward, the 1996 Farm Bill was only taken out of production. This land Program). EQIP started with $200 marginally successful in altering the was chosen using a scoring system, million in annual funding, half of distribution of resources, and there which was unknown to most produc- which went to livestock producers for was still substantial targeting of funds ers. The system ranked the environ- technical and cost-share assistance in for reasons other than environmen- mental improvements that could be addressing environmental improve- tal efficacy. made if the land were taken out of ments on their operations. The other production. Congress targeted enroll- half went into programs that EQIP 2000s—Going Green ment eligibility to highly erodible consolidated: ACP, Great Plains Con- The 2002 Farm Security and Rural land and other lands that posed an servation Program, Water Quality Investment Act (PL 107-171) con- off-farm environmental threat. The Incentives Program, and Colorado tinued to emphasize conservation by USDA estimates that the average ero- River Basin Salinity Control Pro- increasing EQIP funding from less sion rate on enrolled acres was

40 CHOICES 4th Quarter 2004 than $200 million to $1.3 billion farmland. These 202 watersheds are all of the conservation titles, (e.g., the over several years and establishing a located in portions of all 50 states maximum environmental bang for new Conservation Security Program and Caribbean territories, thus the buck; Lovejoy & Doering, 2002). (CSP). Environmental enhancement greatly broadening the scope (and now took priority over other benefits, presumably the cost) of the CSP pro- Future of Farm Bill Conservation such as productivity and supply con- gram. Programs trol. The 2002 Bill also removed Land retirement programs What will conservation programs of restrictions that limited the ability of expanded by this legislation placed a future farm bills look like? Let’s get the USDA to assist larger farmers particular emphasis on wetlands. out the crystal ball. The average fore- (Lovejoy & Doering, 2002). The CRP acreage was increased from 36.4 casted outlays of the Commodity CSP pays producers to adopt or to 39.2 million acres, and an addi- Credit Corporation, $16.5 billion, maintain practices that address tional 1.2 million acres were added to represents about one third of total resources of concern, such as soil, the WRP. The 2002 Bill also created annual net cash farm income. This water, and wildlife. This “green pay- a Grassland Reserve Program (GRP) only signifies the importance of farm ment” program openly recognized to assist landowners in restoring and program payments to the near future that farmers who had strived for con- conserving grasslands. WHIP of agriculture. Since we likely will servation and environmental received a tenfold funding increase not abandon farm subsidies anytime enhancement also deserved some over the 1996 Bill. The Farmland soon, we need to examine where that financial assistance. The CSP is a Protection Program, which provides funding might go. Green payments, three-tier system; higher tiers require funds to state, tribal, or local govern- such as the CSP program, hold real greater conservation effort and offer ments and nonprofit organizations to potential for environmental benefit greater payments. However, to date, help purchase easements against the while retaining producer income sup- the program is still significantly development of productive farmland, port. The upside to such a policy underfunded. This can be blamed also received increased funding. would be increased environmental partially on the funding pipeline, The Farm Security and Rural protection and reaching compliance which is connected to the CCC Investment Act increased funding for in the World Trade Organization. instead of the general congressional environmental programs by 8 times The WTO does not view conserva- funding. Lobbyists believed that by over the 1996 Farm Bill, but recent tion payments (unlike other subsi- funding the CSP through the CCC, increases in defense and homeland dies) as distorting international trade, the program would not be prone to security spending have made getting as long as they are used to make con- the pitfalls of budgetary reductions. money to these programs difficult. servation gains. The downside to However, the weather dictated other- The 2002 Bill sought to reduce tar- such programs is the cost associated wise, as the CCC funding quickly geting funds by developing a regional with them. In a green payment sys- vanished in the form of disaster pay- equity provision. This provision gives tem such as the CSP, almost every ments to producers after a string of priority conservation program fund- producer would be entitled to pay- flooding in the early part of the ing to any approved application in ments, not just those growing spe- decade. In 2004, a total of 2,188 any state that has not received at least cific crops. Moving to such payments CSP contracts were approved (all $12 million in funding for the fiscal could decrease productivity, essen- farms that applied were accepted) year. The “bid down” process was tially driving up food prices. They covering 1,885,400 acres in 18 also removed, and least cost was no require more planning and input watersheds at a cost of $35 million. longer used in selecting from applica- from agencies like the NRCS, costing Of the 27,300 farms in the 18 water- tions with similar environmental more money and further intruding sheds, only 8% of farms applied and benefits. The 2002 Bill shows a fun- on the farmers’ independence. It will received contracts, comprising 14% damental change in the process of be interesting to see where the of the 14 million eligible acres. The environmental spending. Congress tradeoffs will be made among Ameri- NRCS has announced plans to and the USDA would no longer cans’ desire for a healthy environ- increase from 18 to 202 watersheds attempt to simply maximize the ment, low taxes, cheap food, a in 2005, which includes about number of acres in conserving uses, profitable agricultural sector, and a 208,000 eligible farms and ranches but rather maximize the environmen- dynamic rural economy. In an age of and more than 83 million acres of tal benefits for the expended funds in

4th Quarter 2004 CHOICES 41 big budget deficits, it is probably safe from a vehicle of income, price, and Doering, O.C. (1999). Farming’s to assume that we might not see a supply control into an environmental future. Forum for Applied switch to solely green payments in resource management program that Research and Public Policy. the next farm bill, but rather a fight only occasionally manipulates Doering, O.C. (1997, Feb.). An to keep the conservation payments income, price, and supply. Early farm overview of conservation and we currently have. It is more likely bills sought to help the producer con- agricultural policy: Questions that we will see a reform in the way trol erosion and increase productivity from the past and observations direct payments are made to produc- of the land; later acts attempted to about the present. Agriculture and ers with continued countercyclical- control the overall supply of com- Conservation Policies, A Workshop type payments to buffer against the modities to boost prices. Since 1985, in Honor of Norman A. Berg. bad years. If the best indicator of great strides have been made in con- Helms, J.D. (2003, Dec.). The evo- future behavior is past behavior, we servation titles of our nation’s farm lution of conservation payments should not expect revolutionary bills, bringing into focus the true to farmers. Compensating Land- changes in Congress’s handling of the importance of the balance of natural owners for Conserving Agricultural next farm bill, but rather continued ecosystems and production agricul- Land. Davis, CA: U.C. Davis evolutionary change of conservation ture. We are far from finished with Community Studies Extension policy and continued support for this task; there are still many prob- Conference. some level of commodity payments lems of production agriculture that Hurt, R.D. (2002). Problems of and disaster relief. A recent initiative need to be reconciled. This will be plenty: The American farmer in the by some agricultural lobbying groups the duty of future farm bills—to con- twentieth century. Chicago: Ivan suggests declining support for acreage tinue to provide farmers the opportu- R. Dee. retirement programs and increasing nity to become better stewards of the Lovejoy, S. & Doering, O.C. (2002). support for full production. The bal- land. The future of green payments Conservation and environmental ance between the desires of these will likely be a function of time, enhancement in the 2002 farm bill groups and the environmental con- available dollars and congressional (publication CES-344). Purdue cerns of other groups remains to be will. University Cooperative Extension seen. Service. For More Information Napier, T.L. (Ed.). (1990). Imple- Conclusions Bowers, D.E., Rasmussen, W.D., & menting the conservation title of During the Great Depression the fed- Baker, G.L. (1984). History of the food security act of 1985. Soil eral government began a system that agricultural price-support and and Water Conservation Society. invested in the rural agricultural adjustment programs, 1933-84 Zinn, J.A. (2001). CRS report: economy to help farmers face tough (Agricultural Information Bulle- IB96030: Soil and water conserva- times. Before this time, the USDA tin 485). Washington, DC: tion issues. provided research, marketing, and USDA ERS. extension services. Now they were Doering, O.C. (2000, May). Tec hno l- Zachary Cain is a graduate research attempting to provide income and ogy and structural changes in agri- assistant and Stephen Lovejoy is a professor in the Department of Agri- crop price support to the impover- culture since 1900. Presentation to cultural Economics, Purdue Univer- ished American farmer. The mode of Sec. of Agriculture Glickman, sity, West Lafayette, Indiana. This this funding ended up being conser- USDA Conference Visions for research was funded, in part, by a vation programs, and the govern- the Millennium: Structural cooperative agreement from the Con- ment spent greatly, as indicated in Changes Facing Livestock and st servation Effects Assessment Pro- Table 1. This program continued to Grain Markets in the 21 Cen- gram, Agricultural Research Service, evolve over the decades, changing tury, Kansas City, MO. USDA.

42 CHOICES 4th Quarter 2004