Can Commodity Program Payments Encourage
Better Nutrient Management?
Since 1985, farmers’ and ranchers’
eligibility for commodity program payments and other
Federal, agriculture-related payments has been contingent
on their meeting certain soil and wetland conservation
standards. On highly erodible cropland, for example,
producers must apply an approved soil conservation
system to maintain eligibility for government payments.
ERS research indicates that this “conservation
compliance” requirement could be responsible
for up to 25 percent of the 1.2-billion-ton reduction
in annual cropland soil erosion between 1982 and
Nutrient runoff from agriculture
has been identified as a major contributor to water
quality problems, and manure management issues have
received considerable attention. However, the U.S.
Geological Survey (USGS) estimates that commercial
fertilizer applications are responsible for a substantial
share of nutrient runoff, particularly nitrogen.
In areas where USGS has found the highest level
of nitrogen loads to surface water, roughly half
of all nitrogen runoff is estimated to come from
commercial fertilizer applications.
Can commodity program payments
be further leveraged to obtain better nutrient management?
The answer depends on the extent to which areas
receiving these payments coincide with the location
of nutrient runoff problems and whether payments
are large enough to offset the cost of reducing
runoff. ERS estimates that more than 80 percent
of cropland acres with high or very high nitrogen
runoff potential are on farms that receive commodity
program payments. Moreover, the highest payments
appear to flow to producers in areas where nitrogen
runoff potential is greatest. Similar relationships
are observed between commodity program payments
and potential for phosphorus runoff to surface water
and nitrogen leaching to groundwater.
Are commodity program payments
large enough to cover the costs of nutrient management
and still provide the intended income support? The
answer varies among farms. Where nitrogen runoff
potential is highest, annual commodity program payments
ranged from about $42 to more than $100 per cropland
acre. Environmental Quality Incentive Program (EQIP)
payments are the best available estimates of producers’
costs for implementing a nutrient management plan.
Half of all annual nonlivestock EQIP payments (paid
for up to 3 years) are $5 per acre or less, while
95 percent are $15 per acre or less. Buffer practices,
such as filter strips, may be cost-effective for
reducing surface runoff because they occupy only
about 2.5 percent of a field. A grass filter strip
costs an estimated $2.70 per cropland acre, on average,
although costs vary considerably.
For many—but not all—crop
farms with very high nutrient runoff potential,
the cost of measures designed to reduce nutrient
runoff would be modest compared with their commodity
program payments. Moreover, additional nutrient
management requirements would reduce net income
support to producers by the cost of applying nutrient
management practices or conservation buffers. On
the whole, however, a nutrient management requirement
might prove as effective in reducing nutrient runoff
from cropland as conservation compliance has been
in reducing erosion.