Increasing farm rental rates, caused by rising commodity prices and land values, can create a strong temptation for landowners to place expiring Conservation Reserve Program (CRP) land back in production and lease it to the highest bidder. Iowa State University’s 2011 Cash Rental Rate Survey shows the average rent for corn and soybean acres increased $30 to $214 per acre from 2010 to 2011. This is reported as the largest one-year increase since the survey started in 1994.
Rising demand for corn and other grains accompanied by extreme drought and flooding has also led to calls for a penalty-free early release of CRP land and allowances for emergency haying and grazing. In addition, landowners and operators may be contemplating cultivation on CRP land prior to expiration of their contracts or an early release.
Whether considering land management after the expiration of a CRP contract or contemplating early termination, there are important legal, financial, and ecological issues landowners and operators should consider.
Production on Expiring CRP Land
CRP land may be placed back into production at the expiration of the contract. However, this doesn’t mean the conservation benefits realized during enrollment must necessarily be lost, and, in fact, there may be additional legal requirements regarding agricultural production on post-CRP land. It is important as a landowner to not only understand practices, programs, and laws relating to continued conservation, but to also ensure compliance with desired conservation practices and legal requirements from tenant operators.
Much of the land currently in CRP is considered highly erodible, which means an NRCS approved Conservation Plan must be developed and followed in order to receive payments from major farm programs, including direct and counter-cyclical payments, loan programs, and conservation cost-sharing.
Conservation plans can be incorporated directly into a farm lease contract. Such a provision might look like this:
The Landlord and Tenant agree to prepare and comply with a Conservation Plan under the guidance of USDA Natural Resources Conservation Service (NRCS) personnel. This plan shall include conservation practices including but not limited to crop rotation, cover crops, drainage management, soil conservation, soil fertility, waste management, weed and pest control, and wildlife habitat management. The plan shall be periodically reviewed and updated by NRCS, Landlord, and Tenant. Alterations to the plan must be made in writing and signed and dated by Landlord and Tenant.
The conservation topics in this provision may go beyond those required to maintain USDA program eligibility, but will likely aid in the development of a farm operation that embraces a well-rounded approach to sustainability. The specific conservation practices and improvements required will depend on NRCS recommendations and landowner and tenant concerns and priorities. Remember, there is nothing wrong with telling your NRCS personnel that you want to do more than the bare minimum to maintain farm program eligibility.
Soil Loss Limits
Expired CRP land may also be subject to local and state regulations, such as the soil loss limits established by Iowa’s Soil and Water Conservation Districts (SWCD). Landowners are required to limit soil erosion to the extent required by the local SWCD. (Iowa Code § 161A.43 (2011)). The limit established by all Iowa districts is T, or five tons per year, which is believed to be the maximum level of sustainable soil loss. It should be noted that recent research at Iowa State University reveals an average rate of soil erosion in Iowa much higher than five tons per year.
If erosion on land exceeds the established soil loss limits and the landowner does not take steps to bring the land into compliance, the SWCD can seek enforcement of limits through a court order. Landowners required to use conservation improvements can acquire cost-sharing assistance from the SWCD. (Iowa Code § 161A.74 (2011)).
Lease provisions can help ensure erosion is kept below soil loss limits on rented farmland. Many leases also contain language requiring the tenant to comply with all environmental and soil loss regulations. These provisions typically look something like this:
The tenant agrees to comply with pollution control and environmental protection requirements as required by local, state, and federal agencies, as well as to implement soil erosion control practices to comply with the soil loss standards mandated by local, state, and federal agencies.
It should be kept in mind that such provisions require the bare minimum to maintain regulatory compliance and do not necessarily ensure a sustainable farm operation. Consideration should also be given to provisions that establish a high standard of good husbandry as well as require specific conservation practices such as contour farming, grassed waterways, and conservation tillage. The specifics, again, will likely depend on the characteristics of the land and the concerns of the landlord and tenant. More information on these specific practices can be found in the conservation practices bibliography, and more information on conservation provisions can be found in the Key Considerations chapter of “The Landowner’s Guide to Sustainable Farm Leasing.”
Other Conservation Programs
In addition to laws and regulations requiring a certain degree of continued conservation, there are government programs that assist in conservation on working lands.
Many of the conservation benefits derived from enrollment in CRP can be maintained by enrolling portions of the land in the Continuous CRP. This program keeps particularly environmentally sensitive areas, such as riparian zones and wildlife corridors, in the CRP. CRP rental payments continue on the acres enrolled. Cost-sharing is also available to assist in construction of required conservation improvements in these areas.
When using Continuous CRP, or other conservation programs, on leased land it is important for landowners and tenants to decide on the allocation of both rental payments and responsibility for required maintenance. If the landowner wishes to retain CRP payments, the enrolled land may need to be excluded from the leased property. Any decisions on these matters, as well as later modifications, should be set forth in writing as part of the lease contract.
Other programs, such EQIP and WHIP, can help maintain specific conservation benefits such as wildlife habitat and water quality. The NRCS website contains a variety of fact sheets to assist in determining the best practices and programs to use when placing expired CRP land back into production.
Production on CRP Land Under Contract
Allowed Haying and Grazing
Agricultural activities can occur under limited circumstances during the CRP contract. Production on CRP land is typically limited to haying and grazing, and this use is only available under specific circumstances. Managed and Routine haying and grazing may be available under some CRP contracts, though there are limits on the frequency and duration of these activities. Certain areas may also become available for Emergency Haying and Grazing due to drought or other natural disasters. However, this program also has limitations. More information on these programs is provided by the Farm Service Agency (FSA).
Cultivating CRP Land
Landowners that wish to cultivate land under a CRP contract can face termination of the contract as well as penalties. Failure to comply with the terms of a CRP contract can result in the termination of the contract and a demand for repayment of past CRP funds plus interest. As discussed above, increasing farm rental rates may convince some landowners, particularly those only a few years into their CRP term, to breach the contract and pay the penalties imposed. However, before doing this, consideration should be given to long-term financial factors and the possibility of declines in future rent due to decreases in commodity prices as well as the productivity of erosion-prone land. Further, additional sources of revenue from CRP land, such as hunting and other recreational leases or managed haying and grazing, should be weighed when considering giving up future CRP rents and paying penalties.
- Decision Considerations for Expiring CRP Contracts, from Kansas State University Department of Agronomy (March 2008).
- Basic Considerations for Leasing Post-CRP Land, by Debra Elias, Minnesota Institute for Sustainable Agriculture.