Do expiring CRP acres spell opportunity?
Last fall, the U.S. retired 2.8 million acres from the federal Conservation Reserve Program. For many farmers and ranchers, this represents a loss of CRP rental income. But, it could also mean opportunity as a growing amount of former CRP land becomes available for grazing, haying or crop production.
If you own expiring acres, you face several decisions. You can retain grass cover for grazing or hay, or grow crops. You can lease the land to others for agricultural production or hunting. Or, you can sell the property. We talked to a few experts about what you should consider.
While most CRP land has been idle for 10 years or more, all was cropped at one time. Joe Horner, beef and dairy economist with the University of Missouri, thinks the best acres will go back into crop production.
“With $10 soybeans, farmers are likely to line up to rent better CRP land as it comes out,” he said. “No-till and reduced tillage makes many of those highly erodible soils cropable without necessarily subjecting the farms to significant erosion.”
Marginal soils will probably be used for pasture or hay, he added. “Feeder calf prices are likely to be good for the next three years, encouraging cattle producers to expand onto former CRP land.”
Paul Tracy, director of agronomy for MFA Incorporated, believes that the age of landowners may impact decisions more than the economics of cropping versus grazing. “I’d be surprised if more than a quarter of expiring acres will be cropped this year,” he said, adding that many who put land into the CRP were absentee owners or retired farmers who sold off their equipment. “Unless commodity prices go up a lot higher, most will probably keep the acreage in grass,” Tracy said.
No matter what you do with it, over the next three years, CRP contracts expire at a growing rate. This fall, another 4.5 million acres will come out across America, including 132,375 in Missouri and 615,555 in Kansas. Expiring acreage peaks in 2012. Not all acres may come out of the CRP as planned— USDA recently announced another CRP sign-up, with details to follow this summer.
Can you make a living on it?
The shift in CRP policy especially affects areas with highly erodible land, according to Gerald Hrdina, conservation program specialist with USDA’s Farm Service Agency for Missouri. FSA administers the program in cooperation with Natural Resources Conservation Service.
“The large amount of rain we get, along with our soil type, makes Missouri susceptible to erosion,” Hrdina says. “We used to have the second or third-highest rate of erosion in the U.S.”
As of March, Missouri farmers earned an average of about $70 an acre in CRP rental payments. Payments run higher in the north where farmers grow more corn and soybeans, compared to areas where farmers graze or hay.
In Kansas, most CRP land lies in the drought-prone western third of the state, part of the Dust Bowl in the 30s—an event that prompted today’s conservation programs, according to Rod Winkler, conservation specialist with Kansas FSA. “We encourage farming the best of the land, and conserving the rest,” he said. This spring, Kansas CRP payments averaged about $44 an acre, with higher rates in more productive eastern counties.
Considering today’s relatively high commodity prices and increasing livestock returns, most experts think that in most cases, the region’s producers should be able to match rental income from the CRP.
To crop or not to crop.
It’s difficult to predict the share of former CRP acreage that will remain in grass. Less than 36,000 acres of CRP expired in Missouri last fall, but some sold, and the sales offer a window into the future. FCS Financial loaned funds for some of it. “By our estimate, it was almost a 50/50 split between crop and pasture,” said CEO Daryl Oldvader. “While farmers purchased most of the land, some went to investors looking to secure a cash rent above current CRP payout and possibly resell.”
Patrick Westhoff thinks this split will hold true. “We assume that roughly half of expired contracts would go back into crop production,” said the program director of the Food and Agricultural Production Research Institute at MU. “But that will certainly vary by region and the characteristics of the land.”
Hrdina sums up costs. Generally, using CRP land for grazing or hay costs less than breaking it out for crops. And, growing hay costs less than grazing since you don’t have to shell out for fence or water improvements.
But profits matter more than input costs. “For the vast ma¬jority of cropable CRP lands, we expect net returns to be highest for crop enterprises, followed by CRP rental, then grazing,” said Brent Carpenter, FAPRI research associate. For example, he said, with current costs and prices, corn on marginal land yielding 110 bushels an acre returns about $140 per acre after variable cost. “A farmer can afford to spend several hundred dollars to get land back into shape for cropping. Potential gains from grazing do not leave much room to justify investment in water and fencing.”
If your land’s not suited for crop production and it includes livestock water, grazing livestock may reap more profits than haying. Horner suggests you condition old CRP land by patch burn grazing, where you burn off one-third of the farm every year. “Summer grazing cattle will camp on the regrown burned areas while only lightly grazing other areas,” he said. “For lightly stocked backgrounding operations, research by the Missouri Department of Conservation shows that patch burn grazing can lead to average daily gains equivalent to rotationally grazed cattle. And patch burn grazing is cheaper and easier than adding water lines and fencing.”
Help is available
Hrdina reports that farmers are starting to come into local FSA offices to learn about their options. If you have CRP land or you plan to purchase some, you should contact your FSA office about other types of program payments. If you have base acres on former CRP land, you’ll be eligible for payments even if you leave it in grass for grazing or wildlife. If you break out land, NRCS requires you to follow conservation rules before you qualify for USDA benefits.
Check with the Missouri Department of Conservation regarding cost sharing for patch burning, and with NRCS` for fencing and water installations, including rotational grazing. Your Extension office can also help. Contact your NRCS field office for information on the best conservation practices.
CRP expirations may impact land and rent prices
Even if you don’t own CRP land, CRP changes may affect you in terms of land values and rental prices. “Since its inception in 1986, the CRP has been instrumental in establishing a floor under land values,” said Daryl Oldvader, CEO of FCS Financial.
His association finances land and tracks values across most of Missouri. “If budgetary restraints dissolve the CRP, the additional land going into crop production could soften cash rents,” Oldvader said. “With current crop margins, additional land in production could erode rents and even land values in some areas. An old adage supporting increasing land values is that they’re not making any more land. The potential influx of CRP land into the marketplace could have Uncle Sam doing just that.”
Joe Horner, MU beef and dairy economist, offers his view on rents. “Landowners with former CRP fields coming into crop production are likely to see cash rental rates above CRP rental rates,” he said. For those that own pasture and hay acreage, “Unless they take the risks of owning cattle themselves, they are likely to see a decrease in income because pasture and hay rental rates are less than CRP rates in many areas of the state.”
Horner expects crop returns and interest rates to drive land prices more than CRP expirations. “Rental prices for small acreages of marginal land may soften some in areas without significant competition for land by operating farmers,” he said, adding that CRP owners may demand longer-term pasture leases to justify the cost of perimeter fencing.
FSA’s Gerald Hrdina believes that since CRP land tends to be more marginal, the release of CRP acreage won’t drastically affect rental prices.
Because CRP land could always be leased for hunting, experts don’t see much change in prices for wildlife leases or hunting land purchases.
For more on cash rent rates in Missouri, visit http://agebb.missouri.edu/mgt/bull8b.htm.
How to get the most out of former CRP acreage
Paul Tracy, director of agronomy for MFA Incorporated, offers advice for those who plan to farm expired CRP acreage.
You’ll need more fertilizer than you think.
“CRP land will be low in fertility be¬cause plant foods haven’t been added for ten or more years,” Tracy said.
“Soil was tested when it went into the program, but keep in mind that almost all soil test labs make recom-mendations based on multiple years of application,” he added. The lab that MFA uses provides four-year plans, for example. Few landowners followed up beyond the first year, leaving the land hungry for nutrients today, whether you plan to use it for grazing, hay or crops.
Based on the region’s heavy rainfall, Tracy suspects you’ll also need lime The land will be weedier than you expect.
“Weeds can be controlled with herbicides, but after so many years, it will take multiple years of applications,” Tracy said. “If you get rid of 50 to 75 percent the first year, you’ll be lucky.”
Just one type of herbicide won’t clear out the many species of curly dock, brush and trees that you may find. Annual weeds may be easy to eradicate, but biennials and especially perennials will be more difficult.
Invasive plants will be easier to control if you leave the acreage in grass, but tougher if you grow crops. “I recommend a double shot of glyphosate the first year,” Tracy said. “Still, there’s only a 50 percent chance you’ll get a good stand the first year using no-till methods.”
If you crop, avoid the temptation to till.
“One big gully washer and you’ll lose topsoil—you’ve just destroyed 10 years of conservation,” Tracy said. No-till helps prevent erosion.
Tracy recommends that you begin herbicide applications in the fall. “If you wait until spring, you’ll get a late start,” he explained. “You can’t kill fescue until it’s six inches tall.”
Here’s his formula for success: Hit the field with glyphosate in the fall, plant wheat and graze it over the winter if possible, spray again in the spring and plant another smother crop like millet. Establish your no-till crop in year two.
Start with beans.
“Your first crop should be Roundup Ready soybeans,” Tracy said. You can plant beans later than corn, leaving more time for spring herbicides to work.
“When planting beans, be sure to inoculate with rhizobium bacteria,” he added. “It’s usually present in soil that’s been planted to beans regularly, but it will have died off in CRP acreage. Be sure to check the product’s expiration date, and store it properly so it remains viable. You can’t leave it on the dashboard of your truck for a week.”
Your local MFA store can help you get the most out of the acreage with custom application.