Aggregate economic effects of CRP land returning to production

Land enrolled in the Conservation Reserve Program will become eligible to return to crop production as the 10year contracts expire. The earliest contracts will receive final payments in late 1995. An estimated 19.2m acres of the 36.4m acres currently in the reserve are projected to eventually return to crop production, unless CRP contracts are extended. Multiple impacts are anticipated as this land returns to production. Economic impact estimates have been prepared for three scenarios; first, assuming all land currently in CRP remains in conserving use; second, assuming part of the land returns to crop production; third, assuming all land enrolled in CRP returns to crop production. Net U.S. crop income is projected to decrease by about $3b annually, relative to prices and incomes without the return of any CRP land to production. This decrease in crop income will be partially offset by a corresponding increase in livestock income of about $1b annually. Consequently, domestic agricultural income is expected to decrease by about $2b annually. Due to the projected lower prices, consumers will benefit by over $3b annually. Deficiency payments are estimated to increase as a result of lower commodity prices and as escrowed commodity bases return to farm program eligibility. Total taxpayer expense associated with the Acreage Reduction Program (ARP) and other price support programs will initially increase by about $1b, but this increase is expected to moderate to less than $0.3b by 2008.