Conservation Compliance: How Farmer Incentives Are Changing in the Crop Insurance Era

Conservation Compliance ties eligibility for most Federal farm program benefits to soil and wetland conservation. To be eligible for farm program benefits, farmers must apply an approved soil conservation system on highly erodible cropland (Highly Erodible Land Conservation, or HELC) and refrain from draining wetlands (Wetland Conservation, or WC). Conservation Compliance is effective when the incentive—the farm program benefits that could be lost due to noncompliance—exceeds the cost of meeting soil and wetland conservation requirements. HELC significantly reduced soil erosion on highly erodible cropland and may have also encouraged erosion reduction on land not subject to HELC. Compliance incentives (farm program benefits) under the Agricultural Act of 2014 are found to (1) vary widely across farms with cropland in HEL (highly erodible land) fields, (2)approximate the overall level of incentive that would have been provided under an extension of the 2008 Farm Act (although incentives changed significantly on many farms), and (3) be significantly lower on many farms if crop insurance premium subsidies were not subject to Conservation Compliance. Compliance incentives for WC, although measured only in the Prairie Pothole region of the Northern Plains, are clearly larger than Compliance costs for an estimated 75 percent of wetlands that are already cropped or have characteristics (e.g., productivity, topography) that are favorable to crop production.