As I write this, there are 28 million acres across the US enrolled in the Conservation Reserve Program (CRP), the provision in the 1985 Farm Bill that allowed land owners to rent acres to the government, effectively taking marginal acres out of production with the goal of preventing erosion and cleaning up the environment in general. Beginning in 2015 though, the government will cap CRP sign-ups at 26 million. Over the next year then, nationwide, we’ll shake out over 2 million acres from the program, and those 2 million acres, well, the question then is what to do with them.
In KS alone expiring CRP contracts will affect over 120,000 acres. Some of these contracts will be renewed, but with the new, lower cap in 2015, some won’t. And yes indeed, what will we do with them? Farm them?
My question to you would be this: Why in the world would you want to do that?
I know why you’d want to do it: Because those acres used to be making you money by just sitting there, and if they’re no longer making you money by just sitting there, then you’d better find a way to make them make money again. Therefore, your thought is to farm them. However, remember why those acres went into the CRP program in the first place: because they were lousy acres. They didn’t produce. And if they didn’t produce 15 years ago, why should we expect them to produce now?
If I were writing this article in 2012, I might tell you to put a soybean crop on such acres. Commodity prices were high enough in 2012 to put the math on your side. But this is 2014. Revenue is down 25% from 2012, and that’s enough to swing the math against any plans to farm these acres.
What is up in 2014 is cattle. Cattle are selling at an all time high right now, and herein, I believe, lies our answer. If you’re a cattle guy, lend me your ears: use your formerly-CRP acres for grazing and forego the cost of buying hay. If you’re not a cattle guy, lend me your ears: lease your formerly-CRP acres for grazing or hay and earn $60 per acre per year.
To net the same amount from a soybean crop, you’d need to raise at least 30 bushel beans. If we get the rain we need, 30 bushel beans is possible, perhaps even on the low end of what we could expect. But that’s pie in the sky. You know the reality is that it can be a struggle to raise 30 bushel beans even on good ground, which your CRP acres are not. 20 bushel is the more likely yield.
So you can make an easy $60 (the grazing or hay option) or a difficult $20 (the soybean option). The choice is totally yours.
As it was with fertilizer prices, a bird in hand is worth two in the bush. That cool $60 for grazing or hay—that’s a bird in hand. A given. A guaranteed. And that’s not something we get to talk about very often in farming. In addition, it’s the easier option, and likely the more lucrative, which is also an unusual relationship in our line of work. Don’t overthink it. Your acres went into CRP because they were crummy. They’re still crummy today, and that’s okay because some really profitable cattle will be super happy to graze them and make you some dough in the process.