Johanns debuts conservation farm bill study paper at WPX

By Jeff Caldwell

While it's today almost a foregone conclusion that future U.S. farm policy will have a strong conservation arm, the nation's top ag official says addressing this sector of ag production must take into account farmers' economic concerns and liabilities.

U.S. Secretary of Agriculture Mike Johanns shared these and other ideas about conservation in the next farm bill during a stop at the World Pork Expo in Des Moines, Iowa, June 8. He did so in conjunction with the release of a second 2007 farm bill analysis paper, also June 8, that specifically addresses the conservation program in forthcoming legislation. The paper, preceded by exactly one month by another specifically addressing risk management, is not a set of recommendations, but an effort to share information about current programs and possible alternatives for the future.

"These analysis papers educate the public about how our programs operate and how they might be redesigned," Johanns said at the Iowa State Fairgrounds. "The alternatives are not USDA policy proposals, rather an effort by some of the finest economists in the world to provide straightforward information.

"The need for balance also raises questions about what policies can encourage better performance."

In the conservation paper, USDA economists flesh out four tracks for the future of conservation policy in the 2007 farm bill. Each creates a different framework for future policy but does so within the parameters of what is considered "green box" in the eyes of the World Trade Organization.

"When we think about re-authorizing conservation in the next farm bill, green box and green payments are not the same," Johanns said. "Conservation and environmental programs must meet several criteria to be exempt under WTO. In other words, they must be green-box. That means payments must be limited to the extra costs or loss of income involved with complying with conservation practices.

"Generally, we do very well in our conservation programs to meet these criteria."

The first alternative track for future conservation policy, Johanns said, "builds on an existing portfolio," with USDA economists basing new policy on an extension of today's.

"Among their ideas on this basic option is basing payments on performance, greater use of options, consolidation of current conservation programs and enhancing support for alternative energy sources," Johanns said.

The second alternative, the "green payment approach," relies upon income support payments for producers based on their efforts toward environmental benefit.

"It has been suggested as an alternative way to provide environmental benefits and income support and remain consistent with our WTO constraints," Johanns said of the second alternative. "Under this alternative, the government would create a market for environmental needs, and if a payment exceeds the cost of conservation activities, the producer would make a profit by producing environmental gains."

This framework, while offering tremendous upside in bolstering environmental protection, does have holes that concern economists.

"If the payments are largely for income support, the cost of maintaining the environmental benefits would likely consume a more targeted program," Johanns said. "WTO legality is the second concern. Green payments may not qualify as green-box."

The third conservation policy alternative outlined in the USDA farm bill analysis paper comprises an altogether new framework, one based in the private-sector commercial transaction of "credits" for environmentally sound practices. To a small degree, this type of farm conservation management is already underway.

"New private-sector environmental markets would complement, or in some cases, replace existing federally supported conservation efforts," Johanns said. "These would be markets where private companies would buy credits from you, farmers and producers, to meet their environmental commitments."

Finally, Johanns said a fourth conservation policy alternative would "strengthen the links between income support, risk management programs and environmental benefits" by extending "conservation compliance" requirements. Such a framework would require farmers to practice certain conservation measures and take on the costs of doing so, but the financial weight on the ag budget for such a program would be light, making it a viable alternative because of federal budget worries and how such an ax might fall on the farm program in 2007.

"Where we see price and income supports, producers could be required to follow soil and water quality conservation requirements," Johanns said. "An advantage of compliance programs is they do not require additional program funding other than the technical assistance. However, farmers may incur costs that are not offset by cost-share programs."

In general, regardless of how future farm policy takes on the conservation task, Johanns said the Bush administration favors an approach based on two fundamental tenets.

"We must consider cost-share programs versus regulations and programs focused on working lands versus lands in retirement programs," he said.

Jeff Caldwell can be reached by phone at 515-280-5405 or by e-mail at jcaldwell@mchsi.com. For more about the USDA farm bill conservation analysis paper or other information about the administration's farm bill preparation, go online to www.usda.gov/farmbill.

Date: 6/22/06

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