Conservation Program Design

Contrasting Working-Land and 

Land Retirement Programs

Marcel Aillery

Agriculture is a major use of the Nation’s natural resource base, with nearly two-thirds of the U.S.

land area in farmland, ranchland, or private forestland. Given the potential impact of agricultural production on resource use and quality, resource stewardship and protection of natural systems has been

an important focus of the USDA program mission. USDA conservation policy encompasses an array

of agricultural conservation strategies. Two strategies account for the majority of USDA conservation payments to producers: (1) improving resource management on working lands—cropland and

grazing land in production, and (2) longterm retirement of environmentally sensitive croplands.

Cropland retirement has accounted for most USDA conservation funding since 1986, with a recent

shift toward conservation practices on working lands. Differences in objectives and design across

land retirement and working-land programs have implications for regional production and income,

environmental outcomes, public expenditures, and cost effectiveness, requiring an appropriate balancing of program funds. While land retirement often provides greater environmental benefit per

acre, larger environmental gains per program dollar may be achievable through conserving practices

on working lands. The suitability of land retirement versus working-land initiatives depends on

regional resource priorities and resource conditions on the farm. Greater integration across land

retirement and working-land programs could be an effective means of addressing multiple resource

concerns, although policy implementation would involve significant challenges.
ECONOMIC BRIEF Contrasting Working-Land and Land Retirement Programs

UNITED STATES DEPARTMENT OF AGRICULTURE

Conservation Programs Focus on Land Retirement After 1985

The 1985 Food Security Act signaled a new era of agricultural conservation with two major land retirement

programs. The Conservation Reserve Program (CRP) targets removal of highly erodible and other environmentally sensitive lands from agricultural production under 10- to 15-year lease agreements. The Wetland

Reserve Program (WRP) restores cropped wetlands under permanent easement or long-term agreements.

Subsequent extensions of the CRP—including the continuous signup and the Conservation Reserve

Enhancement Program (CREP)—provide for partial-field enrollment in priority conservation practices.

Under cropland retirement, program participants agree to convert environmentally sensitive farmland to

conserving uses in return for annual rental payments or easement payments (lump-sum or phased in) that

reflect the value of local agricultural activity for a given land quality. In CRP’s general signup, payment

rates are derived through a competitive bidding process, subject to rental rate caps fixed by soil type at the

county level. Producers offer to enroll a parcel with a specified practice at a given price. Offers are ranked

using an Environmental Benefits Index (EBI) that weights expected environmental gains and offer prices.

CRP cost-sharing is available for establishing conservation covers and other practices that enhance environmental benefits on enrolled acreage.

Since 1986, land retirement has dominated Federal conservation expenditures (fig. 1). From 1986 through

2000, more than 90 percent of direct conservation payments were allocated to land retirement programs.

This share has declined in recent years as funding for working-land and agricultural land preservation programs increased. Nonetheless, land retirement programs still accounted for more than half of all USDA

conservation expenditures in 2005, including more than $1.9 billion for CRP and $275 million for WRP.

Addressing Environmental Concerns Through Land Retirement

Land retirement programs are best suited to cropland where environmental costs are high relative to the value

of production. Such lands are often characterized by lower productivity in cropped uses or exceptionally high

ecological services in a natural state, particularly where environmental concerns are acute and ecosystem functions require time to re-establish (see box – “Matching Policy Tools with Environmental Concerns”).

Land retirement programs offer important advantages over working-land programs. Greater environmental

benefits per contract acre are often achievable, and monitoring and enforcement requirements are generally

Billion dollars

Figure 1

Trends in USDA conservation expenditures, 1983-2005

0

1

2

3

4

5

1983 1987 1991 1995 1999 2003

 Source: Office of Budget and Policy Analysis, USDA, and the Congressional Budget Office

Other major conservation 

programs

Agricultural land preservation

Working land programs

Land retirement programs

Conservation technical assistance

2

Voluntary conservation

payment programs need to

specify who is eligible to

receive payments, how much

can be received, for what

actions, and the means by

which applicants are selected.

The achievement of program

goals in a cost-effective manner hinges on the choices 

policymakers and program

managers make when 

answering these questions.

This Economic Brief is

one in a set of five exploring

specific design options these

decisionmakers face:

(1) income support versus

environmental objectives,

(2) alternative ways to target

programs,

(3) the use of bidding in

determining payment

levels,

(4) land retirement and

conservation on 

working lands, and 

(5) payments for conservation practices versus the

level of environmental

performance.

Available at www.ers.usda.gov/

publications/eb1, . . ./eb2,

. . ./eb3, . . ./eb4, and . . ./eb5
3

lower. Wildlife populations requiring large contiguous parcels of suitable habitat may benefit from land

retirement. Furthermore, rental payments for retired land provide an important income source for many

small farms. To the extent that commodity supplies are reduced, land retirement may help to support commodity prices and reduce Federal commodity program payments.

However, addressing environmental concerns through land retirement poses challenges. Program cost of land

retirement is relatively high, as payment rates generally reflect the full agricultural value of the land. Retired

lands may require substantial restoration to achieve desired ecosystem functions. Rural communities may be

adversely affected by large adjustments in farm production, farm input and processing activities, and tax

base, although recent ERS research suggests that local impacts are not significant in most areas. Long-term

land retirement may limit producer flexibility in responding to changing commodity markets. Finally, environmental benefits may be partly offset if land retirement induces cropping expansion or intensification on

other lands, and environmental benefits are transitory if land eventually returns to crop production.

Increasing Emphasis on Conserving Practices for Working Lands 

In recent years, there has been growing recognition of the importance of conservation on working farms

and ranches. Given the extent of national acreage in agricultural production, substantial environmental

progress may be possible only through conservation on working lands. Moreover, many environmental concerns may be addressed more cost effectively through working-land practices, extending available conservation dollars. With limits on available funding in land retirement programs, cost-share and incentive mechanisms that leverage private sector investment are important in achieving national environmental goals.

The Environmental Quality Incentives Program (EQIP), introduced in 1996 and extended under the 2002

Farm Security and Rural Investment Act (the 2002 Farm Bill), is the Nation’s primary agricultural conservation program for working farms and ranches. EQIP provides financial and technical assistance to encourage

adoption of farming systems that conserve resources and enhance environmental performance. The

Conservation Security Program (CSP), authorized in 2002, provides financial and technical assistance to

farmers and ranchers recognized as exemplary land stewards. The Wildlife Habitat Incentives Program promotes habitat development on farm and ranch operations. Additional USDA programs providing easement

funding for land preservation—including the Farm and Ranch Land Protection Program and Grassland

Reserve Program—encourage resource stewardship on working farms and ranches.

Under EQIP, cost-share and incentive payments are available for eligible practices under short-term (1- to

10-year) contracts. Cost-share rates range from 50 to 75 percent of installation cost for structural and vegetative practices, with incentive payments for management practices (e.g. nutrient, pesticide, irrigation, and

Situations where land retirement is likely to be 

relatively cost effective:

• Cropland with very highly erodible soils, where costs necessary to

achieve acceptable levels of erosion exceed the value of crops

• Restoration of cropped wetlands, where ecosystem functions

improve with time 

• Cropland subject to severe flooding, resulting in significant risk

of crop loss as well as downstream flood damages

• Farmland and forestland providing habitat—particularly where

species require large contiguous areas, or where critical habitat

for species recovery is limited and highly localized 

• Forest regeneration on environmentally sensitive cropland,

requiring multi-year stand establishment

• Irrigated production in areas with acute water issues, e.g. rapidly

declining aquifers, poor quality return flows

Conservation measures on working lands that are 

likely to be relatively cost effective:

• Nutrient management measures for crop and livestock systems

to protect water quality

• Soil conserving measures to minimize runoff and soil loss on

highly productive fields

• Water management measures for improved water conservation

and drainage control

• Livestock grazing regimes that help sustain grassland and 

riparian systems 

• Wildlife enhancements—including Safe Harbor agreements—

that improve habitat and forage conditions

• Preservation of farmland and open space in urban fringe areas

Matching Policy Tools With Environmental Concerns: Land Retirement and Working-Land Programs
Contrasting Working-Land and Land Retirement Programs ECONOMIC BRIEF

4 ECONOMIC RESEARCH SERVICE

habitat management) established at the county level. Cost effectiveness is assessed through a State or

local ranking procedure that considers anticipated environmental benefits of conservation practices proposed by the applicant. Targeting provisions based on priority resource areas, and more recently,

national/regional environmental priorities, have sought to enhance program effectiveness (see Economic

Brief No. 2).

The CSP differs from EQIP in that payments are awarded based on levels of conservation established

on the farm or ranch. Participants are placed in one of three tiers, with higher payment rates for

improved land stewardship. The CSP was established, in part, to provide equity for producers who have

successfully addressed resource concerns, and may not be served by payment incentives under existing

conservation programs.

Much of the 80-percent increase in conservation funding under the 2002 Farm Bill was allocated to

working-land programs. Annual funding levels for working lands increased from $174 million in 2000

to roughly $1.3 billion in 2005. EQIP accounted for more than $1.0 billion in 2005, with 60 percent of

program expenditures allocated to livestock-related resource concerns. CSP funding increased to $202

million in 2005, with $38 million in the Wildlife Habitat Incentives Program.

Addressing Environmental Concerns Through Working-Land Programs

Working-land programs are best suited to environmental concerns that can be addressed at least cost

through changes in farming practices, particularly in areas where agriculture is highly productive and provides substantial public benefit.

Working-land programs offer important advantages over land retirement. Use of conservation practices

on working lands may achieve environmental benefits at lower program cost (less than the full agricultural value of land), since land remains in production. A wide range of environmental concerns can be

addressed on the vast area of U.S. farmland and ranchland in active production, subject to funding availability. Improved practices can help maintain the long-term productive capacity of agricultural resources

and the viability of agricultural activities. Working-land programs may also help producers mitigate the

cost of Federal/State regulatory requirements (e.g., manure-nutrient management).

But there are also challenges in addressing environmental concerns on working lands. Farmers’ management time is limited, and the management of some conservation systems may compete directly with the

management of production. Conservation practices may require substantial technical support to assess

problems and implement appropriate

conservation structures and practices.

The availability of qualified technical

assistance is an important concern.

Adoption of recommended management practices (e.g., crop nutrient management) may be difficult to monitor

and costly to enforce. Finally, demand for

program participation has exceeded funding levels, and significant information and

resources are needed to allocate scarce

funds effectively.

Regional Enrollment

Patterns Vary by

Conservation Strategy

The distribution of retired farmland differs considerably from enrolled acreage

under working-land programs, with

implications for the nature and magniDifferences in objectives and design across

land retirement and

working-land programs

have implications for

regional production

and income, environmental outcomes, public expenditures, and

cost effectiveness,

requiring an appropriate balancing of program funds.
ECONOMIC BRIEF Contrasting Working-Land and Land Retirement Programs

UNITED STATES DEPARTMENT OF AGRICULTURE 5

tude of regional environmental benefits. CRP enrollment totaled roughly 31.7 million acres nationwide in

2004, much of it in the Midwest and Plains States, reflecting a long-time emphasis on highly erodible soils

(fig. 2). The continuous signup provision has broadened the distribution of CRP enrollment, with an

additional 3.1 million acres in high-priority practices (filter strips, riparian buffers, grassed waterways, windbreaks), much of this targeted to priority resource areas. Approximately 1.6 million acres were enrolled in

the WRP in 2004, with acreage concentrated in the Mississippi Delta area, Florida, and California.

EQIP enrollment has been more evenly distributed across producing areas, reflecting the wide array of

eligible practices, a State allocation system for funding, and broadly defined targeting provisions (based

on national resource priorities under the 2002 Farm Bill). In 2003, program outlays per acre were highest

in parts of the Mountain and Pacific regions and throughout the Eastern States—regions less served by

land retirement programs. EQIP payments generally reflect regional resource concerns: soil conservation

in the Midwest, animal waste management in the East, and water management in the arid West (fig. 3).

CSP payments for resource stewardship are also broadly distributed. CSP contracts were targeted to 220

watersheds through FY 2005, with eligibility eventually extending to all U.S. watersheds on a rotating basis.

Toward an Integrated Agri-Environmental Policy?

Theoretically, working-land and land retirement programs could be integrated to maximize benefits from

public conservation expenditures. This might be achieved through a single comprehensive program, or

through multiple programs within a single administrative system. An integrated policy framework could

better leverage market-based competitive bidding and benefit-cost assessment, resulting in more optimal

funding allocations. A producer’s bid to improve nutrient management, for example, could be compared

against an alternative bid to retire cropland from production. While nutrient management would presumably provide fewer nutrient-control benefits than land retirement (some nutrients would continue to be

lost from cropland), nutrient management would likely be less costly per unit of nutrient loss since farmers retain revenues from land in production.

Figure 3

Distribution of EQIP funds by environmental concern and region, 1997-2002

Source: Economic Research Service, USDA.

Soil and land conservation

Water quality and conservation

Wildlife habitat

Crop nutrients

Livestock manure nutrients

Other

Southern Seaboard

Basin & Range

Fruitful Rim Eastern Uplands

Heartland

Mississippi Portal

Northern Crescent

Northern Great Plains

Prairie Gateway

Theoretically, workingland and land retirement

programs could be 

integrated to maximize

benefits from public conservation expenditures.
Contrasting Working-Land and Land Retirement Programs ECONOMIC BRIEF

6 ECONOMIC RESEARCH SERVICE

An integrated policy framework could be managed to address multiple farm policy objectives. Benefits

may be defined to include various environmental measures—like water quality and wildlife habitat—as

well as producer income and equity, community impacts, Federal outlays, and other considerations. In

principle, the CRP’s Environmental Benefits Index could be expanded to encompass a broader range of

benefits. Cost-efficiency factors by farm practice under EQIP provide a conceptual basis for comparing

across land retirement and working-land initiatives.

Program integration offers several potential advantages:

Consideration of both land retirement and practice adoption bids would maximize environmental gains per conservation dollar while increasing production flexibility and responsiveness

to market signals.

Interactions across resource concerns could be considered in assessing the location and extent

of land retirement relative to working lands. For example, land retirement could be coordinated with farming practices to maximize wetland habitat and crop-residue forage for migratory

waterfowl. Additionally, the retirement of selected irrigated lands with appurtenant water

rights could lessen water-supply cutbacks on downstream operations during drought.

Land retirement and working-land initiatives could be more effectively coordinated with other

conservation policy tools, including conservation compliance, agricultural land preservation,

and regulatory mandates.

Policy integration through expansion of a competitive bid system could reduce distorting

effects on production.

However, effective policy coordination would involve significant information, resource, and administrative requirements:

Assessing the benefits of land retirement versus working-land initiatives over multiple measures

and highly diverse resource settings is difficult, making allocation decisions problematic.

Considerable modeling and data development would be required to expand the EBI.

Administrative costs may offset some portion of efficiency gains due to consolidation.

Alternative administrative structures and program design issues would have to be resolved,

and the role of State versus Federal authorities would need to be established.

Conclusion

Land retirement and working-land initiatives will continue to be important features of the national conservation portfolio, with the suitability of each dependent on the nature of the environmental concern

and resource conditions on the farm. While current land retirement programs remain administratively

and programmatically separate from working-land programs, hard distinctions have blurred as programs

have adapted to accommodate similar priority practices and increased flexibility in producer options.

Working-land programs have encouraged cropland conversion to non-cropped uses, such as grassed

waterways and stream buffers, on environmentally sensitive portions of the farm or ranch operation.

Land retirement programs have increasingly targeted partial fields for high-priority conservation practices—as in the case of stream buffers under CREP and CRP continuous signup. In some cases, retired

acreage may continue to be used for agricultural purposes. CRP lands, for example, may be grazed under

specified conditions (with payments adjusted in some cases), providing additional benefits to producers

while potentially enhancing habitat values. All of these measures suggest a trend toward greater integration of working-land and cropland retirement initiatives.

A comprehensive policy that better integrates land retirement and working-land initiatives offers the

prospect of enhanced cost-efficiency in achieving conservation goals. But our understanding of the policy implications remains limited. Further research in selected watersheds could provide insight on efficiency gains achievable using current measures of costs and benefits, as well as additional resources

(data, technical assistance, etc.) needed for more effective program integration.

THE U.S. DEPARTMENT OF AGRICULTURE IS AN EQUAL OPPORTUNITY PROVIDER AND EMPLOYER

For more information, see www.ers.usda.gov/abouters/privacy.htm

Land retirement and

working-land initiatives

will continue to be

important features of the

national conservation

portfolio, with the suitability of each dependent on the nature of the

environmental concern

and resource conditions

on the farm.

Andrea Cattaneo, Roger

Claassen, Robert Johansson, and

Marca Weinberg, Flexible

Conservation Measures on Working

Land, ERR-5, U.S. Department

of Agriculture, Econ. Res. Serv,

June 2005, available at:

www.ers.usda.gov/

publications/ERR5.

Patrick Sullivan, Danield

Hellerstein, LeRoy Hansen,

Robert Johansson, Steven

Koenig, Ruben Lubowski,

William McBride, David

McGranahan, Michael Roberts,

Stephen Vogel, and Shawn

Bucholtz, The Conservation Reserve

Program: Economic Implications for

Rural America, AER-834, U.S.

Department of Agriculture,

Econ. Res. Serv., September

2004, available at:

www.ers.usda.gov/

Publications/AER834.

U.S. Department of Agriculture,

Food and Agricultural Policy: Taking

Stock for the New Century,

September 2001, available at:

www.usda.gov/news/pubs/

farmpolicy01/fpindex.htm

This brief is drawn from . . .