Conservation Program Design

Greening Income Support and

Supporting Green

Roger Claassen and Mitch Morehart 

“Green payments” refer broadly to farm payment programs that would, if enacted, merge farm income

support and conservation payments. Although some existing programs do support both objectives, they

typically focus on one or the other. For example, the Conservation Reserve Program (CRP) retires land

from crop production largely for environmental reasons, but may also reduce production and increase

crop prices. Under the Conservation Security Program, “stewardship payments” that reward producers’

ongoing conservation efforts may also enhance their income. Likewise, Conservation Compliance is an

example of a policy that makes traditional commodity payments “greener.” Because green payments

would join two of the most popular aspects of agricultural policy into a single program, it is tempting to

view them as a way to “kill two birds with one stone,” perhaps saving money and broadening support for

agricultural policy in the process. The extent to which that is true, however, depends on the extent to

which income support payments are also suited to achieving environmental goals, and vice versa.

Do farms with income support needs also have pressing environmental problems that could be

addressed through green payments? Not necessarily. Income support and conservation payments are

triggered by different actions or conditions, are made in different amounts, often go to different producers, and are spread across the country differently. Moreover, while many farms that receive income

support payments also have acreage with resource concerns such as soil erosion and nutrient runoff,

many farms with high erosion or nutrient runoff potential do not receive income support payments.

These differences may indicate that some compromise of income support objectives, conservation objectives, or both would be required to create a program of green payment.
ECONOMIC BRIEF Greening Income Support and Supporting Green

UNITED STATES DEPARTMENT OF AGRICULTURE

Conservation and Income Payments and Purposes Differ

Commodity-based income support is intended to enhance the incomes of eligible producers, primarily of

major field crops—corn, wheat, soybeans, and cotton (see box “Summary Comparison of Income

Support and Conservation Payments”). Historically, producers with greater production received larger

payments. Since 1996, some (but not all) income support payments have been based on historical crop

acres and yields rather than current acres and yields. The change was designed to reduce the effect of

income support on production decisions and avoid stimulating production that could otherwise affect

commodity prices. Even so, producers who farm highly productive land (with a history of high yields)

that is eligible for commodity payments (by virtue of a history of program crop production) will tend to

reap the largest income support payments.

Conservation payments, on the other hand, are designed to prompt change in land use or production

practices that would have a beneficial environmental effect. Conservation payments are available to a

wider range of producers—nearly all crop and livestock producers are eligible for at least one conservation program. While conservation programs do seek to change production practices, the level of production itself may or may not be affected. Land retirement is likely to affect production, although how much

depends on the quality of the land retired and the extent to which other land is converted to crop production (sometimes referred to as “slippage”). On the other hand, many conservation practices will have

little or no impact on production levels. Producers who install terraces to reduce soil erosion, for example, would likely see little change in production, at least in the short term. Finally, most conservation payments are limited to the amount necessary to prompt adoption of new practices, perhaps covering only

a portion of the producer’s cost. Some programs use competitive bidding among producers to stretch

program budgets (see Economic Brief No. 3).

Different Payments Mean Different Participants

About 40 percent of U.S. farms, representing 60 percent of all agricultural production, receive some type

of government payment. Of the 40 percent of farms that do receive some type of government payment,

only 15 percent—about 6 percent of all farms—receive both commodity and conservation payments

(fig. 1). If the amount of money available for conservation programs were significantly increased, the

number of farms receiving both types of payment would increase. However, less than half of current

conservation payments (43 percent) go to farms that also receive commodity payments, so a large share

of additional conservation payments could also flow to farms that do not receive commodity payments.

Differences in the distribution of commodity and conservation payments across farm types and regions

are striking. Most income support payments go to large, commercial farms, while most conservation payments go to rural residence farms1 (fig. 2).

Commodity payments, relative to the value

of agricultural sales, are concentrated in

areas where production of program crop

commodities, including corn, wheat, and

cotton, is prevalent—the Corn Belt,

Northern Plains, and the Mississippi Delta

(fig. 3a). Conservation payments tend to be

higher relative to sales in some areas of the

Northern Plains and intermountain West,

and where farmlands are hilly and prone to

soil erosion (southern Iowa and northern

Missouri, for example; fig. 3b).

The lack of overlap between commodity and

conservation payments, however, does not

mean that commercial farms do not face

environmental issues, nor that environmental

1Commercial farms are large

family farms with sales above

$250,000 and some nonfamily

farms organized as cooperatives or nonfamily corporations. Intermediate farms have

sales below $250,000 and the

operator reports farming as his

or her major occupation. Rural

residence farms have gross

sales below $250,000 where

farming is considered a secondary activity both in terms

of resources invested in the

farm and the amount of

income it contributes to the

farm household.

Figure 1

Distribution of farms receiving farm program 

payments by major program type, 2003

19%

Conservation but

not commodity

Commodity but 

not conservation

48%

15%

Conservation 

and commodity

Neither conservation

nor commodity*

18%

Source: Economic Research Service, using data from the 

Agricultural Resources Management Survey.

*Mostly disaster payments.

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

2
problems are concentrated on rural residence farms. Nearly every farm faces some type of environmental concern. For example,

the potential for nitrogen runoff associated with the application of commercial fertilizer in crop production is spread across all

three farm types in the collapsed ERS farm typology (fig. 4). Rural residence farms account for a relatively small share of acres

vulnerable to nitrogen runoff because they account for a relatively small share of land in crop production. Likewise, soil erosion

on cropland that is not highly erodible is also spread across farm types. This is of concern because such land is not subject to

conservation compliance (which makes soil conservation on highly erodible land (HEL) a condition of farm program eligibility)

and is not generally eligible for the Conservation

Reserve Program (which

pays for long-term retirement of cropland).

The existing distribution

of conservation payments

largely reflects existing

programs. The largest U.S.

conservation program, the

Conservation Reserve

Program (CRP) provides

annual payments in

exchange for (1) long-term

retirement of land and (2)

installation of “buffer”

3

Figure 2

Distribution of government payments by collapsed ERS farm typology

0 10 20 30 40 50 60

Source: Economic Research Service using data from the Agricultural Resources Management Survey.

Rural 

residence

Commercial 

farms

Intermediate 

farms

Percent of payments, by payment type

Commodity Other* Conservation

*Mostly disaster payments.

Summary Comparison of Income Support and Conservation Payments

Income support payments Conservation payments

Key programs Direct payments, counter-cyclical payments,

loan deficiency payments, and marketing

loan gains.

Conservation Reserve Program (CRP), Wetlands Reserve

Program (WRP), Environmental Quality Incentives Program

(EQIP), and Conservation Security Program (CSP)

Which producers? Primarily producers of major field crops (e.g.,

corn, wheat, soybeans, cotton). To be eligible,

producers must have a history of producing

program crops. Since 2002, dairy producers

are also eligible for income support payments.

Programs are entitlements, so all eligible producers can participate if they choose to.

Crop and livestock producers, although emphasis varies

among programs. Eligibility varies by program, but can

depend on the type of land (e.g., highly erodible land),

land use (e.g., land retirement focuses on cropland), or

location (e.g., conservation priority areas). Livestock

waste management is a priority in some programs.

Programs are competitive and often favor enrollment 

of producers who offer greater environmental benefits

relative to cost.

What action? Direct and counter-cyclical payments are

decoupled from production. Payments are

based on a history of producing eligible crops.

Loan deficiency payments and marketing loan

gains are based on current production. 

Payments are based on conservation-oriented action,

e.g., land retirement, conservation practice adoption,

etc., to address environmental issues such as water quality.

How much? Although some payments are decoupled from

current production, payments still tend to be

largest for producers who produce large quantities of eligible crops. Because decoupled 

payments are based on the amount of land a

producer controls and the yield history, large

payments tend to go to farms with large

acreages of highly productive land. 

Most programs attempt to limit payments to levels necessary to encourage participation. Some programs use

competitive bidding to set payment rates.
Greening Income Support and Supporting Green ECONOMIC BRIEF

4 ECONOMIC RESEARCH SERVICE

practices such as edge-of-field filter strips

or grassed waterways that can filter nutrient and sediment out of runoff before it

reaches water. Roughly 60 percent of CRP

payments go to rural residence farms,

which accounts for their substantial share

of overall conservation payments. But

these farms receive a small share of commodity payments, contributing to the limited overlap between commodity and conservation payments.

The Environmental Quality Incentives

Program (EQIP), on the other hand,

focuses on a wide range of practices on

working agricultural lands, including cropland, grazing land, and issues related to

confined animal feeding operations

(CAFOs). By statute, 60 percent of EQIP

payments address livestock-related issues.

Because livestock farms are less likely than

crop farms to receive commodity payments, the EQIP requirement also tends to

limit the overlap between commodity and

conservation payments.

Does the existing distribution of conservation payments maximize the environmental benefit that could be gained from available funding? Because the processes by

which agriculture affects the environment

are very complex (e.g., nutrient runoff) and

the damage to natural resources difficult to

value (e.g., the loss in recreational value due

to eutrophication), the environmental gain

from application of conservation practices

is difficult to gauge. Nonetheless, previous

research suggests that targeting CRP

enrollment using the Environmental Benefits Index has increased the level of environmental benefits

obtained from that program (see Economic Brief No. 2). The same research indicates that additional gains

are possible, but uncertainties remain because only some of the potential environmental gains from CRP

(or other conservation programs) have been quantified.

Greening Income Support or Supporting Green? 

Commodity and conservation programs could be combined in many different ways. Consider hypothetical

“polar” cases to illustrate key issues that policymakers are likely to face if they decide to meld commodity

and conservation programs. On one end of the spectrum, policymakers could start with existing commodity

programs and add “green” requirements similar to existing compliance requirements. Current compliance

requirements make eligibility for income support (among other Federal agricultural payments) contingent

on wetland conservation (Swampbuster) and soil conservation on HEL (Conservation Compliance and

Sodbuster). On the other end of the spectrum, they could start with existing conservation programs and

increase payments to levels that support farm income as well.

Roughly 60 percent of

CRP payments go to

rural residence farms,

which accounts for

their substantial share

of overall conservation payments.
Many conservation indicators could be used to

determine eligibility for

conservation payments.

For illustrative purposes, we

consider three indicators: 

• Rainfall erosion

acreage—cropland that

is not highly erodible land

(HEL) with rainfall erosion

rates greater than the soil

loss tolerance (T);

• Wind erosion acreage—

non-HEL cropland with

wind erosion rates

greater than the soil loss

tolerance (T); 

• Nitrogen runoff

acreage—cropland

acreage where nitrogen

runoff to surface water is

estimated to exceed

1,000 kg/km2/year. 

For details see AgriEnvironmental Policy at

Crossroads, AER-794, 2001.

ECONOMIC BRIEF Greening Income Support and Supporting Green

UNITED STATES DEPARTMENT OF AGRICULTURE 5

Farms receiving 

commodity payments

encompass about 75

percent of agricultural

land and account for

55 percent of crop

production and 45

percent of livestock

production. 

If policymakers choose to focus green payments on the current recipients of farm income support, these payments would not

address the same environmental issues or direct funds to the same producers as current conservation payments. In 2003,

only 43 percent of conservation payments went to farms that also received commodity payments.

Likewise, recipients of commodity payments represent only a portion (albeit substantial) of agricultural

production: farms receiving commodity payments encompass about 75 percent of agricultural land and

account for 55 percent of crop production and 45 percent of livestock production. If commodity payments were to serve as the basis of a new green payments program, environmental effort would focus

more heavily on crop production than on livestock concerns, which play a large role in existing programs

such as EQIP.

One way to “green up” income support would be to expand compliance requirements. The effectiveness

(and enforceability) of compliance mechanisms in achieving environmental gain, compared with a conservation payment program, would depend on the size and location of payments relative to the cost of

addressing specific environmental problems and their location. Given that major income support programs are centered on major field crops, environmental problems associated with cropland are likely candidates for compliance. Witness the overlap between farm program payments and high potential for

nitrogen runoff from land in crop production (fig. 5).

Expanding compliance could, however, undercut income support if conservation requirements were

expensive to fulfill. Moreover, unless payments tend to be high where conservation costs are high (and there

is no reason to believe that they would be), equity issues could also arise. Some producers could face relatively large costs while receiving only modest payments, while others who receive larger income support

payments might face only minimal conservation cost. In Conservation Compliance, for example, the (estimated) level of farm program payment per HEL cropland acre—which represents the incentive to meet

compliance requirements relative to the scope of the problem on a given farm—varies widely across farms.

Figure 4

Acres vulnerable to selected environmental concerns, by collapsed ERS farm typology

0 5 10 15 20 25 30 35 40 45 50

Rural residence 

farms

Intermediate

farms

Commercial

farms

Percent of vulnerable acres

Source: Economic Research Service using data from the National Resources Inventory (NRI) and the 

U.S. Geologic Survey.

Wind erosion Rainfall erosion Nitrogen runoff
Greening Income Support and Supporting Green ECONOMIC BRIEF

6 ECONOMIC RESEARCH SERVICE

If green payments were developed from existing conservation programs, payments would be distributed across producers differently than existing income support payments. While commodity payments go primarily to those who own or

farm land with a history of producing certain crops, conservation payments tend to be more broadly

available (even though participation has been small, relative to commodity programs, due to limited

funding). The distribution of payments (under existing working land programs) would be unlikely to

match that of current income support programs or even that of current conservation programs, with

their overall emphasis on land retirement. Producers of non-program crops and livestock could be

eligible for income support delivered through a green payments program.

Income support would depend on the relationship between green payments and conservation costs,

which vary among producers. For example, producers with more erosion-prone land might find it more

difficult and expensive to reduce soil erosion (to improve water quality) than producers who farm less

erosion-prone land. Unless differences in cost are recognized, the effective level of support received by

producers would be higher for producers with low costs than those with high costs. Existing conservation programs that offer cost-sharing to producers do recognize differences in the cost of applying practices. For structural practices like terraces and grassed waterways, actual cost can be precisely determined

from receipts for dirt work, seed, planting, etc. For management practices such as conservation tillage or

nutrient management, however, producer-specific costs are more difficult to determine because costs

result from changes in input use and, perhaps, crop yields.

Payments could also be tied to the value of environmental gains that result from a producer’s action (see

Economic Brief No. 5). If producers who can deliver larger environmental benefits (and attract a higher payment) tend to have higher conservation costs, most producers would receive about the same level

of income support. Otherwise, producers with low costs relative to the environmental gain-based payment would receive a higher level of income support than other producers.

Designing a green payments program would largely be an exercise in allocating the limited funds available

for income support and environmental purposes. Because few producers receive both commodity and

conservation payments from existing programs, however, melding income and conservation programs

would likely require some compromise of income support and environmental objectives. Building green

payments around commodity programs would risk excluding some producers who face environmental

challenges, particularly in the livestock sector. On the other hand, starting with conservation programs

could lead to a significant redistribution of income support efforts.

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

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

Cattaneo, A., R. Claassen, R.

Johansson, and M. Weinberg.

2005. Flexible Conservation

Measures on Working Land: What

Challenges Lie Ahead? U.S.

Department of Agriculture,

Economic Research Service,

Economic Research Report 

No. 5 (June).

Claassen, R., L. Hansen, M.

Peters, V. Breneman, M.

Weinberg, A. Cattaneo, P.

Feather, D. Gadsby, D.

Hellerstein, J. Hopkins, P.

Johnson, M. Morehart, and M.

Smith. 2001. Agri-Environmental

Policy at the Crossroads. U.S.

Department of Agriculture,

Economic Research Service,

Agricultural Economic Report

No. 794 (January).

Claassen, R., V. Breneman, S.

Bucholtz, A. Cattaneo, R.

Johansson, and M. Morehart.

2004. Environmental Compliance in

U.S. Agricultural Policy. U.S.

Department of Agriculture,

Economic Research Service,

Agricultural Economic Report

No. 832 (June).

This brief is drawn from . . .