## United States Government Ac countabilit y Office 

# GAO Report to Congressional Requesters



# AGRICULTURAL CONSERVATION
Farm Program Payments Are an Important Factor in Landowners’ Decisions to Convert Grassland to Cropland September 2007

GAO-07-1054

## What GAO Found

**United States Government Accountability Office** 

## Why GAO Did This Study 

# H ighlights **Accountability Integrity Reliability Septe**  **m ber 200**  **7** 

# AGRICULTURAL CONSERVATION
**Farm Program Payments Are an Important Factor in Landowners’**  **Decisions to Convert Grassland to Cropland**  Highlights of GA O-07 -1054

, a rep o rt to congressional re queste rs



### The n a tion’s r e m a ining gr as sland has s e veral i m por tant ben e fits , such as pr ovi d i n g l and f o r gr azi n g

an d wildlife ha bita t for many atri sk sp eci es. How e ve r, ov e r th e pas t 3 ce ntu r i e s abo u t h a l f of th e gr assl an d h a s be en c o n v e r t e d to oth e r uses , p r incipally crop land. In addi tion to lo sing imp o rtan t gr assl an d val u es, su ch co n v e r si ons may re sult in inc r e a se d spending on feder a l far m pro g r a ms, such as
c r op in su rance , e s pec i a lly in

mar g i n al ar e a s. GAO e x am i n ed (1) th e ext e n t of gr assl an d con v e r si ons to cro p l an d a nd th e cost o f f a rm pro g ra m p a ymen ts for th e s e n e wl y
c o nve r te d cr op lan d ac re s; (2 ) t h e
re lative importance of fa rm pro g ram p a ymen ts versus oth e r factors in pro ducers’ d ecisi ons to

con v ert g r assl and t o cropl a nd; an d (3) an y im pact the So dbus ter

cons er vation pro v ision—w hich places s o il er osion s t and a r d s on certain con verted land— has had o n limiting gra ssl an d co nv er sion s.


## What GAO Recommends

GAO re co mm ends t h a t th e U.S

. De pa rtm e n t o f Ag ri cul t ur e (US D A) (1) tr ac k th e ann u al co nv e r si on o f native grassl and to cro p lan d to pro v i d e pol i c ym ak ers wi th mor e
com p rehensive and cu rren t i n form ati o n o n su ch co nv er si ons and ( 2 ) s t ud y th e ext e n t to whi ch far m pr ogram paym en ts an d

cons er vation pro g rams m a y b e workin g at cr oss pu rpos es and rep o rt findin g s to th e C o n g r e ss. US DA agr e e d wi th GAO’s fi ndi ngs and r e comm endations

. 

### No comprehensive and current sour ce of information exists on the conversion of grassland t o cropland or on the resulting farm pro g ram payments for newly conve r ted land. However , the d a ta that ar e a vai labl e show a dec l i n e in priv ate gras sland nat i onwide, con t inuing conversion of native grassland to cropland in some areas of the country, and that certain farm program payments made to pr oducers in Sout h Dakota counties with relati ve ly h i g h rates of co nversion wer e si gnifi cantl y high er than paym ents in other counties. According to USDA’s National Resources Inven tory, the nation’s privately owned grassland de crea sed by al most 25 mil l i on acres be twe e n 19 82 and 20 03

. W h ile some conversions are attributable to development and other land uses, the lead ing type o f conversion has been to cropland. O u r analysis of South Dako t a counties found that bet w een 1997 and 2006, the average annual net crop in surance payment per acre for the 16 counties wit h the highestrates of conver sion was nearly twic e as high as the average payment for all other counties in the stat e.

Farm progra m paym ents are an impor tant factor in producers’ decisions on whether to convert grassland to cropland. Certain l y other facto r s, including rising crop prices—large ly spurred by increase d ethanol deman d —and the

emer genc e o f geneti c ally modified cr o p s and new farming t echn i ques that make cropping on heretofore unsuitable land possible are also important in producers’ decisions. Sp eci fically, ou r analysis found that farm program payments ar e an important factor in c onversions. Sever al econ o mic studie s have r e a c hed the sam e conclusion. Fo r exampl e, a 20 06 USDA s t udy found that increa se s in crop ins u rance s ubsidies motivat ed producers to expand cropland in the contiguous 48 stat es by an estimat e d 2.5 million acres in the mid-19 90 s. More ov e r , fa rm program payments an d conservation programs may b e working at cross p u rposes with one another. For example, from 1982 to 1997, 1.69 million acres of cr op land in South Dakota were enrolled in the Conservation Reserve Program, wh ile during the same period, 1.82 million acres of grassland in South Da k o ta were converted to cro p land.

The Sodbust e r conservation provision has had little impact on conversions. For certain cropland converted from na tiv e gr ass l a nd and clas si fied as highly erodible, Sodbuster requires th atproducers apply a soil conservat ion system that does not allow a substantial increase in erosion as a condition to

rece iving cer tain farm pro g ram p aym e n ts. Howeve r, much of the nati ve gras sland converted in r e cent y ears is not highly erodible and therefore is not subject to Sodb uster. In additi on, according to county-level USDA official s, the cost of cont rolling soil er osion relati ve to potential profits from cultiv ating th e l and provides l i ttle di sin centiv e to co nversion. US DA has proposed legislation to make newly con verted native grassland ineligible for program ben e fits. www.gao.g o v/ cgi

- bin/getrpt? GA O-07-1054

.
To view t he full product, including the scope and methodolog y, click on the link above. For mo re informa t ion, conta c t Lisa Shames at (202) 5 12-384 1 o r sham esl@ga o. gov

.

# Contents

Letter 1

Results in Brief 3 Background 6 Available Data Show Conversion of Native Grassland to Cropland Continues and These Co nversions Add to Farm Program Co sts 12 Farm Program Payments, Rising Crop Prices, an d the Adopti on of New Farmin g Technolo g ies Provide I n centives to Expand Crop Production on Native Grasslands 20 Sodbuster Has Had Little Impact on Native Grassland Conver sions 26 C o n c l u s i o n s 3 0 Recommendations for Executive Act i on 30 Agency Comments and Our Evaluatio n 31



## Appendix I Objectives, Scope, and Methodology 33



## Appendix II National Resources Inve nto r y Dat a o n Net Ch anges in U.S. Land Use, 1982-2003 37



## Ap pendi x III Census o f Agricult ure Data on Ne t Changes in Uses of Land in Farms for the United States and Selected States 39



## Appendix IV Partial Budget Analys is for a Propos ed Conversion of Native Grassland to Cr opland in Central South Dakota, 2003-2007 43



## Appendi x V Summari es of Economic St udi e s Examini n g the Impact of Farm Pr ogram Paym ents 58



## Appendi x VI GAO Contact and Staff Acknowledgments 63

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## Relat e d GAO Products 64



## Tables

Table 1: Conversions of Rangela nd and Pastureland to Cropland in Selected Crop Producti on Regions, 1982- 1997 and 1997- 2003 14 Table 2: Conversions of Grassland That Had No Prior Cropping History to Cropland in Montana, Nort h Dakota, an d South Da kota , 2 005 and 20 06 1 5 Table 3: Comparison of Net Crop Insurance Payments in South Dakota for the 16 Highest Conversion Counties versus Other Counties 18 Table 4: Comparison of Crop Disaster Assistanc e Payments i n South Dakota for the 16 Highest Conversion Counties versus Other Counties 19 Table 5: Estimated Net Change in Income for a Shift to Crop Production from a Cow-Calf Gr azing Operation o n a 160- Acre Tract i n Central So uth Dakota, 2003- 200 7 23 Table 6: Loc al NRCS Officials’ Respo n ses to GAO Survey Que s tion on the Effectiveness of S odbuster in Limiting the Conversion of Native Grassland to Cropland 27 Table 7: Net Changes in Rangeland, Pastureland, and Other L and Types, 19 82- 2003 38 Table 8: Net Changes in Uses of Land in U.S. Farm s, 1978-19 9 2 and 1997- 200 2 4 0 Table 9: Net Changes in Uses of Land in Farms in States with Large Amounts of Rangeland and Pa stureland, 1978-1992 and 1997- 200 2 4 0 Table 10: Partial Budget Analysis for a Proposed 2003 Change from a Cow-Calf Enterprise to a Corn/Soybean/Wh e at Cropping Enterprise in Central So uth Dakota, 2003- 200 6 50 Table 11: Partial Budget Analysis for a Proposed 2003 Change from a Cow-Calf Enterprise to a Corn/Soybean/Wh e at Cropping Enterprise in Central So uth Dakota, 2007 56 Table 12: Economic Studies That Analyze the Impact of Fed e ral Farm Program Payments on Either Producers’ Land Use Decisions or Farm Profit ability and Risk 58

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## Figures
Figure 1: U. S. Grasslands before European Settl e m ent 7 Figure 2: Pr ocess to Determine Sodbuster’s Applicability 11

Abbreviations

CRP Conservation Reserve Program ERS Economic Research Ser v ice FSA Farm Service Agenc y FWS U.S. Fish and Wildlife Service HEL highly erodi ble land NASS National Agricultural Statistics Service NRCS Natural Resources Conservation Ser v ice NRI National Resources Inventory RMA Risk Management Agen cy USDA U.S. Department of Agriculture

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. Howe ver, becaus e this work may c ontai n copyrig h ted im ages or oth e r material, p e rmi ssion from the copyrig h t hol de r may be

necess a ry if you wish to repr o duce this mate rial sep a rate ly.

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### Unit ed Stat e s Governm e nt Acco unta b ility Off i ce Wash ingto n , DC 205 48



### September 1 0 , 20 07

The Honorable Tom Harkin Chairman Committee on Agricultu r e, Nutrition, and Fores t ry United States Senate

The Honorable Collin C. Peterson Chairman Committee on Agricultu r e House of Representative s

Before the E u ropean sett lement of North Americ a, grassland s occupied approximately 1 billion acres of the contiguous United States ––about h a lf of the land

– – mostly west of the Mississippi River. Over the la st 3 centurie s , about half of this presettlement, or “native,” grassl and was con verted to other uses, a nd in some states, such a s Iowa, almost all the nat i ve grassland ha s been con v erted. The m o st common use to which grassland has been co nverted is cr opland for t h e producti on of crops such as corn and wheat. 1 

### This cropland produces f ood, feed, and fiber––an d now, with the rising de mand for ethanol and ot her renewable fuels, en e r gy––an d ca n yield relati vely high financial re turns to landowners and agri c ultural producers. However, grassland is also a valua bl e resource, providing la nd for livestock grazing; recreational op portunities, such as hunt ing and fishing; and environmental benefits , s u ch as reduc ing soil erosion, improving water qualit y, increasing carbon sequestration, and providing wildlife habi tat. In particular, so me grassland provides habitat for threatened a nd endan ger ed and oth e r at-risk species. Converti ng grassland to cropland reduces or eliminates these benefits, and can result in additional s p ending on f e deral farm programs. W ildlife, en vironmental, and conservation groups, as well as ce rtain cattl e industry interests, have

1 According to U

. S. De partment of Agricult u r e’s (U SDA) Natio n al Res ources I n ventory , croplan d inclu d es areas us ed for t h e p r o duct i on of ada p ted crops f or harve s t; rangelan d is composed principally of nativ e grasses or ot her native vege tation suitable for g r azing; a n d
pas t ureland is land t h at is man a ged fo r intr od uced f orage pla n ts for graz ing. T h e US DA definitions of c roplan d, rangel and, an d pas t u r e land are dis c u s s e d in appe ndi x II. F o r the
pur pos es of t h is repo rt, native gras s l and ge ne rally refers to r a ngeland unles s otherw is e specified.

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### expressed c oncerns that the finan c ial incentiv e s these farm programs provide are a significant factor in lan downer deci sions to convert grassland to cropland.

The federal f a rm programs include a variety of in come and pr ice support programs for specific co mmodities, such as corn, soybeans, a nd wheat; crop insurance; and ad h o c disaster a ssistance programs. For the purposes of this report, farm program “p ayments” include c o mmodity-related payments, crop insurance subsidies, and other benefits. The U

. S. Department of Agriculture (USDA) a d ministers the farm programs. In recent years, farm program paymen ts have averaged about $20 billion annually.

The conservation compliance provisi ons of the F ood Security Act of 1985, as amended, condition th e receipt of f a rm program payments on a producer’s efforts to control soil erosion on highl yerodible l a nd and protect wetlands. One of these prov isions, known as Sodbuster, requires producers to apply a soil conservati on system that does not allow a substantial increase in s o il eros ion on land con v erted from native grassland if the land was not cropped before December 23, 1985, and was determined by USDA to be highly er odible land. In addition, USDA conservatio n programs provide financial incenti ves for takin g conservatio n actions on working land or for retiring it from production. Several of th ese programs, including the Grassland Reserve Program and Conservation Reserve Program (CRP ), promote the conservation of grassland. Under the Grassland Reser ve Program, USDA offers easements and rental agreements to landowners to assist th em in protecting, conserving, and restoring eligibl e gra ssland—suc h as important habitat fo r wildlife. Under CRP, USDA provides about $1.8 billion in annual rental payments to landowners to retire en vironmentally sensitive cropland from production and establis h permanent vegetative cover on this land.

In November 2006, we id entified the need for bet t er oversight of farm program payments. 2 

### We s p ecifical ly h i ghlighted th at USDA support programs may have unin t ended cons equ enc e s, in cluding in ce ntives for producers to grow crops on land pr one to drought or erosion. Without better oversi ght to ensur e that farm p r ogram funds are spent as economicall y , effici ently, and eff ecti vely as possible, we poin t ed out that

2 GAO, Suggested Areas for Oversight for the 110t h Congress , GAO-07-235R (Was hingt o n , D.C. : Nov

. 17 , 2 006).

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### USDA has little assurance that these funds benefi t the agricu l tural sector as intended.

In this context, you asked us to determ ine (1) the extent of grassland conversions to cropland, and the cost of farm program payments related t o these newly converted cropland a c re s; (2) the relative importance of f a rm program payments versus other facto r s in producers’ decision s to convert grassland to cropland; an d (3) any impact the S o d buster provision has had on limiting grassland conversions.

In conductin g our work, we spoke with and revi ewed documents provided by officials i n USDA headquarters an d field loc a ti ons; the U.S. Fish and Wildlife Ser v ice (FWS); farm, wildlife, conservati on, and e nvi ronmental organization s ; state gove rnments; and land grant universities. To determine the extent of grassland co nversions to cropland, w e examined land use dat a from (1) USDA’s Nati onal Resources Inventory; (2) USDA’s Census of Agriculture; ( 3 ) USDA sta t e offices in Montana, North Dakota, and South D a kota; and (4) a coll aborative study b y Ducks Unlimited, Inc., a private ad vocacy grou p supporting the protecti on and resto r ation of wetlands and waterfowl habitat, in conjunction with FWS; the South Dakota Dep a rtment of Game, Fish an d Parks; The Nature Conservancy; and the Univ ersity of Montana. We al so reviewed other releva nt studies of grassland co nversions to cropland. T o determine the cost of f a rm program payments on converted land, we anal yzed USDA data on crop insurance and disaster assistance payments. To determine the relativ e i m portance of the availabil i ty of farm program p ayments in producers’ deci sions to convert gras sland to cro p land, we an alyzed pa yments per cro p land acre i n counties with relativel y high con ver sion rates of grassland to cropland. We also analyzed farm-level financial inf o rmation for a South Dakota county that has had numerous conversions. To determine the impact the Sodbuster provision has had on grass l and con ver sions, we examined USDA land use data an d conducted i n terviews with USDA field officials i n selected cou n ties with relatively high rates of con versions in Montana, Nebraska, North Dakota, and South Dakota to o b tain their vi ews of the impact of So dbuster on conversion d eci sions. A more detailed description of our scope and method ology is pres ented in app e ndix I. We performed our work between October 200 6 and August 2007 in acc ordan ce with generall y ac cepted gove rnment auditing standar d s.

No comprehensive and current source of information exists on the exte nt of grassland conversions to cropla nd or the amount of farm program payments related to this newly converted croplan d. As a result, 

# Results in Brief

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### policymaker s do not have current inf o rmation on the extent o f conversions for all areas where conv ersions may have o ccurred in rec e nt years. Altho u gh limited, availab l e dat a show a de cline in priv ate grasslan d nationwide and continui ng conversion of native grassland to cropland in some areas of the count ry––particul a rly the Northern Plains––and that these conv e r sions have added to f a rm program c o sts. For example, USDA’s Nati onal Resources Inventor y data indicate that the nation’s private grass l and decreased by almo st 25 million acres from 1982 through 2003 . While some conve r sions are attributable to developme n t and other land uses, th e leadin g typ e of con version has been to cropland. Our analysis fou nd that crop insurance p ayments to producers were significantly higher per acre in South Dakota cou n ties with relatively high rates of con version, add i ng to progr a m costs. For example, f r om 1997 through 2006, the 16 Sou th Dakota counties with the high est number of grassland co nversions to cropla nd had an average annual n e t crop insurance p ayment of o ver $1 3 per acre, while t h e av erage p ayment for all other South Dakota cou n ties was less than $7 p e r acre. Acco rding to USDA officials, this diffe rence may b e explain e d by the fa ct t h at the counties with the high est number of conversions are in areas of the state that are more prone to d r ought and crop losses.

Farm program payments are an important factor i n producers’ decisions to convert gras sland to cro p land, but ri sing crop prices and n e w farming technologi e s are also important f act ors in these conversions. From September 2 006 to Janu a r

y 200 7, the pr ice of corn increased by over 66 percent, l a rg ely be cause of the growing demand f o r ethanol, a corn-based renewable f u el. This de mand is expected to con t inue to incr ease, and co rn prices are e xpected to b e relativ e ly high for sev e ral ye ars. Geneticall y modified crops, such as herbicide-re sistant soybeans, as well as new farming techniques, such as no-till pl anting, contribute to conversion decisions as well. These developmen ts have increased the pro f itability of crop production in some areas that h e retofore were consider ed marginall y suitable or generally uns uitable for crop production. Our anal ysis of the economic ef fects on a farm, if it were to con vert native grassland from grazing to cr opping, sho w ed increased income i n 3 of the 5 years covered from 2003 th rough 2007. Without farm program payments, income would have in creas ed only in 1 year. Other s t udies have confirmed a relationship between farm program payments an d conversio n s. The studies we reviewed ge nerally foun d that farm program payments provide significan t incentiv e to convert gras sland to cro p land be cau se they incre a sed the expected profitability of farming while lowering t h e associated risks. For example, a 2006 USDA study found th at increases in crop insurance subsidies motivated pro ducers to ex pand cropland in the co ntiguous 48

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### states by an estimated 2. 5 million acr es in the mid-1990s. Moreover, farm program payments may work at cr oss purposes with payments made under conservation programs intended to protect grassland or to convert cropland to grassland or another con s erving use. For example, between 1982 and 1997, 1.69 milli on acres of cropland in South Dakota were enrolled in t h e CRP, which provides incentiv e s to farmers to convert cropland to grassland, at a cost to th e government of about $633 million. However, during the same period, 1.82 million acr es of grassland in South Dakota were converted to cropland.

Sodbuster has had little impact on slow ing grassland conversions becaus e , in part, much of the con verted nati v e grassland i n recent y e a r s has not been subject to the Sodb uster provision, which applies only t o highly erodible lan d . For example, ac cordi n g to USDA’s National Resources Inventory, a n estimated 59 perc ent o f the rangel a nd converte d to croplan d between 1997 and 2003 i n the Northern Plains was classified as non-highly erodible and therefore was not subject to the Sod buster provision. Similarly, in reviewing records for selected hi gh conversion counties in Nebraska, we found that over half of the land p a rcels converted from 2003 through 2006 were classified as non- hi ghly erodi ble. Even w h en converted grassland is classified as highly erodi ble and subj ect to Sodbu ster, the potential pr ofits from cropping the l and usually outweigh the percei ved costs associated with controlling soil erosion. According to U S DA officials, the cost of implementing an d maintaining the co nservation practices needed to comply with Sodbuster’s soil erosion control standards ge nerally does little to disc ourage con v ersions, especially when the price of corn and oth e r crops is high. Further, these offici als said that new technol ogy such as herbicide-resistant crops and no-till planting has reduced the cost of complying with Sodbuster and made farming highly erodible land economically feasible. For the 2007 farm bill, USDA has offered a pr oposal kno wn as Sod Saver that, according to U S DA, would discourage f u rther grassland conversi on. In prop osing Sod Saver, USDA recognized t h at properly managed gr asslands provide en viron m ental benefits such as the prot ection of wil d life habitat

. Under this proposal, certain grass l and—specif i cally ran gel and and n a ti

ve grassland not cropped for the 6 years p r eceding th e e ffective date of the 2007 farm bill— converted to cropland would be perm anently in eligible for f a rm program payments. The Sod Saver proposal is generall y su pported by wildlife, environmental, and conservation gro ups , as well as certain cattle industry interests. However, sever al farm, crop, and liv estock organiz ations maintain that the proposal would reduce the amount of farmable land available for beginning f a rmers, and would constrain farmers’ ability to

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### adapt to changing market conditions related to th e growing d e mand for crops to produce food and renewabl e fuels.

In light of th ese findings, we are reco mmending that USDA (1) track annually nat i ve grasslan d conversio n to croplan d to develop a comprehensive and current source o f information in those geographic areas where such conver sions can oc cur and (2) study the e x tent to which farm program payments and conserva tion progra ms, such as the CRP, may be working at cross purposes and repor t its findings to the S ecretary of Agriculture and the Con g ress.

We provided a draft of th is report to USDA for re view and co mment. USDA provided oral co mments th rough the Chief, NRCS, on September 5, 2007 , indic a t i ng gen eral a g reement with the report ’ s findings a nd recommendations. USDA also said it wanted to ensure that GAO wa s aware that with few exceptions, th e crop insurance progra m has strict criteria on where converted land may be insured. Although USDA has these criteri a , our work found that it does not have a method and the information needed to e n force them. USDA also provided us with suggested te chnical corrections, which we incor porated into this report as appropriate.

Before the E u ropean sett lement of North Americ a, grassland s occupied approximately 1 billion acres of the contiguous United States —about half of the land —mostly we st of the Missi ssippi River, as shown in figure 1. 

# Background

P a g e 6 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on**F i**  **g u**  **re 1: U.S. G**  **rasslan d**  **s b**  **e fo**  **re Eu ro**  **p e**  **a n**  **Settlemen t** 

S o u rce: Rich a rd Conner, Andrew S iedl, L a rry V a n T ass el, a nd Neill Wilkin s . "United S t a te s Gr ass l a nd s a nd Rel a ted Re s o u rce s : An Economic a nd Biologic a l Trend s A ss e ss ment," (2001). http://l a ndinfo.t a m u .ed u /pre s ent a tion s /gr ass l a nd s .html (Downlo a ded J a n ua ry 31, 2007). Pre s ettlement gr ass l a nd s WA

OR ID MT ND

NE

K S

OK

TX IA

IL

MO MN

WI S D
WY

CO UT NV CA

AZ NM



### Over the last 3 centuri es, about half of this presettlement, or “native,” grassland was converte d to other uses, and almo st all the nat i ve grasslan d has been co nverted in s o me states, such as Iowa and Minne sota. While most of the existing priv ately owned grasslands are between t h e Mississippi River and th e Rocky Mo untains, the grasslands west of the Rocky Mountains are lar gely und er f e deral management.

The land use s to which native grasslands have b e en conv erte d include pastureland, develop ed l and, and cro p land. Historically, cropl and—land

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### used for the production of crops such as corn an d wheat—has been the most common use to which native grassland has been converted. Cropland—which produces food, feed, fi ber, and now energy, especiall y ethanol—can yield rel a ti

vely hi gh fin ancial return s to crop producers and landowners, and these r e turns gener ally increase economic activity in rural communities. In 2006, th e valu e of U.S. cro p productio n was $121 billion (43 percent of the value of U.S. agricultural production). As the United State s shifts to more renewable fuels, incr easing amou nts of crops, especially c o rn, are bein g used to pr oduce en erg y . The use of corn to produce eth anol is projected to doub le between 2006 and 2008 and continue to i n crease rapi dly for sever al years. Furthermore, crop exports contribute t o the U.S. balance of tra d e. The Unite d States is th e world’s leading exp o rter of seve ral major crops includin g corn, cotto n, soybeans, and wheat. Finally, crop production contributes to local eco nomies in rural counti e s, affecting demand for farm inputs—seed, fertilizer, pesticides, h e rbicides, fa rm machine r y, and lab o r—as well as grain marketing and transportation companies.

However, the grassland t h at cropland displaces al so has many economic as well as en vironmental benefits. Gr assland provides forage f o r grazing livestock; pr ovides recreational oppo rtunities, such as for hu nting and fishing; redu ces soil erosion; impr oves water quality; and aids carbon sequestration, which red u ces the am ount of carb on dioxide, a greenhous e gas, in the at mosphere. Although thes e benefits generally resul t from both pastureland and native grassland, those concern e d about th e continued loss of grassland hav e pl aced a very high priority on preservi ng the remaining native grassland for the fo llowing reasons:

• 

### Conservation of native grassland contributes to the maintenance of biological di versity. More specific a ll y, native grassland provides habitat for wildlife and native species, incl ud ing nativ e gr assland bird species, some of which are d ecli n ing. The co nversion of native grassland to other uses, includi ng introduced grasses, can change the structure and function of habitat su ch that it no longer supp orts native wildlife species. For example, th e loss of nati ve grassland in the Tex a s coastal prai rie eliminated h a bitat that s upported th e Attwater’s prairie chick e n, a federally en dangered sp ecies nati ve to this area. In addition, research in North Dakota by U. S. Geologi cal Survey wildlife biologists found significantly higher coun ts of certa in grassland bird species in native grassland than in other grassland. Furthermore, the fragment a tion of remaining native grasslands may reduce their h a bitat valu e a nd result in them not bei n g large eno u gh to supp ort their nat u ral biodiversity.

P a g e 8 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on• 

### Once conv erted, restoring nativ e gras sland is difficult and exp e nsive, an d it is questionable whethe r native h a bi tat can ever be fully rest ored. In general, lan d that is con verted ba ck to native gra ssland does not regain th e ecologi cal f unction of u ndisturbed native grassland. Furthermore, FWS estimates that the cost o f restoring native grassland in eastern South Dakota is ab out $20 0 per acre, a subs tantial amou nt relative to the 20 06 market valu e of nativ e g r assland in that area, which ranged from an average of $751 p e r acre in northeast South Dako ta to $1, 055 per acre in east central South Dakota.

Federal farm programs provide pa y m ents that can increase t h e profitability of crop production and m ay create i n centives for conversions. Among these programs are the fed e ral crop insurance program, crop disaster assi stance progr a ms, and th e marketing a ssistance loa n program. 3



### The federal crop insurance program protects crop producers from production risks associated with adverse weather as well as price risks associated with commodity market fluctuations. 4 

### USDA’s Risk Management Agency (R MA) administers the program in partnership with private insurance companies, which share a perc entage of th e risk of loss and the opp ortunity for gain associa t ed with eac h insurance policy written. RMA pays companies a p e rcentag e of t h e premium on policies sold to cover the administrative costs of selling and servicing these policies. In t u rn, insurance companie s use this money to p ay commissions to their age n t s, who sell the polici e s, and fees to a d justers when claims are filed. RMA absorbs a large perc enta ge of the cro p insurance program’s losses—the difference b e tween pre m iums collected and ind e mnity payments 5 

### —and subsidizes a portion of the premium paid by participating producers.

3 T h e marketing as s i s t ance loan pr ogram pr ovides benefits to pro ducers of m a jor cr ops when market prices are low. We did not anal yze the cost of marketing assistance loan payments . Acc ording to s p en ding fo recas t s , marketing as s i s tance loan pay m ents are predicted to be zero f o r corn, soybeans, a n d wheat through 2011 because prices of these
crops a r e ex pe cted to be abov e the levels tha t trigger payme n ts.

4 P roduce r s w h o grow a cr op th at is curre ntly i n eligible for c r op ins u rance m a y be eligible for a direct pay m ent u nder US DA’s F arm Ser v ice Agency’s Nonins u r ed As s i s tance P rogram.

5 P roduce r s rece ive indemnity p a yments if they realiz e a qualif ying cro p los s unde r the cr op ins urance prog ram.

P a g e 9 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### Crop disaster assistance programs—ad hoc progr a ms enacted by the Congress and administered by USDA’ s Farm Service Agen cy ( F SA)— provide payments to pro ducers to co mpensate for losses sust ained when planting is p r evented or crop yields are abnormally low becau se of advers e weather and related c o n d itions. From 1998 thro ugh 20 04, ad hoc disaster assistance le gislation was enacted an d crop disaster assistance payments were made for each crop year. Th ese payments were made to both producers with crop insurance and th ose without insurance. A May 2007 supplemental spending bill, 6 

### which a u thorized crop disaster assistance payments for crop year 2 005, 200 6, an d 200 7 losses, prohibited payments to a producer who either waived cro p insurance or did not p a rticipate in the Noninsured Assistance Program in the ye ar of the loss.

The conservation compliance provisi ons of the F ood Security Act of 1985, 7 

### as amended, condition th e receipt of f a rm program payments on the producer’s efforts to control excessive soil erosion on highly erodible lan d and protect wetlands. One of th ese provisions, known as Sodbuster, requires producers to ap ply a soil co nservation system that meets the required lev e l of protect ion that allo ws for no su bstantial increase in soil erosion on land conv erted from native v egetati o n if the land was not cropped bef o re December 23, 1985, and is or was determined by USDA to be highly er odible land. 8 

### A producer applying for certain farm program payments certifies with FSA that he or she will comply with conservation provisions. If the land in question was not cropped before December 23, 1985 , and U S DA’s Natural Resource s Conservation Service (NRCS) has not previously d e termined whether or no t the land is highly erodi ble land, F S A refers the producer’s ap plication to NRCS to conduct the d e termination. If NRCS determines, or has previously determined, that the lan d is highly erodible, So dbuster applies and the p r oducer must maintain a conservation system that will not pe rmit a subst antial increase in soil erosion. Under NRCS’s procedures, th is producer must use a conservatio n system that controls erosion to a gre a te r extent t h an is requir ed for highly

6 Pub. L. N o . 110-28, tit. IX , § 90 01, 121 Stat. 11 2 (2007).

7 Pub. L. N o . 99-198, 99 Stat. 13 54 (1985) (codi f ied as amende d in scattere d s e ctions of titles 7 and 16 of U

. S.C.).

8 The cropland must have bee n converted for use in producin g annually tilled agricultural commodity c r o p s in o rde r to c o me u nder the protectio n s pr o v ided by S odb u s ter.

P a g e 10 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### erodible lan d that was cropped befo re December 23, 1985. 9 

### Fi gure 2 illustrates when a l andowner must a pply a conservation system, as required by Sodbuster, to control er osion on newly convert e d cropland.

**F i**  **g u**  **re 2: Pro cess to**  **Dete rm**  **in e So**  **db u**  **s ter’s Ap**  **p licab**  **ility**

The prod u cer c a n convert l a nd into cropl a nd Prod u cer, wi s hing to receive cert a in U S DA b enefit s
a nd pl a nt a n a gric u lt u r a l commodity on l a nd th a t h as not h a d a highly erodi b le l a nd (HEL) determin a tion, inform s F S A of hi s intention s

.

F S A req u e s t s HEL determin a tion from NRC S

Doe s the l a nd h a ve a previo us cropping hi s tory? I s l a nd highly erodi b le?

**S odbu**  **s ter doe**  **s not apply:**  A con s erv a tion s y s tem i s s till req u ired; the

con s erv a tion s y s tem m us t provide a subs t a nti a l red u ction in s oil ero s ion or a subs t a nti a l improvement in s oil condition s

. S od bus ter doe s not a pply; no con s erv a tion s y s tem i s needed.

**S odbu**  **s ter applie**  **s :**  A con s erv a tion s y s tem m us t prevent a subs t a nti a l incre as e in ero s ion a nd hold s oil ero s ion to no more th a n the r a te a t which s oil c a n m a int a in contin u ed prod u ctivity. No

Ye s Ye s

No

S o u rce: GAO' s a n a ly s i s of U S DA’ s inform a tion; photo, U. S . Fi s h a nd Wildlife S ervice.

9 A conservation system is a combination of on e or more c o nservation pract i ces that are approved by NRCS. T h ese pra ctices include structural meas ures, suc h as te rraces, or management te chniques, suc h as conservation t illage, used t o enhanc e , prot ect, or ma nage natural res ourc es , including s o il.

P a g e 11 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### Over the last 25 y ears, some areas, pa rticularly in the Northern Plains, experienc e d conversions of native gr assland to cropland, and these conversions have added t o farm program costs. While there is no comprehensive and current source o f information on the ext e nt of native grassland co nversions to cropland or the amount of farm program payments made in rel a ti on to this ne wly convert e d cropland, avail a ble sources provide some in formation on conversio n s and relat e d costs. Nationwide, total private grassland de clined by al most 25 million acres from 1982 th rough 200 3. In addition, conversions of native gra ssland to cropland co ntinue in the Northern Plains, particu l arly in areas of North Dakota and South Dakota. Analysis o f county-level data i ndicates that South Dakota counties w i th relativel y high rates o f conversion s had high crop insurance and crop disaster assistance progr a m costs. 

# A v ailabl e Data Show Conversion of Native Grassland to Cropland Continues, and These Conversions Add to Farm Program Costs

A

vailable Sources of Informati on Indi cate That Grasslands Decreased, and Native Grassland Conversions to Cropland W e re Highest in the Northern Plains Available i n formation on the extent a nd location of grassland conversions to cropland i s not comprehensive an d current. F o r example, data on conversions of grassland to cropland are not av ail a ble at th e st ate or county level for the most recent years (except in t h ree states––Montana, North Dakota, and So uth Dakota––w here data are being colle cted on an informal basis to provide information to FWS and Ducks Unlimited on wildlife habi tat loss). In addition, the most recent national an d regional data are current only thr ough 20 03. As a result of these limitations, policymaker s do not have current inf o rmation on the extent o f conversions at relevant l andscape l e vels for all areas across the country where conv ersions may have o ccurred in rec e nt years. For e x ample, except for t h e abov e thr ee states, inf o rmation is not avail a bl e on conversions within local areas where further loss of native grassland may affect wildlif e population s . Such information—particularly for native grasslands, which are di fficult to restore—is important in assessing the need for and the results of policy ch anges. Moreover, among the av ailabl e sources of grasslands data, differences in grassland definitio n s complicate characterization of conversions to cr opland and t r ends in the amount of grasslands. Despite these limitati ons, avail a ble s ources provide some information on conversi ons. Specifically:

NRCS’s Nati onal Resour ces Inv e ntor y (NRI ) . The NRI is a pe riodic statistical survey of land use and na tu ral resource conditions and trends on nonfeder al lands. 10 

### According to th e NRI, from 1982 to 20 03 in the 4 8 contiguous states, rangel and and p a stureland decl ined by abo u t 10.4

10 All NRI numbe r s in this report are statistical estimates.

P a g e 12 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### million acres (about 2.5 percent) and 14.1 million acres (about 10.8 percent), respectivel y, making the tot a l declin e in grassland ab out 24.5 million acres. Most of th e decline in rangeland occurred bet w een 1982 and 1992 . These net chan ges do not indic a te the num ber of acres converted from rangeland and p a stureland to cropland. For example, so me of the decline i n rangeland was due to con v ersions to non-cropland uses, such as develop ed la nd. Appendi x II has addi tional NRI data on n e t c h anges in grassland an d other land- use categories.

The NRI also provides i n formation on conversi ons of rangeland and pastureland to cropland. As shown in table 1, for selected US DA crop production regions, the h i ghest conversi ons of rangeland to cr opland were in the Northern Plains, where 2.61 million acres (about 3.5 percent) and 590, 000 acres (about 0.8 percent) were converted during 1982 through 1997 and 19 97 through 2 003, respe c ti vely. Th e an nual rangel a nd conversion rates declin e d from the 1982 through 1997 time frame to the 1997 throug h 200 3 time f r ame for eac h of the thre e regions th at had rangeland. Regarding co nversions of pastureland to cropland, the high est amounts we re in the Corn Belt, where 4.48 million acres (about 17.6 percent) and 1.66 million acres (about 8 percent) were converted during 1982 throug h 199 7 and 1 997 through 2003 , respec tively.

P a g e 13 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on**Table 1: Conv ersions of Range**  **land and Pastureland to Cropland in**  **Select ed Crop**  **Production R e**  **gions, 1982-1997 and 1997- 200**  **3**

acres in mil lio n s with margins of error

**Re gion**  **Ra nge**  **la nd to** 
**cro p**  **l an**  **d ,**  **1982-19 97**  **Ra nge**  **la nd to** 
**cro p**  **l an**  **d ,**  **1997-20 03**  **Pastu relan**  **d to** 
**cro p**  **l an**  **d ,**  **1982-19 97**  **Pastu relan**  **d to** 
**cro p**  **l an**  **d ,**  **1997-20 03** 
Northern Pl ai n s a 2

. 6 1 (2.19- 3 .0 3 ) 0.59 (0.47-0.7 1 ) 1.80 (1.57-2.0 3 ) 0.77 (0.62-0.9 2 )
Souther n Plai n s b 1

. 1 7 (0.98-1. 3 6) 0.29 (0.15-0.4 3 ) 0.94 (0.70-1.1 8 ) 0.42 (0.28-0.5 6 )
Mounta in State s c 2

. 0 4 (1.6 3 -2.45) 0.58 (0.27-0.8 9 ) 0.99 (0.76-1.2 2 ) 0.80 (0.55-1.0 5 )
Lake States d d d 1.98 (1.80-2.1 6 ) 0.96 (0.80-1.1 2 )
Corn Belt e e e 4.48 (4.21-4.7 5 ) 1.66 (1.46-1.8 6 )

So u r ce : NRCS’s NRI da ta

. Note: The s e regi ons ha ve large a m ounts of cropla nd and ha ve or p r eviou s ly had la rge amount s of native gra s sland as well.

a The No rthern Plains sta t es a r e K ansa s , Neb r a ska , North D a kot a , a nd South Da kota

.

b The Southe rn Plains sta t es a r e Oklahoma and Te xas.

c The Mountain St ates a r e Arizo na, Colorado, Ida ho, Montana, Ne vad a , New Me xico, Utah, and Wyoming.

d The La ke State s are Michigan, Mi nnesota, and Wi sco nsin. No ne of these state s had measu r able rangeland in 198 2 or 1997.

e The Co rn Belt St ates a r e Illinois, Indiana, Iowa, Mi sso uri, and Ohio. Among these st ates, onl y Missou r i had me asura b le rangela nd in 1982 or 1 9 97. Specifically, Missou r i had abo ut 14 3 ,000 an d 88,000 a c re s of rangeland in 1982 and 1997, resp e c tively.



### National Agricultu r al Statistic s Serv ice’s (NASS ) Censu s of Agricultur e

. The Census of Agriculture, conduct e d every 5 years by NASS, is a census of U.S. farms and ranches and is anot her source o f national d a ta on changes in the amount o f private gr asslands on farms. The Census of Agriculture does not use the NRI defi nitions of rangeland and pastureland, and unlike t h e NRI, the Census of Agriculture combines rangeland and pastureland grasslands into a single category . Also, unlike th e NRI, the Census of Agriculture provides da ta only on net changes and does not provide info rmation on conversions of grassland to cropland. According t o the Census of Agriculture, rangel an d and pastur eland declin ed by 21.9 million acres (about 5.1 percent) be t w een 1978 and 1992 and 2.9 million acres (about 0.7 p e rcent) between 19 97 and 2002. Appendix II I provides additional in formation from the Census of Agriculture on chan ges in land use for the United State s and select ed states.

P a g e 14 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### FSA data for Montana, North Dakota, and Sout h Dakota . In recent y ear s, to provide in formation to FWS and D u cks Unlimited on the amount and location of n a tive grassland converted to croplan d, FSA state and county offices in Montana, Nort h Dakota, an d South Dak o ta voluntar ily collected county-level data on con versions of grassland that had no pri o r cropping history. 11 

### The FSA offices collecte d thi s information through ex isting annual acreage reports. These data s howed that within North Dakota an d South Dakota, conversions have b e en highest in counties in t h e western part of the P r airie Pothole Region, an area of man y small, isolated wetlands where the remaining nativ e grassland provides important wildlife habitat. Tab l e 2 shows the av ailable d a ta on a c res converted in 200 5 and 2006

.

**Table 2: Conv ersions of Grassland That H**  **a d No Prior Croppi**  **ng Histor y to Cropland**  **in Mon**  **t an**  **a, N o**  **rth Dako**  **ta, an d**  **Sou t**  **h Dako**  **ta, 2005 an d**  **200 6** 

in acres
**S t**  **a t**  **e 2**  **0 0**  **5 200**  **6**
Montan a 1 0

, 3 7 3 6

, 2 4 5
North Dak o ta a 20,59 2
South Dak o ta 54,40 4 47,16 7

Sour ce: GAO ’ s an alysis of FS A ’ s da ta.

a A cco rdi ng to FS A offi ci al s i n Nort h Dakot a , co nsi s t ent data are not available for 200 5 becau s e count y office s di d not use con s ist ent data collection method s in that year.



### Ducks Unli mited Study

. 12 

### A recent D u cks Unlimited study pr ovided additional in formation regarding the extent of nat i ve grasslan d conversions to cropland i n the western part of the Prairie Poth ole Region

11 FSA state officials in these states instructed c ounty offices o n the pr oced ur es to use i n collecting data on c onversio n s of g r assland th at had n o cr op ping history to croplan d, and they believe c o unty offices used consistent pro cedures. However, they ha ve not confirmed that the cou n ty offices us ed t h es e proce dures

. As a res u lt, s o me cou n ties may have
overrep orte d o r u nder r ep orte d the n u mber o f acres co nvert e d. I n a ddition , it is pos s i ble that s o me of th e conve r ted la n d identified as previous ly u n cr oppe d gras s l an d ha d been converted to cr opland bef ore F S A began kee p ing cr op his t o r y rec ords , w a s later ret urne d to grassland, a nd t h en was a gain conve r ted to cr oplan d.

12 Scott Stephe ns, Johanna Walker, Darin Bl unc k, A n eetha Jayaraman, and D a ve Naugle, Gra ssla n d Con v ersi on i n th e Mi ssouri Cot e a u of North a n d S o uth Da kota 1 9 8 4

- 2 0 0 3 , Ducks U n limited (f orthc oming ) . I n formatio n f rom t h is repo rt w a s pres e nted as “Gras s l and Conversion an d Risk Mo dels f or t h e Missouri Coteau : To ols for Staying A h e a d of the Plow,” at the a nnual c onference of th e So uth Dak o ta Wildlife Societ y , Oac o ma, So u t h Da kota, March, 2007.

P a g e 15 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### in North Dakota and So uth Dakota. The researc h ers analyze d conversio n s from 1984 th rough 2003, examining sate llite imagery from this period and performing field checks t o identify n a tive grasslan d. The study found that from 1984 th rough 200 3, an estimated 144, 000 acr es were converted from native grassland to cropl and. The hi g h est convers i ons were in central South Dakota. The study concluded t h at the an nu al conversion rates— which range d from 0.32 percent to 0

. 95 perc ent a c ross the study areas— were relativ e ly low but t h at the a c re age convert e d was significant from a biological and economi c perspective.

Although states other than Montana, North Dakota, and So uth Dakota may have experi enced conve r sions in recent ye ars, we did not fin d any oth e r systematic efforts to collect state or l o cal con versions data. H o wever, we were able to obtain some quantit a tiv e information that provi d es some indication of recent co nv ersions in Ne braska. Wh ile data on t h e number of acres converted were not avail a ble, NRCS state and county officials in Nebraska provided d a ta for 26 of the state’s 93 co unties on th e number of land tracts o n which producers had i n formed US DA of their intention to convert gras sland to cro p land. 13 

### The data show that USDA was informed of nearly 5, 200 planned con versions during 20 03 thr ough 20 06, with the highest cou n ty havin g 6 78 plann e d c onversions. According t o FSA, NRCS, and state wildlife ag ency officials in Nebraska, many producer s were motivated to convert b y an interest i n gaining irrigation water rights before moratoriums on these rights took eff ect in certai n areas of th e state. Some of these offi cials belie ve this motivation—and th us the number of conversions—may decli n e if existin g moratoriums on water rights are not modified and new moratoriums are not announced.



# Crop Insurance and Crop Disaster Assistance Costs W e re Significantly Higher in Counti e s That Had Higher Conversion Rates Converting grassland to cropland, an d thus bringing more lan d into production, has the potential to increa se government costs because this new cropland is eligible f o r crop insu rance, crop disaster assistance, and marketing a ssistance loa n payments, and could b ecome eligib le for direct and counter cyclical payments if an update of crop base acres is allowed in the future. H o wever, onl y limited dat a are a vaila b l e on go vern m ent costs associated with grassland converte d to croplan d because USDA has little information on the locati on of converted land tracts and gener ally does

13 T h es e counties are in a c ontig uous a r ea that runs f rom s o ut hw es t to n orth eas t acros s Nebras k a

. NRC S officials believed co nvers i on rates were relatively high in t h e counties of this area. According t o FSA and NRC S official s in Nebraska, producers alm o st always carry out t h es e plan n e d co nvers i ons

.

P a g e 16 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### not track farm program payments to sp ecific tra c ts. As such, we analyze d county crop insurance and disaster assistance payments data in relation t o 2005 and 2006 dat a on conversions of grassland to cropland for South Dakota cou n ties. 14 

### The S outh Dakota counties th at had the most conversions of grassland with no cr opping history to cropland also had significantly higher crop insurance a nd crop disa ster assistance costs tha n other counti e s. Specifically, we foun d:

Crop insura nce . Our analysis of RMA’s crop insurance d a ta in dicates that conversions of grassland with no cropping history added disproportio n ately to go vernment co sts for crop insurance in South Dakota. Tab l e 3 shows the net crop i n surance pa yments recei ved by producers in the 16 Sout h Dakota co unties with the highest r a tes of conversions in 200 5 and 2006 in comparison with the net p a y m ents received by producers in the state’s o t her counties. The 16 hi ghest conversion counties had net crop in surance payments that averaged $13. 03 per a c re from 199 7 to 20 06, al most twice a s much as the $6. 66 p e r acre net p a yment received in South Dakota’s remaining 50 counties. Also illustrated in the table is the contrast between the net payments in the 16 highest conversion counties and 7 his t orically cro pped counti e s in southeast South Dakota that had a n egative net crop insurance benefit during this period––that i s , crop producers in these counties collectively paid more into the crop i n surance program as premiums and other fees than they re ceived from the program as indemnity payments. 15

14 We selected South Dakota counties because c onv ersion data were available by county for 2005 and 2006 and c onversions have received c onsidera b le a ttention in the state. In cond ucting this analys is , w e as s u med that the counties w i th t h e highes t num ber of converted acre s in 2005 a nd 2 006 were also t h e counties with the highest c onversion rates in previo u s yea rs

.

15 In ad dition, w e s e parated t h e 6 6 So uth Dak o ta cou n ties into t hree g rou ps ba s e d on the number of acre s converte d an d fo und that th e 22 co unties w i th the highes t number of converted acre s had net c rop i n surance benef i ts of about $60 0 million from 1997 to 2006 , w h ile the 22 c o unties w i th the low e s t number of co nvers i ons had net benefits of ab out $100 million for t h e same time peri od.

P a g e 17 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on**T a**  **b l**  **e 3: Co mp**  **ariso n**  **o f**  **Net Cro p**  **In su**  **rance Pay m**  **en ts in**  **So u**  **t h**  **Dako ta fo**  **r th e 16 Hig**  **h est Co**  **n versio**  **n Co**  **un ties versu**  **s O t**  **h er**  **Countie s** 

**Cro p**  **year s 19**  **97 to 2006**  **Cro p**  **year s 19**  **89 to 2006** 
**A r**  **e a**  **C r**  **o p**  **T o**  **t al**  **P e**  **r ac**  **re T**  **o t**  **a l**  **P e**  **r ac**  **re**
16 cou n ties wit h the hig hest conversi ons C o r n $25 5,520, 18 3 $22.7 8 $ 2 8 0, 3 92, 0 0 6 $ 1 8

. 6 2

A l l crops a 485,5 22,5 4 6 1 3 .0 3 5 5 0

, 7 51,4 5 6 10. 3 0
50 other co unti e s Corn 2 3 1,6 62,5 9 4 8 .27 2 9 0

, 2 14,2 3 1 7

. 1 1
A l l crops a 5 3 2,1 76, 3 75 6.66 6 7 2

, 8 26,0 8 5 5.67
7 selecte d hist o rical l y cropp ed cou n ti es b C o r n ( 3 ,562,4 66) (0.45) 5

, 1 3 5,5 5 3 0.42

A l l crops a ( 3 ,059,9 47) (0.19) 1 1

, 8 0 5,7 3 9 0.49
**State to tals**  **Co rn**  **$48 7,182,**  **777 $12.4**  **2 $57**  **0,606, 237**  **$10.2 1**  **All crops a**  **$1,01 7,69**  **8,92 1**  **$8.68 $**  **1 ,**  **2 2**  **3,57 7,54**  **1 $7.11** 

Sour ce: GAO ’ s an alysis of RMA ’ s d a ta.

Note: Net cro p insuran c e p a yme n t s are the indem ni ty pa yment s that produ cers re ceived less the premiums an d a d ministrative fe e s that p r odu cers pay. We did not i n clude go vernm e nt co sts re sulting from (1 ) pa yment s to insuran c e co mpanies for und erwriting gains a nd administrati v e and ove r head expen se s and (2 ) the cost of RM A operating e x pe nse s in this anal ysis be cau s e cou n ty-le v el data on these co sts were not available.

a Include s all crop s e xcep t forag e p r oduction and forage see d ing.

b These co unties have not had large increa se s in crop pro duction in rece nt ye ars an d are locat ed in two adjacent NR CS major land re source a r ea s.



### Crop disaster assistan ce payments . Similar to our crop insurance analysis, our analysis of FSA crop disaster assistance p ayme n ts data indicates th at conversions of gra ssland with no cropping history add disproportio n ately to go vernment co st s for disaster assistance payments in South Dakota. 16 

### Table 4 shows the crop disaster assistance payments received by producers in the 16 Sout h Dakota co unties with the highest conversion rates in comparison with the payments received by producers in other Sou th Dakota counties. From 1998 to 2004, crop disaster assistance payments in the 16 h i ghes t conversion counties tot a led more than $195 million (40 per cent of the state total), compared wit h approximately $292 milli on for the ot her 50 South Dakota counties,

16 Crop dis a s ter a s s i s tance paym ents are a ppr ov ed by the Cong res s on a n a d h o c bas i s , a nd therefore these payments do not necessarily a dd t o g o vernm ent costs every year. However, ad hoc c rop disaster assistanc e payments ha v e been available for nearly eve r y crop yea r since 1988.

P a g e 18 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### including ab out $16 milli on in 7 histo r ically cropp ed counties i n southeast South Dakota.

**Table 4: Comparison of Cr op Disaster A**  **ssistance Payments in Sout**  **h Dakota for the 16 Highest Conversion Counties versus**  **Othe r**  **Countie s** 

**Cro p**  **year s**  **1 6**  **c ountie**  **s with the**  **hig h**  **e s**  **t**
**co n**  **versio n**  **s (as a p**  **erc en**  **ta g**  **e**
**o f**  **state to tals)**  **All 5 0**  **othe r**  **c ountie**  **s 7 select**  **ed h**  **i sto**  **r ically** 
**c r**  **oppe d c**  **oun tie**  **s a**  **State to tals** 
199 8 $ 8

, 5 3 4,88 4 ( 3 8% ) $ 1 3 ,7 10,4 7 2 $ 3 9 3 ,778 **$22,2 45,3**  **5 6** 
199 9 1 6

, 0 6 3 ,45 1 (40 % ) 24,50 2,86 8 4 ,969, 3 68 **40,56 6,31**  **9**
200 0 2 3 ,26 6 ,26 6 (45 % ) 28,74 1,6 3 1 1 ,992,9 56 **52,00 7,89**  **7**
200 1 1 2

, 4 8 0,41 7 ( 3 4 % ) 2 4

, 4 7 4,57 0 2 ,782,1 0 4 **36,95 4,98**  **7**
200 2 7 4

, 4 3 2,45 2 (42 % ) 104, 3 22,9 1 3 2,716,9 84 **178,7 55,3**  **6 5** 
200 3 4 3 ,80 0 ,98 7 (46 % ) 50,52 1,90 7 2 ,796,6 99 **94,32 2,89**  **4**
200 4 1 6

, 7 4 4, 3 15 (2 7% ) 4 5

, 3 6 0 ,49 5 784, 3 46 **62,10 4,81**  **0**
**T o**  **t a**  **l $**  **1 9**  **5,322, 7**  **7 2**  **( 4**  **0 %**  **) $29**  **1, 634,**  **856 $16,4**  **36,2 3**  **5 $**  **4 8**  **6,957, 628** 

Sour ce: GAO ’ s an alysis of FS A ’ s da ta. Notes: (1) The s e crop disa ster a s sistan ce pa ymen ts include pa yme n ts fo r losses of major cultivate d crop s, su ch a s corn, soyb eans, a nd wheat, a s well as fruits and veg e tables, such as melons, apple s , cabbage , and be ets. In a ddition, some payme nts w e re made fo r gra ss lo sses. Howe ver, a c cording t o an FSA official, t hese pa yment s were not f o r g r azing losse s. (2 ) In analyzing cro p disaster a s sistan ce payment s, we did not cal c ulate p a yment s pe r acre becau se da ta o n the numbe r of acre s that potentially were eligible for these payment s we re n o t available.

a These co unties have not had large increa se s in crop pro duction in rece nt ye ars an d are locat ed in two adjacent NR CS major land re source a r ea s.


### According t o USDA officials, a possi ble reason f o r the relati vely hi gh cr op insurance and disaster assistance payments in South Dakota counties with the highest conversion rates is that these counties are in areas that are more prone to drought and crop losses than other major crop-producing counties. Drought has been the lar gest cause of crop insurance indemnity payments nationwide from 1989 to 20 04, accounti n g for about 40 percent of the primary causes of total indemnity payments

.

Our 2005 re port on crop insurance e xplains why areas that ar e prone to frequent or severe crop l o sses may h ave rel a tivel y high crop i n surance costs. 17 

### The cr op insurance program has high premium subsidies to encourag e p a rticipation. Premium subsid ies are c a lculate d as a percent a g e

17 GAO, Crop I nsura nc e: Ac ti on s Need ed to Re d uce P r

ogra m ’ s Vu lne r a b i l i t y to Fra ud , Wa ste, a n d Ab use , GAO-05-528 (Was hingt on, D.C. : Sept

. 30 , 2005).

P a g e 19 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### of the total premium and can b e as high as 67 percent. The subsidies sh ield producers from the full c o st of grow ing crops in t h ese areas. Because premiums are higher in a r eas that ar e prone to frequent or severe crop losses than in the major crop-producing counties, premium su bsidies have the effect of causing cro p insurance costs to be h i gher in thes e areas.

Federal farm program payments are an important factor in producers’ decisions to convert nati ve grassland to cropland, but rising crop prices and advances in crop production tech nology are also importan t factors in these conv e r sions. Specifically, i n cre a sed crop pr ices, due l a rgely to risin g ethanol dem and, are imp o rtant in producers’ deci sions. In addition, the adoption of genetically modified crops as well as new farming techni qu es have made cropping more profitable on land previously considered to be marginally suitable or generally unsu i table for cr op producti on. Regardin g farm program payments, our analysis of crop pro duction cost s and returns and our revi ew of econo mic studies i ndicate th at these payme n ts are an important factor in producers’ c onversion decisions. Moreover, the incentiv e s fa rm programs provide to convert gras sland to cro p land app e a r to be incons istent with USDA conservation prog rams that encourage producers to either mai n tain grassla nd or conver t cropland t o grassland or another con s erving use. 

# Farm Program Payments, Rising Crop Prices, and the Adoption of New Farming T e chnologi es Provide Incenti ves to Expand Crop Production on Native Grasslands

Rising Crop Prices and Advanced Crop Producti on T

echnol ogies Are Important Factors in Decisions to Convert Native Grassland to Cropland Increasing d e mand for crops used to produce eth anol and oth e r renewable fuels has caused crop prices to incr ease, increasi n g the profit ability of crop production and pro v iding in cen tives for con versions. For example, the price of a March 200 7 corn futur e s contract on the Chica g o Board of Trade rose from $2.50 p e r bushel in September 2 006 to $4. 16 per bushel i n January 20 0 7 , an in creas e of more than 66 p e rcen t. A May 200 7 USDA study stated that the incr eased dema nd for rene wable fuels would result in continued expansion of crop acreage and bring new land int o crop production, particularly in the Corn Belt and the Northern Plains. 18 

### Furthermore, a June 2007 NASS repor t announced that corn growers had planted 92.9 million acres of corn in 2007, 14.6 million acres more than were plante d in 20 06 an d the high est total since 1944

. 19 

### NASS stated that

18 USDA Econ om ic Res earch Se r v ice and Office of the Chief Ec onomis t, An A n alys is of the Effects of a n E x

p a nsi on i n Bi ofuel Dema nd on U.S

. Ag ri c u ltur e , (Washington, D

. C., Ma y 2007).

19 USDA National Agricultural St atis tics Service, Acrea ge , June 29, 2007.

P a g e 20 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### this increase d corn acre a ge was partially offset b y reduced soybean acreag e in t h e plains an d the Corn Belt. USDA and agricultu ral experts expect this demand to continue to in crease, and corn and oth e r crop prices are e xpected to b e relativ e ly high for sev e ral ye ars. NRCS and FSA officials in states and co unties with the highest c onversions of grassland to cropland co nfirmed that crop prices strongly influence produ cers’ conversion decisions.

In addition, the availabil i ty of advan ced crop pro duction tech nologies, including ge netically modified crops, such as her b icide-resistant soybean s, and new farm ing techni ques, such as no-till planting, contribute to producers’ decisions to convert native grassland t o cropland. For example, herbicide-re sistant soybeans bec a me av a ilable to farmers fo r the first time in 199 6, and , according t o USDA, usage nationwi d e expan d e d to over 4 0 percent of s o ybean acre age in 199 8 and then to 87 perc ent b y20 05 (95 percent in S outh Dakota) . The use of these soybe an varieti es makes weed control easi e r and has, i n turn, made no-till planti ng—a conservation practice th at reduces soil erosion and conserves moisture while also cutting fuel and labor co sts—more feasible. Thes e dev e lopments have reduced the cost of production and made it more profitable to produce high-valu e c r ops, especi ally corn an d soybeans, in some areas that historically were considered margina lly suitable or generally unsuitable for crop production. FS A and NRCS officials co nfirmed that advan ced crop production technol ogies strongly influence producers’ conversion decisions.



# Farm Pro g ram Payments Provide Incentives to Convert Native Grassland to Cropland by Increasing Producer s’ Income and Reducing Their Financial Risks Farm program payments, including crop insurance, crop disas t er assistance, a nd marketing assistance loan payme n ts, are important factor s in producers’ decisions t o convert n a tive grasslan d to croplan d because they reduc e producers’ financial risks and, in man ycases, in crease producers’ profits over maintaining grassland. To evalu a te t h e impact of farm program payments and other factors in producers’ conversion decisions, we prepared a partial budg et anal ysis for a hypothetical 160- acre tract in a South Dak o ta county—located in the Prairie P o thole Region—that was among the state’s h i ghest count ies in conversions of grassland that had no cropping histo r y in 2005 an d 2006. A partial budget analysis eval uates the economic effects of making an ad justment to part o f the farm operation, such as changin g what is produced or buyi n g new machinery. Specific a lly, we compared the estimated costs an d returns for 2003 throug h 200 7 from 160 acres of na tive grassland—used for grazing as part of a co w-calf operation—to the costs and returns if the same land had been con ver ted to cropla nd in 20 03 a nd used to p r oduce corn, soybeans,

P a g e 21 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### and spring wheat through 2007. Thi s period exh i bited a vari e ty of yi eld and price scenar ios as well as farm prog ram payments and thus may illustrate how the significance of f a rm program payments can ch ange f r om year to
year.

We found th at for certai n years, high crop prices as well as farm program payments would provide economic i n centives fo r a producer to convert native grassland used for grazing in a cow-calf op eration to a cropping operation. I n 3 of the 5 years, the co nversion from grazing to cropping would have resulted in i n creased inc o me. In the other 2 ye ars, the conversion would have resulted in reduced i n co me largely b ecause cattl e prices were high relative to crop pric es and farm program payments were lower than in the other y ears. Withou t any farm p r ogram payments, income would have incr eased only i n 200 7, but i n view of projections th at crop prices will remain relativel y high, this increase in incom e without farm program payments may continu e for several years. 20 

### However, e ven with high crop prices, farm progra m payments from crop insurance and crop disaster assistance likely will cont inue to be a relevant factor in conversion decisions be cause of the need for pro t ection a gai nst adverse crop production risks, such as drou ght. Table 5 shows the net chan ge in income from shifting to crop produc tion from a cow-calf op eration on a 160-acre par cel of land, with and without farm program payments (crop insurance, c r op disaster assistance, a nd marketing assistance loan payments). 21 

### The table also shows corn pri ces and yields as we ll as calf and cow prices during t h is period.

20 T o es timate crop prices fo r th e 2007 cr op ent e rpris e , w e us e d regio n al aver a ge cro p prices for January t o J u ly 2007.

21 Since this lan d had not been in cro p pro ductio n p r evious ly, u nder cur r ent legis l ation it

w ould n o t be el igible for c ount er-cyclical payments or direct payments

.

P a g e 22 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on**Table 5: Estimated Net Change in Income**  **for a Shift t o**  **C r**  **op Producti on from a Cow-**  **Calf Grazing Operation on**  **a 160- Acre**  **T ract in**  **Cen t**  **ral So u**  **t h Dako**  **ta, 2003- 200**  **7**

**F acto**  **r s**  **200 3**  **200 4**  **200 5**  **200 6**  **200 7**  **Net change in income**  **a**

W i th farm program payme nts (crop insur anc e, crop dis aster a ssistance, an d marketing assistanc e loa n payme nts) $ 3 ,761.20 ( $ 3 ,60 2 .75) ($4,8 3 4

. 6 6 ) $ 2

, 3 66

. 3 5 $2,09 9.47 Without farm program p a yme n ts (crop insur ance, crop dis aster a ssistance, an d marketing assistanc e loa n payme nts) ($8,49 9.29) ($6,6 3 1.58) ($7,6 3 4

. 6 2 ) ( $ 6

, 7 2 9. 3 5) $2,09 9.47
**Selected p**  **r ice**  **s an**  **d yield**  **s** Corn pric e ($ p e r bush el) b $2. 3 6 $1.64 $ 1

. 7 6 $ 3

. 3 7 $ 3 .52 Corn yie ld (b us hels p e r acre) c 3 7.1 84.4 8 1

. 2 4 1

. 5 69.0 Calf price ($ pe r 100 po un ds) d $11 1. 3 8 $12 1.59 $1 3 6

. 8 5 $ 1 1 3 .16 $12 4.48 Cow pric e ($ p e r hea d) e $61 6

. 5 0 $75 0.8 3 $ 8 3 9.27 $79 7.55 $76 9.00

Sour ce: GAO ’ s an alysis using dat a from Sou t h Dakot a S t at e Univer sity , NRCS, NASS, RMA, FSA, an d Drovers ’ Inc. Notes: (1) We assumed a deci s ion was m ade to convert to crop p r oduction in 200 3 and ca rried forward throu gh 2007. (2 ) The net change in in com e is the re sult of compa r ing the alt e rnate income stream s f r om cro pping (co r n, soyb eans, an d sp ring wheat) versu s grazing (c ow -calf o peration). ( 3 ) Both herd li q uidation and con v e r si on co st s were a m ortized o v e r a 5-yea r pe riod fro m 200 3 to 2007 at a 6 percent rate of interest.

a While the 200 3 to 2006 re sults are retro s pe ctive, t he 2007 crop h a d not been ha rve s ted a s of July 2007. On the ba sis of Jul y 2007 crop price s and US DA estimate s, w e assumed no m a rketing assi stan ce loan payment s wo uld be made for 200 7. We did not incl ude any crop insurance or di sast e r assi stan ce pa ym ents fo r 2007, alt hough such p a yments ma y be m ade in the future.

b C o r n pr ic es f o r 20 0 3 throug h 200 6 are yearly ave r ages of we e k ly cash p r ice s in cen t ral South Dakota from the South Da kota St ate Unive r sit y ex t ension grain marketing se rvice. C o rn pri c es f o r 2007 are a v e r ag e weekl y ca sh p r ices for the Cent ra l South Dakot a region from Janu ary to Jul y 2007, from South D a ko ta State Unive r sit y e x ten s ion se rvi c e.

c Corn yields fo r 2 007 are a m o vin g ave r age of NA SS count y yield s , adjusted fo r soil produ ctivity.

d For 20 0 3 thro ug h 2006, calf price s are No vember S outh Da kota sto cke r cattle prices, monthly

avera ge, obtaine d from South Da kota State Unive r sity ’ s “Cattle Ma rket Re view,” Jun e 22, 2007, fo r 500 to 600 po un d stee rs. For 200 7, calf pri c es are av era ge monthl y price s for th e first 6 months of 2007, Ja nuary th rough June.

e Cow pri c es are bred female p r ices for “young an d middle aged” b r ed cows from th e cent ral region of the United State s which include s South Da kota, o b tai ned from D r o v ers. F o r 200 7 , b r ed female pri c es
are a v erage mon t hly price s fo r the first 5 mont hs o f 2007, Ja nuary th rough Ma y.



### We did not a ttempt to ev aluate th e social, en viron m ental, and wildlife habitat costs and ben e fit s of this conversion. Furthermore, although crop prices are pr ojected to c ontinue to ri se over the next several years, the likelihood of prices remaining at such high levels, especially in conjunction with high levels of prod uction, may not materialize. In the absence of d a ta on futur e weather p a tterns, yiel ds, and commodity prices, we did not p r oject future rates of retu rn. Moreover, we did not project

P a g e 23 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### future rates of conversio n because we cannot speculate on many of the factors that enter into pr oducers’ lan d use decisi ons, such as their aversio n to risk in the presence of significant potential cr op yield vari a bility, although the stabilizing effect of crop insurance would tend to lessen risk
concerns, es peciall ycompared to li v e s tock grazing. Neverthel ess, this analysis de monstrates that there ha ve be en e c o nomic incen tives for producers, at least in the short run, to shift into crop production on native grassland. It also illustrates the impor tance of f a rm program payments in years of lower crop pric es or yields. Appendix IV provides more information on our partial budget an alysis.

In addition t o our partial budget an al ysis, several economic studies we reviewed fo und that farm program payments influence prod ucers’ conversion decisions because they i n crease the expected profitability of cropping lan d while lowering the risks. For example, a study by USDA’s Economic Research Ser v ice (ERS) found that in creased cro p insurance subsidies in the mid-199 0s enc ouraged producer s to expand crop production i n the conti g uous 48 stat es by an estimated 2.5 mi llion acres, with most of the land co ming from p a stureland and other grassland. Another recent paper, b yIowa State University agricultural economists, concluded t h at the redu ction in risk by crop insu rance and commodity programs creates inc e nti ves for farmers and land lords to focus on growing the commodities supported by th ese programs. In addition, so me of the economic studies we reviewed raised the possibility that land value appreciation due to farm program payments may be another economic incentiv e for farmers to convert nativ e grassland t o cropland. Since the value of agri c ultural land depends, in part, upon expected futu re earnings from farming, purchaser s of land will pay a higher price for land that is expecte d to provide a fut u re stream of farm program payments. For example, ERS reported t h at the eff e ct of farm program payments on land values varies widely throughout the Un ited States but that in creases are highest in th e Northern Plains. For more detaile d summaries of these an d other studies that we ex amined, see appendix V.

Most of the FSA and NRCS state and local offi cial s in Montana, Nebraska, North Dakota, and So uth Dakota con f irmed that farm program payments, specifically crop insurance, crop disa ster assistance, and marketing assistance lo an payments are impor tant—although not always the most important—factors in producers’ co nversion decisions. In particular, among the f a rm programs, the offi cials noted th e importance of crop insurance b ecause it red u ces the risk of growing crops. Nearly all of th ese officials beli eved th at farm program payments play a greater role in producer de cisions when crop price s are lower. For example, several

P a g e 24 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### officials not ed that a red u ction in pr ogram payments would have h a d a more pronounced eff ect in reducing crop conver sions 2 year s ago, befor e the prospect of increased demand fo r ethanol co ntributed to higher corn prices.



# Incentives to Convert Grassland May W o rk at Cross Purposes with USDA Conservation Programs The incenti v e s provided by farm program payments appear t o be inconsistent with USDA conservatio n programs, such as the Wetlands Reserve Program, 22 

### the Grassland Reserve Progra m, 23 

### and CRP. These conservatio n programs, among ot her things, pay producers and landowners to either maintain grassl and or conver t cropland t o grassland or another conserving use. However, th ese programs appear to be at odds with farm programs that provide incen tives for co nversions of grassland to cropland. Fo r example, NRI data on South Dakota CRP enrollments— which represent convers i ons of cropl and to grassland—and co nversions of grassland to cropland i llustrate th is apparent in consistency. From 1982 through 1997, 1.69 million acres of cr opland in South Dakota were enrolled in CRP—with almost all of this acrea ge plant e d i n grasses—at a total government cost of abou t $633 million. However, during the s a me period, 1.82 million acres of gras sland in South Dakota were converted to cropland. A bout half of this acreag e had been rangeland, gen erally supporting native grasses and vegetati on, and the other half pastureland. Other states had similar patterns during this peri od. For example, North Dakota had CRP enrollments of 2.8 m illion acres, CRP costs of about $973 million, and grassland conversions to cropland of 1.16 million acres. Montana had CRP enrollments of 2. 7 million acres, CRP costs of about $957 million, and con versions to cropland of 1. 35 million acres.

22 The Wetlands Reserve Progra m was authorized by the F ood , Agriculture , C ons ervation , and Tra d e Act of 1990 (1990 F arm Bill), Pub. L. No. 101-624, 104 Stat. 3359, t o assist landowners i n restoring a n d protecting wetla nds. Producers enrolling in the program m u st agree to implement ap prove d w etland res t o r a tion an d prote ction plans

. In return , participating p r oduce r s receiv e payments bas e d o n t h e fair market value o f the lan d covered by the easement. The 2002 Farm B ill reauthorized the program with mandat ory funding throug h fiscal year 20 07 and set a maximum enrollment ceiling of 2.275 million

acres.

23 The Grassland Reserve Progra m was authorized in t h e 2002 Farm Bill, which aut horized enrollment of up to 2 million a c res of restore d or improved grassland, ra ng eland, a n d
pas t ureland un der tem pora ry and permane n t eas emen ts or r e ntal agreemen ts of at leas t 10 years. A t o tal of $254 million i n mandatory fu nding between fiscal years 2003 and 2007 was provide d . The 2 002 Farm Bill a l so provide d c o st sharing pay m ents at 75 percent to restore dis t urbed gras s l ands and 90 pe rcent t o p rotec t virgin gras s l ands

.

P a g e 25 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### Sodbuster has had little impact in li miting the conversion of native grassland to cropland, in part becaus e much of th e nativ e gras sland converted in recent y ear s is not high ly erodible a nd therefore not subject to Sodbuster. According to USDA officials, even i n most cases where Sodbuster applies, the costs associated with Sodbuster compliance h ave not been en ough to det e r producers from converting the land . USDA and some stakeholder organi z ations h ave suggested a proposal known as Sod Saver that w ould discourage n a tive grassland con versions by making converted l a nd ineligibl e for farm program payments.

Much of the native grassland conv erted to cropla nd in recent years is classified as non-highly erodible land and thus is not subject to Sodbuster. NRI data on the percent a ge of rang el and converted to cropland and classified as highly erodi ble provide an approximation of the percentage of conversions that are subj ect to Sodbu st er. According to NRI data, between 1997 and 20 03, an estimated 5 9 perc ent of the ra ngeland con verted to cropland in t h e Northern Plains production region —encompassing Kansas, Nebraska, North Dakota, an d South Dako ta—was classified as non-highly erodible. In t h e Southern Plains and t h e Mountain regions, which also have l a rge am ounts of rangeland, NRI data for this period indicate an e s timated 43 percent and 47 perc ent, r e spectivel y, of the rangeland acres that producers conver ted were classified as non-highly erodible. In addition, according to o u r analysis o f NRCS records for selected Ne braska coun ties that hav e had rel a tiv e ly high con version rate s, slightly over half of the l and parcels converted in those count ies between 2003 and 2006 were clas sified as non -highly erodi ble. Because non-highly erodible lan d is not subject to Sodbu ster, producers who convert such land do not have to bear the cost of applying co nservation systems in order to maintain fa rm program benefits. 

# Sodbuster Has Had Little Impact on Native Grassland Conversions

Much of the Native Grassland Converted in Recent Y e ars W a s Not Subject to Sodbuster

Even When Planned Conversions Are Subject to Sodbuster , Producers Are Not Usual l y Deterred According t o FSA and NRCS officials, even whe n native grassland that is to be con ver ted is classified as highl y erodible, pr oducers gen erally perceive that the potenti al profit s from cropping the land out weigh the potential costs of controlling soil eros ion as requi r ed by Sodbuster. As such, officials in Montana, Nebraska, North Dakota, and Sout h Dakota counties that have h a d r e lativel y high conversio n rates said t h at the costs associated with meeting Sodbuster’ s soil erosion standards usually do n o t discourage native grassland conv ersion, especi al ly when cro p prices are high and crop productio n is profitable. Specificall y , these offi cials said Sodbuster rarely or never deterred conversions. According t o these officials, the cost of complying with Sodbuster has been redu ced by new

P a g e 26 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### crop production technol ogies. For example, almost all of the officials cit e d no-till planti ng as a low- cost management practice that contr o ls soil erosion sufficiently to m eet Sodbust e r requirements and add e d that the developmen t of herbicid e-resistant crops has facilitated prod ucers’ adoption of no-till planti ng by making it easier to control weeds without using tillage.

The views expressed by the officials we spoke with are gen erally consistent with the respo n ses of local NRCS officials to our 20 02 survey, in which we asked them to rate the eff e ctiveness of Sodbuster in limiting the conversion of native grassland. 24 

### The survey results for four states with relatively hi gh rates of conversions—Montana, Nebraska, North Dakota, and South D a kota—are s hown in table 6. As indicated in th e t a ble, the majority of officials in t h ree of thes e states—Montana, Neb r aska, and South Dakota—responded that Sodbu ster was slig htly or not effective i n limiting native grassland conversion. N early 44 p e rcent of off i cials in North Dakota provided a similar resp onse.

**Table 6: Local NRCS Officials’ R**  **esponses to GAO S**  **u rvey Question**  **on the Effectiven**  **e ss**  **o f**  **So db**  **u s**  **ter in L**  **i mitin**  **g th**  **e Co**  **n versio**  **n of Native G**  **ras s**  **l an**  **d to**  **Cr opla**  **nd**

perce nt

**State Extrem**  **ely effectiv**  **e Very**  **effectiv e**  **Mo d**  **erately effectiv**  **e Some**  **wha t**  **effectiv e**  **Slight ly or** 

**n o**  **t effective** 
Montan a 0 11.9 7

. 1 28.6 52.4
Nebrask a 0 4 .1 1 1

. 0 15.1 69.9
North Dak o ta 0 16.7 18.8 20.8 4 3 .8
South Dak o ta 1.9 7 .7 1 3

. 5 1 7

. 3 59.6

Source: GAO survey r e sults.

24 This survey was done in c onju n ction with ou r work o n Agri c u ltura l Cons e r v a t i o n: US DA Need s to B e tter Ensu re Prot e c t i o n of Hi gh ly Erod i b le Crop l a nd a n d Wetla n d s , GAO-03-41 8 (Was hingto n, D

. C. : Ap r. 21, 200 3 ). See als o t h e s p ecial pu blication, Agri cultura l Conse rva t i o n: S urvey Res u lts on US DA’ s I

m

p l ementa t i o n o f

Food S ecu ri t y Act Comp li a nce Pr ovi si ons ( GAO-03-492SP , A p r

. 21, 2003 ), w h ic h includes s urv ey res u lts stratified by state.

P a g e 27 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### To discourage future co nversions, USDA and some stakeholder organization s have suggested a propo sal known as Sod Saver that would make certai n grassland—primarily na tive grassland—ineligi b le for farm program payments if it is conver ted to cropland. USDA’s pro posed legislative la nguage—issued in April 2007—ap pli e s to rangela nd and nati v e grassland not used for crop producti on at an y ti me during the previous 6 years preceding the effective d a te of the 2007 f a rm bill. If such land is converted to crop production, it would be permanently ineli g ible for a wide range of farm program payments, including direct and countercycli cal, marketi n g assistan ce loan, conservation, dis a ster assistance, and crop insurance paymen ts. Accord ing to USDA’s proposal, Sod Saver is needed because, among other things , grasslands provide important ecological fu nctions and the rate of conversion to cropland could increase greatly o v er the next s everal years as increased production of biofuels b oosts the demand for corn and other crops. 

# USDA and Some Stakehol der Organizations Have Offered a Proposal to Discourage Grassland Conversions

Most NRCS state and local officials we spoke with suggested t h at barring newly converted croplan d from farm program payments, as called for under Sod S aver, would be a det e rrent to new co nversions in their counties. Ho wever, FSA state and local officials we interviewed were less certain than the NRCS officials about Sod Saver’s potential impact. Whil e generall yacknowledging that barrin g farm program payments would affect some conversion decisions, th ese officials placed more emphasis on the impact o f crop prices and ad vanced producti on technolo g ies. Official s from both agencies agreed that Sod S aver’s impact would be less when crop prices are high th a n when they are low.

Certain farm, crop, and li vestock or ganizations have expressed oppositio n to USDA’s Sod Saver pro posal. These organizatio ns include t h e American Farm Bureau Federatio n , National Association of Wheat Growers, National Corn Association, National Cotton Council, National Pork Producers Council, Unit ed Egg Prod ucers, and U S A Rice Fed e ration. For example, a c r op organization official we intervie wed said tha t advan ces i n crop production technol ogy contin u e to make more land suit able for cropping an d that it would be inequit a ble for some crop prod ucers to receive farm program payments on th eir croplan d while othe rs could not. In a May 15, 2007, letter, organization s opposed to the Sod Saver proposal expressed their concern s . Among other things, t h ey said

• 

### Sod Saver w ould constrain farmers’ ability to ad apt to chan gi ng market conditions related to th e growing demand for crops to produce food and renewable f u els.

P a g e 28 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on• 

### Sod Saver w ould reduce the amount of farmable land availabl e for beginning farmers.

• 

### Current information on the extent of conversions is insufficient to justify the Sod Saver proposal.

• 

### Existing policy—referring to the current conservation compliance provisions, including Sodbuster—is e ffectively controlling soil erosion on highly erodi ble land.

On the other hand, the S od Saver ap proach is supported by a number of wildlife, envi ronmental, and conserv a tion organi z ations, as well as certain cattle indust r y interests. These organ izations include, Ducks Unlimited, Pheasants Forever, the North Dakota and South Dakota chap ters of the Wildlife Soci e ty, and the South Dakota Cattlemen’ s Association. In particular, wildlife organi z ations h ave emphasized that Sod Saver would help maintai n native grassland habitat that is important for waterfowl and grassland birds, especial ly in Prai rie Pothole Reg i on areas of Montana, North Dakota, and So uth Dakota. In a ddition, a cattle industry official we spoke with expressed concern that farm program payments en courage conversions and subsidize crop prod uc tion, putti ng cattl e pro ducers at a disadvantage relative to crop producers in the co mpetition for land. In a May 29, 2 0 0 7 , letter, a c o alition of r e presentativ e s from Montana, North Dakota, and South Dakota wildlife organ izations and agencies responded to arguments against the Sod Saver p r oposal. Among other th ings, they said

• 

### Sod Saver w ould not prevent farmers from responding to market signals because it w ould allow c onversions to cropland.

• 

### Beginning farmers would not have go od prospects for success if they gre w crops on marginal lands that have no t been cropp ed previousl y , and beginning ranchers would benefit fro m Sod Saver because it would result in more grassland being availab l e to them.

• 

### Available FS A and NRCS data an d an ecdotal info rmation about conversions are sufficien t to justify th e Sod Saver proposal.

• 

### Soil erosion is still a significant probl em in North Dakota and South Dakota, and the conservation compliance provisi ons, includi ng Sodbuster, do not prevent the con v ersion of native grassland to cropland.

P a g e 29 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### In the absen ce of more c o mprehensive and curre nt data, poli cymakers an d stakeholder s cannot full y understan d the extent of conversio n s of native grassland to cropland or how farm program payments and oth e r factors influence pr oducers’ co nversion decisions. More complete i n formation, especially at the count y or local le vel, would enable stakehol ders to identify whe r e conversio n s are occurr ing and the environmental implications. In addition, having this information would be a f i rst step in assessing the additional farm program costs that result from conversions. Such knowledge can h e l p in develop i ng polici e s balancin g th e environmental and econo mic benefits of grasslands against the rising demand for food, feed, fi ber, and fuel from renewable sources . In developin g t h e means to collect such information, USDA could draw on the experien ces of FSA state and cou n ty offices i n Montana, North Dakota, and South D a kota, which have incor porat ed the collection of conversions data into th eir annual acreage reporting process. I n addition, t h e dynamic between USDA farm program payments and cons ervation pro g rams needs to be better understood. Available d a ta suggest th at USDA’s programs that increase the profitability of cropping and its programs that encourage conservatio n of rural land may be working at cr oss purpose s with one another. Specifically, some conserva tion programs, such as CRP, provide incentives for conversions of cropland to grassland, while farm program payments may ha ve the unintended consequen c e of providin g incenti ves for conversions of grassland to cr opl and. Such apparent inco nsistency undermines USDA’s conservation go al s and the most effective use of funds. While we have id entified po ssible cases where USDA’s farm program payments work at cross purpos es with its conservati on programs, there could be others. Any such inco nsistencies should be id entified and examined in order to bet t er inform th e Congress of opportunities to improve the effectiv enes s and efficie n cy of these programs.

To provide p o licymakers and stakeho l ders with more comprehensive and current information on the extent of native grassland conversions to cropland, th e associated farm program costs of these conv ersions, and their impact on natural r e sources, we recommend that USDA annually track nativ e grassland co nversions to cropland in those geogr aphic are a s where such conversions can oc cur.

To better un derstand the extent to w h ich farm programs, such as crop insurance, and conservation programs , such as the Conservation Reserv e Program, may be worki n g at cross p u rposes, we recommend that the Secretary of Agriculture direct th e A d ministrator of the Econ omic Research Se rvice, the Administrator of the Farm Service Ag e n cy, an d the 

# Conclus i ons

Recom m endations for Executive Action

P a g e 30 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### Chief of the Natural Resources Conservation Ser v ice to j o intl y study this issue and re port their findings to the Secretary an d the Congr e ss.

We provided a draft of th is report to USDA for re view and co mment. USDA provided oral co mments th rough the Chief, NRCS, on September 5, 2007 , indic a t i ng gen eral a g reement with the report ’ s findings a nd recommendations. USDA also said it wanted to ensure that GAO wa s aware that with few exceptions, th e crop insurance progra m has strict criteria on where conv erted land may be insured. USDA noted that land generall ymust have a hi story of bein g cropped in at least 1 of the 3 previous crop years in or der to be eli g ible for cro p insurance coverag e, unless such acreage was not cropped because it was enrolled in another USDA program. Thus, newly convert e d grassland that has not been cropped in t h e previous 3 crop years or enrolled in another p r ogram is only insurab l e by written agreement as approved by USDA’s Risk Management Agency. Ac cording to U S DA, writte n agreement s go through an underwriting process that is much more restrictive th an fo r standard policies, res u lting in red u ced co vera ge and possible denial of covera ge. For example, the insuran ce gu arante e is general l y based on t h e percent o f the average county yi eld

. If the exp e cted yi eld fo r the converted acreage i s less than 50 percent of t h e county average, th e request for insurance is generall y de nied. In ad di tion, USDA said certain types of cov e rage, such as prevented pl anting co ver age, are not availab l e for any written agreement approved fo r newly con verted land

.
We recogniz e that USDA has criteria on where co nverted land may be insured. However, our work found that RMA does not have a method an d the information need ed t o enforce its policy th at l and must have be en cropped in at least 1 of t h e 3 previou s crop years to be eli g ibl e for crop insurance c o verage . Spe cifically , ac c o rding to RMA officials we interviewed, RMA has li mited ability to enforce t h ese restrictions on insurance c o verage bec ause it lacks necessary i n formation on land parcels’ location and cro pping histor y. Thus, the restrictions may not prevent ineli g ible con ver ted land fro m being cov e red. Moreover, ev en if RMA were able to enforc e these restrictions, the converted l a nd would be eligible for c r op insurance cov e rage i n the ye ar af ter the conv ersion.

USDA also provided tech nical correct ions, which we have in c o rporated into the rep o rt as appropriate. 

# Agency Comments and Our Evaluation

P a g e 31 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti on

### As arranged with your office, unl ess you publicl y announce it s contents earlier, we p l an no furth e r distribution of this report until 30 days from its issue date. A t that time we will send copies of this report to appropriate congressional committees; the Se cre t ary of Agric u lture; the D i rector, Office of Management a nd Budget; a nd other int e rested parti e s. In addition, thi s report will be availabl e at no charge on GAO’s Web site at http://www.gao.gov

.
If you or yo ur staff have any qu estions about thi s report, please contact me at (202) 5 12- 3841 or shamesl@gao.gov . Contact points for our Offices of Congressional Relations and Public A ffairs may be found on t h e last page of this report. Key contri butors to this report are listed in app e ndix VI.

Lisa Shames Director, Natural Resources and Envir onment

P a g e 32 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onAppendix I: Obj e ctives, S c ope , and Methodology 

# Appendix I: Objectives, Scope, and Methodology

At the reque s t of the Chai rman, Senat e Committee on Agricult ure, Nutrition, and Forestry, and the Chairm an, House Committee on Agriculture, we reviewed issues related to grassla nd conversi ons. Specific a lly, we determined (1) the ex tent of grassland con ver sions to cropland an d the cost of farm program payments related to th ese newly converted cropland acres, (2) the re lative importance of f a rm program payments versus other factors in produ cers’ deci sions to convert grasslan d to cropland, and (3) any i m pact the S odbuster provision has had on limiting grassland conversions.

To determine the ext e nt of grassland conversions to cropland, we examined la nd use data for 1982 thr ough 20 03 fr om the Natural Resources Conservation Service’s (NRCS) Nati onal Resources Inventor y(NRI). 1 

### We supplemented this information with land use dat a gath e red b ythe U.S. Department of Agriculture’s (USDA) National Agricultural Statistics Service (NASS). 2 

### In addit i on, we anal yzed data ga thered by U S DA’s Farm Service Ag e n cy (FSA) state and cou n ty offices i n Montana, North Dakota, and South D a kota on acr es converted from grassland with no cropping history to cropland for 2 005 and 2 0 0 6

. We also reviewed a col l aborative study on co nversions of native grassland to cropl and in the P r airie Pothole Region prep ared by Ducks Unlimite d , Inc., a pri vate advocacy group supporting the protectio n and restor ation of wetl ands and waterfowl habitat, in conjunction with the U.S. Fish and Wildlife Service (FWS); the South Dakota Department of Game, Fish and Par k s; The Natu re Conservanc y ; and th e University of Montana. 3 

### In addition, we reviewed other relevant studies of grassland conversions to cropland, i n cluding a

1 The NRI, conducted by NR CS in coope ration with Iowa S tat e University’s Center f or Survey Statistics and Met hodol ogy, is a statis ti cal survey of la nd use and nat ural resource conditions a n d trends on U. S. nonfe d eral lan d s

.

2 NASS conducts yearly surveys to gathe r data on aspects of U

. S. agriculture production. NASS als o adm i nis ters the Ce ns us of Ag ri culture, a c o mpre hens ive cens us of U. S. agriculture pro ducers t h at is c ond ucted eve ry 5 years

.

3 Scott Stephe ns , J ohan n a Walk er, Darin Blunc k, A n eetha J ayaraman, and D a ve Naugle. Gra ssla n d Con v ersi on i n th e Mi ssouri Cot e a u of North a n d S o uth Da kota 1 9 8 4

- 2 0 0 3 , Ducks U n limited (f orthc oming ) . I n formatio n f rom t h is repo rt w a s pres e nted as “Gras s l and Conversion an d Risk Mo dels f or t h e Missouri Coteau : To ols for Staying A h e a d of the Plow,” at the a nnual c onference of th e So uth Dak o ta Wildlife Societ y , Oac o ma, So u t h Da kota, March, 2007.

P a g e 33 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onAppendix I: Obj e ctives, S c ope , and Methodology



### 2001 study 4 

### by Texas A&M University and other r e searchers a nd a 19 99 study by Uni versity of Wi sconsin researchers. 5 

### We interviewed USDA officials from the Economic Research Service (ERS), FSA, NASS, NRCS, and the Risk Managemen t Agency (R MA). We also interviewe d FWS state officials in C o lorado, Montana, Nebr aska, North Dakota, Sou th Dakota, and Texas; s t ate gov e rn ment official s; and offici als at land g r ant universities, including Io wa State Un iversity, Kan s as State University, North Dakota State University, South Dakota Stat e University, and Tex a s A&M University. To dete rmine the co st of farm program payments on converted l a nd, we interviewed ERS and FSA offi cials and an alyzed RMA crop insurance and F S A disaster assistance pa yments data. S p ecifical ly, we analyzed crop insurance and cro p disaster assistance pay m ents data in relation to 2 005 and 2 0 0 6 data o n co nversions of grassland that had no prior cropping history to cropland fo r all South Dakota counti e s. We selected Sou th Dakota counties because conversi on data wer e available b y county for 2005 and 2006, and conver sions have received co nsiderable attention in the state. In conducting our analysis, we assume d that the counties with the most acres convert e d during th ose years were indicati v e of the counti e s with the most c onversions during 199 7 through 2006.

To determine the relati ve importance of the avai lability of f a

rm program payments in producers’ decisions to convert grassland to cropl and, we identified an d reviewed s t udies th at d i rectly ex amined the eco nomic incentiv e s of farm program payments on a produ cer’s decisio n to convert grasslands to cropland, as well as re lated studies that examin e the eff ects of farm program payments on farm pr ofitability and risk. To evaluate how factors such as conversi on costs, ex pected crop prices, crop production costs and technology, an d farm program payments affect con v ersion decisions, we anal yzed f a rm-level bu dget dat a for a hypoth e ti cal 1 60 a c re s in a South D a kota count y that had a relatively hi gh conversion rate duri n g 2005 and 2006. The methodology fo r conducting this analysi s was reviewed by ERS, NRCS, and land gran t university agricultural economists and is discu ssed in appendix IV. In addition, we i n terviewed FSA and NRCS officials in Montana, Nebraska, North Dakota, and S o u th Dakota t o

4 Richard C o n n e r , A n d r ew Seidl , La rry V a n T a s s e ll, and Neal Wilkins , “U nited States Grasslands and Related Resou rces : An Eco no mic and Bi olog ical T r ends As s e s s m ent,” a special report prepare d with f i nancial s upp ort from the National Cattlemen ’s Beef Association, The Nature Conservan cy, and D u cks Unlimited, 2001.

5 N. Rama nkutty and J

. E. F o ley, “Es t imatin g hi storical change s in land cover: North American cropl ands fr om 1850 to 1992 ,” Glob al Ec ology an d Bioge o gr aphy , 8: 381-396 (1999).

P a g e 34 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onAppendix I: Obj e ctives, S c ope , and Methodology



### obtain their views of the importance of farm program payments and other factors in producers’ decisions to convert native grassland to cropland.

To determine the impact the Sodbust e r provision has had on grassland conversions, we examine d NRI land use data for 1 982 through 1997 and 1997 throug h 200 3 showing conv ersions of range l and to highl yerodible and non-highly erodible cropland by USDA crop production regions. We supplemented these dat a by an alyzi n g available NRCS data on whether land that pr oducers inte nded to con vert was highly erodible for selected Nebraska co unties. 6 

### We s e lected thes e counties b ecause th e Nebraska NRCS state office had id entified the m as being i n areas that recently h a d relatively hi gh conversion rates. In a ddition, we conducted i n terviews with FSA and NRCS officials i n Montana, Nebraska, North Dakota, and South Dakota to o b tain their vi ews of the impact of Sodbuster on producers’ conversion decisions. W e compared information obtained in t h ese interviews with comme nts on Sodbuste r’s effectiveness submitted by NRCS field office offici als in response to GAO’s nationwide 2002 survey o n conservatio n complianc e issues. 7 

### We also intervie wed FWS officials in Colorado, Montana, Neb r aska, North Dakota, So uth Dakota, and Texas, as well as officials from industry stak eholder organi z ations, incl uding the South Dakota Corn Growers Association, South Dakota Soybean Association, South Dako ta Cattlemen ’s Association, and Montana Grain Growers Association, to obtain their views on Sodbuster’s effectiven ess and proposed legislative changes to r e duce conversions. Finally, to identify pro posed legisl ation that c o uld affect p a yments that producers receive on n e wly conver ted land, we reviewed USDA’s 2007 farm bill proposals and position papers submitte d by en vironmental, conservatio n, and commodity groups, including D u cks Unlimited, Pheasan ts Forever, the North Dakota and S outh Dakota Chapters of The Wildlife Society, the North Dakota Game and Fish Department, the American Farm Bureau

6 To qualify for f arm program payments, a producer must certify compliance with conservation p rovisions. To q u alify unde r So dbuster pr ovisi ons, a p rod ucer seeking to convert previo u s l y uncr o p p ed land t o c ropla nd notifies F S A of t h at inte ntio n. F S A the n reques ts a dete rmination f or h i ghly erodi ble la nd. Acco rding to F S A an d N R CS officials , after informing USD A of their intention t o c o nv ert land, producers seldom decide not t o carry out t h e c onvers i on

.

7 This survey was conducted in c onjunction wi th our w ork on GAO-03-418 . Specifically, in September 200 2, w e s u rveyed s t aff—us ually the dis t rict co ns ervationis t —res pons ible for the co nservatio n com p liance r e views in each of NRC S’s 2
, 549 field offices t h at co nducte d compliance rev i ew s during t h e perio d 1998 th roug h 2001 to o b tain info rmation on their unde rs tanding and implement a tion of co ns er vation p rovis ions , an d t h eir vi ew s on the effectiveness of these provisions.

P a g e 35 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onAppendix I: Obj e ctives, S c ope , and Methodology



### Federation, the National Corn Growers Association, the Nati onal Pork Producers Council, and t h e National Association of Wheat Growers.

We performed our work between Oc tober 200 6 a nd August 2 007 in accordan ce with general ly ac cepted government auditing sta ndards. We performed data reliabilit y assessmen ts for (1) FSA state office data on conversions of grassland that had no prior cropping history to cropland in Montana, North Dakota, and South Dakota, (2) crop insurance dat a from RMA’s Su m m ary of Busi ness databas e , and (3) FSA disaster assistance payments da ta. We d e term ined that d a ta from eac h of these so urces were sufficiently r e liable. For the data obtained from the other sources noted above, we di d not independently veri fy the dat a , but we discussed with these source s, as appropriate, the me asures they t a ke to e n sure the

accurac y of these data. F o r the purposes for whic h the data were used in this report, these measur es seemed reasonable.

P a g e 36 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onAppendix II: Na tional Resour c e s Inv e ntory Data on N e t C h anges i n U.S

. La nd Use , 1 9 8 2

- 20 03 

# Appendix II: National Resources Inventory Data on Net Changes in U.S. Land Use, 1982- 2003

The U.S. Department of Agricult ure’ s Natural Resource Conservation Service’s Na tional Resources Invento ry is a statistical survey o f natural

resource co nditions and trends on nonfed eral land in the Un ited States. Nonfederal l ands include privately o w ned lands, tribal and trust lands, an d lands controlled by state and local go vernments. The NRI provides data o n net chan ges in rangelan d , pasturelan d, and other land types o ver time, as well as on conversions of rangeland and pastureland to cropl and over time. 1 

### Table 7 shows the net chan ges in cropland, Conservation Reserve Program (CRP) land, rangeland, pas t ureland, an d develo p ed land, from 1982 to 2003 for the 48 contiguous st ates. The ch anges illustrated in th e table are net changes, which do not i ndicate th e number of acres converted fr om rangelan d and pastur eland to cropland.

1 Rangeland is a USDA land cov e r/us e category on w h ich t h e p l ant cover is co mpos ed principally of n ative gras s e s , gras s like plan ts , forbs or s h ru bs s u itable for gr az ing, and introduced f ora ge species that are manage d lik e ra ngeland, with little or no chemicals or fertilizer being applied. Grasslands, savannas, many wetlands, some deserts , and t undra a r e
cons idered to b e rangelan d. P a s t ureland is a U S DA lan d c o ver / us e category o f land managed prima rily for t h e pro duction of intr oduc e d fo rage plants for livestock g r azing. Management of pastureland usually consists of treatments such as fertilization, weed control , res eeding or re novati on, an d co ntr o l of g r az ing. C r o p land is a US D A land cover/us e category t h at i n cludes areas u s ed for the pr o duction of ada p ted c rops f o r harvest. Two subcategories of cropland are recog n ized: c u lt ivated and noncultivate d. Cultivated land compris e s land in r o w cr ops o r clos e-grow n c rops a n d als o o t her c u ltivated croplan d, for example, hayla nd or pasturela nd t h at is in a rotation with row or cl ose-grown crops. Noncultivated croplan d inclu d es perma n en t hayland a n d ho rticultural cr op land.

P a g e 37 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onAppendix II: Na tional Resour c e s Inv e ntory Data on N e t C h anges i n U.S

. La nd Use , 1 9 8 2

- 20 03

**T a**  **b l**  **e 7: Net Ch an**  **g es in**  **Ran g**  **e lan**  **d ,**  **Pastu relan**  **d ,**  **an d**  **O t**  **h er L**  **a n**  **d T**  **y p**  **es, 1982- 20**  **0 3** 

acres in mil lio n s with margins of error
**Year Cro**  **p l**  **an d**  **CRP lan d**  **Ran g**  **e lan**  **d Pastu**  **relan d**  **Develo p**  **e d**  **lan d** 
198 2 4 1 9

. 9 (417.8- 422.0) 0 (NA) 415.5 (412.0- 419.0) 1 3 1.1 (129.7- 1 3 2.5) 72.9 (72.1-7 3 .7)
199 2 3 81. 3 ( 3 79. 3

- 3 8 3

. 3 ) 3 4.0 ( 33 .8- 3 4.2) 406.8 (40 3 .5- 410.1) 125.2 (12 3 .9- 126.5) 86.5 (85.5-8 7 .5)
199 7 3 76.4 ( 3 74.4- 3 78.4) 3 2.7 ( 3 2.7- 3 2.7) 404.9 (401.6- 408.2) 119.5 (118. 3

- 120.7) 97.6 (96.6-9 8 .6)
200 3 3 67.9 ( 3 65.5- 3 70. 3 ) 3 1.5 ( 3 1.2- 3 1.8) 405.1 (401.6- 408.6) 117.0 (115.2- 118.8) 108.1 (106.7- 109.5)
Chan ge,1 9 8 2 -200 3

- 5 2 3 1.5

- 10.4

- 14.1 3 5.2

Sour ce: GAO ’ s a n a l ysis o f NRCS ’ s NRI da ta

. Notes: (1) The a m ounts in pa rent hese s rep r e s ent t he two-sided 95 perce nt confiden ce interval. (2 ) This table doe s n o t include othe r land-u s e categori e s, whi c h did not have larg e ch an ges du ring this period. The s e la nd-use ca tegorie s are fore st land, water a r ea s, an d other rural are a s

.

P a g e 38 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onAppendix III: Census of Ag ric u lture Data o n Net Changes in Uses of La nd in Farms for the United States a n d Sele cted Sta t es 

# Appendix III: Census of Agriculture Data on Net Changes in Uses of Land in Farms for the United States and Selected States

The Census of Agriculture, conduct e d every 5 years by USDA’s National Agricultural Statistics Service, is a census of agricultural producers. 1 

### It gathers info rmation about the nation ’s agricultur a l productio n and provides agr icultural dat a for every state and cou n ty in the U n ited States.

Tables 8 an d 9 show net changes in u s es of land i n farms between the years 197 8 a nd 199 2, and 199 7 and 20 02, as report e d by th e Ce nsus of Agriculture. Table 8 sho w s net changes in land u s e at the n a ti onal lev e l, while table 9 shows changes in land u s e for states that—accor d ing to USDA’s National Resources Invento r y —have l a rge amounts of rangeland and croplan d. Data for 1 978 to 199 2 are not comparable to d a ta for 19 97 to 2002 and are listed separately in th e t a bles. This i s because a different methodology was used for the latter time frame to more completely capture all relevant producers.

In tables 8 and 9, “Total cropland” in cludes cropl and harvest e d, cropland used only fo r pasture or grazing, idle cropland, 2 

### cropland on w h ich all crops failed or were abandoned, an d cropland cu ltivated in summer fallow. “Pastureland and rangeland” i n cludes all g r azable land that does not qualify as cropland p a sture or woodland past ure. Pastureland and rangeland i n cludes both native grassland and grassland composed of introduced grasses. Finally, “Total lan d in farms” consists pri m arily of agricultural land used fo r crops, pasture, or grazing.

1 Between 1840 and 1996 , t h e U

. S. De partment of Comme rce, Bureau of the Census was

res pons ible fo r collecting Cen s us of Agricult ure data. T h e C e ns us of Ag ricu lture Act, P u b

. L. No. 105-113, 111 Stat. 2274 (1997), t r ansfer red the responsibility for the Ce nsus of Agriculture f r om the B ureau of the Ce ns us to the Sec r etary of Agriculture who subsequently delegated that re sponsibilit y to t h e Administrat or of NA SS.

2 Idle cropland includes Conservation Reserve P rogram land unless the land was used for haying or g r azing.

P a g e 39 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onAppendix III: Census of Ag ric u lture Data o n Net Changes in Uses of La nd in Farms for the United States a n d Sele cted Sta t es

**T a**  **b l**  **e 8: Net Ch an**  **g es in**  **Uses o f**  **L a**  **n d**  **in U.S. F arms, 197**  **8-19 92 an**  **d 19**  **97-2 002** 

acres in mil lio n s

**Year Tota**  **l**
**cro p**  **l an**  **d Pastu**  **relan d**  **a n**  **d**

**r a**  **nge la**  **nd a**  **Total lan d**  **i n**  **farms**
197 8 4 5 3 .6 4 3 1

. 0 1 0 1 1.5
198 2 4 4 5

. 1 4 1 6

. 0 98 3 .5
198 7 4 4 2

. 9 4 0 8

. 4 961.8
199 2 4 3 5.0 4 0 9

. 1 9 4 3 .0
Chan ge i n acre s,1978- 199 2

- 1 8

. 6

- 2 1

. 9 -68.5
199 7 4 4 4

. 9 3 9 6

. 6 9 5 2

. 5
200 2 4 33 .9 3 9 3

. 7 9 3 6.1
Chan ge i n acre s, 1997- 200 2 -11.0

- 2

. 9

- 1 6

. 5

Sour ce: GAO ’ s an alysis of NAS S ’ s C ens us o f Agr i cul t ur e da ta.

a The full name of this cat egory is Pasturel and and rangeland, othe r than cropland an d woodland pastu red.

**Table 9: Net Changes in Uses of Land in Farms in States with**  **Large Amounts of R**  **a ngeland and**  **Pastureland, 1978-1992 an d**  **199 7-20**  **02**

acres in mil lio n s **State Year**  **T o**  **t al cro**  **p l**  **and P**  **astu relan**  **d a**  **n d**  **ran g**  **e lan**  **d T**  **o t**  **al land in**  **farms**
Color ad o 1 9 7 8 10.6 2 2

. 7 3 5. 3
199 2 10.9 21. 3 3 4.0
Chan ge i n acre s, 1978-1 992 0. 3

- 1

. 4

- 1

. 3
1 9 9 7 10.8 1 9

. 4 3 2. 3
2 0 0 2 11.5 17. 3 3 1.1
Chan ge i n acre s, 1997-2 002 0.7

- 2.1 -1. 3
K a n s a s 1 9 7 8 29.8 1 5

. 5 47.5
199 2 3 1.1 1 3

. 8 4 6

. 7
Chan ge i n acre s, 1978-1 992 1. 3

- 1

. 8

- 0

. 8
1 9 9 7 3 1.1 1 3

. 6 4 6

. 7
2 0 0 2 29.5 1 5

. 5 47.2
Chan ge i n acre s, 1997-2 002 -1.5 1.9 0.6
Montan a 1 9 7 8 16.2 4 2

. 4 61.7
199 2 17.5 3 9. 3 5 9

. 6
Chan ge i n acre s, 1978-1 992 1. 3

- 3

. 1

- 2

. 0
1 9 9 7 18.2 3 7

. 2 5 8

. 4

P a g e 40 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onAppendix III: Census of Ag ric u lture Data o n Net Changes in Uses of La nd in Farms for the United States a n d Sele cted Sta t es

acres in mil lio n s **State Year**  **T o**  **t al cro**  **p l**  **and P**  **astu relan**  **d a**  **n d**  **ran g**  **e lan**  **d T**  **o t**  **al land in**  **farms**

2 0 0 2 18. 3 3 8

. 2 5 9

. 6
Chan ge i n acre s, 1997-2 002 0.8 1 .1 1.2
Nebrask a 1 9 7 8 22. 3 2 2

. 1 4 6

. 1
199 2 22.4 20.6 44.4
Chan ge i n acre s, 1978-1 992 0.1

- 1.6 -1.7
199 7 22.6 21.6 45.9
2 0 0 2 22.5 2 1

. 9 45.9
Chan ge i n acre s, 1997-2 002 -0.1 0. 3 0

. 0 5
New Mexic o 197 8 2. 3 4 2

. 5 4 7

. 9
199 2 2. 3 4 2

. 0 4 6

. 8
Chan ge i n acre s, 1978-1 992 -0.004 -0.5 -1.1
199 7 2. 3 4 1

. 0 4 6

. 2
2 0 0 2 2.6 3 9

. 1 4 4

. 8
Chan ge i n acre s, 1997-2 002 0. 3

- 1

. 8

- 1

. 4
North Dak o ta 197 8 28.6 10.8 41.7
199 2 27.5 10. 3 3 9.4
Chan ge i n acre s, 1978-1 992 -1.1 -0.5 -2. 3
1 9 9 7 27.4 10. 3 3 9.7
2 0 0 2 26.5 1 1

. 0 3 9. 3
Chan ge i n acre s, 1997-2 002 -0.9 0.7 -0.4
O k lahom a 1 9 7 8 14.4 1 6

. 5 33 .7
199 2 14.5 15.1 3 2.1
Chan ge i n acre s, 1978-1 992 0.2

- 1.5 -1.6
1 9 9 7 15.5 1 5

. 5 3 4.1
2 0 0 2 14.8 1 5

. 7 33 .7
Chan ge i n acre s, 1997-2 002 -0.6 0.2 -0.4
South Dak o ta 197 8 18.7 24.2 44.4
199 2 19.6 2 3

. 9 4 4

. 8
Chan ge i n acre s, 1978-1 992 0.8

- 0.2 0.4
1 9 9 7 19.7 2 3

. 0 4 4

. 1
2 0 0 2 20. 3 2 2

. 0 4 3 .8
Chan ge i n acre s, 1997-2 002 0.6

- 1.0 -0.4
T e x a s 1 9 7 8 3 9.4 87. 3 1 3 5.6
199 2 3 6.4 8 7

. 8 1 3 0.9
Chan ge i n acre s, 1978-1 992

- 3 .0 0

. 5

- 4

. 7
1 9 9 7 3 9.1 8 6

. 9 1 3 4.0

P a g e 41 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onAppendix III: Census of Ag ric u lture Data o n Net Changes in Uses of La nd in Farms for the United States a n d Sele cted Sta t es

acres in mil lio n s **State Year**  **T o**  **t al cro**  **p l**  **and P**  **astu relan**  **d a**  **n d**  **ran g**  **e lan**  **d T**  **o t**  **al land in**  **farms**

2 0 0 2 3 8.7 8 3

. 4 1 2 9

. 9
Chan ge i n acre s, 1997-2 002 -0.4

- 3

. 5

- 4

. 1
W y o m i n g 1 9 7 8 2.7 3 0.1 33 .6
199 2 2.8 28.9 3 2.9
Chan ge i n acre s, 1978-1 992 0.1

- 1.2 -0.8
1 9 9 7 3 .0 3 0.2 3 4. 3
2 0 0 2 3 .0 3 0.2 3 4.4
Chan ge i n acre s, 1997-2 002 0.0 0 .1 0.1

Sour ce: GAO ’ s an alysis of NAS S ’ s C ens us o f Agr i cul t ur e da ta.

P a g e 42 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007 

# Appendix IV : Partial Budget Analysis for a Proposed Conversion of Native Grassland to Cropland in Central South Dakota, 2003-2007

To assess the economic i n centives to convert nati ve grassland to cropland at the farm level, we use d a partial b udget an alys is and a “co n structed” farm scenario for a 160-acre tr act in Hand County, South Dakota—a central Sout h Dakota co unty that was relatively h i gh in 2005 and 2006 conversions of grassland that had no cropping his t ory. A partial budget can be used by a farmer or rancher t o evalu a te t h e economi c effects of making an adjustment to a part of th e farm operation, such as switching to an alternati v e farm enterprise or buying new machinery. Whil e not including all farm costs and revenues of the enter p rise, a parti a l budget 1 

### estimates the net ch ang e in income t h at results when shifting from a base plan to an al ternative sc e n ario. 2



### Livestock gr azing enterp rises, in particular cow-c a lf operatio n s, have historically been typi cal farm enterprises in South Dakota. In r ecent years, however, some of the la nd that was used for gra z ing has bee n converted to crop production. To anal yze the role of farm program payments in these conversions, we develop ed a parti a l budget to co mpare the estimated costs and returns for 2003 through 2 0 07 from 160 acres of nati ve grassland—used for gra z ing as part of a cow-cal f operation —to the costs and returns that would have resulted if the 16 0 a c r es had been converted to cropland i n 200 3 and u s ed to produce corn, soyb eans, and wheat through 200 7. We assumed that the f a rm operation initially consisted of both a cropp ing enterprise and a cow-calf ent e rprise. Therefore, the farmer already had certain fixed c a pi tal equipment for both of these enterprises, such as tract ors and harv esting equip ment. In the base plan, the producer had a 160-acre parcel of native grassland that was part of a larger cow-c a lf grazing e n terprise.

We anal yzed cow-calf an d crop budgets (1) prosp ectivel y for t h e current 2007 crop y e a r and (2) re trospectivel y for crop ye ars 2003 thr ough 20 06 to specifically evaluat e the effects of pa st farm prog ram payments on costs and returns. During these ye ars, cr op and calf prices varied and central South Dakota experien ced a ran ge o f weather co nditions that affected

1 Michael D. Boe h lje an d V e rno n R. Eidman , F a rm Ma na gement , J ohn Wiley & Sons , New York, 1984, p p

. 237-242.

2 Specifically, a partial budget analysis exami n es the a dditional returns that would result from a dopting an alternative p l an plus t h e de creas e d cos t s f rom no l onger us ing a bas e plan, mi nus the sum of the additional costs of the alternative plan pl us the re duced retu rns from the base plan. The partial budget only considers the dire ct private c o sts and be nefits to the farmer a nd does not inc l ude the social costs and bene fits to society t h at a c h ange would bring a b out, such as to the environme n t or wildlife habitat.

P a g e 43 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007



### crop and for age producti on. These ch an ges in price and produ ction make these years i llustrative fo r analysis of the effect fa rm program payments can ha ve on farm enterprises.

We found th at for certai n years, high crop prices as well as farm program payments would provide economic i n centives fo r a producer to convert native grassland used for grazing in a cow-calf op eration to an alternativ e cropping op eration. In 3 of the 5 year s, the conversion from g r azing to cropping would have resulted in incr eased incom e . In the oth e r 2 years, 2004 and 20 05, when c a t t le prices an d returns were high relati ve to crop prices and r e turns and t o tal farm prog ram payments were lower, it woul d have b een m o re profitable not to con vert and c o n t inue the co w-calf operation. Without any farm progra m payments, income would have increased o n ly in 2007, but in view of projectio ns that crop prices will remain relatively hi gh, t h is increase in income without farm program payments may continu e for several y ears. However, even with high crop prices, farm program payments fo r crop insurance and crop d i saster assistance will continue t o be an important factor in conversion decisions because of t h e need for protection against adverse crop production risks, such as drought.



# Base Plan Scenar io—CowCalf Grazing For the base plan or cow

- calf secti on of the analysis, we used production and price d a ta from South Dakota St at e Universit y ’s cow-calf budget tool 3 

### as well as ex pert opinion from Sout h Dakota Stat e University livestock extension economists an d USDA Natu ral Resources Conservation Service officials in S outh Dakota. We assumed that Hand County, Sou th Dakota, i n a normal year of precipi tation, woul d support one cow-calf p a ir for every 8 acres of nati ve grassland

. Since S out h Dakota ex perienced v a ried weath e r conditions—including drought—during 2003 thr ough 2007, we adjusted our cow-calf model to incorporate changes in th e number of pounds of calves and cows sold to account for changes in the amount o f forage availab l e for grazing on t h e 16 0 acres . These adju stments were based on NRCS rangeland forage production values for favorable, normal, and unfavorable years. 4 

### On th e basis of So uth Dakota NRCS officials’ expert

3 Sout h Da kota S tate University, Depa rtment of Econ omics, E x tension, Mana gement Tools and Links , Live s t ock Bu dgets , Beef Cow U n it, F eeder Calf So ld, (B1 CC). http://econ

. sdstate.edu/Ex te nsion/Tools/budge t s.htm

.

4 T h es e rangelan d p rod uction v a lues are fr om the NRC S We b Soil Su rvey.

www. web s o ils u r vey.n r c s. u s da. g o v /ap p /

.

P a g e 44 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007



### opinion, we assumed that a 20 percent deviation in annual rai n fall above or below the 30-y ear av erage during 1 976 through 2006 would be either favorable or unfavorable, respectivel y

. Using this definition, 2 003 fora ge production values were normal, 2004 were favor a ble, 2005 were normal, and 2006 were unfavorable. We assumed 2007 fo rage production values were normal based on So uth Dakota NRCS officials’ observat ions as of July 200 7.

In estimating cow-calf r e turns, we used calf prices from South Dakota State Univer sity’s stocker cattle prices (500 to 600 pounds), monthly average prices, for November. For cull cow prices, we used the Sioux Falls price of slau ghter cows for November 2003 throu g h 20 06; for 2007 , we used an a ver age of th e fir s t 5 months of the ye ar. For addition al income due to herd l i quidation, we obtained yearly avera ge “Bred Fe male” prices, Central Regi on, for “you ng and midd le-aged cows” from Drovers for 200 3 through 2006 and th e fi rst 5 months of 2007. 5 

### For corn feed co sts, we calculat e d a n avera ge pr ice for ea ch year, 2 003 th rough 200 6, based on weekly Cent ral South Dakota cash co rn prices from South Dakota State University’s extension se rvice; for 2 0 07, we c a lcu l ated an ave rage of thes e weekly pric es from January to July. For hay alf alfa prices, we used USDA National Agricultural Sta t istics Se rvic e ye arly av erage pric es for 2003 through 200 6, and for 20 07, an av era ge monthly price based on the first 5 months of this year. Reg a r ding “other” co sts, we reduced all di rect costs in the cow-calf spreadsheet before 20 05 by 10 perce n t, with the exception of “Veterinary and Drug,” which we reduced by 15 percent, a n d kept all th e later years the same as in the budget tool spread sheet. 6



# Alternativ e Scenari o

— Corn/Soybean/ Spri n g Wheat Cropping Rotati on For the altern ative sc ena r io—the crop portion of the partial b udget analysis, we assumed a corn/soybean /spring wheat crop rotat i on on the 160-acre par cel for a f a rm in Hand County, South Dakota. We assumed this particular cr op rotation based on th os e crops ha ving the hig h est acrea ge s according to NASS statistics and co n s ultations with South Dakota State University crop extension experts. We first looked retrospectively at the time period from 2003 th rough 200 6 t o s ee the effects of price s , yields, an d

5 Drovers is a monthly magazine and online livestock info rma t ion s e rvice tha t pr ovides business management an d ma rketing inf orma t ion fo r all seg m ents of t h e be ef industry , including t h e fe male market, fe d-cattle market s , and stocke r/feeder prices.

6 T h es e “othe r c o s t s , ” s u ch as v eterinary a n d medicine, w e re obtaine d f rom a So uth Dak o ta State Unive r sity Extension area farm ma nag e ment specialist.

P a g e 45 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007



### farm payments on costs and returns. We then use d preliminary data for crop prices and av erage historical yi el d data t o examine potential returns for crop yea r 2007. 7



### For 2003 thr ough 20 07, we adjusted all yield data to reflect th e fact th at this newly converted lan d may repr esent “marginal” or less productive land than th e land th at was already in crop prod uction. To d o this, we consulted with NRCS officials in cent ral South Dakota to obtai n information on the soil t y pes that were most often being converted. 8 

### On the basis of t h is information, we then adjusted th e county average crop yields for co rn, soybeans , and spring wheat to estimate a likel y yield f o r a newly conve r ted parcel o f native grassland for a p a rticular ye a r . On average, these estimated yields were about 17 per cent lower t h an the county aver age yields. We used these ad justed yields in our calcul a tion of gross income from corn, soybeans, a nd spring wheat in our p a rtial budget analysis. In addition, because docu m entation on the soil types most often being co nve r ted was not avail a ble an d to determine how sensitive our results were to these adj u sted crop y i elds, we also estimated gross returns from crop production in our partial b udget an alys is using unadjusted NASS county average crop yields for 2003 through 2006. For 2007, we estimated an unadjusted 3-year movi ng county average for co rn and soybeans, and for spring wheat, we used the So uth Dakota NASS yield projection as of July 2007.

We obtained the remaini n g data on p r ices and co sts for the crop analysis from extension specialist s and agricul tural econo mists in cent r al South Dakota and at South Dakota State U n iversity. 9 

### For instance, we obtained most of the cost data for the crop bu dgets from an area farm management specialist in the Department of Econ omics at South Dakota State University. For price da ta, we used yearly avera ge c e ntral S outh Dakota cash prices f o r corn, soybeans, and s p ring wheat for 2003 thr ough 20 06

7 Also, since the 2007 crop has not bee n harv ested, we assumed a 3-year movi ng average county yield fr om NA SS statistics, adjusted b y expe rt o p inio n fr om o u r inte rviews with Sout h Da kota s o il s c ientis ts

.

8 P e r ou r dis c us sions w i th NRC S officials c onc erning Hand C ounty , Sout h D a kota, the s o il types most like l y to be convert e d were: ErB (Eakin-Raber C o mplex-Undula t ing), HkB (Hou dek-P ros p e r L o ams , U n d u lating), RaB ( R aber Loams , Undulating ) , R eB (Rabe r -Eaki n Complex, U n d u lating), WmB (Glenham Loa m, U ndulating) , WpB (Gle nha m-Cavo, Undulating ), and WzC (G lenham-Java, Rolling).

9 For the cost est i mates, we assumed t h at the c ropping e n terprise used no-till treatment rather than conventional tillage.

P a g e 46 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007



### from South Dakota Stat e University’ s ex tension grain marketing speciali s t. For 2007 price dat a , we used the most recent sta t ewide aver age cash price, as of July 13, for South Dakota for co rn, soybeans , and spring wheat. For 2003 through 2006 loan deficien cy p ayments, we used Hand County averag e y ear ly loan d e fic i ency p ayme n ts for this period from the USDA Farm Service Agenc y ’s S outh Dakota state office. 10 

### For crop in surance payments to farmers, we used crop i n surance in demnity pay m ents per acre in Hand County, So uth Dakota as estimated by a USDA Risk Management Agency official. For cro p disaster assistance pay m ents, we used data fr om FSA on crop disaster assistance payments by county to estimate an averag e cro p disaster assistance pay m ent per acre for Hand County for 2003, th e only year when t h ese payments were significant. 11 

### Because cro p insurance indemnity a nd crop disa ster assistance pa yments generall yar e related to t h e same crop losses, we used RMA c r op insurance indemnity payments data in making th is estimate. Specifi cally , we applied the proportion of the am ount of crop insurance i ndemnities that were pai d to each crop (i.e., corn, s o ybeans, an d spring wheat) to the t o tal crop disaster assistance payments in the county for 2003 to estimate the crop disaster assistance pa yment for each crop.

In addition t o income from crop production, the p r oducer’s ad ditional returns in the first year o f conversion would be from the sale or liquidatio n of the herd t h at had grazed on the 16 0-acre p a rce l . Specifi call y , we assumed the conversion takes plac e i n 200 3, and t h e herd liqui dation in a normal year would consist of about 20 bred femal e s that previ ously grazed on the land , of which 10 would be sold in the bred female market and 10 i n the cull cow market since the cow he rd would be composed of various ages. In ord e r not to disproportionately influen c e any o n e year’s returns from the herd liquidation , the proceeds were amo r tized over a 5-year period, from 200 3 to 2 0 0 7 , at a n inter e st rate of 6 percent, res u lting in annual revenue of about $3,125. Simi larly, as part of the con v ersion, we also assume d conversio n costs for the 16 0-acre parcel of l an d , consisting of about $3, 200 for herbi c ide treatme nt, would be amortized over this period, resulting in an an nual cost of about $760. According t o NRCS

10 Land new l y co nverted into cr opland w ould o n ly qualify for marketing assistance be nefits,

s u ch as loan de ficiency payme n ts , an d w o uld not be eligible f or c ounte r cyclical payments

or direct payments since the l a nd wo uld not have a c r opping history.

11 May 2007 sup p lemental app r o priation legislati on aut horized crop disaster a ssistance payments for c rop years 2005 , 2006, a n d ea rly 2007. P r od ucer s can receive a dis a s ter assi stance pay m ent for only one of the 3 years . Because thes e payments ha d not been ma de as of July 2007 , we did not incl ude estimates of them in our analysis.

P a g e 47 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007



### officials, roc k removal c an also add t o conversio n costs, but these costs are highly variable becau s e the amount of rocks on native grass and the methods used in removing them varies. Thus, we did not inclu d e rock removal in o u r partial bu dget an alysi s

.
As noted, we assumed the conversion to cropland occurred in 2003. The use of anoth e r year for t h e conv ersion would ha ve some effe ct on the results. For example, if t h e conv ersion had oc cu rred in 200 4, a ye ar of relatively hi gh cattl e pri ces and b e tter forage a v a ilable for grazing, the revenue fro m the cow liquidation w ould hav e be en great er. I n that ye ar, the amortized annual val ue from the sale of the cow herd wo uld have been $4,284, abou t $1,158 gr eater than in 2003. Thus, th e annual net change in income resulting from the conversion to croplan d would have been abou t $1,1 58 hig h e r

.



# Partial Budget Anal ysis After creatin g the base pl an and altern ative sc ena r io and colle cting the appropriate data for the 5 ye ars, we then used the s e data in th e partial budget to an alyze the rol e of farm program payments in conv ersion decisions an d determine which option, the cow-calf enterprise or the cropping ent e rprise, would provide hi gher returns over costs. Specifically, as table 1 0 shows, the alternat ive scenario—conversion to cropland— would result in additional returns from crop production, farm program payments, a nd the sale o f the cow he rd (Section 1), reduced costs from no longer havi n g the presen t cow-calf e n terprise (Section 2), ad ditional cost s from crop production (in c luding con version costs) (Section 3), and reduced ret u rns from the cow-calf e n terprise (Section 4). Th erefore, in t h e partial budget anal ysis, the net change in income for the producer would be the total benefits of t h e proposed change (Sections 1 and 2) minus the total costs (Sections 3 a nd 4).

The partial b udget result s for crop ye ars 2003 thr ough 20 06 are shown in table 1 0 . For each year, we estimated the net ch ange in inco me using crop yields adjust ed for soil productivity. As noted ear lier, we also estimated these income chan ges using unadjus t e d NASS co unty av erag e crop yi elds. In 200 3, the sum of gross revenue fr om the sale of crops produced, farm program payments (crop insurance, c r op disaster assistance, a nd loan deficien cy p ayments), and the amortize d proceeds from the liquidation of the cow her d would hav e resulted in a positive c h ange in net income of $3,761 in f a

vor of the alt e rnative scenario, crop production using the adjusted cro p yields. Alt hough 2003 cas h corn pr ices were at relatively averag e hist orical lev e ls, $2.3 6 per bu shel, and so ybean pric es were high, averagin g ab out $7.7 0 pe r bushel, yie l ds were at v e ry low level s resulting

P a g e 48 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007



### in relativel y low crop revenue. Howe ver, farm program payments would have offset t h is low crop revenue , co ntributing a pproximately $1 2,30 0 on the 16 0-acre tract. Witho u t these farm program payments, net income from the base pla n , the cow-c a lf enterprise, would hav e been abou t $8,5 00 greater than crop production in this year. Using th e unadjusted county average, cro p yields woul d have produced a net change in income of abou t $6,8 24 in f a

v o r of the cro pping altern ative.

For 2004, we estimate n e t income of about $3,602 in favor of remaining with the base plan, th e cow-calf enterprise. Although crop yi elds were relatively hi gh in 2 004, c o rn and soyb ean prices were much lower than the previous yea r, at $1. 64 an d $5.4 9 , resp ectivel y. Also, the total o f crop insurance, c r op disaster assistance, a nd loan defi ciency paym ents for this year were al most $9,000 lower than in 200 3. Alth ough loan d e ficienc y payments were higher d u e to the lo wer crop prices, crop ins u rance benefits were lower due to the high er crop yields, and crop dis a ster assistance payments would not hav e been made because, as provided in the legislati on, the prod ucer could o n ly recei ve a crop disaster assistance payment for 2003 or 200 4 and could n o t receiv e a payment for both years. Moreover, 2004 cow-calf returns were relativ e ly high, as c a lf prices had increased ov er 200 3, goin g from an av erage of $11 1 to $1 22 p e r hundredweight. In additi on, we estimate high er returns to the cow-calf enterprise in this year du e to more fa vorable wea t her for forage production and lower prices for feed stuffs. Furth e rmore, direct costs of production f o r the cow-calf enterprise (about $6, 500) were about one-thi rd that of the costs of production for th e cropping enterprise (about $19,500). However, using unadjust e d county av erage yields to estimate gross

revenue cau ses the altern ative sc ena r io, conversi on to cropla nd, to be higher in net income, but only by abo u t $1,3 75.

Similarly, for 2005, we e s timate that net income f r om the alternative scenario, cr op producti on, with yiel ds adjusted for soil productivity wou l d have b een about $4, 835 l e ss than the base plan, th e cow-calf enterprise. The net change in in co me using the unadjusted county aver age crop yiel ds would have been higher for the altern at ive scenario by about $90. In 2005, crop yields were similar to those in 2004 , but cr op prices were again quit e low. At the same time, calf prices were at historic ally high lev e ls—$137 p e r hundredweight. Feedstu ff costs, due to th e low corn prices, were relatively low, and the costs of production for cropping were over three times greater than costs for the cow-calf en terprise. Also, in 20 05, w h ile some loan defici e n cy pa yments ($2,175 fo r the 160- acr e parcel) we re receiv e d, crop insurance payments, about $625 fo r the parcel, were much lower than

P a g e 49 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007



### the previous year, and n o crop disast er assistance payments had been received as of July 200 7.

For 2006, we estimate an increase n e t income of about $2,366 in favor of the alternati ve scen ario, crop producti on. Although crop yi el ds were very low due to d r ought, crop prices incr e a sed. Averag e cash corn prices for Central South Dakota ju mped from $ 1 .76 p e r bushel in 2005 t o $3.37 per bushel in 20 06. More importantly, h o wever, due to the low y i elds that ye ar, the producer would have recei ved a bout $8, 995 on the 160-acre parcel from crop insurance payments. 12 

### At the same time, cow-calf ret u rns decreased b ecause of d e creases in c a lf and c o w prices and u n favorable conditions for forage pr oduction because of the drought. Thi s reduced forage prod uction would result in lower calf weights and hig h er feed c o sts for the cow-calf ent e rprise. Using the unadjusted NASS county average crop yields would have i n creased th e net income chan ge to about $6,069.

**Table 10: Part ial Budget Analysis for a**  **Proposed 2003 Change from a Cow-Calf Ente**  **r p**  **r i**  **s e**  **to a Cor**  **n /Soy**  **be a**  **n /Whe**  **a t**  **Cr oppin**  **g Ente**  **r p**  **r i**  **s e**  **in Ce ntr**  **a l**  **South Da k**  **o ta**  **, 200**  **3-20 06** 

**Partial budget ,**  **2003**
**Amount of c**  **h a**  **nge**

**Ad ju**  **sted cro**  **p yield s**  **County average crop yield**  **s Sectio**  **n 1** 
**Additio n**  **a l**  **r e**  **t ur**  **ns fr**  **om pr**  **opos e**  **d c**  **h a**  **nge** C o r n $ 4

, 6 6 6.7 3 $ 5

, 6 1 0.14 Soybe a n s 4

, 0 6 3 .0 6 4

, 8 8 3 .88 Spring w h e a t 6,120.9 7 7, 3 49.0 0
Loa n defici enc y payment 3 51.1 4 4 2 1

. 7 1 Crop ins ura n ce payment 7,895. 33 7

, 8 9 5

. 33
Disaster assist ance p a yment 4,014.0 2 4,014.0 2
Li q u i d a tion of c o w her d (amortized) 3 ,125.2 3 3 ,125.2 3

**Su b**  **t o**  **t al add**  **i tio**  **n a**  **l retu r**  **n s**  **$30,2 36.4**  **9 $33,2**  **99.3 2** 

12 Crop disaster a ssi stance paym ents, which lik ely will be made for the 2006 c rop year, are not included in this analysis.

P a g e 50 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007

**Sectio n**  **2**
**Re duc**  **e d**  **c o**  **s t**  **s fr**  **om pr opos**  **e d**  **ch an**  **g e**  Reduc ed costs from cow-calf oper ation $5,47 3

. 6 2 $ 5

, 4 7 3 .62

**Su b**  **t o**  **t al red**  **uced co**  **sts $5,47**  **3.62 $5,47**  **3.62**

**Sectio n**  **3**
**Additio n**  **a l**  **c o**  **s t**  **s of pr**  **opos e**  **d ch**  **an g**  **e** C o r n $ 7

, 33 0

. 8 8 $ 7

, 33 0.88 Soybe a n s 4

, 7 7 0

. 3 5 4

, 7 7 0

. 3 5 Spring w h e a t 5,0 3 9.5 2 5

, 0 3 9.5 2
Herbic ide tre a tment for conversi on (a mortized) 759.6 7 7 5 9

. 6 7

**Su b**  **t o**  **t al add**  **i tio**  **n a**  **l co s**  **t s**  **$ 1**  **7 ,**  **9 00.4**  **2 $17,9**  **00.4 2** 

**Sectio n**  **4**
**Re duc**  **e d**  **r e**  **t urns**  **fr om**  **pr opos**  **e d**  **c h**  **a nge**  Sale of calv es and cu ll cows i n a year with n o rmal forag e prod uction $14,0 48.4 9 $ 1 4

, 0 48.4 9

**Su b**  **t o**  **t al red**  **uced retu**  **r n**  **s $14,0**  **48.4 9**  **$14,0 48.4**  **9**
**Net ch an**  **g e**  **in in co**  **me, 2003 $3,76**  **1.20 $6,82**  **4.03**

**Partial budget ,**  **2004**
**Amount of c**  **h a**  **nge**

**Ad ju**  **sted cro**  **p yield s**  **County average crop yield**  **s Sectio**  **n 1** 
**Additio n**  **a l**  **r e**  **t ur**  **ns fr**  **om pr**  **opos e**  **d c**  **h a**  **nge** C o r n $ 7

, 3 7 7

. 5 7 $ 8

, 8 6 3 .58 Soybe a n s 7

, 3 7 3 .9 5 8

, 8 6 6

. 3 0 Spring w h e a t 8,029.9 6 9,662.2 2
Loa n defici enc y payment 1,817. 3 2 2

, 1 8 4

. 3 9 Crop ins ura n ce payment 1,211.5 1 1,211.5 1
Disaster assist ance payment — — Li q u i d a tion of c o w her d (amortized) 3 ,125.2 3 3 ,125.2 3

P a g e 51 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007

**Su b**  **t o**  **t al add**  **i tio**  **n a**  **l retu r**  **n s**  **$28,9 35.5**  **4 $33,9**  **13.2 3** 

**Sectio n**  **2**
**Re duc**  **e d**  **c o**  **s t**  **s fr**  **om pr opos**  **e d**  **ch an**  **g e**  Reduc ed costs from cow-calf oper ation $6,57 0

. 1 4 $ 6

, 5 7 0.14

**Su b**  **t o**  **t al red**  **uced co**  **sts $6,57**  **0.14 $6,57**  **0.14**

**Sectio n**  **3**
**Additio n**  **a l**  **c o**  **s t**  **s of pr**  **opos e**  **d ch**  **an g**  **e** C o r n $ 8

, 5 6 8

. 5 1 $8,56 8.51 Soybe a n s 4

, 7 9 6

. 4 7 4,796.4 7 Spring w h e a t 6,16 3 .6 1 6

, 1 6 3 .61
Herbic ide tre a tment for conversi on (a mortized) 759.6 7 7 5 9

. 6 7

**Su b**  **t o**  **t al add**  **i tio**  **n a**  **l co s**  **t s**  **$ 2**  **0 ,**  **2 88.2**  **6 $20,2**  **88.2 6** 

**Sectio n**  **4**
**Re duc**  **e d**  **r e**  **t urns**  **fr om**  **pr opos**  **e d**  **c h**  **a nge**  Sale of calv es and cu ll cows i n a year with favor able for age prod uction $18,8 20.1 8 $ 1 8

, 8 20.1 8

**Su b**  **t o**  **t al red**  **uced retu**  **r n**  **s $18,8**  **20.1 8**  **$18,8 20.1**  **8**
**Net ch an**  **g e**  **in in**  **co me, 2004**  **($3,60 2.75)**  **$1,37 4.94** 

**Partial budget ,**  **2005**
**Amount of c**  **h a**  **nge**

**Ad ju**  **sted cro**  **p yield s**  **County average crop yield**  **s**

**Sectio n**  **1**
**Additio n**  **a l**  **r e**  **t ur**  **ns fr**  **om pr**  **opos e**  **d c**  **h a**  **nge** C o r n $ 7

, 6 1 7

. 2 1 $9,15 5.66 Soybe a n s 7

, 4 1 6

. 7 0 8,927.0 0 Spring w h e a t 7,079.5 7 8,516.0 1
Loa n defici enc y paym e n t 2

, 1 7 4

. 7 5 2,614.1 5 Crop ins ura n ce payment 625.2 1 625.2 1

P a g e 52 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007

Disaster assist ance payment — — Li q u i d a tion of c o w her d (amortized) 3 ,125.2 3 3 ,125.2 3

**Su b**  **t o**  **t al add**  **i tio**  **n a**  **l retu r**  **n s**  **$28,0 38.6**  **6 $32,9**  **63.2 6** 

**Sectio n**  **2**
**Re duc**  **e d**  **c o**  **s t**  **s fr**  **om pr opos**  **e d**  **ch an**  **g e**  Reduc ed costs from cow-calf oper ation $5,7 3 7

. 8 0 $ 5

, 7 3 7.80

**Su b**  **t o**  **t al red**  **uced co**  **sts $5,73**  **7.80 $5,73**  **7.80**

**Sectio n**  **3**
**Additio n**  **a l**  **c o**  **s t**  **s of pr**  **opos e**  **d ch**  **an g**  **e** C o r n $ 9

, 1 8 7

. 8 5 $9,18 7.85 Soybe a n s 5

, 3 44. 3 9 5

, 3 44. 3 9 Spring w h e a t 6,459.4 3 6

, 4 5 9

. 4 3
Herbic ide tre a tment for conversi on (a mortized) 759.6 7 7 5 9

. 6 7

**Su b**  **t o**  **t al add**  **i tio**  **n a**  **l co s**  **t s**  **$ 2**  **1 ,**  **7 51.3**  **4 $21,7**  **51.3 4** 

**Sectio n**  **4**
**Re duc**  **e d**  **r e**  **t urns**  **fr om**  **pr opos**  **e d**  **c h**  **a nge**  Sale of calv es and cu ll cows i n a year with n o rmal forag e prod uction $16,8 59.7 8 $ 1 6

, 8 59.7 8

**Su b**  **t o**  **t al red**  **uced retu**  **r n**  **s $16,8**  **59.7 8**  **$16,8 59.7**  **8**
**Net ch an**  **g e**  **in in co**  **me, 2005 ($4,83**  **4.66) $89.9**  **4**

**Partial budget ,**  **2006**
**Amount of c**  **h a**  **nge**

**Ad ju**  **sted cro**  **p yield s**  **County average crop yield**  **s**

**Sectio n**  **1**
**Additio n**  **a l**  **r e**  **t ur**  **ns fr**  **om pr**  **opos e**  **d c**  **h a**  **nge** C o r n $ 7

, 4 5 4

. 2 7 $8,96 3 .09 Soybe a n s 5

, 6 3 2.6 4 6

, 7 5 2

. 5 8

P a g e 53 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007

Spring w h e a t 5,197.8 2 6,252.0 9
Loa n defici enc y payment 100.2 6 120.1 9 Crop ins ura n ce payment 8,995.4 4 8,995.4 4
Disaster assist ance payment — — Li q u i d a tion of c o w her d (amortized) $ 3 ,125.2 3 $ 3 ,125.2 3

**Su b**  **t o**  **t al add**  **i tio**  **n a**  **l retu r**  **n s**  **$30,5 05.6**  **5 $34,2**  **08.6 2** 

**Sectio n**  **2**
**Re duc**  **e d**  **c o**  **s t**  **s fr**  **om pr opos**  **e d**  **ch an**  **g e**  Reduc ed costs from cow-calf oper ation $4,60 9. 3 6 $ 4

, 6 0 9. 3 6

**Su b**  **t o**  **t al red**  **uced co**  **sts $4,60**  **9.36 $4,60**  **9.36**

**Sectio n**  **3**
**Additio n**  **a l**  **c o**  **s t**  **s of pr**  **opos e**  **d ch**  **an g**  **e** C o r n $ 9

, 7 0 7

. 0 0 $9,70 7.00 Soybe a n s 5

, 6 1 7

. 8 2 5,617.8 2 Spring w h e a t 7,04 3 .0 6 7

, 0 4 3 .06
Herbic ide tre a tment for conversi on (a mortized) 759.6 7 7 5 9

. 6 7

**Su b**  **t o**  **t al add**  **i tio**  **n a**  **l co s**  **t s**  **$ 2**  **3 ,**  **1 27.5**  **5 $23,1**  **27.5 5** 

**Sectio n**  **4**
**Re duc**  **e d**  **r e**  **t urns**  **fr om**  **pr opos**  **e d**  **c h**  **a nge**  Sale of calv es and cu ll cows i n a year with u n fav o rabl e forag e prod uction $9,62 1

. 1 2 $ 9

, 6 2 1.12

**Su b**  **t o**  **t al red**  **uced retu**  **r n**  **s $9,62**  **1.12 $9,62**  **1.12**
**Net ch an**  **g e**  **in in**  **co me, 2006**  **$2,36 6.35**  **$6,06 9.31** 

Sour ce: GAO ’ s an alysis base d o n d a ta provid ed by an d co nsult a tion s with So uth Dakot a St ate Univ ersity, FSA, NASS, NRCS, an d R M A. Par t i a l b u d get te m p l a te used by per m i ssi on of th e A g r i cul t ur al Econ om i cs D epar tm e n t, U n i v er si ty o f M i ssour i

.

P a g e 54 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007

Notes: (1) W e ca l c ul ated retu rns a nd co st s as sum i ng con v ersion of native gra s sland to cro p land on a “con structe d ” fa rm in Hand Count y, South D a kot a t h at produ ced a rotation of co rn, soybean s, and spring w heat. (2 ) For the crop ent erprise

, we u s ed regional ave r age crop price s ; NA SS count y
avera ge crop yields, both adjusted and unadjust ed f o r soil prod ucti vity; central South Dakota region crop produ ction cost data; and cou n ty a v era ge crop insuran c e, an d crop disa ster assi stan ce, and loan deficiency p a yment s. We u s ed assumption s an d data provide d by ag ricultural economi s ts, agronomis t s , an d s o il s c i enti s ts f r o m South Da k o ta State Univ e r s i t y and NASS to e s timate y i elds a n d

con v ersion co st s. Farm p r ogram payment s data w e re pro v ided b y FSA and RMA of ficials. ( 3 ) Data and assumption s for the cow

- calf enterpri s e are fro m South Da kota State Unive r sit y exten s ion se rvice in the cent ral and easte rn region s and NRCS offi cial s in South Da kot a . We did not incl ude in our analysi s the ben efits from a n y livesto ck disa ster a ssi stan ce pa yme n ts, although we realize there were such pa yment s in 2004. Fo r feed price s , we u s ed avera ge wee k ly cash co rn p r ice s for the Ce ntral region of South Dakota, from th e South Da kota St at e Unive r sit y ext ension se rv ic e an d y e ar ly N A S S price s for alfalfa hay. (4) T he da shes indicate t hat we did not includ e a crop disa ste r assi stan ce payment f o r 200 4, 2005, or 2006.



### We also esti mated the in come effects of conv erting nativ e gras sland to crop production prospectively for the current 2007 crop year. As table 11 shows for 20 07, we estimate that th e net chan ge i n income for the alternative scenario, crop productio n , would be about $2,099. Also, in this high price year for crop s, the val u e of productio n from the cropping enterprise would be abo u t $15, 000 more than fro m the cow-calf enterprise. An important factor for the cow-calf en terprise during this year would be the adjustment to much higher feed prices, which along with lower calf prices, would lead to lo wer cow-calf returns in 2007 . On the crop side, because 200 7 crop price s are forecas t to stay abo ve the mark eting loan rates, we assumed no loa n deficien cy payments would be rec e i ved for this year. In addi tion, we did not include any crop ins u rance or di saster assistance payments for 2007 , althou gh such pa y m ents may be made in th e future. Despite the absen ce of farm p r ogram payments, the partial budget demonstrates that in this high crop p r ice year cro p productio n would have been more p r ofitable tha n using the l and for grazi n g cattl e. Using the unadjusted 2007 project ed county aver age yields would increase the net income resulting from the conversion to croplan d to about $8,290.

P a g e 55 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007

**Table 11: Part ial Budget Analysis for a**  **Proposed 2003 Change from a Cow-Calf Ente**  **r p**  **r i**  **s e**  **to a Cor**  **n /Soy**  **be a**  **n /Whe**  **a t**  **Cr oppin**  **g Ente**  **r p**  **r i**  **s e**  **in Ce ntr**  **a l**  **South Da k**  **o ta**  **, 200**  **7**

**Partial budget ,**  **2007**
**Amount of c**  **h a**  **nge**

**Ad ju**  **sted cro**  **p yield s**  **Pro j**  **ected an**  **d aver**  **ag e** 
**cro p**  **yield s**  **Sectio n**  **1**
**Additio n**  **a l**  **r e**  **t ur**  **ns fr**  **om pr**  **opos e**  **d c**  **h a**  **nge** C o r n $ 1 2

, 9 51.1 3 $ 1 5

, 5 66.5 0 Soybe a n s 8

, 33 5.7 6 1 0

, 0 1 8.18 Spring w h e a t 9, 3 82.8 0 1 1

, 2 7 6.15
Loa n defici enc y payment — — Crop ins ura n ce payment — — Disaster assist ance payment — — Li q u i d a tion of c o w her d (amortized) 3 ,125.2 3 3 ,125.2 3

**Su b**  **t o**  **t al add**  **i tio**  **n a**  **l retu r**  **n s**  **$33,7 94.9**  **2 $39,9**  **86.0 6** 

**Sectio n**  **2**
**Red u**  **ced co**  **sts fro m**  **pr opos**  **e d**  **c h**  **a nge**  Reduc ed costs from cow-calf oper ation $7,18 7

. 8 0 $ 7

, 1 8 7.80

**Su b**  **t o**  **t al red**  **uced co**  **sts $7,18**  **7.80 $7,18**  **7.80**

**Sectio n**  **3**
**Ad d**  **i tion**  **al costs o f**  **pr opos**  **e d**  **c h**  **a nge**  C o r n $ 9

, 7 2 6

. 1 8 $9,72 6.18 Soybe a n s 5

, 5 7 3 .0 5 5

, 5 7 3 .05 Spring w h e a t 7, 3 24.4 9 7

, 3 24.4 9
Herbic ide tre a tment for conversi on (a mortized) 759.6 7 7 5 9

. 6 7

**Su b**  **t o**  **t al add**  **i tio**  **n a**  **l co s**  **t s**  **$ 2**  **3 ,**  **3 83.3**  **9 $23,3**  **83.3 9** 

P a g e 56 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix IV: P a r t ial B u d g et A n al ysis for a Proposed Conversion of Native Grass l and to Cropland in Ce ntral South Da kota, 2003-2007

**Sectio n**  **4**
**Re duc**  **e d**  **r e**  **t urns**  **fr om**  **pr opos**  **e d**  **c h**  **a nge**  Sale of calv es and cu ll cows in a year wit h u n favora ble forage pr oducti on $15,4 99.8 6 $ 1 5

, 4 99.8 6
**Su b**  **t o**  **t al red**  **uced retu**  **r n**  **s $15,4**  **99.8 6**  **$15,4 99.8**  **6**
**Net ch an**  **g e**  **in in co**  **me, 2007 $2,09**  **9.47 $8,29**  **0.61**

Sour ce: GAO ’ s an al ysi s base d o n d a ta pr ovi d ed byan d co nsul t a ti on s w i th So uth D a kot a St ate U n i v er si ty ext ensi o n ser v i c e, N A SS, an d NRCS. Partial b u d get t e mplate use d bypermi ssion of th e A g ricultura l Econ omi cs Departme n t, Universi ty of Misso uri.

Notes: (1) W e ca l c ul ated retu rns a nd co st s as sum i ng con v ersion of native gra s sland to cro p land on a “con structe d ” fa rm in Hand Count y, South D a kot a , that produ ced a rotation of co rn, soybean s, and spring w heat. (2 ) For the crop ent erprise

, we u s ed regional ave r age crop price s fo r January to July 2007; a 3 -y ea r m o v i ng a v erage of NASS c ount y a v erage c r op y i elds, adjus ted an d un adjus t ed fo r s o il produ ctivity fo r corn and so ybean s and a projec t e d 2007 South Da kota yield for sprin g wheat, adjusted and una d justed for soil productivit y ; and centra l South Da kota regional crop produ c tion co st data. We used a ssu mptions a nd data pro v ided b y NRCS officials t o estimate con v ersion co st s. ( 3 ) Data and a s sum p tions for t he co w-calf ent erp r ise ar e from So uth D a kota State Universit y ext e nsion service in the ce ntral and ea stern regions a nd NR CS officials in So uth Dakota. Fo r 2007, we u s ed 2007 average we ekly ca sh corn p r ices fo r the cent ral region of Sout h Dakot a from Ja nuary to July from the South D a kota State Universit y ext ensio n service a nd Janu ary to Jun e average monthly NASS pric e s for alfalfa hay . (4 ) The das h e s indic a te that no loan d e fic i ency pa y m e n ts would be recei v ed for 200 7 and that we did not include an y crop in sura nce o r disa ster a s sista n ce pa yment s fo r this yea r , althoug h su ch pa yment s may be ma de in the future.


### In summary, if South Dakota corn, s o ybean, and wheat prices stay at relatively hi gh lev e ls, as forecast by USDA national price pro j ections, incentives for conversion should co ntinue in the near future. 13 

### In addition, as the retrospective anal ysis suggests , farm program payments, especiall y crop insurance and crop disaster assistance pa yments, lower the risk of negativ e ret u rns in year s with low c r op yields.

13 USDA Agricult ural Projections to 2016, Inte ragency Agricult ural Projections Committee, Long Term Pro j ections Report OCE-2007-1, ( W ashington , D

. C., Februa ry 20 07).

P a g e 57 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix V: S u mmari es of E c o n omic St udies Exam in in g the Impact of F a rm Program Pay m ents



### We identified and revi ewed 15 studi es that anal yze the poten tial economi c impacts of federal farm program p ayments on either producers’ land use decisions or farm profitability and ris k . The impact of farm program payments on farm profit ability and risk is closely related to l a nd use decisions. T a ble 12 summarizes the 15 studies, i n cluding th e purpose an d results associated with each.

**Table 12: Economic Studies That Analyze the Impact of Fe deral Farm Program Payments**  **on Eit h**  **er Producers’ Land Use Decisions or Farm Profitability and Risk** 

**Ec onomic**  **s t**  **u d**  **y Pur**  **pos e**  **of th e**  **s t**  **udy Ye**  **a r**  **Re la**  **te d findin**  **g s**  **a nd c**  **onc lu**  **s i**  **ons** Jansse n, Larry , Burton Pflueg er, and Terry Ahrendt. South Dakota Agric u l t ural La nd Market T r ends, 1991- 200 7 . South Dak o ta State Univers i ty Agricultura l E x perime n t Station, USDA. T o report on cu rrent agricu l tur al land v alu es an d cash renta l rates by lan d u s e in differe nt regio ns in So uth Dakota. 200 7 Lan d valu es in South Dak o ta have d oub le d since 2 002 a n d tripled si nce 1 996. Dur ing this time, farm commodity p a y m ents increas ed from $2 3 0 mi llio n to more than $70 0 milli on a year. In additi o n to commodity payme nts, interest rates, technolo gy, and ethan ol dem an d have a l so b e en factors in increas in g lan d values. Ho wev e r, farmland values have b e c ome more d e pen dent o n farm program payme nts. Shaik, Sal eem, Joseph Atwo o d , and G len n Helmb e rs. “F arm Programs a nd Agric ultura l Lan d Valu es: T he Cas e of Southern Agricultur e.” Paper pr esente d to the Souther n Agric ultural Ec onom ics Associati on An nual M eetin gs, O r land o, F lorida, F ebr ua ry 2006. T o examin e the contrib u tion of expecte d farm returns an d farm program paym ents in 12 souther n states. 200 6 T he prop ortion of land va lues attributab le to farm program payme nts has i n creas ed from abo ut 14 perc e nt in the early 198 0 ’ s to 67 perce nt in the souther n Unite d States from 200 2 to 200 4. 

# Appendix V : Summaries of Economic Studies Examining the Impact of Farm Program Payments

P a g e 58 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix V: S u mmari es of E c o n omic St udies Exam in in g the Impact of F a rm Program Pay m ents

**Ec onomic**  **s t**  **u d**  **y Pur**  **pos e**  **of th e**  **s t**  **udy Ye**  **a r**  **Re la**  **te d findin**  **g s**  **a nd c**  **onc lu**  **s i**  **ons** U.S. Departme n t of Agricultur e. Economic Researc h Serv ice. Environmental Effects of Agricultur al L a nd-Use Cha n g e : T he Role of Economics an d Policy . Econ omic Rese arch Report N u mbe r25, W a shingt on, D.C., August 20 06. T o examin e the relati onsh ip betwe en agr icu l tural la nd us e chan ges, soil p r oductivity, an d enviro n me ntal sensitivity a nd the effects of increased cro p insura n ce su bs idies o n la nd u s e. 200 6 Lan d movin g b e twee n cultivat ed crop lan d and l e ss intens ive agric ultur al uses is less prod uctive an d more vuln erab le to erosi on and n u trient ru noff than other cultivate d lan d. Produc ers tend to keep hig hly prod uctive land i n cultiv ati on reg a rdl e ss of chang ing

econ omic con d i tions. But eco nomic conditi ons, suc h as chan gin g commodity prices or pro d u c tion costs, en coura ge farmers to exp and pr oducti on to less prod uctive la nd or to shift less prod uctive cropla nds to ot her uses. Agric ultural and

conserv a tion p olici e s also affect land us e. T hese la nd us e chan ges affe ct enviro n me ntal q ual ity, particul a rly whe n affected low er- q ual ity lan ds ar e enviro n me ntall y sensitive. Cr op ins uranc e raises inc entiv es to expan d c r ops to less prod uctive la nd . Increased cro p insur ance subsid ies i n the mid-19 90s m o tivated prod ucers to e x pan d cropl an d in the contig uous 4 8 states by an es timated 2.5 milli on acres, with most of the lan d comin g from pasturel a nd an d other gr asslan d. Due to this land- use chang e, ann u al win d an d water erosi on estimates incr e ased by 1.4 and 0.9 p e rce n t, respectively, as of 1997. U.S. Departme n t of Agricultur e. Economic Researc h Serv ice. Agricult ura l Resourc e s and Env i ronm e n tal Indic ators, 200 6 Editio n

. Economic Infor m ation Bu lleti n 16, W a shingt on, D

. C., July 2006. To describ e pa tterns and tren ds in lan d, water, and b iol ogic al resources; report on the conditi on of n a tural a nd other

resources use d in the agricu l tural s e c t or; and descri be publ ic po lici e s and pr ograms as well as ec on o m ic factors that affect resource use,
conserv a tion, a nd env ironm en tal q ual ity in agr ic ulture. 200 6 P revious r e sea rch has sho w n that capital izati on o f expected far m program payme nts incre ases crop lan d values. T he effect of farm p r ogram payments on cropla nd va lue s varies wid ely throug hout the United States, but incre ases a r e hig hest in the Norther n Pl ains.

Jansse n, Larry , and Yon a s Hamda. F eder al F

a rm Program Payments (19 9

0

– 200 1): An Analysis of Ch angi ng D epe nd ency an d the Distributi on of F a rm Payments in South Dakota . Sel e cted pa per 1 3 64 74 pres ented t o the America n Agricultur al Ec onomics Associati on An nual M eetin gs, Provide nce, Rhod e Islan d, July 20 05. T o examin e the econ omic impact of feder al farm progr a m payme nts in South Dak o ta at the state and loc al levels from 1 9 9 6 to 2001. 200 5 S tatewid e , federal farm pro g ram payme nts
avera ged 3 6 p e rcent of net fa rm income from 1990 to 1 995 a nd alm os t 54 percent from 1996 to 2 001. T he lo wes t depen de ncy rate of net farm income o n pay ments was in the most cropl and-i n tens ive East Central/S outhe ast regio n, whil e the hig hest dep end ency ra te was in the W e stern regi on , which w a s the only re gio n wit h payme nts
excee din g net farm income i n most years examin ed. T h e depe nde ncy rate of farm income on pay ments incre ase d consi dera bly in all re gio ns from the 199 0-1 995 time p e rio d to the 199 6-20 01 per iod.

P a g e 59 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix V: S u mmari es of E c o n omic St udies Exam in in g the Impact of F a rm Program Pay m ents

**Ec onomic**  **s t**  **u d**  **y Pur**  **pos e**  **of th e**  **s t**  **udy Ye**  **a r**  **Re la**  **te d findin**  **g s**  **a nd c**  **onc lu**  **s i**  **ons** Babcock, Bruc e, and Ch ad H a rt. “Risk-F r ee F a rming?” Iowa Ag Review , vol. 10. no. 1 (W inter 200 4), 1- 3 ,11. T o examin e ho w farm progra m s and cro p insur ance affect

revenue. 200 4 T he reducti on i n risk that crop farmers obtain from crop insur ance a nd com m odity programs has l a rgely res ulte d in risk-free crop pro ductio n . In additio n, the articl e states that farm pr ograms cr eate inc entives for farmers and landl ords to fo cus on growi ng the co mmodities th at are sup ported by these pro g r a ms. G oodwi n , Barr y, Ashok Mishra, and F r anco i s O r tolo-Magn e. “Lan dow ners ’ Riches: T he Distributi on of Agricultur al Su bsidi es.” (Madiso n , W i sconsin: U niver sity of W i sconsin, F e bruary 2 004).

www. busc. wis c

. e du/Realestate/pdf/ Landow nersric hes.pdf (d ownloaded June 21, 200 7). T o examin e the distrib ution of farm program payme nts and how la nd own e r s may benefit from these pay ments. 200 4 F arm program subsid ies h a ve a signific ant impact on farm land va lues. A m ong the types of payme nts studied, lo a n defici ency payme nts app ear to have th e largest effect. Lon g-term pay ments not dire c tly related to prod uction h a d relatively l i ttle i m pact.

G r ay, Allan, Michael B oeh lje, Brent G loy, and Step he n Slinksy. “How U. S. Farm Programs a nd Crop Rev e n ue Insuranc e Affect Returns to F a rm Land,” Review of Agricultur al Ec onomics , vo l. 26, no. 2 (200 4), pp. 2 3 8- 25 3

. T o examin e the econ omic impact of feder al farm progr a m and cro p insur ance p a yments on a typical N o rth w est India na corn/soyb ean f a rm. 200 4 F ederal farm p r ogram p a yme n ts influe nce land use dec isi ons bec ause th ey incre ase the expecte d returns to farmi ng whi le lower ing th e as sociate d risk. Also, crop

reven ue ins ura n ce en hanc ed the impact of other farm pro g rams by subst antial ly increas in g the attractiveness of farming for the most risk-averse pro ducer s. Smith, Katheri ne. “T he G r owi ng Preva lenc e of Emergency, Disaster, an d O t her Ad Hoc F a rm Program Payments: Implicatio ns for Agri-Envir onm ental a nd Co ns ervatio n Programs,” Agr i cultura l an d R e

sourc e Economics R e view , vol. 3 0, n o .1 (200 4): 1-7

. T o examin e va rious fed e ral disaster ass i stance pr ograms to determin e pote n tial re asons fo r the rise in a d h o c disaster payme nts and their impact o n agri-e n viro nme n tal an d

conserv a tion p r ograms. 200 4 T he use of em erge ncy, disast e r, and oth e r ad hoc so urces of income sup port to American farm ers escal a ted d r amatical ly betwe en 19 91 and 2 002, i n creasin g year-toyear unc ertaint y about the ma gnitu de an d distributi on of farm program b enefits. Ad hoc payme nts have the potenti al to substitute for or conflict with agri-e n viro nme n tal an d

conserv a tion p r ogram g oals. Crop dis aster payments mitigate ri sk for risk-averse prod ucers, thu s increasi ng ris k y producti on, which, in tur n , could l e a d to more natur al and mark et-ba s ed loss e s. T his could increas e the n eed for ad ditio nal cro p insura n ce a nd disaster p a yme n ts.

P a g e 60 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix V: S u mmari es of E c o n omic St udies Exam in in g the Impact of F a rm Program Pay m ents

**Ec onomic**  **s t**  **u d**  **y Pur**  **pos e**  **of th e**  **s t**  **udy Ye**  **a r**  **Re la**  **te d findin**  **g s**  **a nd c**  **onc lu**  **s i**  **ons** G oodwi n , Barr y, and Vince n t Smith, “An Ex Post Evaluati o n of the Cons e rvation Reserve, F e d e r al Crop Ins u ra nce, and O t her G o vernme nt Programs: Progr am Participati on a nd Soi l Erosio n , ” Journal of Agricultur al a n d Reso urce Ec onomics , vol. 28, no. 2 (20 0 3 ): 201-21 6. T o examin e the impact of fed e ral farm programs on soil erosi on. 200 3 T he Cons ervati on Res e rve Pr ogram signific antly re duce d soil er os ion in areas where prod uce rs have partic i p a ted. W hile federa l crop in suranc e and d i s aster relief programs app e a r to have ha d little impact o n soil eros ion, i n c ome sup ports that have

enco u rag ed pr oducti on hav e had su bstanti a l effects. In particular, ab out ha lf of the reducti on in so i l erosio n attrib utabl e to CRP enrol lment w a s offset by increased er osio n induc ed by i n cr eases i n incom e-sup portin g federa l progr a m s.
F ederal R e ser v e Bank of St. Louis. Po litica l Allocati on of U. S. Agriculture Disaster Payments in th e 199 0s . W o rking pa per 200 3 -00 5 C (St. Louis, Misso u r i , 200 3 ). T o examin e the impact of politic al infl u e n c e on the alloc atio n of crop dis aster payme nts, in additio n to the effectiveness o f legislati on aimed at prom oting mor e efficient dis aster payme nts systems, such as crop insura n ce, ove rdirect payme nts. 200 3 T he report cite s earlier stu die s findin g that crop dis aster p a yments creat e an inc entive for produc ers to contin ue far m ing in hig h-ris k areas, therefor e contin uin g th e likel iho od of losses a nd the nee d for assistance. Also, beca u se in divi dual prod uctio n histori es are not alw ays ava ilab le, cou n ty averag es are often used to d e termine disast e r payme nts, and pr oduc ers farming less th an the cou n ty
avera ge rece iv e payme nts exceedi ng the i r actual l o sses. F inally, dis aste r payments do not have pr edi ctable a nnu al c o sts.
Youn g, C. Edwin, Monte Van d e veer, an d Rand al Sch n e p f. “Production and Pric e Impacts of U.S. Crop Insuran c e Programs,” American J our nal of Agric ultu r al Econ omics

, vol. 8 3 , no. 5 (200 1), 119 6-12 0 3

. T o examin e the impact of fed e ral crop ins uranc e on farmers ’ crop decisi on maki n g

. 200 1 T he prese n ce of subsid ized c r op ins uranc e adds a n estima ted 960,0 00 ac res to the

ann ual p lanti n g of grain, soyb ean, cotton, and five oth e r row crops for th e years 20 01- 201 0, with mor e than ha lf of these p lanti ngs occurrin g in th e G r eat Plains. T o the extent that subsid ized crop insur anc e lea ds to expa nde d acre age a nd hi gh er producti on, market returns to produc ers wi ll be re duce d for the major cr ops. T his redu ction parti ally offsets the sub s idy be nefits of the insura n ce. Claass en, Ro g e r, and Abe bay ehu T e g e n e , “Agricultur al L a nd Use C hoic e : A Discrete Choic e Appr oa ch,” Agricultur a l

and Resourc e Eco nomics Rev iew (1999), 26- 3 6. T o examin e the impact of cer t ain

econ omic an d l and q ual ity factors on lan d use choic es betwe en crop prod uction a n d pasture or C R P in the Corn B elt betwe en 19 80 and 1 987. 199 9 C onvers i o n pro babi lities dep e nd on the relative ret u rns from crop prod uction a nd pasture, gov er nment po licy ( CRP), and l a n d q ual ity. In gene ral it is found th at land own e rs are less i n clin e d to remove la nd from crop prod uction tha n to convert la nd to crop prod uction. Co rn Belt lan dow ners ap pear to be ge nera lly le ss inclin ed to r e move l and from crop prod uction tha n to convert la nd to crop pro ductio n for land that was not el igi bl e for the CRP. T his is true eve n for low- q u ality land th at was n o t eligi bl e for the CRP. T he asymmetry found her e is cons istent with a long-t e rm trend toward incr eas ing cro pla nd

acrea ge in the Corn Belt. CR P eligi bil ity signific antly i n c r ease d the pro babi lity of converti ng la nd away from crop prod uction.

P a g e 61 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onA ppendix V: S u mmari es of E c o n omic St udies Exam in in g the Impact of F a rm Program Pay m ents

**Ec onomic**  **s t**  **u d**  **y Pur**  **pos e**  **of th e**  **s t**  **udy Ye**  **a r**  **Re la**  **te d findin**  **g s**  **a nd c**  **onc lu**  **s i**  **ons** Atwood, Jose p h , Myles W a tts, and Alan Ba q u e t. “An Examinati on of th e Effects of Price Sup ports and F eder al C r op Insura nce upo n the Econ omic G r owth, Capita l Structure, and F inanci al Survi val of W heat G r owers in the Northern H i g h Plains,” American J our nal of Agric ultu r al Econ omics

, vol. 78, no. 1 (F ebruary 1 996 ), 212-21 4. T o examin e the econ omic impact of feder al farm progr a m and cro p insur ance p a yments on wheat pr oduc e r s in High Pl ai n s states, such as Montana. 199 6 P rice sup port p r ograms a nd cr op ins uranc e are substitutes in red u cin g pro ducer risk beca u se the av aila bil ity of crop insur ance led to little ch a nge i n farm via bility if price supp orts were avail abl e. More over, the avail abi lity of crop ins uranc e i n a setting with price su pports allo ws prod uce rs to service high er lev els of debt with no i n crease i n risk.
Heiml i ch, Ral p h . “Agricultur al Programs a nd Cropl an d Conv ersion, 1 975- 1 981,” La nd Economics , vo l

. 62, no. 2 (May 1986), 17 4- 181. T o examin e the implic ations of legis latio n to re duce the conversi on of r ang ela nd a nd other la nd to cropla nd. 198 6 F or some newl y converted h i g hly ero dib le cropla nd, pric e support an d fa rm credit program s ubsi dies wo ul d ma ke the differenc e betw een cro p prod u c tion

reven ues an d variab le costs positive. F a rm programs w oul d provi de a su bsidy for conversi on of h ighly er od ibl e l and to cropla nd, aver agin g ab out $1 7 per acre.

Sour ce: GAO ’ s an al ysi s of t he st udi es ci ted

.

P a g e 62 G A O- 07 -1 05 4 A g ri cu l t u r al Con s erv a ti onAppendix VI: A GAO Conta c t and Staff

c kno w l edg m e n ts

P a g e 63 G A O- 07 -1 05 4 

# Appendix VI: GAO Contact and Staff Acknowledgments

Lisa Shames, (202) 5 12-3 841 or shamesl@gao.gov

In addition t o the cont act named abo ve, James R. Jones, Jr. (Assistant Director), Kevin S. Bray , Gary T. Brown, Barbara J. El Osta, Chad M. Gorman, Grant M. Mallie, Lynn M. Mu sser, Ali s on D. O’Neill, Susan E. Offutt, and S t eve C. Rossman made key contribut ions to this report. Also contributing to this report were Muri el C. Brown and Kim M. Raheb. 

# GAO Contact

Staff Acknowledgments

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