TO CONSERVE OR TO CULTIVATE: THE EFFECT OF USDA LOAN PROGRAMS ON CONSERVATION RESERVE PROGRAM ENROLLMENT

Abstract

The Conservation Reserve Program (CRP) within the United States Department of Agriculture (USDA) is a land retirement program that compensates farmers to temporarily retire cropland for 10-15 year periods. This program serves to protect and restore environmentally sensitive land, focusing on the five established goals of wildlife conservation, water quality, erosion control, enduring benefits, and air quality. There is an extensive literature around the CRP, including individual enrollment incentives, auction design theory, and empirical studies of environmental effects. A newer base of literature studies the interactions of various government agricultural programs. This paper enters the literature in the niche of government agricultural loan programs, and argues that farmers make decisions between acquiring loans for the purpose of production and temporarily retiring their land. This paper explores the relationship between two USDA farmer loan programs and CRP enrollment. On a state level, I focus on the Farm Service Agency’s Direct and Guaranteed farm operating loans. Using an Entity-Time Fixed Effects (FE) model, I find a statistically significant negative relationship between Direct Operating Loans and CRP enrollment. On a county level, I look at the Commodity Credit Corporation (CCC) marketing assistance loan program, which provides farmers with short-term loans using crops as collateral. Also using an Entity-Time Fixed Effects (FE) model, I find a statistically significant negative relationship between CCC loans and CRP enrollment.