CRP for Hay and Grazing

You may have heard the news about the USDA deciding to allow 24 million acres of CRP (Conservation Reserve Program) to be used for hay and grazing after the early June wildlife nesting period. So, by the middle of June farmers and ranchers who have a portion (or all) their land in CRP will be able to use it for grazing and haying. The idea is that it will help ease the pain that the beef producers (high grain prices). Although the announcement was welcomed by many there are also plenty of people against it, and I'm not just talking about the hunters and wildlife people. You can read an article from the Brownfield Network titled, "Opinions vary on CRP haying, grazing decision," by clicking on the link. There is also an audio report at the bottom of the page.

I for one am none too pleased! Especially considering the fact that I just spent close to $10,000 last week so that I could make hay on and graze the land that I already owned. I knew that was going to be the case going into the land purchase, but that doesn't mean that I like it (you can read more on the CRP Buyout on this older post). My big problem ... with a little bit of paperwork and a $75 fee you can graze or hay or both your CRP ground and still get your full payments! I think that is just dumb, especially after I just wrote my check to buy it out (although they would have to continue the program for 5 more years in order it to work for me).

Some hay producers in Iowa aren't very happy about it either. One custom baler (who also owns 400 acres of hay ground) said on the WHO Radio Big Show yesterday that his phone has been ringing off the hook since this announcement came out. The reason for all the phone calls? They are coming from farmers who have CRP (or who think the hay prices will drop because of the news) and also have some hay ground. If they have a marginal stand of hay that isn't as good as it could be they want to cut it and get it off the field right away so they can then come in and plant beans.

My states Ag Secretary Bill Northey didn't think any thing like that would happen, but apparently he was wrong. So, let me break it down for you. If instead of just the 40 acres that I own now I also owned another 40 acres of pasture ground that I used for my cattle I would now be able to throw them on a dry lot for a couple weeks, till under my pasture and charge someone $150 per acre to plant beans, move my cows over to the CRP in the middle of June, still collect $85 (or whatever) per acre on my CRP, in the fall after the beans come out I can seed it back to some sort of grass, and over the winter I can feed some hay that was less expensive than the year before. Sounds like a pretty big deal ... if you love your government spending lots of money.

Thoughts?

Taking Land Out of the CRP

I thought I would take a little bit of time today to share some of what we have learned about taking land out of the Conservation Reserve Program (CRP) ... you can read about what the CRP is HERE. As I have mentioned before most of the land we are in the process of buying is in CRP right now. In fact of the 38 acres there are 31.5 acres in CRP right now, and as far as we can tell they have been in for about 14 years. But, taking land out of CRP isn't as easy as just deciding to do it ... it takes money and time!

We are planning on taking out the 26 acres of pasture and leaving the other 5.5 acres in the program. Normally land that is placed in the Conservation Reserve Program needs to be land that could be in crop production, but our land owner must have know somebody! The 5.5 acres we are leaving in is mostly a wooded hill on the other side of a ravine. We will leave it in as long as we can and collect the money ... probably until the contract ends.

I have heard of CRP contracts running for different amounts of time, but I think normally they are around 7-10 years in time. When you sign up you must basically leave the land alone, although you are allowed to do some waterway improvements and seeding or even mow a path through the land. It can be used for hunting and mowed down in the winter. But, if you want to take it out of the program before the contract is up you will have to do a few things ... and by a few things I mean give them money.

You must pay back all of the money that has been paid out during the time of the contract. Those payments include the contract money and any other cost sharing money that was given for land improvements. Next you must pay interest on that money which varies from year to year. In our case the interest was as low as 2% for one year and as high as 5.5% for another. Really, the interest isn't that big of a deal. Finally, you must pay 25% of one years payment for "Liquidated Damages". They are quick to point out that the "Liquidated Damages" fee is not a penalty!

Now, it is important to recognize that you must pay this back regardless of whether or now you received it and in some cases if your contract was extended (instead of ended and then a new one put in place) you may have to go a long ways back. I talked with someone the other day who had recently found out that they would have to pay back 14 years worth of payments! I'm not saying it is right or wrong ... just saying how it is.

For us, we are just looking at the CRP buyout money as part of the land expense and we decided that it still made the land reasonably priced for the market. I can understand why some farmers are pushing for a provision in the new Farm Bill that would allow them to take the land out without having to pay back anything, but I don't think it is going to happen.

If you have any CRP questions fire away ... because of this I have learned a lot more about the program than I knew going in! I wish we wouldn't have to pay to take the land out, but it is what it is...