According to at least one report, inflation isn’t just taking a bite out of crop revenue, but conservation practices as well.

This year, the University of Illinois conducted a thorough review of federal data to analyze how inflationary pressures are affecting the reach of USDA’s conservation assistance to farmers.

Looking at data from the USDA’s Economic Research Service (ERS) for crop receipts, production costs (fertilizer, pesticides, fuel, energy, and seed), and conservation assistance to farmers, researchers Jonathan Coppess and Inder Majumdar from the Department of Agricultural and Consumer Economics at the University of Illinois point out the post-pandemic inflation issue would naturally impact the costs borne by farmers adopting conservation practices and potentially affect adoption.

For example, the cost of adopting cover crops would increase with seed, fuel, and herbicide costs.

The researchers argue there is a fundamental flaw in how Congress funds conservation assistance: annual spending is not adjusted to keep pace with inflation and funding limits make the situation worse for programs that have been persistently underfunded and oversubscribed by farmers.

Here are some interesting observations:

• While crop receipts have increased after the pandemic, so have costs for production. At the same time, conservation program payments have not increased to meet these costs.
• In looking at two of the most oversubscribed, underfunded conservation programs – EQIP and Conservation Stewardship Program – they are funded in the Farm Bill at a maximum of $2 billion and $1 billions respectively. To fund EQIP at the same level with inflation considered, the funding level should be $2.5 billion for FY 2024, researchers say.
• Researchers compared total conservation funds and “practice instance counts” for a subset of EQIP practices -- conservation cover, conservation crop rotation, no-till, cover crops, reduced tillage, grassed waterway and nutrient management. Data show EQIP is paying more for fewer of these practices: average funds for these practices went from $163 million in the years prior to the pandemic to over $180 million in the three years after the pandemic. But total practice counts decreased from 33,245 (2017-2019 average) to 26,275 (2021-2023 average).

Effectively, 10.5% more funding resulted in 21% fewer practices, and the cost per practice increased by 40% or about $1,954 per practice adopted.

Researchers say this indicates that inflation “is very likely to be impacting conservation programs and the farmers seeking assistance to adopt practices: more dollars for fewer practices, at least for this subset of practices.”

The Bottom Line

Just a few weeks ago, the researchers updated their findings, estimating the impact of inflation on cover crop costs in Illinois as an example. The cost for seed, labor, planting equipment, custom application, termination and fertilizer (optional) showed an increase of $0.71 to $16.28 dollars per acre, or -7% to 36%, depending on the practice.

The authors note different practices will be impacted at different rates, and much depends on how the practices are implemented. But for sure, “the impacts of inflation have consequences for conservation not adequately considered in the policy and are mostly ignored in public discussions of farm policy,” the report says.

“While EQIP reimbursement rates are determined annually based on input cost estimates,” they add, “the total number of federal dollars allotted to EQIP for reimbursements is not pegged to inflation and does not grow to accommodate the increased cost of conservation each year.”

Clearly, adopting any new conservation practice costs farmers money and taking that step is a big decision for many of them. With the reauthorization of the 2018 Farm Bill being debated ad nauseum in Congress and a very important election happening Tuesday, we’re calling on U.S. lawmakers to find a more flexible method to fund conservation programs that are in line with market realities.

Doing this will keep adoption of conservation practices at a healthy rate, rather than perpetuating limitations that can hurt adoption.