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The 2018 harvest crew on the Robert Plucker Farm
in Touchet.

Photo by Derey Edmonds

COAXIUM

AGEXPO

POLICY

RATE SHOCK

New CRP payment rates leave many Eastern Washington growers scratching their heads

November 2018
By Trista Crossley


Earlier this year, some Washington producers got a shock when they went to renew their Conservation Reserve Project (CRP) contracts. The rates had changed, and in many cases, not for the better. One farmer in Franklin County reported that his rate dropped by more than $20 per acre. In Asotin County, farmers saw their rates drop by more than half from last year.

The cause appeared to be twofold. First, the Farm Service Agency (FSA) changed their soil rental rates, but not all Washington county rates went down. Some even went up from last year (see Chart 1). The second change, and the one that might have hit harder, was the FSA’s change in their soil productivity factors.

Previously, FSA determined a CRP contract rate by taking the county rate and multiplying it by a soil productivity factor. That factor is determined using data from the Natural Resources Conservation Service and is based on a soil’s estimated yield—the most productive soils getting a factor of 1.5 and the least productive getting a .5. Before this year, FSA had five productivity factors: 1.5, 1.25, 1.0, .75 and .5. At the direction of the secretary of agriculture, FSA reset the top two productivity factors to 1.0. Any new contracts received the new rates. Contracts extended under the 2018 one-year extension did not.

Rod Hamilton, farm programs chief for the Washington state FSA office, said the changes to the productivity factors were likely a response to concerns that CRP was paying rents above the county average and unfairly competing against farmers who wanted to lease the ground for production.

“I think the administration says that we are going to try this for the rest of this fiscal year and see what the consequences are,” Hamilton said, adding that when U.S. Department of Agriculture Undersecretary Bill Northey was in Eastern Washington in July, some concerns were expressed to him about these changes negatively impacting some of the areas they were most trying to protect, such as filter strips, that tend to have the most productive soils. “One of consequences of this approach is maybe that it did lower the overall rate, but it also lowered it in places where we are trying to get people to give up a small amount of land.”

FSA’s soil rental rates are based on information gathered by the National Agricultural Statistics Service (NASS). In another blow to Washington state wheat farmers, those rates are based on cash rent, not crop share. Unlike the Midwest or eastern U.S., Eastern Washington wheat farmers tend to favor crop share agreements over cash rent, resulting in NASS data that may not accurately reflect Eastern Washington rental rates. Hamilton theorized that one of the reasons crop share agreements are more popular in the western part of the U.S. is because the lower average precipitation makes farming inherently riskier. Crop share agreements allow farmers to spread their production risk a little more without also taking on all the production costs as well.

Chris Mertz, regional director at the NASS Northwest Regional Field Office in Olympia, said NASS collects the cash rent data at the direction of FSA, which also funds that effort. For those counties that don’t report enough cash rent information—NASS requires at least 30 reports or reports that cover 25 percent of the county—the county is given a district average number (see Chart 2).

While this isn’t a new problem—Mertz said NASS has been collecting cash rent data for FSA since at least 2008—in the past, the Washington state FSA office had a way to somewhat address it.

“Up until this year, we were allowed to make an argument for why we thought the numbers were wrong,” Hamilton explained. “In our state, we usually hung our hat on the fact there wasn’t a lot of cash rent. We would take yield data, the typical share rent calculation and convert that to a cash amount and say here’s our justification why we think this number is too high or too low. Sometimes they took our number exactly, and sometimes they went in our direction but not entirely. For this last change in June, the states were not allowed any input at all. We were just given the number and told ‘this is what you are going to use.’”

When changes like this come down the pipe, Hamilton said FSA’s standard procedure is to publicize it in two ways: in their monthly newsletter, which is available on the state FSA’s website, and by printing out the rental rates and posting them in the agency’s county offices. Because of the one-year extension that was offered, Hamilton said less than 100 CRP contracts in the state got the new rates. That extension expires Sept. 30, 2019, and if the agency doesn’t make any changes to these new rates, many more producers could be in for a shock. But there’s a glimmer of hope, maybe.

“When we were given this latest round of numbers, they were very specific that the numbers were for fiscal year 2018, which was, I think, their way of saying they are keeping their options open for thereafter. I think they wanted to see what happened when they made the changes in this manner,” Hamilton explained.

While the state FSA office has no avenue of recourse to modify the rates to better reflect Washington’s cash rent vs. crop share data deficit, the Washington Association of Wheat Growers (WAWG) is taking the fight to the top, with the help of the National Association of Wheat Growers.

In September, WAWG President Marci Green, WAWG Executive Director Michelle Hennings and WAWG National Legislation Committee Chair Nicole Berg met with Peter Bachman, a USDA policy advisor, and Senate and House leaders to discuss the situation.

“We heard that other states are in the same situation with regards to the CRP rates being based on cash rent information, but unless changes are made in the farm bill, the authority to set the rental rates lies with the secretary of agriculture,” Hennings said. “We have asked the secretary to allow the states to modify the rates, and we are working with legislators to put language in the farm bill that would allow FSA to consider data other than NASS data to set rental rates.”

WAWG has discussed CRP talking points with Sens. Maria Cantwell (D-Wash.), Pat Roberts (R-Kan.) and Debbie Stabenow (D-Mich.) that support the association’s position. Discussions with staff from the Senate Agriculture Committee are ongoing.

Chris Herron, a wheat farmer from Connell, Wash., said he had 480 acres of filter strips that were expiring this year. When he went into his county FSA office to renew the contract, he was told his rate would drop from $78 to $54. He opted to take the one-year extension at his current rate, instead.

“FSA used insufficient and/or nonexistent NASS data based on dryland cash rental rates. The fact is, there just aren’t any of those leases in my county, so how did NASS come up with soil rental rates based on data that doesn’t exist?” Herron asked, pointing out that his CRP rental rate nearly three decades ago was $54. “Being held to the same rental rate for 33 years while implementation and maintenance costs have risen 100 to 500 percent is tough to manage.”

In the southeast corner of the state, it wasn’t the fact that rental rates dropped that puzzled Ron Scheibe, it was where the rates dropped.

When Scheibe went to resign his Conservation Reserve Enhancement Program (CREP) ground in Asotin County, he learned that while all his rates were going to be lower, the rates on his most productive ground were the ones getting cut the most. He said he has two main parcels of CREP ground, one that is extremely rocky and the other that’s in a broad valley with deep soils and a creek running through it. The rental rate for the rocky ground was cut $10 to $15 per acre to approximately $75 to $80 an acre. The good CREP ground was cut from about $100 per acre to about $21 per acre.

“It’s hard for me to imagine how anybody in their right mind would pay me less for that than these totally washed out draws,” he said. “If you came in as anybody but FSA, you would just about croak thinking that this rocky, nonproductive ground is worth three times what the productive ground is. It doesn’t make any sense.”

In the end, Scheibe ended up resigning all his CREP ground, as well as some Continuous Conservation Reserve Program ground that also had the rates cut on it. He said while he considered pulling out the good CREP land and putting cows on it, the potential hassle from state and federal agencies wasn’t worth the trouble. Because the land is next to a highway popular with tourists, in the past, he’s had to deal with people making complaints because his cows were grazing near water. He also considered appealing the rates to the national FSA office, but decided the time and effort that that would require wasn’t worth it.

“Money wise, I won’t make a cent on that ground. I’ll probably lose money, but at least I won’t end up fighting with the Department of Ecology,” he said.