The CRP Choice

Justin Benavidez, James Richardson (jwrichardson@tamu.edu) and David Anderson

No 205342, 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California from Agricultural and Applied Economics Association

Abstract: Several unique factors will make 2015 a watershed year for the CRP. First, the Agriculture Act of 2014 mandates an acreage reduction in CRP enrollment from thirty-two million acres nationwide to no more than twenty-four million acres by 2018. According to the Agriculture Act of 2014 total CRP acreage must be no more than twenty-six million acres in 2015. The mandate comes at a ‘ten-year interval’ from the beginning of the CRP, meaning that a large amount of CRP acreage is up for renewal. According to an Economic Research Service report published in August 2014, an estimated two million acres are scheduled for reenrollment at the end of fiscal year 2014. Complicating the situation further is the drastic change in crop prices over the last year. According to the Food and Agricultural Policy Research Institute’s December 2014 U.S. Crop Price Update, corn price has fallen from a national average of $6.89/bu in 2012 to $4.46/bu 2013, grain sorghum from $6.33/bu to $4.48/bu, wheat from $7.70/bu to $6.70/bu, and soybeans from $14.40/bu to $13.00/bu. Prior to the price decline, per acre return disparity between CRP land and cropland would have been more significant, therefore making the decision to stay in the program or use the land for production easier for producers. This research has several objectives. The first is to provide a decision aid for producers that will help them decide at what bid price they should enter the program. This aid will take in to consideration the decision to stay in the CRP, or to go back in to production of several major row crops, or livestock. The second objective of this study will be to develop a ‘probability of acceptance’ for farmers bidding in to this program, based on their bid amount and EBI score. The final result of this paper will be a comprehensive decision aid that will inform producers on the best financial choice they can make, using their probability of acceptance.

Keywords: Agribusiness; Agricultural and Food Policy; Crop Production/Industries; Environmental Economics and Policy; Farm Management; Land Economics/Use (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-agr and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea15:205342

DOI: 10.22004/ag.econ.205342

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