Three essays on the Conservation Reserve Program

Abstract

[ACCESS RESTRICTED TO THE UNIVERSITY OF MISSOURI-COLUMBIA AT REQUEST OF AUTHOR.] Over 35 years, the Conservation Reserve Program (CRP) has provided a variety of envi-ronmental benefits, reducing run-off of sediment, nitrogen, and phosphorus, sequestering carbon, and providing wildlife habitat (FSA, 2018). In order to evaluate the net impact of the program on the environment and on agricultural markets, it is important to understand both direct and indirect effects. The study fills gaps in the literature by examining how net returns for cropping activities affect the use of land exiting the program when contracts expire and by using a new approach to measuring some of the factors that contribute to program "slippage," the difference between expected and realized performance. The purpose of this research is to evaluate 1) impacts of net returns for corn, soy-beans, and wheat on land-use decisions after the contracts expire, 2) factors that cause slip-page between the number of acres enrolled in the program and net reductions in area planted to crops, and 3) the impact of the U.S.-China bilateral trade conflict and associated government payments on the land returned soybean production after CRP contracts expire. For the first and third questions, the Bayesian zero-inflated beta regression model is utilized to examine farm production regional data on how land was used after CRP contracts ex-pired. The extent of program slippage is estimated using a modified version of the OECD (2001) PEM model, a four commodity markets calibrated to the 2017/18 marketing year. The first essay finds that a ten percent increase in net returns for corn, soybeans, and wheat had impacts on the share of former CRP land devoted to each crop that differed by crop and region. The second essay estimates that area planted to coarse grains, oilseeds, and wheat declines by 0.32 to 0.45 acres for every acre of expanded CRP enrollment when CRP program spending is increased. The third essay finds that the amount of land returning to soybean production when contracts expire is affected by the state of U.S.-China trade relations and payments that were made in 2018 and 2019 to compensate U.S. farmers for the impacts of retaliatory tariffs. For example, the phase 1 deal, increases the amount of former CRP land returned to soybean productions by 78 thousand acres in the northern plains. The models used in all three essays have limitations that should be addressed in future research, but the essays utilize novel approaches and generate interesting results. The first essay demonstrates the value of a new Bayesian approach with a zero-inflated regression model. The second essay uses an adapted partial equilibrium model to evaluate sources of CRP program slippage. The third essay provides one of the first attempts to examine the relationship between the U.S.-China trade war and the CRP.

The United States–China Trade War and Impact on the Post-Conservation Reserve Program Land Allocation

“…In Beta or Dirichlet regression models, the posterior distributions of coefficient βs do not indicate the marginal effect of expected land-use net returns to post-CRP land-use shares since the dependent variables are not linear relations with explanatory variables (Lee, 2020;Liu and Kong, 2015). Instead, we examine how posterior predictive samples change due to a shock to each net return variable at a time starting from the Base scenario.…”