Balancing Conservation Costs and Benefits

The growing role of natural resource conservation in U.S. farm policy is evident in the fivefold increase in funding for the Environmental Quality Incentives Program (EQIP) in the 2002 Farm Act. EQIP provides technical, financial, and educational assistance to farmers and ranchers implementing a wide range of agri-environmental practices on land used for farming. Recognizing the dearth of data concerning the installation of conservation practices on U.S. farms, ERS constructed a database using EQIP conservation practice data. The database offers a unique opportunity to better understand the demand for conservation practices across regions, the conservation practices being funded and implemented, and the unit costs (dollars per acre, dollars per foot, etc.) of implementing these practices.

The types of conservation practices that farmers use fall into two broad categories, each of which covers a wide range of practices. Structural practices, as their name suggests, are conservation activities that involve the installation of some sort of equipment or structure, such as a pond to provide water for livestock. Management practices are conservation methods or techniques that help farmers with the operational aspects of their work. Some examples are tillage techniques, integrated pest management, and conservation crop rotation.

The data reveal the range of costs farmers incur in implementing conservation practices. On average, structural practices tend to have higher fixed costs than management practices because they typically require the use of heavy machinery. For many practices, producers realize economies of scale (lower unit costs) on larger conservation projects or installations. Not surprisingly, structural practices, because they have higher fixed costs, tend to show greater economies of scale. A comparison of small- and large-size installations shows that the average unit cost reduction for structural practices (from small to large installations) ranged from 14 percent to 70 percent, while for management practices, the range was 19 percent to 35 percent.

Now, with the creation of this database, researchers and policy analysts can examine the costs of conservation programs and policies in a comprehensive manner and identify opportunities to reduce costs. Policymakers can use such analyses to evaluate program performance. Combined with information on the farm structure of the rural economy, these data could also be used to target conservation programs more effectively. Given the growing but still limited budget for conservation, the database can help conservation program managers attain environmental goals while attending to farmers’ specific conservation needs and minimizing costs.