A potential program expansion south of the border could help American producers weather tough times
By Daniel Schuurman, Nicholas Bannon and Alfons Weersink
University of Guelph
Canadian farmers once again envy the continued support their American counterparts receive, as a result of a proposed expansion of the Soil Health and Income Protection Plan (SHIPP).
The program would fall under the Conservation and Reserve Program (CRP) which Ronald Reagan signed into law in 1985. Historically, the CRP pays farmers to remove environmentally sensitive land from production for 10 to 15 years. This move is intended to improve water quality, prevent soil erosion and protect wildlife.
Similarly, farmers who enroll in SHIPP receive a fixed rental rate per acre to grow a low-cost perennial cover crop for three- to five-year contracts on portions of their lowest quality land. The same conservation and soil improvement goals of the CRP underpin SHIPP.
The potential expansion of the program from 50,000 acres in its 2018 pilot to five million acres came as part of a larger nation-wide economic recovery plan in mid May. Through the expansion of SHIPP, farmers can receive US$70/acre with an additional US$30/acre to cover the cost of seeding. Participating farmers move their lowest quality, previously cropped land into a low-cost perennial crop. Up to 15 per cent of an individual farmer’s land may be contracted into the program.
This payment can be front-loaded over the entire contract period, allowing emergency financial support to flow to American farmers.States in the Prairie Pothole region (Iowa, Minnesota, Montana, North Dakota, and South Dakota) and into the Southern Plains (Oklahoma and Texas) will receive the greatest financial benefits as cover crop adoption is already growing and the rental rate is fixed.
This program not only addresses the immediate financial needs of farmers, but also allows for a small degree of supply management for row crops and attempts to tackle long-term soil health issues in the Midwest.
The response came on the heels of decade-low corn and soybean future prices seen through April. By supporting the temporary repurposing of five million acres from crop production into perennials, the American government may be attempting to manage domestic supply levels over the next several years. Between a steady increase in foreign row-crop competition and reduced ethanol demand expected to remain for a few years, supply management appears to be a straightforward solution.
While this approach is not supply management in the form Canadian farmers are most familiar, it has a similar end goal of intervening in the market to raise domestic prices for row crops.
The expansion of SHIPP is more about market adjustment, emergency financial assistance, and income support for farmers than soil health.
While the intensified crop rotations throughout the Corn Belt and the Midwest deplete organic matter and leave the land vulnerable to erosion, SHIPP’s benefits will be short lived. The temporary conversion of annual crops to perennials reverses the process of soil degradation, improving nitrogen retention, water holding capacity and drainage. Diversified cropping rotations can lower future weather-induced risk of crop failure.
However, if farmers revert to the initial practices following the end of their contracts and don’t incorporate cover crops into their subsequent rotations, the land will simply return to its “marginal” status.
The temporary nature of the support from SHIPP means the agronomic and environmental benefits will also likely be temporary. Instead, the main benefit American farmers will receive is the emergency financial aid.
The Canadian agricultural industry should seek a program(s) that enhances the long-term viability of the sector through both improved soil health and competitiveness.
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