Conservation Programs May Lead to Noncompliance

Study reveals some producers collect payments without complying with program provisions because of associated costs. Compiled by staff

Published on: Oct 4, 2004

Government policies designed to encourage soil conservation also contain components that may lead to noncompliance in some cases, a University of Nebraska-Lincoln agricultural economist says.

While the vast majority of producers comply with soil conservation program requirements, the costs associated with the program have led some producers to collect payments without complying with program provisions, according to study by Konstantinos Giannakas, agricultural economist in the Institute for Agriculture and Natural Resources.

"The USDA wanted to know why farmers don't always comply, so we looked for loopholes and other problems in the design of their policies," Giannakas says. "The problem with the current policy design is that the penalty for noncompliance equals the government payment. This is shown to create economic incentives for producers who do not adopt conservation practices to claim government payments they are not entitled to."

The 1985 Farm Security Act linked eligibility for commodity program payments to conservation activities on highly erodible lands. Since the inception of the policy, more than 11,000 producers nationwide have been cited for noncompliance violations. Data from 1997 revealed that out of 50,000 producers audited, more than 2,000, or about 4%, were found not to be actively applying conservation measures.

Giannakas says his research showed the extent of producer noncompliance and the level of adoption of conservation practices depend on the size of the government payment to the producer, the costs associated with the adoption of conservation practices, and the level of government oversight and enforcement.

"The share of producers in noncompliance is shown to increase with the costs of adopting conservation practices," he says. "Noncompliance falls with an increase in either audit frequency or size of farm program payment, or a combination of the two."

Giannakas says noncompliance can be completely deterred if the expected penalty exceeds the costs associated with program adoption.

"In addition to identifying the economic determinants of noncompliance, the results of this research provide insights on the likely effect of the latest Farm Bill on conservation compliance," he says. "The positive relationship between producer compliance and the size of the farm program payments suggests that the increase in government support can be expected to reduce noncompliance and increase the adoption of conservation practices."