In recent years, direct payments (DPs) have provided recipients with an incentive to satisfy environmental compliance (EC) provisions. Under EC, farmers must apply approved soil conservation systems to highly erodible cropland and refrain from draining wetland to maintain eligibility for most USDA agricultural programs.

Federally subsidized crop insurance is the only large USDA program that is not currently subject to EC. If DPs are reduced or eliminated for budgetary reasons, the incentive to satisfy EC provisions would decline, particularly among farmers not receiving conservation and disaster assistance.

Could inclusion of crop insurance in EC provisions counteract this decline?

In 2010, 261,000 farms, operating on 234 million acres of cropland, received DPs and also purchased crop insurance. For these farms, making crop insurance subject to compliance sanction could help compensate for compliance incentives lost if direct payments end.

This chart is found in the ERS report, The Future of Environmental Compliance Incentives in U.S. Agriculture, EIB-94, March 2012.