overview

Incentive payments for natural resource conservation are a growing part of farm and conservation policy. The Environmental Quality Incentives Program (EQIP) provides technical, financial, and educational assistance for a wide range of agri-environmental activities. EQIP is attractive to producers because of the program's flexibility in addressing natural resource concerns, while maintaining land in productive agricultural use. EQIP applications have far exceeded available funding. The increasing concern about environmental impacts of working farm land, combined with high demand for EQIP funding and the fact that financial support under EQIP is not constrained by WTO rules, may increase EQIP funds available.

EQIP's principal objective, as enacted in the 1996 Farm Act, is to achieve the greatest possible environmental benefits per dollar of program expenditure. The program relies on a bidding framework whereby farmers propose a cost-share level for the practices they intend to undertake as part of a conservation plan. Environmental targeting is accomplished by assisting farmers to implement a conservation plan to address the identified priority resource concerns, explaining what changes in farming practices are expected. A conservation plan may include a combination of structural, vegetative, and land management practices.

EQIP consolidates and better targets the functions of the Agricultural Conservation Program (ACP), the Water Quality Incentives Program (WQIP), the Great Plains Conservation Program (GPCP), and the Colorado River Basin Salinity Control Program. EQIP's status as USDA's primary conservation program providing support on working farm land, along with the choice of among some 250 eligible conservation practices, offers a unique opportunity for better understanding what conservation practices are being implemented, how producers' conservation needs vary regionally, and the costs of implementing these practices. The data presented here provide:

•   An overview of what conservation practices are being funded,
•   Preliminary estimates of unit costs for the most commonly contracted conservation practices and,
•   A comparison of unit costs for different contract sizes to determine the extent to which   economies of scale exist practice by practice.

All results are presented at the national level, by ERS Farm Resource Regions, and for ERS Farm Production Regions. A state-by-state breakdown of the allocation of EQIP funds is also provided.

feature

EQIP: Conserving While Farming—Applications to participate in the program have exceeded annual funding, but some participants have opted to cancel out entirely or withdraw some of the practices specified in their contracts. This could have implications for program design and funding, Agricultural Outlook (9/01).

recommended readings

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. Recognizing the dearth of data concerning the installation of conservation practices on U.S. farms, ERS has 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.

media and naming convention

The 10 table files in the EQIP summary database can be downloaded in either text (Tab delimited) and Excel spreadsheet formats.

File names are listed and described below:

EQIP_FUNDS_NAT Excel spreadsheet        Tab-delimited text file
EQIP_FUNDS_STATE Excel spreadsheet     Tab-delimited text file
EQIP_FUNDS_ERS Excel spreadsheet        Tab-delimited text file
EQIP_FUNDS_FPR Excel spreadsheet        Tab-delimited text file

These files provide data for all EQIP funds allocated during FY1997-FY2000, by conservation practice, at the national, State, ERS Farm Resource Region, and Farm Production Region levels.

UNIT_COST_NAT Excel spreadsheet         Tab-delimited text file
UNIT_COST_ERS Excel spreadsheet         Tab-delimited text file
UNIT_COST_FPR Excel spreadsheet         Tab-delimited text file

For some conservation practices (those most commonly implemented under EQIP), cost data were computed on a per-unit basis. Obtaining these data required tracking mistaken entries in the database. Given the database's large size, the unit costs were computed for only 33 conservation practices out of approximately 250 eligible practices. These files contain the mean unit cost (along with its standard error) for a practice contracted under EQIP, the median of the unit cost, and the number of contracted practices used in obtaining the mean.

SCALE_NAT Excel spreadsheet                 Tab-delimited text file
SCALE_ERS Excel spreadsheet                 Tab-delimited text file
SCALE_FPR Excel spreadsheet                 Tab-delimited text file

The last set of files illustrates, for the 33 conservation practices for which unit costs were calculated, how the unit cost for a conservation practice changes as the size of the contract increases. The data include the median number of units approved for a conservation practice, and the mean unit cost for the contracts below and those above the median units approved. Making this distinction highlights whether larger contracted practices have a lower unit cost due to economies of scale.

For the files highlighting the economies of scale, only those practices measured in acres or feet among the 33 selected practices were included. The excluded practices were all major structural practices (such as waste storage facilities, wells, ponds, etc.). The excluded practices are reported in terms of the number of structures involved, which does not capture the size of the practice. Furthermore, most EQIP contracts include only one unit of these structural practices leading to only a few data points to be used for estimating the unit cost for projects above the usual one unit.

Some of the 33 practices are land management practices, for which incentive payments are provided, such as:

• Brush management
• Conservation crop rotation
• Irrigation water management
• Nutrient management
• Pest management
• Residue management
• Waste utilization

In all files, the units are provided alongside the variable names at the top of the column. Where different practices are measured in different units, no single unit can be defined at the top of the column. In that case, the physical units (acres, feet, etc.) used to measure a conservation practice are provided in the column NRCS_UNIT.

Excel files include a description of the variables as a pop-up window when the mouse cursor engages the variable name.

data sources and assumptions made in computing the unit costs

All data in the files are derived from Record04 of the FSA EQIP database detailing approved contracts. The time period covered in all cases is FY1997-FY2000.

Apparently there were misunderstandings on the convention adopted for reporting the number of units approved for a conservation practice in EQIP contracts in this database. The computerized database input convention requires that the number of units approved be multiplied by 10 (one implicit decimal place). For example, 10.2 acres should be entered as 102 in the database. However, in many cases, inordinately high unit costs are obtained (obtained by dividing the total cost of completion for a conservation practice by the number of units approved), arising from the fact that the number of units approved was not entered with the implicit decimal place. To correct for this upward bias in the unit costs, a range was established for the unit cost of each practice. For sample points whose unit cost was beyond this range, the assumption was made that the units had been reported without multiplying by 10 and the amount approved was adjusted accordingly by a factor of 10.

The acceptable range for unit costs was derived from a sample of State NRCS field technical guides on the Internet detailing the average costs of conservation practices. The States used to derive the range were Alabama, Maine, Missouri, Montana, Ohio, North Dakota, Oklahoma, Virginia, and Wyoming. The edit criteria adopted were:

•   Establish a cutoff point at 1.5 times the midpoint of the range.
•   Drop all points falling between 1.5 and 2 times the midpoint.
•   Rescale by a factor of 10 all points above 2 times the midpoint (but less than 15 times the maximum unit cost encountered).

Visual inspection of the distribution and the cutoff points indicated that the method was effective.

For the regionally disaggregated unit-cost files, some of the unit costs are based on relatively few data points. The standard error of the mean is a useful indicator of the reliability of the estimate.

The unit costs are calculated by inferring the total cost of the practice based on the program payment made and what cost-share was requested. The program allows for 75 percent cost-sharing, but the maximum rate established by the either the State (for Statewide resource concerns) or locality (for conservation priority areas) is often less than the maximum. Also, in the competitive bid process, some producers will offer to take less than the maximum cost-share to improve their ranking.

The EQIP program allows incentive payments for a maximum of 3 years, but requires the practice to be implemented for the term of the contract. The unit cost presented here may be biased upwards for these practices.

Land management practices are often cost-effective and producers will offer to add them to the contract at no cost to improve their ranking. To avoid biasing the unit cost data, these offers were excluded from the calculation.

glossary

The National Handbook of Conservation Practices provides definitions and information on the EQIP practices. Go to "Alphabetical Listing" in the document.

updates

This data set will be updated to include FY 2001 data in November or December 2002.

ERS produces a range of data products available in different formats, including online databases, spreadsheets, and web files. All data products online are available at no charge.

for more information, contact: Andrea Cattaneo
web administration: webadmin@ers.usda.gov
page updated: September 26, 2003