Reward the best and motivate the rest. That was the motto former Secretary of Agriculture Ann Veneman coined for the Conservation Security Program, a new USDA green payments program that is tied to farmer performance.

But, a new study suggests that policy-makers need to put more “green” in the pockets of farmers if Congress wants more producers to adopt the practices that reduce the amount of nitrogen and phosphorous reaching the Chesapeake Bay.

That’s according to a team of farmers, scientists and resource managers funded in part by the Maryland Center for Agro-Ecology to survey farmers and assess the program.

The team’s report, “Assessing and Developing the Opportunities for Green Payments Programs for Maryland’s Farmers,” is available at www.agroecol.umd.edu.

The report calls for better tools to assess the environmental performance of farmers and the designation of the entire Bay watershed as a “national priority enrollment area” if the program is not made available to all farmers nationally.

At the urging of Sen. Tom Harkin, D-IA, Congress created the new conservation program in 2002 to link some federal stewardship payments to indices of environmental performance, rather than simply reimbursing farmers and ranchers for the costs of conservation practices.

Under the CSP, farmers can receive up to $20,000 a year if they meet minimum thresholds for soil and water quality on part of their farm, and up to $35,000 a year if they meet these standards for their whole farm and the farmer addresses one more environmental challenge—such as providing habitat for wildlife.

Farmers who address all of the environmental challenges on their farms—what U.S. Department of Agriculture calls “resource concerns”–can collect as much as $45,000 a year.

Payments come in several flavors, including a “stewardship” payment that a farmer gets for meeting basic soil and water quality standards. Once farmers pass this basic threshold, they become eligible for more lucrative “enhancement” payments for the adoption of certain land management practices that go well beyond these basic standards, as well as a one-time “new practice payment” to help share the cost of such practices.

When created as part of the 2002 Farm Bill, the CSP was expected to be a national entitlement program–that is, every farmer and rancher who got a minimum score on the USDA’s environmental indices would receive a stewardship payment and be eligible for enhancement and new practice payments. If the soil and water quality thresholds and stewardship payments were set right, policy-makers reasoned, thousands of farmers who were “early adopters” of conservation practices would get a payment for past and ongoing performance. But, many more farmers would adopt basic conservation practices, such as conservation tillage, to become eligible for the stewardship payment.

But Congress quickly capped the program to divert funds to pay for disaster relief, and the USDA’s Natural Resources Conservation Service was forced to limit enrollment to farmers in select watersheds, further limiting participation in these watersheds by creating “enrollment” categories, and reducing the basic stewardship payment.

As a result, most farmers are in watersheds where the CSP is not yet available. And, the stewardship payment rate has been too low to entice many of the farmers who are eligible.

Farmers in only two Maryland watersheds–the Monocacy and the Chester/Sassafras–were able to enroll in the program in 2005. Farmers in the Choptank and Patapsco watersheds will be given the chance to enroll this year.

In general, farmers are pleased with the program. “Farmers are pleased to be finally recognized for the good conservation measures that they have undertaken over the past years, rather than only poor farming getting all the attention and dollars,” said Michael Heller, manager of the Chesapeake Bay Foundation’s Clagett Farm near Upper Marlboro and one of the report’s authors.

The authors expected farmers to say the program–which has three tiers and four payments–was too complicated. But, “none of the farmers surveyed and interviewed complained about this,” Heller said.

Farmer surveys and additional analysis told researchers what the CSP is doing right–and identified some improvements.

One potential problem, the report found, is that reliance on an index of soil quality used by the NRCS might discriminate against farms that use certain tillage systems, such as vegetable farms.

The NRCS should carefully analyze the soil index, the report suggested, and rely more upon an index of water quality, which the NRCS is now developing. The report also suggested that the NRCS require farmers to get a higher score on the agency’s soil and water quality indices if farmers are seeking the highest available stewardship payments.

Likewise, enhancement payments for practices that go well beyond the basic standards should be focused on water quality benefits, as well as be graduated to reflect increasing levels of environmental performance.

Another problem, according to the report, is that linking payments to acres and rental rates discourages small farmers from participating “because they felt the money received just was not worth the time involved.”

Because Maryland has a higher proportion of small farms than many states–the state average is 169 acres and the national average is 432 acres–the stewardship payment for small farmers was too low to invite much interest. A 160-acre pasture-based farm in the Monocacy watershed that is meeting CSP soil and water quality standards and taking steps to benefit wildlife would, for example, receive a grand total of slightly more than $200 a year, according to the report.

One way to make the program more attractive for small farmers would be to establish a “floor” for the stewardship payment of $500 for farms up to 50 acres and $1,000 for farms greater than 50 acres. By establishing such a floor, “the smaller farmers are assured that the time they put into the application process is warranted,” Heller said. The report also urged the USDA and policy-makers to consider using alternatives to rental rates when calculating payments. Another way to ease enrollment into the program is to allow farmers three years to achieve the basic soil and water quality standards required for the stewardship payment.

Finally, the report calls on policy-makers to restore the original intent of the program by making it available to all farmers, all of the time. At a minimum, Congress should make all farmers and ranchers on the Bay watershed eligible for the CSP, and should allow longer periods for enrollment.

Some policy-makers hope that green payments will help bring U.S. farm policies into compliance with a 1994 treaty that places limits on “trade-distorting” subsidies like traditional income subsidies. Last year, taxpayers spent about $22 billion subsidizing the production of the corn, soybeans, wheat, cotton, rice and other row crops.

Reducing and restructuring these subsidies will help avoid retaliatory tariffs, experts say, and may pave the way for a new trade agreement that could open overseas markets to farm exports, according to trade advocates.

In exchange for a reduction in tariffs on U.S. exports, the Bush administration has called for the gradual elimination of “trade-distorting” subsidies and a much lower cap on “counter-cyclical” subsidies that set a floor for farm prices. The 1994 treaty creates a $19.1 billion annual cap on trade-distorting or “amber box” subsidies and no cap on counter-cyclical or “blue box” subsidies. The administration has also proposed a $7.6 billion annual cap on amber box subsidies and a $5 billion cap on blue box subsidies and the gradual elimination of all amber box subsidies.

The White House has also called for proportionate reductions in EU and Asian subsidies as well. For example, under the White House proposal, the cap on Europe’s trade-distorting subsidies would fall from $88 billion to $15 billion. But, many European and Asian leaders so far are unwilling to reduce their own subsidies and protective tariffs.

A December meeting of trade negotiators in Hong Kong resulted in little progress, and trade experts say real progress must be made by late summer if this round of trade negotiations–called the Doha Round–will succeed. That’s partly because the Bush administration’s “fast-track” authority to approve trade deals will expire in mid-2007, and many observers say the narrowly divided House of Representatives is unlikely to renew the president’s deal-making powers.

Conservation payments are, for trade purposes, considered “green box” payments that are not now subject to a cap and would not likely be capped in future trade deals. That’s because green payments do not encourage the production of surplus crops that lower world prices.

Boosting conservation payments would not only help U.S. farm spending comply with existing and potential trade deals. Increasing green payments would also help the region collect a larger share of federal farm spending, studies show.

Traditional subsidy payments–which are tied to the production of select row crops–account for about half of all farm spending nationally. But, most farmers don’t grow corn, soybeans, wheat, cotton, rice and other subsidized crops. As a result, farmers in just eight states and 22 congressional districts collected about half of all farm payments during the last decade, according to USDA data released by the Environmental Working Group.

In particular, Pennsylvania, Virginia, and Maryland collected, in combination, about $1.4 billion in farm spending over the last decade–or about 1 percent of $143 billion delivered to farmers between 1995 and 2004.

Some local leaders say the expansion of programs like the CSP will help states with small and medium-size farms growing a wide variety of farm products. And because CSP green payments are tied to performance–rather than conservation practice costs–the green payments program should also improve the bottom line of cost-effective producers of environmental goods like clean water and wildlife habitat.

“The potentially most positive aspect of CSP is that it could combine conservation and income assurance programs to protect farmers and farmland while achieving conservation objectives,” said Tom Simpson, a University of Maryland soil scientist and an author of the report. “Given [World Trade Organization] pressures on commodity programs, this could be a rare opportunity to provide incentives for multiple societal benefits. Keeping farmers farming is a societal benefit.”

Nonetheless, some large subsidized farmers surveyed for the CSP report expressed mixed feelings about the notion of replacing some traditional subsidies with green payments.

“Income supports for farmers and ranchers…are very different than support for conservation,” NRCS Chief Bruce Knight told the Bay Journal. “The expectations for conservation [payments], quite frankly, are much higher, so one should not misconstrue today’s CSP for an income support program. People have to provide meaningful conservation benefits in return for the very modest assistance provided through CSP.”

But, Heller found that many farmers were willing to accept a green payment in lieu of a traditional subsidy payment if the transition occurs over time.

“Many grain farmers support this shift from commodity payments to CSP conservation payments if it is done gradually,” Heller said. “Mostly, these farmers point to WTO restrictions on trade distorting payments, which will curtail the commodity programs sometime in the future. And, many farmers are sensitive about the perception in the public that farmers are getting ‘welfare’ payments. Conservation payments are something farmers think the public will support.”