By Tom Polansek
(Reuters) - North Dakota farmer Justin Zahradka will plant wheat this spring on 40 acres that has been off-limits for two decades, protected by a government conservation program that is shrinking as high crop prices make farmland more valuable.
The 18-year-old high school senior leased the land a year ago from a neighbor who opted not to re-enroll it in the federal Conservation Reserve Program, a scheme that pays farmers and landowners nearly $2 billion annually to leave land idle in order to protect wildlife and the environment.
After loosening up the soil with vegetables last year, he has high hopes for a good harvest. His acres are part of a total 1.7 percent rise in the number of acres of U.S. field crops that farmers are projected to plant this spring, according to Friday's annual U.S. Agriculture Department plantings survey.
U.S. farmers tapping conservation land could lift crop acres in the world's top grains producer to a record next year. The trend could ease food supply fears across the globe at the risk of disrupting wildlife including bald eagles that migrate across North Dakota.
"Obviously there isn't any more land being made," Zahradka said. "With the high commodity prices, there's an interest in gaining more land to get a greater profit."
A growing number of young farmers like Zahradka have been outbid for established cropland in the Midwest. For them, the CRP territory offers a rare chance to join the biggest agricultural boom in a generation, although the land in the conservation program is not the most productive for farming.
This year, contracts covering more than 6.5 million acres worth of CRP land will expire, the second-largest turnover in its 26-year history, according to USDA data.
In total, the amount of land in the CRP has fallen to the lowest since 1988, down 20 percent from a peak of 36.7 million acres in 2007, according to USDA data as of end-February.
While not all that land will be suitable for crops, economists say as much as half may be put back into farming for the first time in decades.
Younger farmers are driving the return, which could take several years to bear fruit as the hard, untilled soil slowly soaks up multiple layers of fertilizer and softens up for cash crops, according to growers and crop specialists.
The full impact will likely be known in about a month, when the USDA will reveal how many acres were enrolled in the latest general sign-up program, which ends Friday.
REVERSAL OF FORTUNE
Farmers will be tapping acres that were put into the conservation program 15 to 20 years ago, when a tough farm economy chased a lot of owners into the program. Many signed up eager to earn an income from their land that was more stable than farming, in which fortunes can swing with the weather.
Now, increased demand for food from countries with expanding middle classes like India and China has made the prospect of farming much more profitable. Corn prices are trading around $6.50 a bushel, compared to $3 a bushel in 1997.
Global corn use is expected to exceed production for a fourth consecutive year, according to the USDA.
As a result, the conservation program is shrinking.
The addition of new acres gives farmers "the ability to grow huge crops in the U.S.," said Hal Reed, chief operations officer for The Andersons, a U.S. grain and ethanol company.
To encourage producers to put more acres back into the program, the USDA this month increased a one-time signing bonus for those enrolling land that has been deemed among the most environmentally sensitive. The bonus now will be $150 per acre, up from $100.
The potential loss of protected acres "is concerning to a lot of various interests" including wildlife and environmental groups, said Jay Hochhalter, conservation specialist for North Dakota's Farm Service Agency, a branch of the USDA.
"It's concerning to me," he said.
In North Dakota, a key producer of wheat, corn and soybeans, farmers have contracts covering almost 840,000 acres that are expiring, more than any other state. Land under conservation in North Dakota equaled almost 5 percent of the state area planted to principal crops last year, USDA data show.
The USDA says that the program nationwide has restored more than 2 million acres of wetlands and increased populations of pheasants, quail, ducks and rare species like the sage grouse.
To produce big yields on conservation land, farmers will need to cover it with costly fertilizer after they break ground, which often takes several passes with plows and other gear.
Justin Zahradka and his dad Jeff know the challenges of preparing land that has been idle for decades. Two years ago, they bought 160 acres that had been in the conservation program for decades and spent weeks loosening the soil.
One tactic for preparing the land for grain output is growing crops like radishes and turnips, known as "earth's little drillers," because they grow down into the soil, helping replenish moisture and nutrients. That's what Justin Zahradka did last fall.
His family will keep its eyes open for more opportunities to expand into formerly protected lands, as Justin and his sister want to stay in the farming business.
"It takes quite a few acres to make things work," father Jeff Zahradka said.
Grain elevator managers and seed dealers are also hoping to benefit from the shift of acres back into farming. These business people have long criticized the conservation program for hurting local economies because land owners stopped buying seed, fertilizer and farm machinery when they enrolled acres.
"The land is coming out so I'm expecting we'll see that business in the next few years," said Danny Miller, manager of Farmers Co-Op Grain and Seed in Minnesota, which operates a grain elevator and sells inputs.
Anthony Mock, a North Dakota farmer, was in high school 20 years ago when owners were putting their land into the program because of low crop prices, making it tough for him to break into the business.
Younger farmers "never had that chance to rent land," he said.
"To me, it was a bad program to start with, with good intentions," he said. "This day and age, when our population is exploding...it's not good for the economy."
The USDA says the program has benefited farmers with payments for conserving the land.
Indeed, some landowners are sticking with the program to protect the environment or because they know their land is too poor to produce good yields.
Last year, the government accepted nearly 3 million acres into the program, although the net number of acres declined.
The decline in protected acres means bald eagles that soar over Frank Redlin's 1,200 acres of gently sloping North Dakota prairie may be forced to seek out a new route on their annual migrations. He expects to start farming some of the land after 20 years in the conservation program.
The eagles "may lose some of the food source that they like," said Redlin, a wildlife lover who struggled to decide whether to re-enroll his acres in the program.
Redlin's nephew, Eldon, farms the land and encouraged Frank to withdraw from the program to boost profits.
Eldon Redlin said using land to make money trumps protecting wildlife, such as the ducks that nest in prairie grasses on the property.
CRP contributed to a net increase of about 2 million additional ducks per year, or a 30 percent increase in duck production, since 1992 in North Dakota, South Dakota and northeastern Montana, according to the U.S. Fish and Wildlife Service.
"When it comes down to making a living or worrying about where the ducks will nest, I'm not really worrying about it," Eldon Redlin said.
(Reporting By Tom Polansek; Editing by David Gregorio)