Summary 



Farmers who grow annual crops on converted wet- 

 lands, a practice popularly known as swampbust- 

 ing, will be denied all farm program benefits under 

 the Food Security Act of 1985. Denying price sup- 

 ports to operators converting wetlands can be an 

 effective sanction in some situations, but may be 

 less effective where tax breaks are the main motive 

 for conversion. Although remaining wetlands may 

 be productive if converted, high conversion costs 

 probably make most wetlands unprofitable to con- 

 vert. Further, the high social value of existing wet- 

 lands may outweigh the value of increased agri- 

 cultural production through conversion, particularly 

 in wetland areas critical for wildlife habitat. 



Extent of the problem. Agricultural conversion was 

 responsible for the loss of 12 million acres of 

 wetlands between the mid-1950's and mid-1970's. In 

 1982, some 78.4 million acres of non-Federal 

 wetlands remained. Privately owned wetlands 

 available for conversion totaled 59.5 million acres. 



Farm programs and wetlands. Of private wetlands 

 suited to conversion, 72 percent (42.9 million acres) 

 would be productive if converted to cropland. Defi- 

 ciency payments would help offset high clearing 

 and drainage costs that are the principal obstacles 

 to converting these wetlands, but may not be suffi- 

 cient to ensure longrun profitability. Only 5.1 

 million acres of remaining wetlands were judged to 

 have high or medium potential for conversion to 

 cropland in 1982. 



Income taxes. Denying price-support payments to 

 representative farms converting wetlands reduced 

 after-tax income 26 to 144 percent. Income tax 

 breaks on land improvements for extensive, high- 

 cost conversions can offset loss of price support 

 payments, especially where the owner has large 



nonfarm income to shelter from taxes. Denying 

 price supports will discourage wetland conversions ^ 

 when deficiency payments are a large part of net \ 

 farm income and either conversion costs or non- 

 farm incomes are low. 



Conversion costs. The physical process of convert- 

 ing wetlands for crop production differs across 

 regions and results in widely varying conversion 

 costs. Annual conversion costs can range from less 

 than $20 per acre in the prairie pothole region of 

 Minnesota to almost $200 per acre for North 

 Carolina pocosin wetlands. The importance of farm 

 program subsidies falls as conversion costs in- 

 crease, while the size of income tax subsidies rises 

 along with conversion costs. 



Wetland values. Wetlands provide habitat for fish 

 and wildlife, reduce floods and improve water 

 quality, and provide recreational and renewable 

 resources. Benefits from existing wetlands may 

 outweigh the social value of additional production 

 of surplus crops through conversion, at least in 

 critical wetland areas. 



Prospects. The drop in farm prices since 1981 may 

 discourage all conversions to cropland, including 

 wetland conversions. Nevertheless, prohibiting pay- ^ 

 ment of farm program subsidies to operators of f 



converted wetlands will ensure greater consistency 

 between USDA resource programs and commodity 

 support programs. Eliminating income tax deduc- 

 tions for land clearing and for soil and water con- 

 servation activities related to wetland conversion 

 would also remove incentives for conversion. 

 However, indirect motivations for conversion- 

 associated with timber harvest, removing nuisance 

 wetlands in existing fields, and lowering water 

 tables through irrigation pumping and flood-control 

 channels — will continue despite sanctions in farm 

 and tax legislation. 



