The question of how insurance programs affect agricultural input use is commanding increasing attention. Previous studies disagree on the likely effects of insurance on fertilizer application rates. Whether insurance is a complement or a substitute for fertilizer depends, in part, on whether the probability of low yields is positively or negatively affected by increased fertilizer rates. This study uses field-level data measuring the response of corn yields to nitrogen fertilizer to determine if the technical relationship between yield and nitrogen fertilizer supports the hypothesis that crop insurance or revenue insurance could induce increased application rates. Our results indicate no support for this hypothesis. At all nitrogen fertilizer rates and reasonable levels of risk aversion, nitrogen fertilizer and insurance are substitutes, suggesting that those who purchase insurance are likely to decrease nitrogen fertilizer applications. Disciplines Agricultural and Resource Economics | Agricultural Economics | Economics | Insurance ABSTRACTThe question of how insurance programs affect agricultural input use is commanding increasing attention. Previous studies disagree on the likely effects of insurance on fertilizer application rates. Whether insurance is a complement or a substitute for fertilizer depends, in part, on whether the probability of low yields is positively or negatively affected by increased fertilizer rates. This study uses field-level data measuring the response of com yields to nitrogen fertilizer to determine if the technical relationship between yield and nitrogen fertilizer supports the hypothesis that crop insurance or revenue insurance could induce increased application rates. Our results indicate no support for this hypothesis. At all nitrogen fertilizer rates and reasonable levels of risk aversion, nitrogen fertilizer and insurance are substitutes, suggesting that those who purchase insurance are likely to decrease nitrogen fertilizer applications. INPUT DEMAND UNDER YIELD AND REVENUE INSURANCEThe effect of agricultural insurance on optimal per acre input levels is in dispute. The issue of how input decisions change under crop and revenue insurance schemes is attracting increased attention because of proposals to force farmers to rely more on insurance and less on direct government subsidies. For example, a group oflowa farmers and farm organizations has proposed the elimination of current commodity programs in favor of a plan that insures gross revenue. If optimal chemical use increases under insurance, as suggested by Horowitz and Lichtenberg, then it is likely that a move away from direct government payments and towards increased reliance on insurance will result in greater environmental pollution from agriculture. However, if optimal chemical use declines significantly under insurance, as concluded by Smith and Goodwin and Quiggins, Karagiannis, and Stanton, then the environment may benefit, but moral hazard issues will make the pricing of insurance difficult. 2The Horowitz ...

No abstract

The management practices farmers choose have significant effect on agricultural pollution. The authors analyze the adoption of alternative combinations of conservation practices and their impacts on fertilizer use, corn yield, and soil erosion in the Central Nebraska Basin, using a polychotomous-choice selectivity model. The results suggest that soil N testing and corn-legume rotation complement each other, but that the interaction between conservation tillage and rotation is more complicated. Th1s research was partially supported by the U.S. Environmental Protection Agency, Region VII. under C)orerati ve Agreement X007822-0 1-1. Abstract\Vbich management practices farmers adopt has a significant effect on agricultural pollution.

Growing demand for corn due to the expansion of ethanol has increased concerns that environmentally sensitive lands retired from agricultural production and enrolled into the Conservation Reserve Program (CRP) will be cropped again. Iowa produces more ethanol than any other state in the United States, and it also produces the most corn. Thus, an examination of the impacts of higher crop prices on CRP land in Iowa can give insight into what we might expect nationally in the years ahead if crop prices remain high. We construct CRP land supply curves for various corn prices and then estimate the environmental impacts of cropping CRP land through the Environmental Policy Integrated Climate (EPIC) model. EPIC provides edge-of-field estimates of soil erosion, nutrient loss, and carbon sequestration. We find that incremental impacts increase dramatically as higher corn prices bring into production more and more environmentally fragile land. Maintaining current levels of environmental quality will require substantially higher spending levels. Even allowing for the cost savings that would accrue as CRP land leaves the program, a change in targeting strategies will likely be required to ensure that the most sensitive land does not leave the program.

No abstract

No abstract

Public agencies and private enterprises increasingly desire to achieve ecosystem service outcomes in agricultural systems, but are limited by perceived conflicts between economic and ecosystem service goals and a lack of tools enabling effective operational management. Here we use Iowa-an agriculturally homogeneous state representative of the Maize Belt-to demonstrate an economic rationale for cropland diversification at the subfield scale. We used a novel computational framework that integrates disparate but publicly available data to map ∼3.3 million unique potential management polygons (9.3 Mha) and reveal subfield opportunities to increase overall field profitability. We analyzed subfield profitability for maize/soybean fields during 2010-2013-four of the most profitable years in recent history-and projected results for 2015. While cropland operating at a loss of US$ 250 ha −1 or more was negligible between 2010 and 2013 at 18 000-190 000 ha (<2% of row-crop land), the extent of highly unprofitable land increased to 2.5 Mha, or 27% of row-crop land, in the 2015 projection. Aggregation of these areas to the township level revealed 'hotspots' for potential management change in Western, Central, and Northeast Iowa. In these least profitable areas, incorporating conservation management that breaks even (e.g., planting low-input perennials), into low-yielding portions of fields could increase overall cropland profitability by 80%. This approach is applicable to the broader region and differs substantially from the status quo of 'top-down' land management for conservation by harnessing private interest to align profitability with the production of ecosystem services.

No abstract