It has been commonly accepted that crop rotations reduce risk compared with monoculture systems. Quantifying this phenomenon requires that effects of yield stability on risk (positive or negative) arising from rotating crops be separated from other risk elements. Using an ARS–University of Nebraska series of yields for corn (Zea mays L.) and soybean [Glycine max (L.) Merr.] grown over a 14‐yr period, both in rotation and in monoculture, the impact of crop rotation on risk was isolated and estimated. Risk was defined as the failure to meet an annual per‐hectare net return target. A corn–soybean rotation had significantly less risk than monoculture practices. Diversification was found to contribute to part of this reduction while higher yields and reduced cost contributed to the remainder. This reduction in risk occurred even though the corn–soybean rotation had a higher yield variance.

The economic environment of agricultural producers has been influenced by formal U.S. agricultural policy for more than seventy years. Among the first pieces of New Deal legislation proposed by incoming President Franklin D. Roosevelt, was a farm program designed to address declines in crop prices and net farm income. Key features of the Agriculture Act of 1933 included mandatory price support for specified commodities, direct subsidy payments to farmers, and supply controls. Farm programs, once viewed as temporary and supplementary to agricultural earnings, are increasingly viewed as permanent and of major proportion. Gardner examined the relationships between U.S. farm commodity programs and U.S. farm structure, while others (see Sumner for concept, evidence, and implications) have examined farm programs and specific crops. Gardner (2002), and Weersink et al. analyzed the effects of farm program programs upon land values. These studies examined various aspects of agricultural policy including whether farm program payments have enhanced land prices and landowner wealth rather than the welfare of producers. While it would seem logical that revenueenhancing farm programs would increase land values, reliably estimating the magnitudes of farm program effects upon land values is an empirically challenging task. Both statistical and budgeting-based methodologies have been used to estimate the share of land prices generated by farm program payments. Statistically based studies are complicated by the fact that both real per acre crop receipts Saleem Shaik is post-doctoral research associate,

[1] A multiple regression model was applied to annual time series data in an attempt to quantify the influence of irrigation wells on annual streamflows of Frenchman Creek in Southwestern Nebraska where intensive well development has taken place since 1950. A strong statistical relationship was found between the logarithm of streamflow and number of wells, current and lagged annual precipitation, and two variables that are the geometric mean of precipitation and number of wells in the current year and the year before last. Estimated mean streamflow from the statistical model in 1998 is approximately one third of that in 1950. A simpler model without the interaction terms between number of wells and precipitation was estimated for the Republican River near its final entry into Kansas from Nebraska, and an even greater decline in mean annual streamflow was found. The present mean is approximately one quarter of the 1950 level.

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Thirteen cropping systems were analyzed with respect to profitability and risk for east-central Nebraska. The systems were developed from 1) a four-year rotation containing a small grain, 2) two row crop rotations, 3) three continuous cropped alternatives, and 4) combinations of continuous cropped alternatives. Three systems were developed from the four-year rotation including two alternative treatments of inorganic chemicals as well as an organic alternative. Eight years of experimental yields, historical prices, and estimated costs were combined to estimate net returns for each of the thirteen systems. Risk was analyzed as net return variability using statistical characteristics of the net return series. The stability component of rotation risk was separated from the diversification component. We found rotations to have higher average net returns than continuously cropped systems. Different chemical treatments (including organic) had little impact on profitability. Rotations had lower return variability than most continuous crops. The organic treatment did not decrease variability of returns compared to other chemical systems.