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Crop Insurance, Disaster Payments and Land Use Change: The Effect of Sodsaver on Incentives for Grassland Conversion

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  • Claassen, Roger
  • Cooper, Joseph C.
  • Carriazo, Fernando

Abstract

Subsidized crop insurance may encourage conversion of native grassland to cropland. The Sodsaver provision of the 2008 farm bill could deny crop insurance on converted land in the Prairie Pothole states for 5 years. Supplemental Revenue Assistance payments, which are linked to crop insurance purchases, could also be withheld. Using representative farms, we estimate that Sodsaver would reduce expected crop revenue by up to 8% and expected net return by up to 20%, while increasing the standard deviation of revenue by as much as 6% of market revenue. Analysis based on elasticities from the literature suggests that Sodsaver would reduce grassland conversion by 9% or less.

Suggested Citation

  • Claassen, Roger & Cooper, Joseph C. & Carriazo, Fernando, 2011. "Crop Insurance, Disaster Payments and Land Use Change: The Effect of Sodsaver on Incentives for Grassland Conversion," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 43(2), pages 1-17, May.
    • Handle: RePEc:ags:joaaec:104623
    DOI: 10.22004/ag.econ.104623
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    Cited by:

    1. Gaurav Arora & Peter T. Wolter & Hongli Feng & David A. Hennessy, 2016. "Role of Ethanol Plants in Dakotas Land Use Change: Incorporating Flexible Trends in the Difference-in-Difference Framework with Remotely-Sensed Data," Center for Agricultural and Rural Development (CARD) Publications 16-wp564, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Wang, Tong & Luri, Moses & Janssen, Larry & Hennessy, David & Feng, Hongli & Wimberly, Michael & Arora, Gaurav, 2016. "Farmers’ Rankings of the Determinants of Land Use Decisions at the Margins of the Corn Belt," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235109, Agricultural and Applied Economics Association.
    3. Ifft, Jennifer & Jodlowski, Margaret, 2018. "Federal crop insurance participation and adoption of sustainable production practices by US corn farms," 166th Seminar, August 30-31, 2018, Galway, West of Ireland 276196, European Association of Agricultural Economists.
    4. Nagler, Amy M. & Menkhaus, Dale J. & Bastian, Christopher T. & Ehmke, Mariah D. & Coatney, Kalyn T., 2013. "Subsidy Incidence in Factor Markets: An Experimental Approach," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 45(1), pages 17-33, February.
    5. Claassen, Roger & Bowman, Maria & Breneman, Vince & Wade, Tara & Williams, Ryan & Fooks, Jacob & Hansen, LeRoy & Iovanna, Rich & Loesch, Chuck, 2017. "Conservation Compliance: How Farmer Incentives Are Changing in the Crop Insurance Era," Economic Research Report 261814, United States Department of Agriculture, Economic Research Service.
    6. Wang, Tong & Luri, Moses & Janssen, Larry & Hennessy, David A. & Feng, Hongli & Wimberly, Michael C. & Arora, Gaurav, 2017. "Determinants of Motives for Land Use Decisions at the Margins of the Corn Belt," Ecological Economics, Elsevier, vol. 134(C), pages 227-237.
    7. Miao, Ruiqing & Hennessy, David A. & FENG, HONGLI, 2013. "Native Grassland Conversion: the Roles of Risk Intervention and Switching Costs," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149865, Agricultural and Applied Economics Association.
    8. Arora, Gaurav & Wolter, Peter T. & Hennessy, David A. & Feng, Hongli, 2016. "Land Use Change and Policy in Iowa’s Loess Hills," Sustainable Agriculture Research, Canadian Center of Science and Education, vol. 5(4).
    9. Arora, Gaurav & Hennessy, David A. & Feng, Hongli & Wolter, Peter T., 2016. "Strategic Grasslands Conversions and Conservation Easement Acquisitions in the Dakotas: Analysis using Remotely Sensed Data," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236016, Agricultural and Applied Economics Association.
    10. Miao, Ruiqing & Khanna, Madhu, 2017. "Costs of meeting a cellulosic biofuel mandate with perennial energy crops: Implications for policy," Energy Economics, Elsevier, vol. 64(C), pages 321-334.
    11. Miao, Ruiqing & Khanna, Madhu, 2013. "Crop Insurance for Energy Grasses," 2013 AAEA: Crop Insurance and the Farm Bill Symposium 156936, Agricultural and Applied Economics Association.
    12. Wang, Tong & Jin, Hailong & Kreuter, Urs & Teague, Richard, 2021. "Expanding grass-based agriculture on marginal land in the U.S. Great Plains: The role of management intensive grazing," Land Use Policy, Elsevier, vol. 104(C).
    13. Ifft, Jennifer & Jodlowski, Margaret, 2018. "Federal crop insurance participation and adoption of sustainable production practices by U.S. farms," SCC-76 Meeting, 2018, April 5-7, Kansas City, Missouri 276148, SCC-76: Economics and Management of Risk in Agriculture and Natural Resources.
    14. Jayalath, Tharaka A. & Grala, Robert K. & Grado, Stephen C. & Evans, David L., 2021. "Increasing provision of ecosystem services through participation in a conservation program," Ecosystem Services, Elsevier, vol. 50(C).
    15. Woodard, Joshua D. & Chiu Verteramo, Leslie & Miller, Alyssa P., 2015. "Adaptation of U.S. Agricultural Production to Drought and Climate Change," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205903, Agricultural and Applied Economics Association.
    16. Ruiqing Miao & David A. Hennessy & Hongli Feng, 2014. "Sodbusting, Crop Insurance, and Sunk Conversion Costs," Land Economics, University of Wisconsin Press, vol. 90(4), pages 601-622.

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    More about this item

    Keywords

    Agricultural and Food Policy; Production Economics; Risk and Uncertainty;
    All these keywords.

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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