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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(02), May.
  • Handle: RePEc:ags:joaaec:104623
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    Citations

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    Cited by:

    1. 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, Southern Agricultural Economics Association, vol. 45(01), February.
    2. 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.
    3. repec:eee:eneeco:v:64:y:2017:i:c:p:321-334 is not listed on IDEAS
    4. 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.
    5. Gaurav Arora & Peter T. Wolter & David A. Hennessy & Hongli Feng, 2015. "Land Use Change and Policy in Iowa's Loess Hills," Center for Agricultural and Rural Development (CARD) Publications 15-wp558, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    6. 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;Western Agricultural Economics Association.
    7. 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.
    8. 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, 2016, Boston, Massachusetts 235109, Agricultural and Applied Economics Association.
    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, 2016, Boston, Massachusetts 236016, Agricultural and Applied Economics Association.
    10. Miao, Ruiqing & Khanna, Madhu, 2013. "Crop Insurance for Energy Grasses," 2013 AAEA: Crop Insurance and the Farm Bill Symposium, October 8-9, Louisville, KY 156936, Agricultural and Applied Economics Association.
    11. 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.

    More about this item

    Keywords

    bootstrap; crop insurance; grassland; joint densities; Sodsaver; Supplemental Revenue Assistance; Agricultural and Food Policy; Production Economics; Risk and Uncertainty; Q2;

    JEL classification:

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

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