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Soil Capital Investment and Optimal Cover Crop Choice

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  • Brown, Zachary S.
  • Chen, Le
  • Cho, Chanheung
  • Rejesus, Roderick

Abstract

Soil health investments such as cover crop adoption are widely promoted to improve long-run productivity and reduce fertilizer dependence, yet adoption remains limited due to delayed and uncertain returns.This paper develops a structural dynamic model of soil capital accumulation, nitrogen fertilizer use, and cover crop technology choice under biophysical and market uncertainty. Using data from a 35-year cotton field experiment, we estimate a yield function in which output depends on fertilizer, accumulated soil capital, and their interaction. We structurally recover soil capital and embed the estimates in a stochastic dynamic programming model with regime-switching price dynamics. The results reveal strong dynamic substitution: as soil capital increases, the marginal productivity of fertilizer declines sharply. Optimal policies exhibit threshold-type adoption patterns, with cover crops becoming profitable only beyond critic also il capital levels. Policy simulations show that targeted incentives can accelerate transitions toward soil-health-based production while improving both profitability and environmental outcomes.

Suggested Citation

  • Brown, Zachary S. & Chen, Le & Cho, Chanheung & Rejesus, Roderick, 2026. "Soil Capital Investment and Optimal Cover Crop Choice," 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri 404397, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea26:404397
    DOI: 10.22004/ag.econ.404397
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