By Wendiam Sawadgo and Alejandro Plastina
Farmers often use cover crops for their soil health benefits. However, the benefits of cover crops go beyond the farm, as they have been shown to reduce nutrient pollution from fields to waterways through leaching or runoff. As such, cover crops have been extensively promoted as a way to improve Iowa’s water quality. However, as of 2017, cover crops were used on only 4% of Iowa cropland (see figure 1).
Source: 2017 Census of Agriculture, USDA-NASS.
This low adoption rate is likely in part due to the high costs of implementing cover crops, which have been found to amount to $40 per acre, mostly from the added cost to plant cover crops. To help farmers partially cover this extra cost, cost-share programs from the Iowa Department of Agriculture and Land Stewardship, USDA National Resources Conservation Service, and other sources pay farmers a fixed per-acre amount to plant cover crops. The question remains—are cost-share programs effective at increasing cover crop use or would the participants of cost-share programs have planted cover crops regardless? If farmers are not planting additional acres of cover crops due to the cost-share payment, then these programs simply act as a cash transfer and do not lead to increased environmental benefits.
To test the effectiveness of cost-share programs, we use data from an Iowa State University producer survey and the 2012 Census of Agriculture. The Upper Midwest regional office of the National Agricultural Statistics Service (NASS) mailed the survey to 1,250 operators in 2017 and received 674 responses. The survey asked detailed questions on agricultural practices relating to the planting and termination of cover crops, farmers’ experiences with cover crops, and cost-share payments. The sample used in our analysis has about the same number of cover crop users and non-users in 2015 (208 vs. 199, respectively). About 40% of cover crop users received cost-share payments that averaged $26 per acre.
After accounting for factors, such as differences in past cover crop area, farm size, rented farmland, and presence of livestock or poultry, we find that cost-share recipients planted an additional 15% of their farmland to cover crops than they would have had they not received cost-share. We calculate that 54% of cost-share funded acres were additional, meaning that over half of farmland in cost-share programs funded cover crop acreage that would not have been planted without payment. This suggests that although a large chunk of spending went to acreage that would have had cover crops regardless, there was a significant amount of farmland that was planted to cover crops due to the cost-share programs. Using state data for cover crop cost-share expenditures and cover crop acreage, we estimate that cost-share programs led to 172,000 additional cover crop acres in 2015.
Lastly, we consider the costs of achieving environmental gains by estimating the cost of reducing each pound of nitrogen loss through cover cropping. We use results from a study that looks at the effectiveness of cover crops at reducing nitrogen loss in central Iowa and estimate that cover crop use helped avoid 3,078–8,405 tons of nitrogen loss in Iowa in 2015. We combine these values with the public cost-share expenditures in 2015 and our survey estimates of what farmers spent on cover crops. We find that the cost of avoiding one pound of nitrogen amounted to $1.59–$4.33, with cost-share funding paying for 32% of this cost and farmers covering the remaining 68% (figure 2a). The large farmer portion comes because almost half of the state’s cover crop acreage was self-funded, and even cost-share participants saw net annual losses of $23 per acre from using cover crops after accounting for the cost-share payments. In all, farmers were estimated to contribute $18.28 million statewide to funding cover crops and the public contributed $8.4 million through cost-share funding.
On farmland funded through cost-share, the public cost of avoiding nitrogen loss beyond what would have occurred in the absence of cost-share programs is estimated to be $1.72–$4.70 per pound of nitrogen. Overall, 29% of the state’s nitrogen loss that was avoided due to cover crops would not have occurred in the absence of cost-share programs (figure 2b).
How does this compare to other states?
Iowa has the second-largest state cost-share program for cover crops in terms of acreage enrolled, only behind Maryland. When comparing Iowa to Maryland, prior studies find that Maryland has a larger proportion of its cost-share acreage that would not use cover crops in absence of cost-share funds. However, the public cost of abating nitrogen through cover crop cost-share programs in Iowa was estimated at $1.72–$4.70 per pound of nitrogen, which was less than the reported costs in Maryland, which range from $5.80 to $8.87 per pound (Fleming 2017; Fleming et al. 2018). The cost was less in Iowa than in Maryland most likely because the average payment rate in Maryland was $45 per acre, compared to $26 per acre in Iowa. The tradeoff between program costs and the incentives to entice farmers to enroll acres in the program lies in the heart of cost-effective policy design.
Voluntary cost-share programs are likely to remain the preferred conservation policy vehicle in the United States moving forward. We find mixed results in terms of the effectiveness of cover crop cost-share programs in Iowa. Only about half of the cover crop acres enrolled in cost-share programs funded farmland that would not have had cover crops without the payment; however, the cost of reducing nutrient pollution is lower in Iowa than in other states due to its lower payment rate. In Iowa, farmers fund about 70% of the cost of cover crops through annual net-losses, while the public finances the remaining 30% through cost-share programs. Questions remain as to the best way to reduce nutrient pollution to waterways and increase the use of conservations practices like cover crops that remains sparse.
For more information, see Sawadgo, W., and A. Plastina. 2021. “Do Cost-share Programs Increase Cover Crop Use? Empirical Evidence from Iowa.” Renewable Agriculture and Food Systems, 1-9. doi:10.1017/S1742170521000132.
References
Fleming, P. 2017. “Agricultural Cost Sharing and Water Quality in the Chesapeake Bay: Estimating Indirect Effects of Environmental Payments.” American Journal of Agricultural Economics 99(5):1208–1227.
Fleming, P., E. Lichtenberg, and D.A. Newburn. 2018. “Evaluating Impacts of Agricultural Cost Sharing on Water Quality: Additionality, Crowding in, and Slippage.” Journal of Environmental Economics and Management 92:1–19.
Suggested citation:
Sawadgo, W. and A. Plastina. 2021. "Cover Crop Cost-Share Programs in Iowa: Do They Work?" Agricultural Policy Review, Spring 2021. Center for Agricultural and Rural Development, Iowa State University. Available at www.card.iastate.edu/ag_policy_review/article/?a=121.