Plastina, Alejandro; Liu, Fangge; Sawadgo, Wendiam; Miguez, Fernando E.; Carlson, Sarah; and Marcillo, Guillermo. “Annual Net Returns to Cover Crops in Iowa” (2018). Economics Working Papers: Department of Economics, Iowa State University. 18005.
Economics of Cover Crops. Presented by Alejandro Plastina and Sarah Carlson at the Soil Health Institute Webinar, April 27, 2018.
There is substantial variability in the net returns to cover crops, driven by the difference in yields obtained in fields with and without cover crops, planting and termination costs, and cost-share program payments.
General agronomic and economic recommendations for all types of cover crops in Midwestern row crop production systems should be avoided, and instead recommendations should be issued for a specific region and a specific cover crop mix.
For most farmers, cost-share payments are insufficient to cover all private costs associated with cover crop use, but are a critical incentive to support this practice.
Grazing cover crops or harvesting them for forage is likely to generate sufficient additional revenue (or cost savings in an integrated crop/livestock production system) to result in overall positive returns to cover crops.
Although partial budgets based on survey data suffer from several limitations related to the self-selection bias of survey respondents and the potential unrepresentativeness of the sample, they provide valuable information for farmers and policy makers. The calculated returns are based on field data (instead of experimental plots) from farmers that manage row crop production on acres with cover crops and on acres with no cover crops, and can be used as benchmarks for current and potential cover croppers, as well as ground-truth references for agricultural and conservation policy design.
Agronomic simulations suggest that sustained cover crop use is likely to result in soybean yield increases, and generates positive environmental externalities: reduced nitrate leaching and soil erosion.
However, additional economic incentives to scale up cover crop adoption cannot be currently justified by the potential cost savings to water treatment plants.
The results of the present study (particularly those comparing net returns across different levels of experience with cover crops), in conjunction with a lack of market valuations for actual soil health, suggest that the necessary conditions to substantially scale up the use of cover crops are currently missing.
Potential measures to improve the economic viability of cover crops without increasing government transfers to cover croppers include (1) the development of a more competitive market for cover crop seeds (offering high quality seed adapted to local conditions, at low cost); (2) promoting the use of cover crops for livestock grazing or forage; and (3) developing and promoting location-specific guidelines to facilitate the decision-making process for farmers, seed companies, and implement dealers, but particularly to minimize the yield drag on corn and soybeans, while containing planting and termination costs. An obvious but likely unsustainable alternative (due to federal and state budget constraints) to reduce the net losses derived from cover crop use is to increase the flow of public monies to adopters of the practice through cost-share payments, subsidized seed bags, discounted crop insurance premiums, tax credits, or similar incentives.
It is critical for cover crop advocates to understand that cover crops cannot be scaled up to mainstream agriculture if the practice does not at least break-even in the short term. Given the potential short term losses if cover crop management is poor, cover crop advocates should not expect farmers to massively adopt cover crops solely based on their long-term effects on soil and water quality.