Institutional Development for Agricultural Heritage Conservation
Agricultural Conservation: A Farmer’s Risk Management Tool
Transcript of Agricultural Conservation: A Farmer’s Risk Management Tool
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Agricultural Conservation: A Farmer’s Risk Management Tool
August 2015
Agricultural producers mitigate risks of doing business in various ways by utilizing private
sector risk management options and enrolling in various federal subsidy programs. Private risk
management techniques include hedging, vertical integration, forward contracting, private
insurance, diversifying operations, and many more. Producers also enroll in taxpayer subsidized
crop insurance, government-set price supports, shallow loss entitlement programs, and other
government interventions. With either private or federal dollars, producers also manage short-
and long-term risks, particularly those related to drought or flooding, by implementing best
management conservation practices. Soil and water conservation practices not only reduce the
risk of crop loss, but also save costs and increase revenues; these practices include conservation
tillage, crop rotation, cover crops, installation of stream buffers and terraces, and other
approved conservation practices.
Cover crop of rye in northeast Nebraska, July 2014.
However, upfront investments such as planting trees for erosion-reducing windbreaks may be
required to reap long-term benefits, leading to questions about land tenure and whether
landowners or tenants should make short- and long-term investments to conserve soil and
water. Other challenges to greater adoption of risk-reducing agricultural conservation practices
include public benefits versus on-farm costs, certain crop subsidies working at cross-purposes
with conservation practices, and the historic lack of proper oversight of conservation
accountability standards tied to the receipt of farm subsidies.
Mitigating Risk with Agricultural Conservation Practices
Numerous on- and off-farm benefits occur as a result of well-implemented agricultural
conservation practices, leading to less risk for both producers and off-farm entities such as water
utilities, communities, and various industries. Off-farm benefits of soil and water conservation
include downstream fishing benefits, reduced dredging costs, lower flood risk, less water
pollution, lower costs for removing contaminants from drinking water supplies, better
recreational activities, etc.1 Table 1 includes numerous ways that conservation practices reduce
risk and costs, increase farm revenues, and result in other on-farm benefits, including common
conservation practices that achieve each of these goals.
Windbreak as part of Conservation Reserve Program (CRP) land in northeast Nebraska, July 2014.
Note that Table 1 references “conservation tillage,” which includes the following three types of
tillage. According to Purdue University, conservation tillage is defined as the retention of at least
one-third of crop residue on the soil, meaning that if corn was previously planted on a field, at
least one-third of the corn stalks, cobs, and leaves would be left to conserve soil after harvest.2
See Appendix 1 for more information.
No-till/strip-till/vertical tillage: minimal amount of surface area is disturbed; with
strip-till, mole knives are used to till only a narrow band of soil
Ridge-till: row cultivation results in 4- to 6-inch “ridges” that are later reduced during
planting
Mulch-till: 100 percent of surface area is tilled
Water erosion in a northeast Nebraska soybean field, July 2014.
Table 1: Agricultural Conservation Practices that Reduce Farmers’ Risks and
Costs, Increase Farm Revenue, and Result in Other On-Farm Benefits
Cost-Saving or Revenue-
Enhancing On-farm Benefits
Types of Practices
Reduce costs for expensive
synthetic fertilizer,
herbicides, and pesticides;
retain soil nutrients to
reduce input costs3
Integrated pest management reduces insecticide costs
Cover crops retain soil nutrients and reduce fertilizer costs4
Crop rotations and diversified plantings reduce risk of
losing entire crops to pests
Rotational grazing and integrating livestock with crop
production utilizes manure and reduces the use of synthetic
fertilizers
Efficient use of costly
resources: drought
mitigation via water
conservation
Grassed waterways and stream buffers retain moisture in
the field instead of draining into nearby streams or rivers
Minimize use of artificial tile drainage which quickens the
pace at which water leaves the field
More efficient irrigation systems and other water
conservation practices
Planting crops less prone to drought5
Efficient use of costly
resources: conserve rich
topsoil
Windbreaks reduce soil erosion
Conservation tillage reduces soil runoff and soil disruption
in certain areas such as hilly farmland
Stream buffers and grassed waterways help retain soil
stability and reduce runoff into nearby streams and rivers
Terraces on hilly land reduce soil runoff into lower areas
Higher yields and better soil
health for long-term
productivity6
Conservation tillage may reduce soil erosion and increase
farmer returns during certain growing years and in certain
areas (see Appendix 1)7
Stream buffers and retention of wetlands enhance soil
carbon and reduce soil erosion
Terraces reduce soil erosion
Crop rotation enhances soil nitrogen and carbon content,
adding nutrients to the soil and enhancing productivity
Less crop failures and loss of
income from drought,
storms, or flooding8
Healthy pollination reduces risk of crop failure
Diversified cropping systems reduce risk of losing an entire
crop to pests or other risks
Structures and practices to control wind and soil erosion
such as windbreaks
Stream buffers retain soil moisture
Contour plowing reduces the formation of gullies during
downpours and hence, reduces soil runoff
Maintenance of vegetative cover via cover cropping allows
moisture to penetrate the soil without running off into
nearby waterways
Reduced equipment, repair,
maintenance, labor, and fuel
costs
Conservation tilling (however, herbicide costs can
sometimes increase with conservation tillage practices
when chemicals are used in place of disks and plows to
eliminate weeds)9
Incorporating alfalfa into corn/soybean rotations can help build soil fertility and reduce soil erosion, northeast Nebraska, July 2014
Diversified Community Supported Agriculture (CSA) and grain farm, northeast Nebraska, July 2014
Challenges
While the benefits of conservation practices are clear, structural/implementation and adoption
challenges remain. Structural/implementation challenges include the following:
Conservation accountability standards: the government’s oversight and
monitoring of conservation accountability standards, which require farmers to conserve
highly erodible land and wetlands in exchange for farm subsidies, have historically
suffered from a lack of resources and personnel; if conservation benefits are to be
realized, monitoring and enforcement of these provisions must be improved.
Conservation standards must also be flexible to allow producers to use local knowledge
and skills to maximize conservation practices where they are most beneficial. See
Appendix 1 for more information.
Targeted, cost-effective programs: federal agricultural conservation program
dollars could be better targeted to the most cost-effective projects with the greatest
return on taxpayer investment. Currently, some taxpayer dollars cover agribusinesses’
normal costs of business, such as cleaning up livestock waste. Other programs prioritize
regional equity instead of cost-effectiveness, leaving riskier projects or those with less
public benefits to crowd out more efficient projects.
Perverse incentives: certain taxpayer subsidies work at cross-purposes with
conservation practices instead of investing in programs that deliver public benefits. For
instance, the federal crop insurance program subsidizes producers’ premium subsidies
and private insurance companies’ administrative and operating costs. This leads to a
crowding out of private sector risk management options and more risky production
practices as unnecessary risks are shifted from agribusinesses and private companies
such as Wells Fargo and John Deere Risk Protection onto taxpayers.
Diversified grain and pastured livestock operations reduce the use of synthetic fertilizers and water pollution, northeast Nebraska, July 2014
Adoption challenges include short-term gains versus long-term productivity and public benefits
versus on-farm costs:10
Short-term gains at expense of long-term productivity: unlike tenants,
landowners are more likely to have long-term productivity in mind when planning future
agricultural production. If tenants and landowners fail to agree to appropriate
conservation plans, short-term gains may come at expense of long-term soil health.11
Related is the fact that the average age of a farmer is nearly 60 years old so conservation
practices may not implemented if landowners plan to retire over the next few years.
Current crop prices can also affect long-term conservation; for instance, over the past
seven years, crop prices skyrocketed as corn ethanol mandates, drought, increased
exports, and other factors increased demand, leading to the conversion of sensitive land
into intensive cropland production to reap short-term gains. For this reason, Iowa State
University’s Extension Office separates conservation practices into nine “operational”
and nine other “permanent” categories landowners or tenants can utilize to reduce risk.12
Public benefits versus on-farm costs: certain conservation benefits such as lower
risk of water pollution and flooding may benefit downstream users such as water utilities
and communities but costs are incurred on the farm, leading to a discrepancy as to who
pays and benefits. However, information sharing, trading systems, regional partnerships
such as the Mississippi River Basin Initiative, and other innovative programs help bring
these constituencies together to mitigate risk, reduce costs, and enhance both on- and
off-farm benefits of agricultural conservation practices.
Flooded cornfield in northeast Nebraska, July 2014
“If there weren’t farm subsidies,
the landscape would be a lot more
diversified.”
- Grain and former vegetable
farmer from northeast Nebraska,
July 2014
Conclusion/Recommendations
Numerous agricultural conservation practices reduce on- and off-farm risks, enhance farm
income, and save costs, especially during years of drought, flooding, or severe storms. Farmers
are usually aware of these benefits, but more can be done to educate about new cost-saving and
best management practices proven to enhance income in other regions or countries.13 Federal
programs such as the Conservation Reserve Program
and Conservation Stewardship Program support these
types of practices, but more can be done to ensure that
they are targeted to the most cost-effective areas and
practices, are accessible to beginning farmers or
tenants who do not own land, and result in measurable
and positive outcomes for taxpayers. Eliminating
perverse incentives that spur the conversion of
environmentally sensitive lands to cropland
production also reduces farmers’ risk profiles and enhances long-term productivity.
Conservation practices and accountability standards, if implemented properly, can produce off-
farm benefits as well through lower costs of flood protection programs, environmental clean-up,
and water treatment, saving millions or even billions in taxpayer dollars.
Cornfield with hail damage in northeast Nebraska, July 2014
For more information, please contact Josh Sewell at 202-546-8500 or josh [at]taxpayer.net.
Farmplace with tornado damage in northeast Nebraska, July 2014
Appendix 1
Conservation practices and accountability standards must be tailored to local conditions and
informed by local farmers and conservation experts. As an example, conservation accountability
(conserving land in exchange for commodity and crop insurance subsidies) requires
conservation of wetlands and highly erodible land, specifically the use of no-till or conservation
tillage practices on hilly land. However, when only a small portion of a field is hilly but the entire
field is categorized as “highly erodible land,” no-till practices can be required on all acres. As a
result, some crops have lower yields since fields are more uneven. The opposite can also be true,
depending on local conditions, soil types, topography, agricultural residues left on the field after
harvest, etc., demonstrating that not all conservation plans should be one-size-fits-all.
Soybean field tilled to the left of the arrow and no-tilled to the right of the arrow, northeast Nebraska, July 2014
Soybean field tilled past the darker line in the middle of the picture and no-tilled in the foreground of the picture (where crops are more uneven and shorter), northeast Nebraska, July 2014
1 http://www.fao.org/docrep/004/y2781e/y2781e03.htm#TopOfPage 2 http://www.ctic.purdue.edu/media/pdf/TillageDefinitions.pdf 3 http://www.ers.usda.gov/ersDownloadHandler.ashx?file=/media/913013/aer792h_002.pdf 4 http://www.sare.org/Learning-Center/Books/Managing-Cover-Crops-Profitably-3rd-Edition 5 http://www.fao.org/fileadmin/templates/tc/tce/pdf/Grenada_draft_final_report_May_2008.pdf 6 http://www.rma.usda.gov/pubs/rme/covercrops2.pdf 7 http://www.fao.org/docrep/004/y2781e/y2781e04.htm#TopOfPage 8 http://www.fao.org/fileadmin/templates/tc/tce/pdf/Grenada_draft_final_report_May_2008.pdf 9 http://edis.ifas.ufl.edu/ae486 10 http://www.fao.org/docrep/004/y2781e/y2781e03.htm#TopOfPage 11 http://foodandagpolicy.org/strategy/provide-risk-management-tools-producers 12 http://www.extension.iastate.edu/agdm/crops/html/a1-41.html 13 http://www.fao.org/docrep/004/y2781e/y2781e05.htm
Too much agricultural residue (see righthand side of picture) – corn stalks, in this example - can inhibit plant growth, northeast Nebraska, July 2014