Abstract:
Cover cropping has the potential to improve resilience of agriculture to climate-change-induced extreme weather events. However, rigorous quantitative evidence on the resilience effect of cover crops is still lacking. In addition, the interaction of farm safety-net policies -- such as crop insurance -- on the use of "climate-smart" practices like cover crops is not well-understood. This talk will discuss recent research work investigating the resilience effects of cover crop use in the US Midwest and the potential behavioral impact of crop insurance participation on uptake of cover crops.
Bio:
Roderick “Rod” M. Rejesus is a Professor and Extension Specialist in the Department of Agricultural and Resource Economics at North Carolina State University. He received his Ph.D. in Agricultural Economics from the University of Illinois at Urbana-Champaign. Dr. Rejesus has an active research and extension program that focuses on applied production economics, with special emphasis on agricultural policies related to risk management (e.g., crop insurance and other safety-net policies for farmers) and economic impact assessment of agricultural technologies. Over the last five years, he has worked on topics related to the economics of soil health and climate change.
Summary:
Climate change is increasing the incidence of extreme weather events
Agriculture is unusually vulnerable to such events, e.g. crop yields
Important to make agriculture resilient to extreme weather events
Crop crops are a climate smart practice
Plants planted between the seasons of the main cash crop
E.g. grasses, brassicas, leguminous plants planted between harvest and replanting of corn/soy
Improve soil structure, water use efficiency, chemicals in soil, reduce soil erosion, improve soil biodiversity
Stabilize and increase food production
Empirical evidence of climate resilience of cover crops is anecdotal and still too weak
Climate-induced extreme weather events influence economic outcomes: growing and planting season
Crop insurance pays farmers if they’re impacted
Using insurance payments to identify these agriculture-impacting events
Empirical question: will cover crops reduce impact of extreme weather on growing/planting season?
Challenge:
Adoption of cover crops is low: ~4% of crops in 2017 US (highest prevalence on Atlantic coast)
Crop insurance rules for cover crops were unclear before 2018
Since 2018 crop insurance creates a moral hazard, protecting farmers from extreme events and reducing need for protective measures like cover crops
Crop insurance usually doesn’t take cover crops into account
USDA sets insurance premiums, private insurers deliver it
Usually based on past performance
There is now a pilot program to try lump sum insurance premium reductions for using cover crops
Analysis:
County-level dataset of weather-related crop insurance losses, cover crop adoption and weather
2005-2018
645 Mid-West counties
Dependent variable to predict:
Loss cost ratio (LCR) = loss / total liability
Loss acres ratio (LAR) = insured acres with loss / total insured acres
For prevented planting (PP) use variants focused on PP
Independent variables
Estimation: Predict causal impact of using cover crops on losses
Linear model that predicts loss metric (LCR, LAR) from the independent variable + space fixed effects
Challenging to control for time-variant effects such as government/university outreach efforts
Using external-IV-free approaches to partially control for this
Result:
Cover crops consistently reduce impact of extreme events, especially moisture events
Crop losses and prevented planting
Scale: 1% increase in cover crop adoption ~$16m reduction in crop losses, ~$38m in prevented planting losses
Observation: longer use of cover crops is more effective at reducing loss
Estimation: Quantify moral hazard of using crop insurance on adoption of cover crops
Predict proportion of cash crops planted with cover crops based on crop insurance participation
Based on similar independent variables
Result: impact of insurance on cover crop adoption is negative (it is a moral hazard) but small