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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