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Cover Crop Economics

Ray Massey Commercial Ag Program Crops Economist. Cover Crop Economics. Presentation Objective. I cannot give an answer of whether or not growing cover crops are a good economic decision! What I can give Discussion of valuation of benefits Discussion of costs to consider

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Cover Crop Economics

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  1. Ray Massey Commercial Ag Program Crops Economist Cover Crop Economics

  2. Presentation Objective • I cannot give an answer of whether or not growing cover crops are a good economic decision! • What I can give • Discussion of valuation of benefits • Discussion of costs to consider • A few interesting anecdotes on growing cover crops.

  3. Cover Crop Functions • reduce soil erosion, • increase water infiltration, • decrease water runoff, • conserve soil water, • increase soil organic matter, • reduce soil compaction, • reduce nitrate leaching, • supply nitrogen to subsequent crops, • suppress weeds, • attract beneficial insects, and • other functions

  4. Valuation of Benefits • How much does a ton of soil not eroded contribute to my net income? • How much does an acre-inch of rainwater saved contribute to my net income? • How much does 1000 lady bugs attracted to my field contribute to my net income? • How much does a pound of nitrogen supplied to subsequent crops contribute to my net income?

  5. Easy Incomes to Consider • Nitrogen saved or fixed from a cover crop that reduces my fertilizer bill on the next crop. • Any harvestable material such as silage or grazing. • Process: quantify the benefit and multiply it times the market price of the item.

  6. Difficult Incomes to Consider • Soil not lost eventually prevents my ground from losing crop productivity. • Increased water infiltration helps me in most years – maybe not 2009. • Increased organic matter may improve crop yields or lower input costs. • Process – • No market prices exist to use • incorporate risk analysis and discount future contributions to today

  7. Benefits that don’t affect income • Attract beneficial insects that I later kill with my insecticide. • Reduce nitrate leaching (considering leaching for leaching sake as opposed to saving N for subsequent crop) • Process: ignore or seek an incentive that makes the benefit worthwhile.

  8. Internal vs. External Benefits • An internal benefit is something that benefits the person making the decision. • Reducing soil erosion is good because it makes my land more productive and valuable. • An external benefit is something that does not directly benefit the decision maker. • Reducing soil erosion is good because it improves fish habitat and reduces municipal water treatment costs.

  9. Economic Externality • Negative Externality – when the decision maker imposes a cost on someone else • Positive Externality – when a decision maker bestows a benefit on someone else. • External benefits (reducing soil erosion) are considered negative externalities by society (pollute the stream with soil).

  10. Dealing with Externalities • Regulation – force the decision maker to manage in such a way that the cost is not imposed on society. • Subsidy – incentivize the decision maker so that he voluntarily chooses to manage in such a way that the cost is not imposed on society.

  11. USDA Environmental Quality Incentive Program (EQIP) • Practice 340: Cover Crop • USDA specifies • what cover crops to plant • The cover crop plant planting window • The cover crop growing period • Incentive: $38/acre

  12. EQIP Quick Budget Calculation • Seed - Rye Grass: 9 lb/ac * $79/cwt = $7.11/ac • Planting cost = $13.00/ac • Subtotal $20.11/ac • Burndown (needed anyway) = $0.00 • Burndown (cover crop specific) = $15.00 • The $38/acre EQIP subsidy may completely pay for the cover crop

  13. Costs to Consider • Definite costs: • Seed purchase • Planting expense • Possible costs • Fertilizer? • Herbicide burn down or disking? • Delays in planting due to cover crop? • Other?

  14. Manure slurry-enriched seeding of cover crops Tim HarriganMichigan State University

  15. Suitable for several crops Slurry No-till Slurry No-till Oil seed radish Annual rye grass Tim HarriganMichigan State University

  16. Tim HarriganMichigan State University

  17. Cover Crop and Manure Results, 2006-2007 Source: J.W. Singer, J.L. Kovar, C.A. Cambardella, M.D. Tomer and T.B. Moorman. USDA National Soil Tilth Lab.

  18. Ray Massey Commercial Ag Program Crops Economist Cover Crop Economics

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