Academic journal article Journal of Agricultural and Resource Economics

An Ex Post Evaluation of the Conservation Reserve, Federal Crop Insurance, and Other Government Programs: Program Participation and Soil Erosion

Academic journal article Journal of Agricultural and Resource Economics

An Ex Post Evaluation of the Conservation Reserve, Federal Crop Insurance, and Other Government Programs: Program Participation and Soil Erosion

Article excerpt

Recent research has questioned the extent to which government policies, including conservation and risk management programs, have influenced environmental indicators. The impacts of income-supporting and risk management programs on soil erosion are considered. An econometric model of the determinants of soil erosion, program participation, conservation effort, and input usage is estimated. While the Conservation Reserve Program has reduced erosion an average of 1.02 tons per acre from 1982 to 1992, approximately half of this reduction has been offset by increased erosion resulting from government programs other than federally subsidized crop insurance.

Key words: Conservation Reserve Program, farm policy, soil erosion

Introduction

The Conservation Reserve Program (CRP) was established under Title XII of the Food Security Act of 1985 as a voluntary, long-term cropland retirement program. Participants receive an annual rental payment plus 50% of the cost of planting an eligible cover crop in exchange for removing highly erodible cropland from production for 10 years. The 1985 law had a goal of enrolling 40-45 million acres by the end of the 1990 crop year, of which 12.5% was to be planted in trees. While these goals were not met, nearly 34 million acres were enrolled in the CRP by the end of 1990. The primary objective of the program was to reduce soil erosion, but secondary objectives included protecting agricultural productivity, reducing sedimentation, improving water quality and wildlife habitat, curbing surplus commodity production, and providing income support to farmers.

Federal crop insurance and disaster relief programs have a much longer history. A systematic federal crop insurance program was first introduced under the provisions of the 1938 Crop Insurance Act. From the outset, concerns were expressed about the potential land-use effects of the legislation, which initially provided insurance for only a limited number of commodities. A1937 Christian Science Monitor editorial, for example, raised the following rhetorical question:

Will the [crop insurance] program become in effect an underwriting of high risk farming areas which in fact ought to be retired from farming and put to grazing, forests, and other uses...? (quoted in Kramer, p. 184).

Under the provisions of the 1980 Federal Crop Insurance Act and subsequent legislation, beginning in 1983, the federal crop insurance program was substantially expanded to cover many more crops in most geographic regions of the United States. Thus the potential for the federal crop insurance program to have an impact on land-use decisions and environmental indicators increased over approximately the same time period in which the U.S. government also introduced and expanded the Conservation Reserve Program.

The federal crop insurance program has undergone significant changes in recent years. In 1994, the Federal Crop Insurance Reform Act brought about major changes to the legislation, including a brief period of mandatory participation in the programs (at least in order to be eligible for other program benefits). The 1994 Act mandated a pilot program to develop cost of production coverage, which, along with innovations by the private insurance sector, eventually led to the development of a number of crop revenue insurance products. These revenue insurance products have had a major impact on insurance participation, now accounting for the largest share of overall crop liability.

Another major change to crop insurance programs was incorporated into the 2000 Agricultural Risk Protection Act (ARPA). This Act substantially increased premium subsidies, and thus provided further incentives for participation. ARPA brought about a number of other important changes to insurance programs, including expanded incentives for research and development.1

As will be made clear below, our analysis is focused on the period of time in which the Conservation Reserve Program was introduced (1982-1992, with CRP beginning in 1985). …

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