Cover Crop Economics

Ray MasseyCommercial Ag Program Crops Economist

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.

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

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?

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.

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

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.

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.

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).

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.

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

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

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?

Manure slurry-enriched seeding of cover crops

Tim Harrigan Michigan State University

Suitable for several crops

Oil seed radish Annual rye grass

Slurry No-till Slurry No-till

Tim Harrigan Michigan State University

Tim Harrigan Michigan State University

Cover Crop and Manure Results, 2006-2007

Cover Crop?

Manure Application?#N/acre

Sidedress Nitrogen#N/acre

Corn yieldbushels/

acre

No No 151 160Yes No 151 153Yes 112 90 169No 224 90 183Yes 224 90 176Yes 336 90 173Source: J.W. Singer, J.L. Kovar, C.A. Cambardella, M.D. Tomer

and T.B. Moorman. USDA National Soil Tilth Lab.

Cover Crop Economics

Ray MasseyCommercial Ag Program Crops Economist