Cover crops help mitigate farmer losses

A North Carolina State University study suggests that cover crops – or crops grown in between cash-crop seasons – can help keep Midwestern soil drier and healthier, thereby preventing losses incurred when farmers can’t plant cash crops because of flooding or excessive soil moisture.

In a study that examined county-level cover-crop planting, crop insurance data and weather measures in 12 states in the U.S. corn belt from 2005 to 2016, researchers found that higher cover-crop adoption led to lower levels of crop insurance losses due to prevented planting, possibly because cover crops helped the soil handle excessive moisture in the spring.

“Our study suggests that counties with higher cover-crop adoption rates tend to have smaller prevented-planting losses,” said Roderick M. Rejesus, professor and extension specialist in the Department of Agricultural and Resource Economics at NC State and corresponding author of a paper describing the study. “Our results are consistent with the notion that planting cover crops can help control excess water in the soil through improved transpiration and better water infiltration. In turn, improved soil conditions help reduce the likelihood of farmers being prevented from planting their cash crops.

“We also find evidence that longer term use of cover crops allows for more accumulation of soil health benefits over time and results in larger reductions in prevented-planting risk in the long term.”

The effect was not trivial.

“A 1% increase in cover-crop adoption translated to nearly $40 million in reduced prevented-planting-related indemnities,” he said.

In the United States, insured farmers can be compensated if they are prevented from planting due to naturally occurring, insurable causes of loss – like excessive moisture. In response to major Midwestern flooding events, the Federal Crop Insurance Reform Act of 1994 expanded the scope of the U.S. crop insurance program to cover prevented-planting losses as a basic component of crop insurance policies. 

Prevented-planting coverage is now widely available for most crops under the federal crop insurance program. This coverage compensates farmers for the pre-planting costs incurred up to the point of not being able to plant the crop. 

Some farmers use winter cereals like wheat or rye to establish plants that will use water and will dry surface soils while providing an adequate seedbed for the desired cash crop, such as corn or soybeans. About 4% of farmers utilize cover crops nationally, Rejesus said.

“Farmers may not see all the benefits of using cover crops because of the initial focus on the costs of planting and then removing them, but this study may provide some more evidence of their overall benefits to their farming operations,” Rejesus said.
    
The paper appears in the American Journal of Agricultural Economics. Former NC State Ph.D. student Sunjae Won, who is now at Auburn University, is the paper’s first author. Barry K.Goodwin, William Neal Reynolds Distinguished Professor of Agricultural and Resource Economics, and former NC State postdoctoral researcher Serkan Aglasan (now affiliated with Mehmet Akif Ersoy University and the University of Arizona) also co-authored the paper. Support for the work was provided by the U.S. Department of Agriculture through NIFA Hatch Project No. NC02696, NIFA AFRI Project No 2019-68012-29818, and NRCS Grant/Award No. 2021-1033/NR213A750013G022

- kulikowski -

Note to editors: An abstract of the paper follows.

“Understanding the effect of cover crop use on prevented planting losses”

Authors: Sunjae Won, Roderick Rejesus, Barry Goodwin and Serkan Aglasan

Published: Feb. 26, 2023 in American Journal of Agricultural Economics

DOI: 10.1111/ajae.12396

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. Using a novel data set that combines satellite-based cover crop information and county-level crop insurance data, we examine the impact of planting cover crops on prevented-planting-related losses that are typically caused by heavy rainfall events. The US federal crop insurance program offers “prevented planting” coverage, which pays indemnities if insured growers are unable to plant their crop due to adverse weather. Linear fixed effects models, instrument-based estimation methods, long-difference models, and a number of other robustness checks are utilized in the empirical analysis to achieve the study objective. Our findings suggest that counties with higher cover crop adoption rates tend to have lower levels of crop insurance losses due to prevented planting. The resulting reduction in prevented planting risk also becomes larger with longer term, multiyear cover crop use. These results support the notion that cover crops improve soil conditions such that the likelihood and magnitude of prevented planting losses decrease. We posit that the ability of cover crops to handle excess moisture (i.e., through better water absorption and improved water infiltration in the soil) is the main factor in its ability to reduce prevented planting losses in the US Midwest.