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Crop Insurance, Disaster Payments, and Land Use Change: The Effect of Sodsaver on Incentives for Grassland Conversion

Published online by Cambridge University Press:  26 January 2015

Roger Claassen
Affiliation:
Economic Research Service, U.S. Department of Agriculture, Washington, DC
Joseph C. Cooper
Affiliation:
Economic Research Service, U.S. Department of Agriculture, Washington, DC
Fernando Carriazo
Affiliation:
Universidad de Los Andes, Bogota, Columbia
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Abstract

Subsidized crop insurance may encourage conversion of native grassland to cropland. The Sodsaver provision of the 2008 farm bill could deny crop insurance on converted land in the Prairie Pothole states for 5 years. Supplemental Revenue Assistance payments, which are linked to crop insurance purchases, could also be withheld. Using representative farms, we estimate that Sodsaver would reduce expected crop revenue by up to 8% and expected net return by up to 20%, while increasing the standard deviation of revenue by as much as 6% of market revenue. Analysis based on elasticities from the literature suggests that Sodsaver would reduce grassland conversion by 9% or less.

Type
Research Article
Copyright
Copyright © Southern Agricultural Economics Association 2011

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