Michael J. Livingston

Nitrogen in Agricultural Systems: Implications for Conservation Policy

Nitrogen is an important agricultural input that is critical for crop production. However, the introduction of large amounts of nitrogen into the environment has a number of undesirable impacts on water, terrestrial, and atmospheric resources. This report explores the use of nitrogen in U.S. agriculture and assesses changes in nutrient management by farmers that may improve nitrogen use effi ciency. It also reviews a number of policy approaches for improving nitrogen management and identifi es issues affecting their potential performance. Findings reveal that about two-thirds of U.S. cropland is not meeting three criteria for good nitrogen management. Several policy approaches, including fi nancial incentives, nitrogen management as a condition of farm program eligibility, and regulation, could induce farmers to improve their nitrogen management and reduce nitrogen losses to the environment.

Genetically Engineered Crops in the United States

More than 15 years after their first successful commercial introduction in the United States, genetically engineered (GE) seeds have been widely adopted by U.S. corn, soybean, and cotton farmers. Still, some questions persist regarding the potential benefits and risks of GE crops. The report finds that, although the pace of research and development (measured by the number of USDA-approved field tests) peaked in 2002, other measures show that biotech firms continue to develop new GE seed varieties at a rapid pace. Also, U.S. farmers continue to adopt GE seeds at a robust rate, and seed varieties with multiple (stacked) traits have increased at a very rapid rate. Insecticide use has decreased with the adoption of insect-resistant crops, and herbicide-tolerant crops have enabled the substitution of glyphosate for more toxic and persistent herbicides. However, overreliance on glyphosate and a reduction in the diversity of weed management practices have contributed to the evolution of glyphosate resistance in some weed species.

Agricultural Adaptation to a Changing Climate: Economic and Environmental Implications Vary by U.S. Region

Global climate models predict increases over time in average temperature worldwide, with significant impacts on local patterns of temperature and precipitation. The extent to which such changes present a risk to food supplies, farmer livelihoods, and rural communities depends in part on the direction, magnitude, and rate of such changes, but equally importantly on the ability of the agricultural sector to adapt to changing patterns of yield and productivity, production cost, and resource availability. Study findings suggest that, while impacts are highly sensitive to uncertain climate projections, farmers have considerable fl exibility to adapt to changes in local weather, resource conditions, and price signals by adjusting crops, rotations, and production practices. Such adaptation, using existing crop production technologies, can partially mitigate the impacts of climate change on national agricultural markets. Adaptive redistribution of production, however, may have signifi cant implications for both regional land use and environmental quality.

Optimal Storage by Crop Producers

When post-harvest marketing strategies are restricted by disallowing speculative purchases, sales out of storage becomes an irreversible decision and the dynamic marketing problem becomes analogous to the optimal exercise of a financial option. The optimal marketing strategy is to hold at low prices and to sell at high prices with a cutoff price function marking the boundary between low and high prices. A method for estimating the cut-off price function is developed and applied to Illinois soybean prices. The decision rule is demonstrated to result in substantial gains from storage. Copyright 2002, Oxford University Press.

Optimal Sequential Plantings of Corn and Soybeans Under Price Uncertainty

Optimal crop choice and fertilizer applications depend on the stochastic dynamics of commodity prices, fertilizer prices, and the agronomic effects of rotation versus monoculture. The efficient decision rule accounts for real option values associated with maintaining land disposition in an environment with highly uncertain future prices and irreversible past planting decisions. We parameterize a baseline model for a representative acre in Iowa and compare the models predictions and profits to relatively naive, shorter-horizon decision rules, and a field managed with optimal fertilizer applications conditional on corn and soybeans always being rotated. We also examine the effects of a permanently larger premium on corn prices relative to soybean prices, which has been observed in locations near recently established ethanol plants. We then compare the various decision rules to actual crop choices in a panel of over 6500 Iowa plots during 1979-2007. As compared to less forward-looking objectives, we find the agronomic benefits of rotations coupled with real option values can lead to a more inelastic response of planting decisions to both transitory and permanent price changes. Always rotating, regardless of prices, is close to optimal, but so are shorter-horizon objectives. One implication is that reduced corn monoculture and fertilizer application rates might be implemented with modest incentive payments of

Economic Determinants of Invasion and Discovery of Nonindigenous Insects

4 per acre or less.

Simulating the U.S. Impacts of Alternative Asian Soybean Rust Treatment Regimes

Introductions of nonindigenous organisms into the United States have been linked to international trade. The individual contributions of imports, immigration, and international travel, however, are poorly understood because introduction dates are unavailable. We examine relationships between economic trends and discoveries of nonindegenous insects and use these relationships to infer the timing and determinants of introductions. We find that a few variables can explain much variation in species introductions and identifications. The most significant contributor to the introduction appears to be agricultural imports. Currently available proxies for academic effort are weak determinants of the probability that introduced species are identified.

Economic Returns to Herbicide Resistance Management in the Short and Long Run: The Role of Neighbor Effects

Asian soybean rust (rust) is an emerging issue in U.S. crop production and was identified in nine states during 2004. Recent farm surveys indicate that many producers are adjusting their management practices to the possibility of a rust infestation. The economic and environmental impacts of such adjustments are not known in the medium run given these new developments. We combine 2005 data on the geographical distribution of the fungal pathogen that causes rust with 2005 information on the availability and material costs of fungicides to analyze three treatment strategies. Our results indicate a higher range of economic impacts than previous research has indicated, but are consistent with earlier findings indicating that rust infestations will likely result in reduced soybean production, reduced exports, and higher prices.

Do Refuge Requirements for Biotechnology Crops Promote Economic Efficiency? Some Evidence for Bt Cotton

A bioeconomic model is used to estimate how managing glyphosate resistance to horseweed affects short- and long-run profits in corn, soybean, and corn–soybean rotation systems. Model results found that resistance management reduces profits in the first year of implementation, but increases profits in the second and subsequent 18 yr. In all three systems, long run gains begin to outweigh short-run costs (and resistance management “pays for itself”) by the second year. Over a 20-yr horizon, the estimated annual average profit advantage from managing resistance exceeded

Preliminary Assessment of Nitrous Oxide Offsets in a Cap and Trade Program

158 ha−1 (