Roger Claassen

Least-cost management of nonpoint source pollution: source reduction versus interception strategies for controlling nitrogen loss in the Mississippi Basin

Abstract Nutrient pollution is one of the major sources of water quality impairments in the U.S. Agriculture is a major source of nutrients. Two alternative strategies for reducing nutrient loads from cropland are to reduce fertilizer application rates and to filter nutrients coming off cropland with restored wetlands. These two approaches are evaluated in the Mississippi Basin, where nutrient loadings to the Gulf of Mexico have caused a large zone of hypoxic waters. Because of the easement and restoration costs of wetlands, a fertilizer standard was found to be more cost effective than restoring wetlands for achieving a water quality goal up to a particular level of total nitrogen loss reduction. Beyond this point, wetland restorations are more cost-effective.

Uniform and Non-Uniform Second-Best Input Taxes

We investigate second-best, input-based taxes foragricultural nonpoint pollution control when marketprices are endogenous and production isheterogeneous. Theoretically, we derive the optimalforms of taxes which take account of heterogeneity(non-uniform taxes) and a tax which does not (auniform tax). Empirically, we use a multi-factor,market-equilibrium simulation model to determineoptimal tax rates and associated equity effects,particularly differences in landowner gains/lossesacross a heterogeneous region. When market prices areendogenous, second-best tax policies result inpecuniary externalities that affect existingenvironmental externalities. In particular, thepecuniary externalities amplify the effect of producerheterogeneity on determination of sub-regionaldifferences in tax rates and returns to land,particularly for the uniform policy. With endogenousprices, the uniform tax rate is considerably higherthan any of the non-uniform rates and, ironically, thenon-uniform taxes result in less dispersion oflandowner gains across sub-regions than the uniformtax.

Working Farm Participation and Acreage Enrollment in the Conservation Reserve Program

Among Conservation Reserve Program (CRP) participants, there is a distinction between farm households using the program to ease out of farming and those using the program to augment production receipts. We find evidence that factors other than crop or livestock revenue and environmental factors are associated with program participation and acreage enrollment among farmers who continue agricultural production. Program payments and farm size are positively associated with the amount of land enrolled in the CRP, and characteristics of participants in land retirement and working-lands CRP components are similar.

Estimating the Effects of Relaxing Agricultural Land Use Restrictions: Wetland Delineation in the Swampbuster Program

Wetland protection is an issue of ongoing debate. Although it is widely agreed that wetland loss to agriculture has been declining in recent decades, the role of policy remains contentious. We analyze the effect of changes in wetland delineation rules that were proposed but rejected by Congress during the 1996 farm bill debate. Our research combines detailed, site-specific information on wetlands with a broader model of the agricultural economy. Using site-specific data, we analyze the potential agricultural profitability of a representative sample of actual wetlands. We estimate wetland acreage that would have been exempted from swampbuster and Section 404 of the Clean Water Act under the proposed delineation changes, the acreage of exempted wetland that could be profitably converted to crop production, and the associated commodity price, crop acreage, and farm income effects. We find that up to 82.7 million wetland acres would be exempted under the proposed delineation changes, of which as many as 12 million acres could be profitably converted to crop production. This conversion would have a dampening effect on commodity price and farm income. We conclude that (a accurately estimating the effect of resource policy depends critically on detailed information on resource quality and (b) commodity price and farm income effects imply that all agriculture producers—not only those who could expand cropland acreage through wetland drainage—have a stake in wetland policy.

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

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.

AGRICULTURAL LAND USE CHOICE: A DISCRETE CHOICE APPROACH

A discrete choice model and site-specific data are used to analyze land use choices between crop production and pasture in the Corn Belt. The results show that conversion probabilities depend on relative returns, land quality, and government policy. In general it is found that landowners are less inclined to remove land from crop production than to convert land to crop production.

The Ethanol Decade: An Expansion of U.S. Corn Production, 2000-09

The recent 9-billion-gallon increase in corn-based ethanol production, which resulted from a combination of rising gasoline prices and a suite of Federal bioenergy policies, provides evidence of how farmers altered their land-use decisions in response to increased demand for corn. As some forecasts had suggested, corn acreage increased mostly on farms that previously specialized in soybeans. Other farms, however, offset this shift by expanding soybean production. Farm-level data reveal that the simultaneous net expansion of corn and soybean acreage resulted from a reduction in cotton acreage, a shift from uncultivated hay to cropland, and the expansion of double cropping (consecutively producing two crops of either like or unlike commodities on the same land within the same year).

Additionality in agricultural conservation payment programs

A large number of both state and federal agricultural policies are designed to pay farmers and ranchers to undertake conservation practices that have off-farm environmental benefits or long-run farm-productivity payoffs. These supported actions can include implementing a nutrient management plan, installing stream-side or field-edge buffers, adopting no-till, or retiring cropland to grass or tree cover. Payments can take the form of cost-sharing for explicit costs incurred by the farmer, specified payment amounts meant to capture the cost of transitioning to the new practices, or lost income, particularly when land is taken out of production. In fiscal year 2012, USDA spent nearly US

AGRICULTURAL CONSERVATION POLICY AT A CROSSROADS

5.5 billion through voluntary payment programs to support the adoption of conservation practices. What are taxpayers getting for their money? The answer entails, in part, knowing whether practices that receive conservation payments would have been pursued without those payments. Additionality is a measure of the extent to which conservation payments are necessary for practice adoption for those farmers who receive payments. Practices supported by payments are additional if they would not have been adopted without the payment, or, from an environmental standpoint, if the environmental benefits would not have been realized without the payment. Practices that would have been…

Agricultural Land Tenure and Carbon Offsets

U.S. agricultural conservation policy has focused on a range of potential policy instruments centered on voluntary approaches tied into Depression-era commodity programs. Entering the twenty-first century, conservation policy is at a crossroads between more coercive regulatory policies, more costly voluntary programs, and more facilitative market-oriented policies. What are the pitfalls, advantages, disadvantages, and tradeoffs along these paths?