Strip Tillage Effects on Crop Production and Soil Erosion, 2002

Report produced by Iowa Departmment of Agriculture and Land Stewardship

Greenhouse Gas and Nitrogen Fertilizer Scenarios for U.S. Agriculture and Global Biofuels, June 2011

This analysis uses the 2011 FAPRI-CARD (Food and Agricultural Policy Research Institute–Center for Agricultural and Rural Development) baseline to evaluate the impact of four alternative scenarios on U.S. and world agricultural markets, as well as on world fertilizer use and world agricultural greenhouse gas emissions. A key assumption in the 2011 baseline is that ethanol support policies disappear in 2012. The baseline also assumes that existing biofuel mandates remain in place and are binding. Two of the scenarios are adverse supply shocks, the first being a 10% increase in the price of nitrogen fertilizer in the United States, and the second, a reversion of cropland into forestland. The third scenario examines how lower energy prices would impact world agriculture. The fourth scenario reintroduces biofuel tax credits and duties. Given that the baseline excludes these policies, the fourth scenario is an attempt to understand the impact of these policies under the market conditions that prevail in early 2011. A key to understanding the results of this fourth scenario is that in the absence of tax credits and duties, the mandate drives biofuel use. Therefore, when the tax credits and duties are reintroduced, the impacts are relatively small. In general, the results show that the entire international commodity market system is remarkably robust with respect to policy changes in one country or in one sector. The policy implication is that domestic policy changes implemented by a large agricultural producer like the United States can have fairly significant impacts on the aggregate world commodity markets. A second point that emerges from the results is that the law of unintended consequences is at work in world agriculture. For example, a U.S. nitrogen tax that might presumably be motivated for environmental benefit results in an increase in world greenhouse gas emissions. A similar situation occurs in the afforestation scenario in which crop production shifts from high-yielding land in the United States to low-yielding land and probably native vegetation in the rest of the world, resulting in an unintended increase in global greenhouse gas emissions.

Native Grassland Conversion: the Roles of Risk Intervention and Switching Costs

We develop a real option model of the irreversible native grassland conversion decision. Upon plowing, native grassland can be followed by either a permanent cropping system or a system in which land is put under cropping (respectively, grazing) whenever crop prices are high (respectively, low). Switching costs are incurred upon alternating between cropping and grazing. The effects of risk intervention in the form of crop insurance subsidies are studied, as are the effects of cropping innovations that reduce switching costs. We calibrate the model by using cropping return data for South Central North Dakota from 1989 to 2012. Simulations show that a risk intervention that offsets 20% of a cropping return shortfall increases the sod-busting cost threshold, below which native sod will be busted, by 41% (or $43.7/acre). Omitting cropping return risk across time underestimates this sod-busting cost threshold by 23% (or $24.35/acre), and hence underestimates the native sod conversion caused by crop production.

1102-001 Twelve Mile Lake Final Report

Twelve-Mile Lake is an 800-acre man-made lake in central Union County. The watershed has 13,964 land acres that are used by farmers for row crops and pasture. This lake is used as a water supply source for the City of Creston and the Southern Iowa Rural Water Association. In total approximately 40,000 people are affected by this project. Developed over 20 years ago, the lake and fishery was renovated and restocked and much of the shoreline was riprapped about six years ago. During its history, extensive watershed efforts have been ongoing. However, as farmland for cropland has become more valuable and demand has increased, hilly land once used for dairy farming, grazing, and CRP has been put into row crop production. Consequently, sediment loss has become an increasing issue for farmers, conservation professionals, and the Creston Waterworks Department, which owns the water treatment facility at the lake. In 2011, the Creston Water Board received a WIRB grant to implement a sedimentation structure at the north end of the main channel flowing into the lake. The WIRB funds were used for land acquisition, with the IDNR actually constructing the facility. This report depicts work performed as part of the WIRB project.

1119-008 Lake Icaria Final Report

Lake Icaria is a 660 acre man-made lake in rural Adams County. Lake Icaria is a popular recreational attraction providing ample fishing, boating, and swimming opportunities. Constructed in 1977 for water supply, Lake lcaria continues to provide reliable drinking water to 1,900 households in Adams and Montgomery counties. No stranger to the water quality world, Lake Icaria was the primary lake in the 3Lakes Water Quality Project(1996-2004), an eight year water quality effort which came to be known as one oflowa's first great water quality successes. At time of construction the Lake Icaria watershed was primarily grass. A shift towards maximizing crop production in the 1980's brought about the end of dairy farms and a concern for sediment loss and how that would affect water quality. This change in land use set the stage for the first water quality project at Lake Icaria. Since the conclusion of the 3Lakes Water Quality Project in 2004land use in the watershed has made yet another monumental shift towards crop production. Nearly 2,000 acres ofland that was once in the conservation reserve program is now being planted to a crop. This change in land use has once again brought about serious concerns for the quality of water being provided by Lake Icaria.

08005-002 Silver Lake Watershed Final Report

Silver Lake is located in an 18,053-acre watershed. The watershed is intensively farmed with almost all of the wetlands being previously drained or degraded over the last 50 years. Silver Lake is listed on the State of Iowa’s impaired water bodies list due to sediment and high nutrient level. Silver Lake is also known be in the bottom 25 percentile of Iowa’s lakes due Secchi disk readings and Chlorophyll a level. Farming in the watershed is the principle concern and cause for many of the problems occurring in Silver Lake currently with 78% of the watershed being intensively farmed. There are two major drainage ditches that have been used to drain the major wetlands and sloughs that, at one time, filtered the water and slowed it down before it reached Silver Lake. With these two major drainage ditches, water is able to reach the lake much faster and unfiltered than it once did historically. The loss of 255 restorable wetland basins to row crop production has caused serious problems in Silver Lake. These wetland basins once slowed and filtered water as it moved through the watershed. With their loss over the last 50 years that traditional drainage no longer occurs. We propose to create a Wetland Reserve Program incentive project to make WRP a more attractive option to landowners within the watershed. The incentive will be based on the amount of sediment delivery reduction to the lake, therefore paying a greater payment for a greater benefit to the lake. The expected result of this project is the restoration of over 250 acres of wetland basins with an associated 650 acres of upland buffers. The benefit for these wetlands and buffers would be reduced sediment, reduced nutrients, and slowed waters to the lake.

07017-006 Little Clear Lake Watershed Final Report

Little Clear Lake is a 162 acre natural lake located in the western part of Pocahontas County. The lake has a 375 acre watershed that is gently rolling with nearly 84% of the watershed in row crop production. The lake is listed on the Iowa DNR’s impaired waters list due to nutrients, siltation and exotic species (purple loosestrife). These impairments have been verified with in-lake monitoring and landowner conversations as well as watershed modeling. The watershed models estimates that the average sheet and rill erosion is 1.74 tons/acre/year and sediment delivery is .12 tons/acre/year with a total of 44 tons/year being delivered to Little Clear Lake. The goal of the Little Clear Lake Watershed Protection Plan is to (1) reduce sediment delivery to Little Clear Lake by 60%, or 26.5 tons annually, by installing best management practices within the watershed. Doing this will control nearly 100% of the of the lake’s drainage area; and (2) initiate an information and education campaign for residents within the Little Clear Lake watershed which will ultimately prepare the residents and landowners for future project implementation. In an effort to control sediment and nutrient loading the Little Clear Lake Watershed Protection Plan has included 3 sediment catch basin sites and 5 grade stabilization structures, which function to stabilize concentrated flow areas.

06015-008 Bear Creek Watershed Final Report

Big Bear Creek is the upper portion of Bear Creek which drains 26,734 acres and ends at the Highway 136 crossing of Bear Creek. Bear Creek flows into the section of the Maquoketa River, which is on the EPA’s 303(d) List of Impaired Waters. Monitoring by the Iowa DNR indicates that Bear Creek is contributing significant amounts of sediment and nutrients to the Maquoketa River. The primary use of land in the Big Bear Creek Watershed is row crop production. A roadside survey completed by Anamosa Field Office Staff indicated that 123,747 tons/yr. of sediment was being lost due to sheet and rill erosion only. The sediment delivered to Big Bear Creek is 24,447 tons/yr. Based on this data, 34,226 lbs. of Phosphorus is reaching the stream per year. With the added amount of sediment and phosphorus delivery through gully and streambank erosion, one can clearly see that the water quality in Bear Creek is severely impaired. The Big Bear Watershed Project will work to reduce the sediment and phosphorus delivered to the stream by 30% through the installation of practices that trap sediment and reduce erosion.

Influence of the Premium Subsidy on Farmers’ Crop Insurance Coverage Decisions, April 2005

The Agricultural Risk Protection Act greatly increased the expected marginal net benefit of farmers buying high-coverage crop insurance policies by coupling premium subsidies to coverage level. This policy change, combined with cross-sectional variations in expected marginal net benefits of high-coverage policies, is used to estimate the role that premium subsidies play in farmers’ crop insurance decisions. We use county data for corn, soybeans, and wheat to estimate regression equations that are then used to obtain insight into two policy scenarios. We first estimate that eventual adoption of actuarially fair incremental premiums, combined with current coupled subsidies, would increase farmers’ purchase of high-coverage policies by almost 400 percent from 1998 levels across the three crops and two plans of insurance included in the analysis. We then estimate that a return to decoupled subsidies would decrease farmers’ high-coverage purchase decisions by an average of 36 percent.

An Analysis of the Link between Ethanol, Energy, and Crop Markets, November 2006

This study analyzes the impact of price shocks in three input and output markets critical to ethanol: gasoline, corn, and sugar. We investigate the impact of these shocks on ethanol and related agricultural markets in the United States and Brazil. We find that the composition of a country’s vehicle fleet determines the direction of the response of ethanol consumption to changes in the gasoline price. We also find that a change in feedstock costs affects the profitability of ethanol producers and the domestic ethanol price. In Brazil, where two commodities compete for sugarcane, changes in the sugar market affect the competing ethanol market.

Get a GRIP: Should Area Revenue Coverage Be Offered through the Farm Bill or as a Crop Insurance Program? 2007

The successful expansion of the U.S. crop insurance program has not eliminated ad hoc disaster assistance. An alternative currently being explored by members of Congress and others in preparation of the 2007 farm bill is to simply remove the “ad hoc” part of disaster assistance programs by creating a standing program that would automatically funnel aid to hard-hit regions and crops. One form such a program could take can be found in the area yield and area revenue insurance programs currently offered by the U.S. crop insurance program. The Group Risk Plan (GRP) and Group Risk Income Protection (GRIP) programs automatically trigger payments when county yields or revenues, respectively, fall below a producer-elected coverage level. The per-acre taxpayer costs of offering GRIP in Indiana, Illinois, and Iowa for corn and soybeans through the crop insurance program are estimated. These results are used to determine the amount of area revenue coverage that could be offered to farmers as part of a standing farm bill disaster program. Approximately 55% of taxpayer support for GRIP flows to the crop insurance industry. A significant portion of this support comes in the form of net underwriting gains. The expected rate of return on money put at risk by private crop insurance companies under the current Standard Reinsurance Agreement is approximately 100%. Taking this industry support and adding in the taxpayer support for GRIP that flows to producers would fund a county target revenue program at the 93% coverage level.

Intellectual Property Rights and Crop-Improving R&D under Adaptive Destruction, June 2007

This paper studies how the strength of intellectual property rights (IPRs) affects investments in biological innovations when the value of an innovation is stochastically reduced to zero because of the evolution of pest resistance. We frame the problem as a research and development (R&D) investment game in a duopoly model of sequential innovation. We characterize the incentives to invest in R&D under two competing IPR regimes, which differ in their treatment of the follow-on innovations that become necessary because of pest adaptation. Depending on the magnitude of the R&D cost, ex ante firms might prefer an intellectual property regime with or without a “research exemption” provision. The study of the welfare function that also accounts for benefit spillovers to consumers—which is possible analytically under some parametric conditions, and numerically otherwise—shows that the ranking of the two IPR regimes depends critically on the extent of the R&D cost.

Impact of High Crop Prices on Environmental Quality: A Case of Iowa and the Conservation Reserve Program, 2007

Growing demand for corn due to the expansion of ethanol has increased concerns that environmentally sensitive lands retired from agricultural production into the Conservation Reserve Program (CRP) will be cropped again. Iowa produces more ethanol than any other state in the United States, and it also produces the most corn. Thus, an examination of the impacts of higher crop prices on CRP land in Iowa can give insight into what we might expect nationally in the years ahead if crop prices remain high. We construct CRP land supply curves for various corn prices and then estimate the environmental impacts of cropping CRP land through the Environmental Policy Integrated Climate (EPIC) model. EPIC provides edge-of-field estimates of soil erosion, nutrient loss, and carbon sequestration. We find that incremental impacts increase dramatically as higher corn prices bring into production more and more environmentally fragile land. Maintaining current levels of environmental quality will require substantially higher spending levels. Even allowing for the cost savings that would accrue as CRP land leaves the program, a change in targeting strategies will likely be required to ensure that the most sensitive land does not leave the program.