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.

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.

Row Crop Response to Topsoil Restored on Borrow Areas, HR-186, Supplemental Report, 1982

Borrow areas are created where soil is needed to provide fill for construction projects. This research evaluated (1) the changes in row crop productivity resulting from removal of soil for highway construction in Iowa and (2) restoration methods which included: depth of topsoil, subsoil tillage, manure application, and two years of legume growth prior to row cropping. The research was carried out from 1977-1981 at four locations. Corn and soybean y1elds from borrow areas have been below, equal to; and greater than yields from undisturbed, neighboring farmland. Little or no yield increase was noted from restored topsoil at coarse textured sites. At finer textured sites, a marked yield increase of both crops occurred after the addition of 6 inches of topsoil but little added yield increase resulted from restoring 12 inches of topsoil. Subsoil tillage has shown little or no beneficial effect on crop yields. The manure treatment has resulted in a corn yield increase but only in the first year after application.

Row Crop Response to Topsoil Restored on Borrow Areas, HR-186, 1982

Borrow areas are created where soil is needed to provide fill for construction projects. The changes in row-crop productivity resulting from removal of soil for highway construction in Iowa and restoration methods, which included addition to topsoil, subsoil tillage, manure application, and 2 yr of legume growth before row cropping, were evaluated. The research was carried out from 1977 to 1981 at four locations. Corn and soybean yields from borrow areas have been below, equal to, and greater than yields from undisturbed neighboring farmland. Little or no yield increase was noted from restored topsoil at coarse-textured sites. At finer-textured sites, a marked yield increase of both crops occurred after the addition of 6 in. of topsoil but little added yield increase resulted from restoring 12 in. of topsoil. Subsoil tillage has shown little or no beneficial effect on crop yields. The manure treatment has resulted in a corn yield increase but only in the first year after application.

Iowa Soybean Promotion Board, August 31, 2001 & August 31, 2002

State Agency Audit Report

Iowa Soybean Promotion Board, August 31, 2002 & August 31, 2003

State Agency Audit Report

Strip Tillage Effects on Crop Production and Soil Erosion, 2002

Report produced by Iowa Departmment of Agriculture and Land Stewardship

Iowa Soybean Promotion Board, Independent Auditor's Reports, Financial Statements and Supplemental Information, Schedule of Findings, August 31, 2003 & 2004

State Agency Audit Report

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.

Iowa Soybean Promotion Board, Independent Auditor's Reports, Financial Statements and Supplementary Information, August 31, 2004 & June 30, 2005

State Audit Reports

Woodland Improvement and Crop Trees in Iowa, 2005

Vigorous and Healthy woodlands in Iowa have the unique distinction of being able to provide a wealth of benefits for the landowner and residents of the state. Benefits from a healthy forest include timber and wood resources, watershed protection, fragile site protection, wildlife and bird habitat, aesthetics and beauty, and recreational opportunities.

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.

Emerging Biofuels: Outlook of Effects on U.S. Grain, Oilseed, and Livestock Markets, 2007

Projections of U.S. ethanol production and its impacts on planted acreage, crop prices, livestock production and prices, trade, and retail food costs are presented under the assumption that current tax credits and trade policies are maintained. The projections were made using a multi-product, multi-country deterministic partial equilibrium model. The impacts of higher oil prices, a drought combined with an ethanol mandate, and removal of land from the Conservation Reserve Program (CRP) relative to baseline projections are also presented. The results indicate that expanded U.S. ethanol production will cause long-run crop prices to increase. In response to higher feed costs, livestock farmgate prices will increase enough to cover the feed cost increases. Retail meat, egg, and dairy prices will also increase. If oil prices are permanently $10-per-barrel higher than assumed in the baseline projections, U.S. ethanol will expand significantly. The magnitude of the expansion will depend on the future makeup of the U.S. automobile fleet. If sufficient demand for E-85 from flex-fuel vehicles is available, corn-based ethanol production is projected to increase to over 30 billion gallons per year with the higher oil prices. The direct effect of higher feed costs is that U.S. food prices would increase by a minimum of 1.1% over baseline levels. Results of a model of a 1988-type drought combined with a large mandate for continued ethanol production show sharply higher crop prices, a drop in livestock production, and higher food prices. Corn exports would drop significantly, and feed costs would rise. Wheat feed use would rise sharply. Taking additional land out of the CRP would lower crop prices in the short run. But because long-run corn prices are determined by ethanol prices and not by corn acreage, the long-run impacts on commodity prices and food prices of a smaller CRP are modest. Cellulosic ethanol from switchgrass and biodiesel from soybeans do not become economically viable in the Corn Belt under any of the scenarios. This is so because high energy costs that increase the prices of biodiesel and switchgrass ethanol also increase the price of cornbased ethanol. So long as producers can choose between soybeans for biodiesel, switchgrass for ethanol, and corn for ethanol, they will choose to grow corn. Cellulosic ethanol from corn stover does not enter into any scenario because of the high cost of collecting and transporting corn stover over the large distances required to supply a commercial-sized ethanol facility.

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.

Evaluation of Soybean Varieties Resistant to Soybean Cyst Nematode in Iowa, 2007

Use of resistant soybean varieties is a very effective strategy for managing soybean cyst nematode (SCN), and numerous SCN-resistant soybean varieties are available for Iowa soybean growers. Each year, public and private SCN-resistant soybean varieties are evaluated in SCN-infested fields throughout Iowa by Iowa State University personnel. The research described in this report was performed to assess the agronomic performance of maturity group (MG) I, II, and III SCN-resistant soybean varieties and to determine the effects of the varieties on SCN numbers or population densities.