Costs of Continuous Conservation Tillage in Iowa and Illinois

Environmental policies and the funding of conservation programs towards agriculture have been a contentious issue and a major concern in the United States. Increasingly, these programs are perceived as a more convenient way to transfer income to farmers because of the environmental benefits that are produced. Some of these policies have focused on completely retiring environmentally sensitive lands from agricultural production. Others have also focused on changes in farming practices on lands still under cultivation, specifically moving away from conventional to conservation farming practices. However, some studies have established that incentive-based approaches to environmental regulation are generally more efficient than command-and-control or design-standard regulations because of the cost differences in implementing emissions reductions across sources of pollutants. This study develops county-level simulation models to estimate the opportunity costs of continuous conservation tillage in Iowa and Illinois under a given set of exogenous variables and parameters. Specifically, the study models a farmer's optimal choice among a set of rotation and tillage choices. The study also investigates what the change in optimal rotations would be if the farmers are compensated for the costs of conservation tillage adoption. Results show that the opportunity costs of continuous conservation tillage are significantly non zero and decreasing over time for most land quality classes. The study finds that if farmers are compensated for the costs of conservation tillage adoption, there will be no potential shift in rotation favoring corn-after-soybean in Iowa and two-years-corn-after-soybeans in Illinois. The study also finds that under higher energy prices, opportunity costs of adoption tend to be lower and vice versa though the change in magnitude is minimal.