Agriculture Reference
In-Depth Information
Prior research has found that the practice of no-till cultivation was delayed by the
normal capital replacement process because it requires purchase of an expensive
no-till planter (Krause and Black 1995). Despite this financial hurdle, adoption of
conservation tillage has been expanding over the past 15 years. By contrast, reduc-
ing fertilizer rates and planting cover crops are generally accessible technologies
that most farmers have not elected to practice.
Incentives and Payments for Ecosystem Services
In focus group interviews, farmers made it clear that maintaining profitability
is a necessary condition when it comes to deciding which crop management
technologies to adopt. Hence, cropping practices that offer public benefits but
impose private costs were acceptable to most participants only in exchange for
a payment.
The next logical question, then, is what payments would be required to
get farmers to adopt practices with greater public benefits but also higher
private costs? Farmer focus group participants were invited to participate
in three rounds of experimental auctions to elicit their willingness to adopt
progressively more costly stewardship practices. The experimental auctions
were modeled on USDA CRP procurement auctions in which the low bidder
receives the payment contract. However, the experimental auctions differed
from the CRP process in two important ways: (1) farmers were presented with
pre-set bid amounts and had to decide whether or not to accept them and, if so,
on how many acres, and (2) the lowest bidders were enrolled in the program
and paid the amount per acre of the second lowest bid. This approach pro-
vides participants an incentive to truthfully reveal the minimum amount that
they would be willing to accept because no single bid controls both the pay-
ment awarded and whether enrollment is successful (Harrison and List 2004,
Milgrom and Weber 1982).
Farmers were asked to consider a basic corn-soybean cropping system (System
A). Considering their own costs and environmental views, they were asked to deter-
mine how much they would need to be paid to replace System A with one of the
four lower input systems shown in Table 13.2. All the alternative systems (B to E)
included reduced tillage, pre-sidedress nitrate testing on corn, and split nitrogen
applications. Beyond these, Systems C to E each added a new level of steward-
ship: winter cover crop (C, D, E), wheat in rotation with corn and soybean (D, E),
and agrochemicals applied at two-thirds of the normal recommended rate (univer-
sity rate for fertilizer and pesticide label rate for pesticides). In each case, partici-
pants were invited to specify the number of acres they would be willing to supply
from their own farms at the bid offered.
Experimental auction responses (Table 13.3) showed a clear willingness to
adopt environmental stewardship practices if the price is right. As the systems
become more complicated with higher direct and opportunity costs, (1) fewer
farmers were willing to participate and (2) the average payment the farmers
would need to receive increased. In particular, farmers would require higher
