Land Use Consequences of Crop Insurance Subsidies

David Hennessy, Ruiqing Miao and Hongli Feng

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: It is estimated that net conversion of Northern Great Plains rangeland was about 0.09% per year between 1997 and 2007, but the conversion rate in some counties just east of the Missouri River in the Dakotas may have been much higher, in the order of 0.6% per year (Claassen et al. 2011). It is important to recognize the technology and market environment surrounding these land use choices. The advent of herbicide-tolerant insect-resistant corn and soybean varieties since 1996 has reduced chemical, labor and management time costs associated with cropping while also likely increasing yields. In facilitating low-till cultivation, they may also have eased any conservation compliance constraints and reduced energy costs. In addition, seed companies have had success in introducing drought-tolerance into their product (Yu and Babcock 2010, Carena et al. 2009). Since 2006, historically high corn and other commodity prices have also incentivized conversion incentives, have driven up land rents, and have made the Conservation Reserve Program alternative less attractive. In the past three decades also, but especially since the mid-1990s, government subsidy rates to crop insurance products have grown. These subsidies are in proportion to the crop price so the per-acre subsidy has grown markedly since 2006.

Date: 2012-01-01
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Working Paper: Land Use Consequences of Crop Insurance Subsidies (2011)
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