What Does a Cover Crop’s Carbon Really Cost? New PCM Data Puts a Number on It

Farmers hear about new conservation payment programs every year, offering payments for cover crops, reduced tillage, nitrogen management and other conservation practices. Payment levels for these practices vary widely and are usually made in exchange for ability to claim or, at minimum, to quantify an environmental asset, like reduction in greenhouse gas emissions or improvements to water quality, which are addressed with the practice. What has been harder to pin down is what it costs the farmer to provide these environmental benefits. A recent farmdoc webinar used field-level data from IL Corn’s Precision Conservation Management (PCM) program to answer that question.

Dr. Laura Gentry, Director of Water Quality Science at IL Corn, and Dr. Saurav Raj Kunwar, an agricultural economist at Texas Tech University, presented the findings of a University of Illinois-led economic analysis that was recently published in the Journal of American Agricultural Economics.

The traditional view

Gentry opened the webinar by describing the way PCM has historically reported cover crop economics to farmers. Averaged across the PCM dataset representing 11 years and nearly 10,000 corn field-years from high-productivity Illinois soils, the average operator and land return was:

• $341 per acre for fields without a cover crop
• $319 for winter-terminal cover crops
• $305 for overwintering cover crops

Most of the gap in operator and land return between cover cropped and non-cover cropped corn fields comes from slightly lower yields for cover cropped fields, along with added direct and machinery costs. The environmental benefits were also clear. Cover-cropped fields lost roughly half a ton less soil per acre and showed meaningful reductions in net greenhouse gas emissions.

A sharper measure

The new approach and results presented in the webinar utilize a mathematical programming analysis which treats cover crops as a technology the farmer pays for and asks a direct question: what is the minimum payment a farmer would need to provide carbon services and be no worse off?

Using 2021 data from 793 Illinois corn fields, the researchers put that cost at $27.30 per acre. The data came from 159 growers across 46 counties and about 51,700 acres. The total breaks into two parts:

• $17.88 for storing additional soil carbon. Cover-cropped fields already stored far more carbon than other fields, 0.55 versus 0.12 tons CO₂e per acre. Each additional gain in soil carbon therefore requires more costly management changes.
• $9.42 for reducing greenhouse gas emissions. A critical factor determining greenhouse gas emissions from agricultural fields is nitrogen fertilizer application rates. Cover cropped fields applied lower total nitrogen fertilizer rates than non-cover cropped fields, with a median of 195 lb versus 207 lb.

The data also confirmed a pattern PCM has seen for years. About 86% of cover-cropped fields also used conservation tillage, compared with about 70% of all non-cover cropped fields.

How payments stack up

Gentry compared the estimate with real programs:

• USDA’s Farmers for Soil Health program pays $35 an acre over three years.
• PCM’s private-sector partners, including PepsiCo, Kraft Heinz and the Kentucky Distillers Association, pay $15 per acre in years one and two and $10 after that. These partner payments can be stacked with tillage and nitrogen practices for up to $35 an acre.
• Partner payments come with simple, single-year contracts. Those partners claim the carbon asset in return.
  

Gentry noted that farmers may reasonably carry some of the cost themselves, because healthier soil increases the long-term value and productivity of their own land. On rented ground, she said, the farmer and landowner should discuss how to share that cost.

The fine print

Kunwar stressed the limits of the estimate. It covers one year and one crop, and it represents less than 1% of Illinois acres. It also captures only the farmer’s private cost for carbon services. The value of reduced erosion, better soil structure and lower nutrient loss is not included.

The method itself can be applied to other crops, practices, environmental assets, states and years. Valuing those additional benefits is a logical next step, and that work could help shape how future conservation incentives are designed.

Watch full webinar.  American Journal of Agricultural Economics Journal