Do cost-share programs increase cover crop use? Empirical evidence from Iowa

Cover crops have been shown to have both on-farm and water quality benefits. However, the use of cover crops in Iowa remains subdued, in part due to the implementation costs faced by farmers. In this paper, we test the hypothesis that monetary incentives through cost-share programs are effective at increasing the amount of farmland planted to cover crops in Iowa, using a propensity-score matching estimator. Combining data from a unique cover crop survey of 674 farm-operator respondents and the 2012 Census of Agriculture, we find that cost-share payments induced an 18 percentage-point expansion of the cover crop area beyond what would have been planted in absence of the programs, for the farmers who participated in cost-share programs. In addition, at least two-thirds of the payments funded acres that would not have been planted without cost share. We also calculate farmers’ net returns to using cover crops with a partial budget analysis and estimate that the combined public and farmer cost of avoiding one pound of nitrogen pollution through cover crops is between $1.72 and $4.69 per pound, with farmers undertaking 70% of this cost through net losses. Overall, cost share for cover crops has been a relatively low-cost method to reduce nitrogen pollution to waterways in Iowa.