Loduca, N. R. 2024. Understanding farmer decisions about climate change adaptation and conservation decisions in agriculture. , .

Citable PDF link: https://lter.kbs.msu.edu/pub/4192

As farmers adjust to the evolving climate, they alter their farming practices and technologies to
manage the risks associated with changing crop yields. These adjustments can range from minor
changes like tweaking crop insurance coverage to major investments such as adopting irrigation
systems. Their responses are influenced by their risk preferences and perceptions of how climate
change will affect the risks they face. Additionally, government incentives can play a role in shaping
these behavioral responses. This research contributes to the existing body of knowledge by delving
into the drivers of farmer decisions in the context of climate change.
The first chapter of this dissertation empirically estimates the risk aversion of 44 corn-soybean
farmers in Michigan under different utility function assumptions. We then compare risk aversion
across these utility functions and between general lottery choices and choices related to agricultural
investments that can mitigate weather risk. We compare the fit of three utility models—constant
absolute risk aversion (CARA), constant relative risk aversion (CRRA), and nonconstant risk
preferences—and chose the CRRA model as the most suitable for our application. We estimate risk
preferences at both the sample- and individual-level, to compare drivers of risk aversion in each
lottery setting. While the sample-level estimates of CRRA are similar across lottery settings,
individual-level comparisons reveal greater variability in risk preferences within the agricultural
lottery setting. In the general lottery, participants' age significantly influences risk preferences,
whereas wealth (measured by acres in operation) significantly impacts risk preferences in both
lottery settings. Simply measuring farmers' risk preferences without considering contextual factors
fails to capture the diversity in preferences and the factors driving this heterogeneity.
The second chapter of this dissertation explores the connection between farmers' risk
preferences, perceptions of crop yields, and decisions regarding climate change adaptation. Drawing
on the same 44 interviews, we construct perceived crop yield distributions under investment
scenarios for tile drainage, center pivot irrigation, and drought tolerant seeds to identify the
perceived efficacy of these practices. We uncover that farmers foresee shifts in future crop yield
distributions, anticipating rising means with greater variances. Individuals who perceive a larger
increase in expected crop yield from irrigation adoption are more likely to be currently using center
pivot irrigation or be considering adopting irrigation. Meanwhile, participants who believe that tile
drainage will increase their crop yield variance are less likely to adopt drainage. Assessing risk
preferences and subjective crop yield distributions across different technology scenarios enables us
to identify the key factors influencing adaptation adoption decisions.
This dissertation's third and last part explores how the U.S. Department of Agriculture Natural
Resource Conservation Service (NRCS) cost-share programs encourage the adoption of cover crops
across the Midwest. Cover crops provide both public ecological benefits, such as improving air and
water quality, and private benefits to farmers, such as improved soil health and reduced soil erosion.
Analyzing NRCS cover crop contract county level data, we find that an increase in the cost-share
proportion translates to an increase in enrolled acres, which provides evidence of additionality.
Results also indicate that the basic single species cover crop contract is the most popular, and higher
adoption rates correlate with lower precipitation levels in the preceding growing season. Using
remote sensing data, we test the relationships between enrolled cover crop acreage and conservation
tillage practices. We do not find positive learning and peer effects from previous enrollment in cover
crop contracts, but we do see a positive relationship between cover crop and no-tillage acreage.
These findings deepen our understanding of the drivers behind cover crop adoption and shed light on the effectiveness of government incentives in promoting sustainable agricultural practices.

Associated Treatment Areas:

  • LTER Research Context

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