Risk, cost-share payments, and adoption of cover crops and no-till

Abstract

The objective of this research is to determine the effect of producer risk preferences on the willingness to adopt cover crops and no-till, given cost-sharing incentives, operator attributes, and farm management characteristics. The analysis extends previous research by showing how producer risk preferences affect the adoption of best management practices (BMPs). Risk aversion was quantified using a risk preference elicitation method that was included in a lottery choice experiment. A survey was conducted with Tennessee row crop producers. Probit regressions were used to determine how risk preferences, cost-share incentives, and respondent characteristics were associated with the adoption of these BMPs. An increase in the cost-share payment for cover crops was associated with an increase in the likelihood of its adoption, but adoption of no-till practices was unaffected by the offered incentive. Cover crop adoption was uncorrelated with risk preferences, but as producer risk aversion increased, the likelihood of adopting no-till diminished. The results could be useful in revising BMP cost-share programs to increase adoption while considering risk preferences. Also, this study will contribute to the academic literature by better guiding future studies in the measurement and assessment of risk and its role in BMP adoption.