**1. Introduction**

Conservation practices such as the utilization of a no-till crop system or cover crops can be used to improve soil health, reduce soil loss, and mitigate net greenhouse gas (GHG) emissions. No-till is the practice of refraining from tilling the soil from harvest of the previous crop to the harvest of the current crop. Cover cropping involves planting a crop for seasonal cover. For example, numerous U.S. farms plant annual or cereal ryegrass in the fall to provide cover during the winter months.

No-till and cover crop practices vary widely among farms. Using U.S. Department of Agriculture-Economic Research Service (USDA-ERS) survey estimates, 27 percent of corn in 2016, 40 percent of soybeans in 2012, and 45 percent of wheat in 2017 utilized no-till cropping systems [1]. Though cover cropping is not as common as notill systems, its use has been growing. In 2017, 5.1 percent of U.S. acres utilized cover crops [2]. Moreover, with the recent interest in carbon farming, a carbon sequestering change made to some farm practices in exchange for receiving payments for carbon credits, the interest in no-till and cover crop practices has increased.

Given their obvious conservation benefits, why have management practices such as no-till and cover crops not been more widely adopted? As with any new system or technology, the benefits have to be weighed against the costs. Benefits may include an improvement in soil health, a reduction in soil loss, and mitigation of net greenhouse gas emissions. Costs may include extra costs associated with the practice (e.g., planting a cover crop), potential reductions in crop yields, and potential increase in net return risk (i.e., increased variability or downside risk of net returns resulting from the adoption of a conservation practice), because there are numerous benefits and costs, it is important to examine tradeoffs between key variables such as net returns, risk, soil health, and net greenhouse gas emissions. In other words, it is seldom possible to adopt a conservation practice that has higher net returns and less risk, and that improves soil health or reduces net greenhouse gas emissions.

The objective of this chapter is to examine the relationship between crop net returns, risk, and conservation practices. The conceptual framework developed can be used to explore crop net returns, risk, soil loss, and greenhouse gas emissions for different conservation practices.

### **2. Previous research**

Given the importance of the no-till and cover crop rotations to the conceptual framework developed in this study, the literature review in this section will briefly discuss previous studies that have examined the impact of tillage practices on net returns, soil health, and net greenhouse gas emissions, and the costs and benefits of cover crops. These discussions will be followed by a brief discussion of carbon markets.

Wade et al. [3] summarized the adoption of conservation practices that could be used to reduce the environmental impact of crop production, improve soil health, and reduce net greenhouse gas emissions. Though practices varied widely among crops and regions, approximately 40 percent of the combined acreage of corn, soybean, wheat, and cotton utilized no-till or strip-till practices. Strip-till is a tillage system that utilizes tillage only in narrow strips where seed are planted. In another USDA-ERS study, Claassen et al. [1] noted that no-till and strip-till used in conjunction with conservation rotations and cover crops have a multitude of soil health benefits. The authors noted that practices varied widely among crops and locations. They noted in general, however, that 70 percent of soybean, 65 percent of corn, 67 percent of wheat, and 40 percent of cotton acres used conservation tillage practices, which included no-till, strip-till, and mulch-till. Mulch-till refers to a technique in which organic materials, such as crop residues or mulch, are left on the soil surface and incorporated into the top layer of soil through tillage. The purpose of mulch-till is to improve soil fertility, moisture retention, and weed suppression while reducing soil erosion.

Bergtold and Sailus [4] edited a book that discussed the production, profitability, and stewardship involving conservation tillage systems in the southeast U.S. One of the chapters in the book focused on conservation economics [5]. The authors of this chapter indicated that in order to achieve goals related to maximizing profit and environmental stewardship requires an understanding of tools such as partial budgeting and/or enterprise budgets.

Practices such as the adoption of a no-till crop rotation often involve a learning curve. This fact was confirmed by Cusser et al. [6] who compared the development and stability of a no-till crop rotation with a conventional till system over a 29-year period. The authors indicated that it took over a decade to ascertain the impacts of the no-till system, underscoring the importance of long-run studies.

#### *Examining the Relationship between Crop Net Returns, Risk, and Conservation Practices DOI: http://dx.doi.org/10.5772/intechopen.112263*

Precision Conservation Management [7] summarized gross revenue, production costs, soil loss, and greenhouse gas (GHG) emissions for various tillage systems including no-till, strip-till, 1-pass light, 2-pass light, 2-pass moderate, and 2+ passes. The "light" passes utilized low disturbance tillage. Operator and land return were higher for the 1-pass light, 2-pass light, and 2-pass moderate systems than it was for no-till, strip-till, and 2+ passes. In particular, the return for the no-till system was from \$19 to \$30 lower than the return for the light and moderate pass systems. However, soil loss and GHG emissions were lower for the no-till system than they were for other tillage systems examined.

Next, we will turn our attention to previous research pertaining to cover crops. Plastina et al. [8] used partial budgets to assess the economic return to cover crop use on Midwest U.S. row crop farms. Essentially, the authors compared returns and costs for farms that utilized cover crops to those that did not utilize cover crops. The economic loss accruing to use of cover crops terminated with herbicides in a corn/ soybean rotation was \$12 per acre with the inclusion of cost-share payments and \$43 per acre without the inclusion of these payments. Plastina et al. [9] used focus groups and a partial budgeting framework to compare the net returns of crop systems with and without the use of cover crops. The net change in profits associated with cover crop use was a negative \$54 per acre.

Myers et al. [10] note that additional net returns generated from the adoption of cover crops is difficult to discern with one-year budget analysis. The authors noted that some farms have a very long-term positive experience associated with the use of cover crops. Cover crops were found to provide a faster payment when herbicideresistant weeds are a problem, cover crops are grazed, soil compaction is an issue, cover crops are used to speed up and ease the transition to no-till, soil moisture is at a deficit, fertilizer costs are high, and incentive payments are available.

A recent USDA-ERS publication noted that the share of harvested cropland with cover crops increased from 3.4 percent in 2012 to 5.1 percent in 2017 [2]. This study noted that unlike no-till and conservation tillage, cover crops involve increased costs, particularly in the short term. A recent survey by the Conservation Tillage Information Center [11] indicated that cover crops are typically combined with a no-till system. Approximately 12 percent of those surveyed went from not using cover crops to using cover crops on some of their acres between 2015 and 2019. Over half of the respondents used cover crops on at least 40 percent of their crop acres.

Gross revenue, production costs, soil loss, and GHG emissions for a no cover crop system and two cover crop systems, overwintering and winter terminal, are summarized by Precision Conservation Management [7] and Sellars et al. [12]. Operator and land return for the overwintering and winter terminal cover crop systems used for corn production (soybean production) were \$32 (\$44) and \$12 per acre (\$21 per acre) lower than the return under the no cover crop system, respectively. As with the utilization of a no-till system, soil loss and GHG emissions were reduced by utilizing the cover crop systems.

The potential to sequester carbon in agricultural soils has increased public and private interest in markets that pay farmers to sequester carbon using various management practices. Two common management practices discussed are the adoption of a no-till system or the use of cover crops. In their review of the literature, Havens et al. [13] noted that the average implementation cost for no-till was \$17 per acre and that the average implementation cost for cover crops was \$31 per acre. On average, sequestration resulted from the adoption of a no-till system and cover crops would be 0.77 and 0.76 metric tons per acre. In addition to discussing the average sequestration and average cost per acre, the authors estimated that the social benefit of sequestration would be \$51 per metric ton of CO2, which would more than offset the expected cost of implementing no-till or cover crop systems.

Thompson et al. [14] reported recent survey results pertaining to farm adoption of carbon contracts. Of the survey respondents, 39 percent were aware of opportunities to receive payments for capturing carbon, 7.1 percent had actively engaged in discussions regarding receiving payments for capturing carbon, and 1.3 percent had signed a contract to capture carbon. In a follow-up question, reasons preventing producers from enrolling, in order of percentage responding affirmatively, were payment level offered that was not large enough, potential legal liability, skepticism of carbon sequestration viability, and previous use of eligible practices were not covered under the contract.

In a series of Ag Decision Maker articles, Plastina [15], Plastina and Jo [16], and Plastina and Wongpiyabovorn [17] discuss carbon markets; how data, payments, and methods are made in carbon programs; and describe a tool that can be used to examine the potential net returns for carbon farming. Net returns are dependent on farming practices, contract type, contract length, frequency of additional practice implementation, contract price for each practice, expected change in contract price, farm area enrolled, participation in cost share programs, expected changes in costs, and discount rate. Plastina [15] noted that programs typically require additionality to generate payments. Additionality means that farmers must do something different or adopt a new practice to receive carbon payments.
