Do Cover Crops Reduce Downside Production Risk?

This study examines whether cover crop adoption reduces downside production risk. A crop insurance loss measure is used as the main measure of downside production risk. To achieve the study objective, we utilize a unique county‐level panel data set with information on cover crop adoption rate, crop insurance production losses, and weather variables. The data covers the main corn and soybean production regions in the Midwestern United States for the period 2005–2018. We employ linear fixed effects econometric models and a number of robustness checks in the empirical analysis (i.e., implementing different estimation procedures and a variety of empirical specifications). The different estimation methods employed leverage the panel nature of the data to address various specification and endogeneity issues. Our estimation results suggest that counties with higher cover crop adoption tend to have lower crop insurance losses and lower downside production risk. This finding supports the idea that the soil health benefits from cover crop use translate to a reduced likelihood of production losses.