Modeling Farm-Level Costs of the Yield Reserve Program

Nonpoint Source (NPS) pollution, pollution that comes from diffuse sources that are difficult to trace back to a single point such as farm fields, is a major concern affecting America's water ways. Nationally, agriculture is the leading source of water impairment and has also been identified as the largest source of pollution affecting the Chesapeake Bay.

There are proposals now for a program that would pay farmers to use 15 percent less than the extension recommended amount of fertilizer. Known as the Yield Reserve Program, or Enhanced Nutrient Management, this policy could possibly help to reduce the nutrient loads.

The objective of this study was to evaluate the effects of a Yield Reserve Program on farm yields and net revenues. Costs were estimated for different policy implementations for the Virginia Coastal Plain to better understand problems with this type of program. The effects of Yield Reserve on enterprise net returns, yields, and N applications for corn under varying weather and soil conditions were estimated.

Based on experimental trials from North Carolina and Virginia from 2000 to 2004, yield response functions were calculated for corn. The costs of the Yield Reserve Program vary depending on its implementation, but under current proposals these costs were estimated at $113 per hectare, and $10,855,000 for the coastal plain. This proposal is a more costly program than would be necessary to compensate farmers for yield losses based on estimates in this study.