Subsidized crop insurance may encourage conversion of native grassland to
cropland. The Sodsaver provision of the 2008 farm bill could deny crop
insurance on converted land in the Prairie Pothole states for 5 years.
Supplemental Revenue Assistance payments, which are linked to crop insurance
purchases, could also be withheld. Using representative farms, we estimate
that Sodsaver would reduce expected crop revenue by up to 8% and expected
net return by up to 20%, while increasing the standard deviation of revenue
by as much as 6% of market revenue. Analysis based on elasticities from the
literature suggests that Sodsaver would reduce grassland conversion by 9% or
less.