Economics of Grassland Conversion to Cropland in the Prairie Pothole Region

Abstract:  Much of the remaining grassland, particularly in North America, is privately owned, and its conversion to cultivated cropland is largely driven by economics. An understanding of why landowners convert grassland to cropland could facilitate more effective design of grassland‐conservation programs. We built an empirical model of land‐use change in the Prairie Pothole Region (north‐central United States) to estimate the probability of grassland conversion to alternative agricultural land uses, including cultivated crops. Conversion was largely driven by landscape characteristics and the economic returns of alternative uses. Our estimate of the probability of grassland conversion to cultivated crops (1.33% on average from 1979 to 1997) was higher than past estimates (0.4%). Our model also predicted that grassland‐conversion probabilities will increase if agricultural commodity prices continue to follow the trends observed from 2001 to 2006 (0.93% probability of grassland conversion to cultivated crops in 2006 to 1.5% in 2011). Thus, nearly 121 million ha (30 million acres) of grassland could be converted by 2011. Conversion probabilities, however, are spatially heterogeneous (range 0.2% to 3%), depending on characteristics of a parcel (e.g., soil quality and economic returns). Grassland parcels with relatively high‐quality land for agricultural production are more likely to be converted to cultivated crops than lower‐quality parcels and are more responsive to changes in the economic returns on alternative agricultural land uses (i.e., conversion probability increases by a larger magnitude for high‐quality parcels when economics returns to alternative uses increase). Our results suggest that grassland conservation programs could be proactively targeted toward high‐risk parcels by anticipating changes in economic returns, such as could occur if a new biofuel processing plant were to be built in an area.