Farmer Response to Nutrient Credit Trading Opportunities in the Coastal Plain of Virginia

The purpose of this study is to evaluate agricultural producer response to opportunities to generate nutrient credits under Virginia’s water quality trading program. In 2005 the Virginia legislature passed legislation authorizing trade of nutrient reduction credits from nonpoint to new/expanding point source dischargers. A mathematical programming model of a typical commercial cash grain farm operation in the coastal plains of Virginia is constructed to model farmer credit supply response under the trading program. A corn, barley, and soybean crop rotation with the implementation of a no-tillage Best Management Practice (BMP), was the BMP used to maximize profits and generate nutrient credits for the model farm. Contrary to common assumptions that agricultural nonpoint source credits will be a low cost compliance option, the results show that the supply of credits is limited at modest credit prices and high nutrient credit prices will be necessary to induce additional farm level reductions