Economic benefits from plant species diversity in intensively managed grasslands

Grasslands cover a major share of the world's agricultural area and are important for global food security. Plant species diversity in grasslands is known to increase and stabilize biomass yields. We economically evaluate these effects, using a rich dataset from 16 intensively managed grassland sites across Europe. We extend earlier research by accounting for plant species diversity effects on both quantity and quality of yields. Consequently, we can express plant species diversity effects in terms of milk production potential yields per hectare and potential revenues thereof. Plant species diversity not only increased milk production potential yields and thus revenues, but also reduced production risks. Thus, increasing plant species diversity resulted in higher certainty equivalents, for example, the certainty equivalent rose by +29% when comparing the average mixture to the average monoculture. For risk averse decision makers, this gain in certainty equivalent was mainly due to the increase in revenues (accounting for 90%) compared to the total insurance value (accounting for 10%). Overall, we show that farmers benefit economically from plant species diversity and that even a moderate increase in this diversity contributes to more stable grassland-based production. Thus, our results are highly relevant for future sustainable intensification of grassland-based production.