- Email: [email protected]
US agriculture and the environment
US agriculture and the environment
Pierre Crosson
Prospective increases in demand for us agricultural output suggest rising economic and environmental costs. Among environmental costs, those resutting from erosion appear most threatening. Policy alternatives for restraining the increase in erosion include limiting the growth of demand for crops, strengthening policies to induce farmers to adopt erosion control practices, and investing in research to develop higher yielding, less erosive technologies. Limiting exports faces severe domestic political difkulties and probably is not consistent with other US interests in foreign trade. wider fanner And inducing of erosion control adoption practices probably would prove expensive. This approach should not be abandoned, but it should be accompanied by a policy to develop new technologies. Keywords: USA
Agriculture; Environment;
The
author is Senior Fellow at Resources for the Future, ii75 Avenue, NW, Massachusetts Washington, DC, USA. An earlier version of this article was presented at the annual meeting of the Amerkan Association for the Advancement of Science, Washington, DC, %8 January 1982. ‘USDA, Econom ic Indicatorsof the Farm Ptvductfon and Efficiency Sector: continuedon page 100
0306-9192/w-
After the second world war, US agriculture experienced a technological revolution which yielded enormous benefits to both the US economy and foreign consumers of US farm products. Total farm output increased by 76% from 1946-49 to 197941, and crop output rose by 82%. l Exports of wheat, feedgrains and soybeans, by far the most important crops, increased almost ninefold, raising the USA from a relatively modest to a dominant position in world trade in these crops.2 Despite these massive increases in output, US agriculture required only one-quarter as much labour in 1979-81 as in 194649 and only 2% more cropland. The people leaving the farm found higher paying jobs in non-agricultural activities, and the inflation adjusted per capita income of those who remained behind rose 2.7 times. By the end of the 1970s the per capita income of US farm people had risen to full parity with that of the non-farm population from only 60% in the late 1940s. This occurred because the expansion of non-farm job opportunities and other sources of non-farm income for farm people more than offset a relative decline in per capita income from farming. A substantial amount of the increase in productivity was passed on to consumers, evidenced by a decline of about one-third in real prices received by farmers from the late-1940s to the late-1970s. Despite the run-up in food prices paid by consumers in the 197Os, prices still were slightly less in real terms at the end of the decade than in 1946-49.4 Technological advance was the key to this unprecedented increase in the productivity of US agriculture. The experience gave an exceptionally clear demonstration of the beneficial power of technology to extend the limits to growth posed by relatively fixed quantities of land and labour. Yet the experience gave rise also to some nagging, and in time strong, concerns about the environmental impacts of the technology. Initially the effects of pesticides on non-target plants and animals, and on humans, were the focus of concern. But eventually impacts of fertilizers, salinity and erosion on land, water and air quality also were included. The concern about environmental impacts of agricultural technologies is well taken in principle. These impacts are a sub-class of what economists call external costs. They are external in the sense that the farmer does not bear them. Consequently he has no incentive to take them into account in farm management decisions. Yet the costs are real to others in the society. The farmer’s failure to consider them results in a divergence between society’s interest and the farmer’s interest in the
12$X000 1983Butternorth 8 Co (Publishes)Ltd
99
US agriculture and the environment
management of his resources. This divergence justifies consideration of public policies to induce or require the farmer to give proper weight to the environmental impacts of his operations. The environmental movement of the 1960s and 1970s in the USA produced such policies. Their effectiveness so far has been much debated. Of greater interest, however, is how well they may serve in the future. The answer will depend in large measure on the future severity of the environmental pressures exerted by agriculture. The first part of this article, therefore, is an assessment of these presssures. It is based on analysis of prospective trends in agricultural output and technology. Given this assessment, the second part of thk paper is addressed to the question of which policies would be most effective in easing the emerging environmental pressures.
Trends in production The dominant element in future agricultural production in the USA will be rising foreign demand for wheat, feedgrains (maize, grain sorghum, oats and barley) and soybeans. 5 In research done at Resources for the Future,6 total production (by volume) of these crops is projected to rise by 75% from 1977-79 to 2010, with exports accounting for 78% of the increase. In 2010,55% of total production would be for export, compared with 37% in 1977-79. The projected annual percentage increase in exports is substantially less than in the 197Os, and in that sense is conservative. The projections assume slower income and population growth in both the developed and developing countries than in the 1970s; that growth of grain production in the developing countries will be higher than in the 197Os, but not enough continued from page 99 Sraristics 7980, Economic Research to keep up with rising domestic demand; no major changes in the Service, Statistical Bulletin No 679, Common Agricultural Policy of the European Community; that both the Washington, DC, 1982. Soviet Union and the People’s Republic of China remain significant *USDA, Agricultural Statistics, Govemof grain; and that US shares of world trade in grains and ment Printing Office, Washington, DC, importers soybeans remain at the levels of the late 1970s. 1972and 1980. 3USDA, op tit, Ref 1. ‘IJSDA, op cir, Ref 2. This assumes that demand for grain for ethanol productionwill not be a significant component of total demand in 2010. Legislationpassed in 1980 set a targetof 10 billion gallons of ethanol by 1990 for combination with gasoline to produce gasohol, implyingan enormousincreasein grain productionfor this purpose.However, gasohol presently is economical only by virtue of substantial federal and state subsidies. By the 1990s. coal and perhaps wood are likely to be more economical feedstocks for liquid fuel productii than grain based ethanol. It is unlikelythat the subsidies for gasohol will be maintainedat a level sufficientto keep it competitive.For an analysis of the present and future economics of gasoholproduction,see Fred Sanderson, ‘Benefits and costs of the US gasohol program’, Resources, No 67, July 1981, Resourcesfor the Future. Washinaton, DC. 6Pierre Crosson and Sterling Brubaker,
Trends in technology
Two key consequences of the technology which transformed US agriculture after the second world war were the rapid increases in the productivity of land and labour. The first was made possible by the development of cheap substitutes for the land: high yielding varieties of grains and soybeans, with hybrid maize the outstanding example; fertilizers and pesticides; and in the arid and semi-arid West cheap water for irrigation, reflecting subsidies, low opportunity costs, and low priced energy for pumping. The increase in the productivity of labour resulted primarily from the substitution of machinery, although herbicides also substituted for labour in weed control. The key factors determining the environmental impacts of agricultural technologies are the quantities and management of land and land substitutes. By comparison the amounts and management of labour and machinery are unimportant. Consequently the focus here is on factors affecting the future demands for land and for fertilizers, pesticides, and other substitutes for the land. Environmental Effects of US Agriculture, For analysis of these demands it is useful to think of agricultural Resources for the Future,Washington,DC, 1982. technologies as lying along a spectrum, with highly land-using techFOOD POLICYMay 1983
US agriculture and the environment
nologies (high ratio of land to land substitutes) at one end and highly land-saving technologies (low ratio of land to land substitutes) at the other. Historical perspective From 1951-55 to 1972, US farmers shifted rapidly toward the land-saving end of the spectrum of technologies, the ratio of all purchased inputs to cropland increasing by 2.7% annually. The quantity of fertilizer, the key land-saving input, rose in this period at an annual rate of 7% relative to cropland. The amount of cropland declined at an annual rate of 0.9%. From 1972 to 1979 the shift toward land-saving technologies continued, but at a much slower pace, the ratio of all purchased inputs to cropland rising only 0.8% annually. The increase in fertilizer relative to cropland declined to an annual rate of 1.3%, and the amount of cropland rose by 2.7% annually.’ The marked trend toward land-saving technologies prior to the early 1970s and subsequent break in trend are explained primarily by the behaviour of prices of key land-saving inputs, particularly fertilizers and energy, and by government policies: From 1951-55 to 1972 fertilizer prices fell at an annual rate of 0.6% relative to crop prices received by farmers and of 1.9% relative to prices of all purchased inputs (excluding labour). From 1972 to 1979, however, fertilizer prices rose at an annual rate of 0.9% relative to crop prices and by 0.2% annually relative to prices of all purchased inputs. The price of energy behaved in a similar fashion before and after 1972, except that it rose much faster in the latter period. These movements in fertilizer and energy prices must have been important in slowing the shift toward land-saving technologies after 1972.8 A change in government policies also was important. Through most of the post-war period to 1972 the federal government encouraged farmers to hold some land out of crop production as a way of supporting crop prices. These policies encouraged farmers to expand their use of fertilizers and other land substitutes. With the rapid run-up in crop prices in 1973 and 1974 the policies were abandoned. Although prices subsequently declined and land set aside programmes were re-instituted in 1978 and again in 1982, the programmes have been weaker than before. And land in crops has continued to increase, reaching an all time record in 1981. A consequence of the slower shift to land-saving technologies after 1972 was that crop production per acre (yields) grew more slowly after that date than in the two preceding decades. In every year from 1973 through 1981 actual crop yields were less than yields found by extrapolating the trend established in 1950-1972. The slower growth of yields is the expected result of the slower shift toward land-saving technologies. Yield growth also was depressed, however, by the incorporation of about 60 million acres of less productive cropland after 1972. Future trenak Real prices of fertilizer and energy are expected to continue to rise over the next several decades, and water in the arid and semi-arid western USA to become more costly. Rising energy prices will increase the cost of me eata in this A the preceding pumping groundwater and increased competition for water for urban and paragrah are fromUSDA (1992). other non-agricultural uses will raise its opportunity cost in irrigation. The price data are from USDA (1972 and These price trends suggest that US farmers will continue to select 1990). FOOD POLICYMey 1983
US agriculture and the environment
Srosson and Brubaker, op tit, Ref 6. ‘O/bid. “Ibid. 12Pierre Crosson, Conservation Tillage and Conventional Tillage: a Comparative Assessment, Soil Conservation Society of America, Ankeny, IA, 1961.
102
technologies from the more land-using end of the spectrum, as they have done since 1972. Fertilizer and energy use per acre will continue to rise, and additional land will be irrigated, but the rates of increase will be more like those in the 1970s than in the 1950s and 1960s9 The implication is that in the future yields are more likely to grow as they did after 1972 than in the two preceding decades. Taking this as a guide, Crosson and BrubakerlO made projections of yields of wheat, feedgrains, and soybeans in 2010 which, when divided into the projected production of these crops for that year, indicated an increase of about 60 million acres of cropland relative to the late 1970s. Some small amount of the additional cropland would be irrigated. Fertilizers applied to cropland are projected to increase by about 70% from levels of the late 197Os, and fertilizer for all purposes about 80%. These are much smaller rates of increase than from 1950 to 1980 and, as indicated, the increase per acre of cropland is smaller still. Cotton currently accounts for about 40% of all insecticides applied to crops in the USA and maize for about 20%. For reasons developed in detail elsewhere’l I expect a sharp decline in per acre application of insecticides to cotton, and some decline also for corn. For some years cotton production has been shifting for economic reasons from the Southeast and Mississippi Delta, where per acre use of insecticides is high, to Texas where it is low. This shift is expected to continue, and it would cause the average application rate to fall even if rates in the South-east and Delta remained at present high levels. However, these rates seem likely to fall also. There is a consensus among knowledgeable people in those areas that the use of ‘scouts’ to monitor insect infestations, development of insect resistant varieties, and other practices under the rubric of integrated pest management (IPM) have high promise for diminished reliance on insecticides to control insect pests of cotton. Scouting and other IPM practices also are beginning to be used to control insect pests of maize, although the potential for widespread use is not as clearly established as it is for cotton. With use of insecticides on cotton likely to decrease sharply, and with some decline for maize also in prospect, US farmers are expected to use a smaller amount of insecticides on crops in 2010 than in the late 197Os, despite the increase in cropland. In contrast, use of herbicides on crops is likely to increase substantially. Nothing comparable to IPM for cotton insect control is on the horizon for weed control, so there is no reason to expect a decline in per acre use of herbicides. Consequently the expansion of cropland would itself tend to increase use of herbicides. In addition, however, conservation tillage, which requires relatively heavy per acre use of herbicides to control weeds, is likely to spread. Conservation tillage uses less fuel and labour than conventional tillage, and these savings more than compensate for the greater use of herbicides. The result is an economic advantage for conservation tillage in areas where its yields are comparable to those of conventional tillage. There are enough such areas to expect conservation tillage to be used on 5040% of US cropland by 2010, compared to about 25% in 1981.*2
Environmental
impacts
The
projected increases in amounts of cropland and of fertilizers and herbicides raise the possibility of increased environmental damage. The FOOD POLICY May 1983
US agriculture and the environment
additional land poses an erosion threat and more fertilizers and herbicides may increase pressure on water quality and other aspects of the environment.l3 Lack of data prevents quantitative estimates of the social costs of these environmental damages. Instead I ask two questions: are the damages presently so severe as to require new policies or modification of existing policies for dealing with them?; and, given the projections of resource use, are future damages likely to be more or less severe than at present? Fertilizer Comprehensive assessments of nitrate-nitrogen in surface water14 and in groundwater15 indicate that in neither case is this now a major national problem. Although it is stated in the Council on Environmental Quality (CEQ) report that nitrogen fertilizer is an important source of groundwater contamination, data presented in the report indicate that this is limited to a few small hotspots around the country. Nitrogen and particularly phosphorus in run-off from farmers’ fields may accelerate eutrophication of lakes, ponds and reservoirs. The CEQ cites a survey by the Environmentat Protection Agency (EPA) which found many eutrophic, and a few hypereutrophic, water bodies around the country. But the CEQ report conveys no sense that eutrophication is a major national problem. In any case, nutrients in municipal, industrial and other non-agricultural wastes contribute much more to eutrophication than fertilizers in run-off. l6 The projected increase in fertilizers implies some increase in the amounts of these nutrients which reach water bodies. However, higher prices of fertilizer will give farmers strong incentives to use these materials more efficiently. Consequently losses to water bodies are likely to increase much less than in proportion to the increase in amounts applied. While concentrations of nitrate-nitrogen in groundwater are likely to continue above Public Health Service standards (10 ppm) in various places around the country, I do not expect this to emerge as a significant national problem. Herbicides
Tram a national perspectivethe environmental impacts of irrigation, namely increasing soil and water salinity, are relatively minor. They are ignored here to save space. For a treatment of these impacts, see Crossonand Brubaker,op tit, Ref 6, Chap 7. Environmentalimpacts of insecticides are expected to become less severe because of the pmqxtive decline in use of these materials. Consequently these impactsare not considered. %amuel Aldrich, Nitrogen in Relation to Food, Environment end Energy, Special publication 61, Agricultural Experiment Station, University of Illinois,Urbana, 1961. %ouncil on EnvironmentalQuality, The Tenth Annual Repoti of the CEQ, Govemment Printing Office, Washington, DC, 1979. Vbid, p 95. ~Zrosson, op tit, Fief 12.
FOOD POLICYM8y 1983
In general herbicides have low toxicity to humans. Paraquat, widely used with conservation tillage, is an exception. There is some suggestion that 2,4,5-T and 2,4-D may increase the risk of cancer and of birth defects or other reproductive abnormalities. The evidence is far from conclusive, however, and the issue is much disputed. In any case the EPA monitors the use of these materials and has the legislative authority to regulate or prohibit their use should it become clear that they pose a serious threat. The restrictions imposed by the EPA in 1980 on use of 2,4,5-T is evidence of this. Concern has been expressed about the effects of herbicides on soil microorganisms. While there is not total agreement on this, the consensus appears to be that the evidence does not indicate lasting damage. l7 The apparent lack of serious environmental damage from herbicides suggests that the projected sizeable increase in amount of these materials will not pose a major threat. This judgment must be taken with caution, however. Not all avenues by which herbicides may impact the environment have been investigated. Moreover, some kinds of damage may occur only when threshholds of use are passed. If such threshholds exist, the large projected increase in use may pass some of them. 103
US agriculture and the environment
Erosion Erosion causes off-farm damages such as impaired water quality and siltation of reservoirs, lakes and harbours. It also causes on-farm damages by reducing the productivity of the land. There is no reliable information about the present importance of either of these types of damage. There are various estimates of the costs of dredging rivers and harbours and of lost reservoir capacity because of siltation, but it is not clear how much erosion from farmland contributes to this. In any case such estimates leave out losses in recreational values resulting from murky water. Concern about the effects of erosion on the productivity of US farmland has been expressed for decades, and it provided the impetus for federal and state soil conservation programmes dating from the 1930s. While continued erosion of any particular piece of land undoubtedly will eventually reduce its productivity, the effects of the erosion experienced so far on the productivity of the agricultural land base as a whole is quite obscure. Whatever these effects, they were swamped by the rapid technological advance which began after the second world war. Moreover, the productivity of even severely eroded land usually can be restored by putting it for some years to alfalfa or similar crops and applying manure. Because of these uncertainties, no clear judgments about the present severity of off-farm and on-farm damages of erosion is possible. Accordingly there is no solid basis for judging the adequacy of present erosion control policies. Whatever the present severity of the erosion problem there is reason to believe it will get substantially worse. Work done for Resources for the Future by Iowa State University indicates that the projected increase in cropland of some 60 million acres would increase erosion by water from cropland from 1.9 billion tons in 1977 to 3.5 billion tons in 2010. The increase per acre would be from 4.7 tons to 7.4 tons. A water quality model developed at Resources for the Future by Leonard Gianessi and Henry Peskin indicates that this amount of erosion would roughly double the sediment delivered to the nation’s water bodies. la If erosion increases on the projected scale, it probably will be viewed as a major threat to water quality, and also to the productivity of the land. In comparison, the threat from fertilizers and herbicides will appear secondary. The effectiveness of current and alternative erosion control policies, therefore, is likely to become a central issue.
A policyrationale
18crosson and Btubaker,op tit, Ref6. 104
The prospective erosion problem is a consequence of the projection of 60 million additional acres of land needed to produce grains and soybeans. Given the projections of demand for these crops, the need for additional land is a direct result of the projections of yields. If yields grow significantly faster than projected, the need for additional cropland would be less and the prospective erosion problem less severe. Indeed, if grain and soybean yields were to grow at the rates established in the 19% and 196Os, little if any additional land would be required. And with the spread of conservation tillage the erosion problem would probably be less severe than at present. Yield growth thus is a critical element in the projected scenario. There are a couple of reasons why yields could grow faster than projected without any change in current policies. Responding simply to the FOOD POLICY May 1983
US agriculture and the environment
opportunity for profit opened up by scientific advance, private firms may develop economical new technologies with higher yield potential than those assumed in the projections. Work in genetic engineering, such as recombinant DNA research on plants, is an example. This type of research already is under way. Although it does not now appear to offer high pay-off in the foreseeable future, breakthroughs could occur within the thirty year projection period used here. Should this happen within the next ten to fifteen years, yields by 2010 could be much higher than projected. The rising demand for cropland probably will increase its economic cost to farmers. This, combined with productivity losses caused by erosion, would increase the economic value of land-saving technologies. This could stimulate research by private firms to develop such technologies. Thus, should the projected scenario of increasing land scarcity and erosion begin to unfold, corrective responses may be triggered in the private sector which would obviate the need for new policies. These are real possibilities. There are a couple of reasons, however, for thinking that private sector responses will be insufficient to deal with the erosion problem. The first is that some promising lines of research, such as on increased photosynthetic efficiency and biological nitrogen fixation, require breakthroughs in basic science before they could lead to technologies that farmers can use. Private investment in this kind of research is likely to be less than the socially desirable amount because it is difficult for the firm making the investment to capture enough of the gains from it. It is significant that private firms are actively engaged in development of technologies based on knowledge of recombinant DNA, but they were not involved in the basic research that produced that knowledge. The second reason is that farmers have little incentive to control erosion to reduce its off-farm damages. Since, with rare exceptions, the waters receiving the eroded soil are not privately owned, those damaged cannot exact compensation from the farmer through private market channels. Their only recourse is through the political process. Thus, although the play of market forces probably will induce technological and managerial responses tending to reduce erosion, the responses are unlikely to be on a scale fully consistent with the social interest in erosion control. There is a rationale for public intervention. Three broad avenues should be considered: restrain the growth of crop demand, particularly demand for exports; strengthen policies to induce farmers to adopt erosion control practices; and, encourage development of land-saving (yield-increasing) technologies and of technologies which permit incorporation of more cropland without corresponding increases in erosion.
Restraining demand
‘g/bid.
FOODPOLICY May1983
The scenario projected in Crosson and Brubaker19 implies that real prices of US grains and soybeans will rise from present levels. At issue here are measures which would result in even higher prices thus causing demand for these crops to fall below the projected levels. An argument can be made that whatever crop prices may be, they ought to be increased to cover environmental costs since these typically are not fully reflected in commodity prices. A commodity tax might be imposed to cover these costs. This approach has merit in principle, but in 105
US agriculture and the environment
practice it would face severe difficulties. Two problems immediately stand out. One is that environmental costs are hard to measure. Even the more obvious ones, such as damages from erosion, are not easily calculated in dollars and cents. And the more subtle and diffused ones, eg some damages from pesticides, are even more elusive. The second major difficulty is political. Some crops cause more environmental damages than others, eg in general maize is a far more erosive crop than wheat. Maize then could justifiably be taxed more than wheat to reflect this difference. However, all maize farmers would be equally disadvantaged by the tax even though some cause less erosion than others. The lesser offenders would see the tax as inequitable, as indeed it would be. They thus would have a strong case against the tax. Whether they could block imposition of the tax would depend upon their political strength, something which could vary from group to group and from time to time. The general point is that because there are wide differences among farmers in the damage they do to the environment, a control instrument that does not recognize these differences, such as a commodity tax, will encounter strong political opposition and be difficult to defend. Any programme to restrain the growth of demand inevitably would give special attention to exports since this is the dynamic element in demand growth. Why should the American people suffer higher economic and environmental costs of agricultural production to satisfy demands of foreigners, particularly when commodity prices do not fully reflect environmental costs? The question is legitimate if one feels a stronger responsibility to one’s own people than to foreigners, as most do. However, it is not at all clear that the long-run interests of the USA would be served by somehow limiting the growth of exports. Doing this would infringe the US commitment to free trade, and while no commitment is beyond modification, this one has served the nation well. Departing from it to limit agricultural exports would raise questions abroad about the thrust of US trade policy and weaken US efforts to promote a more generally open world trading system. Apart from whether limiting exports would serve the nation’s longterm interests, measures to impose limits probably would encounter strong political opposition. Farmers and farm interests stand to gain from expanding exports. Although their numbers are much diminished, they clearly continue to command attention from top policy makers. The Reagan administration’s eagerness to lift the partial embargo on grain exports to the Soviet Union in part reflected a genuine commitment to free market principles, but it clearly was a response also to political pressure from farming interests. Probably the most effective way of limiting the expansion of exports, and the one most consistent with long-run US interests, is to encourage agricultural development in the developing countries. Because of rising population and income in these countries, their demand for food is growing rapidly. They already are important importers of US farm output, and they will be increasingly important over the next few decades. These countries have made much progress in increasing agricultural production, but demand continues to surge ahead of domestic supply. The USA and other developed countries already have made important contributions to agricultural development in the LDCs, eg through support of the system of international food research institu106
FOOD POLICYMay 1983
US agriculture and the environment
tions and through capital contributions to building irrigation systems and other infrastructure. Much more could be done, however. Research and other efforts to stimulate faster growth of feedgrain production in particular could moderate the growth of demand for US feedgrain exports, relieving a major source of mounting pressure on the nation’s resource base. Foreign aid, never the politician’s delight, finds even less favour nowadays in the US Congress and in the Reagan administration. Still, it survives in principle and in practice, and both bilateral and multilateral mechanisms exist for delivering it. There is room for improvement in how this is done, particularly in persuading developing country governments to strengthen incentives for farmers to adopt new technology. Still, the USA and other developed countries have learned much about how to improve the effectiveness of foreign aid resources. Mobilizing support for expanded aid to LDC agriculture would not be easy. Still, when compared with other measures to restrain the growth of demand for US agricultural production, an aid policy probably would encounter less political opposition and be more consistent with the US commitment to freer trade and freer markets.
Strengthening erosion control policies Section 208 of the Federal Water Pollution Control Act Amendments of 1972 gives the EPA authority to take measures necessary to make the nation’s waters ‘fishable and swimmable’ by 1983. Under Section 208 each state is required to draw up plans for achieving the water quality goal, and the plans must be approved by the EPA Administrator. Since erosion is a major source of water pollution, it would appear that the EPA could insist that the state 208 plans specify measures for reducing erosion to levels consistent with the water quality objective. Although the EPA may have this authority it has chosen not to actively exercise it. The agency has allowed the states great latitude in drawing up 208 plans and has accepted reliance by the states on voluntary measures to achieve plan goals. These measures include so-called Best Management Practices (BMPs) that farmers can adopt to reduce erosion and other pollutants in the interest of improving water quality. For erosion control the BMPs for the most part are the various soil conservation tillage practices long favoured by the US Soil Conservation Service (SCS), an agency of the Department of Agriculture. In addition, various forms of conservation tillage also may qualify as BMPs. The objective of 208 planning is to improve water quality. In principle at least, the plans include erosion control measures only insofar as they promote the water quality objective. However, measures which reduce erosion to improve water quality often will also reduce productivity losses from erosion. It is legitimate, therefore, to regard 208 planning as a policy instrument for dealing with both the off-farm and on-farm damages of erosion, even though the latter is not formally within the 208 purview. As indicated, state 208 plans rely on measures to induce farmers voluntarily to adopt erosion control practices. The key question now about 208 planning is whether the voluntary approach will be adequate to deal with the erosion problem should it emerge on the scale projected above. In thinking about the effectiveness of this approach it is important to keep in mind the distinction between on-farm and off-farm erosion damages. Under the Constitution the US legal system gives great leeway
FOODPOLlCYMay1983
107
US agriculture and the environment
to property owners in management of their property. In the case of farmers, the state generally has not intervened in management decisions so long as they do not cause or threaten to cause specific injury to others. So far at least, the possible injury to the interests of future generations from erosion-caused losses of productivity has not induced state intervention to enforce erosion control. The soil conservation programmes promoted by the SCS have had maintenance of productivity as their prime objective. The voluntary approach using financial inducements, eg cost sharing, was appropriate to this objective. The rationale for the approach is that when the damage is confined to the farm, the farmer should not be expected to pay for erosion control measures not in his own perceived economic interest. If society believes that additional measures are necessary to protect the long-run social interest in the productivity of the land, society must expect to pay for them. When off-farm damages of erosion are at issue, the principle that the polluter can be held to account for off-site damages to others legitimately comes into play. The principle is well established in law and administrative procedures, eg those of the EPA. While the principle is sweepingly applied to industrial firms, it has not been applied to farmers to control off-farm damages of erosion. It is argued that industrial firms can pass on pollution control costs, but that farmers, being in a highly competitive industry, cannot. Therefore the ‘polluter pays’ principle should not apply to farmers. I see no merit in principle in this argument, although there may be practical reasons for not enforcing the ‘polluter pays’ principle against farmers. Where off-farm erosion damages are small relative to administrative and/or legal costs of enforcing the principle, then the voluntary approach to control may make sense. This suggests that the question to ask about control of off-farm erosion damages is a practical one, not one of principle: will the voluntary approach based on financial inducements such as cost sharing be more cost-effective than enforcement of the ‘polluter pays’ principle? I don’t know the answer. I suspect, however, that if the erosion problem threatens to emerge on the projected scale, controlling off-farm damages through cost-sharing will be expensive. Even if current restraints on federal and state budgets are loosened, it would be difficult, in my judgment, to mobilize political support for cost-sharing on the required scale. Since the ‘polluter pays’ principle now is generally accepted, the public probably would ask why it should not apply to farmers as well as to industrial and municipal operations. If the strictly voluntary approach were to founder for lack of sufficient political support, what would be the alternatives? A possibility would be an effluent tax on erosion which causes off-farm damages. Effluent taxes are consistent with the ‘polluter pays’ principle and have the virtue of treating the environmental media as valuable resources whose services must be paid for. Taxes on eroded soil causing off-farm damages would force farmers to take steps to reduce erosion or reimburse society for the damages. So far the notion of effluent taxes has proved more attractive in principle than in practice. Proposals to tax erosion would provoke strong opposition from farmers. If the opposition were overcome, implementation of a soil loss tax probably would be costly, given the large number of farmers involved and the detailed information needed about the farming operations of each of them. Still, if off-farm erosion damages threaten to FOOD POLICY May 1983
US agricuhre
and the environment
rise high enough the soil loss tax approach may prove more cost-effective than the alternatives. Programmes which are basically voluntary but which impose important costs on the farmer if he refuses to participate may also have merit. The so-called cross-compliance approach is an example. The idea underlying cross-compliance is that a farmer who refuses to adopt erosion control practices would be denied participation in other programmes of value to him, eg price supports. No farmer would be required to adopt erosion control practices, but failure to do so would be costly. Obviously the strength of the cross-compliance approach would depend upon the value to the farmer of participating in other agricultural support programmes. I find it hard to avoid the conclusion that if the erosion problem emerges on the projected scale, achievement of adequate control with programmes now in place or under discussion will prove extremely difficult. The traditional voluntary approach based on financial inducements, while appropriate to the productivity maintenance objective, probably will prove expensive. Where the objective is water quality, voluntary approaches are inappropriate in principle, which probably would make it difficult to mobilize the political support necessary to fund their high cost. Attempts to achieve water quality goals by applying the ‘polluter pays’ principle, while appropriate, also would be expensive and would encounter massive resistance from farmers. So what is to be done? I do not argue that the various voluntary programmes should be abandoned. They clearly have value and their effectiveness could be improved, eg by focusing them on those relatively few farmers now responsible for most of the erosion. In addition, more thought should be given to ways of applying the ‘polluter pays’ principle that would make it more palatable to farmers. However, if erosion emerges on the projected scale, neither voluntary nor regulatory approaches are likely to achieve adequate control. Policies to develop new technologies and practices which reduce the scale of the problem should be considered.
New technologies and practices
Vbid.
FOOD POLICYMay 1983
Two main lines of research on new technologies appear most promising. One would seek to develop higher yielding technologies than those implicit in the scenario projected by Crosson and Brubaker.z’J Faster growth in crop yields would reduce the demand for cropland, making it possible to concentrate production on less erosive land. The second line of research would seek to overcome the present economic limits to the spread of conservation tillage. Conservation tillage leaves residue from the previous crop on the soil surface. The residue absorbs much of the energy of falling rain and run-off, greatly reducing erosion. Research on extending the economic limits of conservation tillage therefore has promise for achieving a reduction in erosion without transgressing the farmer’s economic interest in the management of his land. The key to development of higher yielding (land-saving) technologies is finding economical substitutes for fertilizer, fossil energy, and irrigation water, since in the projected scenario it is rising prices of these inputs which propels farmers toward more land-using technologies. Improvements in photosynthesis in main crops would substitute the sun’s energy for that from fossil sources and increased biological nitrogen fixation would substitute for nitrogen fertilizer. Increased research in 109
US agriculture and the environment
these areas would appear to be an appropriate response to key emerging resource scarcities. Progress in both areas is slow, however, and a substantial pay-off clearly is not just over the horizon. Whether there are equally appropriate lines of research that promise earlier returns I am not prepared to say. Yields with conservation tillage do not compare favourably with those of conventional tillage on poorly drained soils, or where weeds cannot be adequately controlled with herbicides, or in the northern tier of states because the growing season is too short. These limits define targets for research. Development of shorter season varieties would extend the northern limits of conservation tillage; seeds resistant to diseases fostered by moisture would encourage adoption of the technology on less well drained soils. Perennial weeds present special problems for conservation tillage because they are hard to manage with presently available herbicides. Development of new herbicides effective against perennials would overcome an important obstacle to more widespread adoption of the technology. The main advantage of a new technologies strategy relative to present erosion control programmes in the USA is that it aims to let the market harmonize the social interest and the farmer’s interest in erosion control. One need not have a philosophical preference for market solutions to recognize the market’s advantages of flexibility and speed of response compared with management by government intervention. The latter is clumsy and inefficient by comparison. The reason is not hard to find. Farmers have better information than anyone else about the highly variable soil, climatic and economic conditions bearing on their operations. The market permits effective use of this information. But the market solution will be acceptable only if it serves society’s interest in erosion control as well as the farmer%. A carefully conceived and sustained research programme to develop economically attractive technologies along the lines suggested above may be the most promising way to achieve this coincidence of interest.
FOOD POLICYMay 1983
Pierre Crosson
Prospective increases in demand for us agricultural output suggest rising economic and environmental costs. Among environmental costs, those resutting from erosion appear most threatening. Policy alternatives for restraining the increase in erosion include limiting the growth of demand for crops, strengthening policies to induce farmers to adopt erosion control practices, and investing in research to develop higher yielding, less erosive technologies. Limiting exports faces severe domestic political difkulties and probably is not consistent with other US interests in foreign trade. wider fanner And inducing of erosion control adoption practices probably would prove expensive. This approach should not be abandoned, but it should be accompanied by a policy to develop new technologies. Keywords: USA
Agriculture; Environment;
The
author is Senior Fellow at Resources for the Future, ii75 Avenue, NW, Massachusetts Washington, DC, USA. An earlier version of this article was presented at the annual meeting of the Amerkan Association for the Advancement of Science, Washington, DC, %8 January 1982. ‘USDA, Econom ic Indicatorsof the Farm Ptvductfon and Efficiency Sector: continuedon page 100
0306-9192/w-
After the second world war, US agriculture experienced a technological revolution which yielded enormous benefits to both the US economy and foreign consumers of US farm products. Total farm output increased by 76% from 1946-49 to 197941, and crop output rose by 82%. l Exports of wheat, feedgrains and soybeans, by far the most important crops, increased almost ninefold, raising the USA from a relatively modest to a dominant position in world trade in these crops.2 Despite these massive increases in output, US agriculture required only one-quarter as much labour in 1979-81 as in 194649 and only 2% more cropland. The people leaving the farm found higher paying jobs in non-agricultural activities, and the inflation adjusted per capita income of those who remained behind rose 2.7 times. By the end of the 1970s the per capita income of US farm people had risen to full parity with that of the non-farm population from only 60% in the late 1940s. This occurred because the expansion of non-farm job opportunities and other sources of non-farm income for farm people more than offset a relative decline in per capita income from farming. A substantial amount of the increase in productivity was passed on to consumers, evidenced by a decline of about one-third in real prices received by farmers from the late-1940s to the late-1970s. Despite the run-up in food prices paid by consumers in the 197Os, prices still were slightly less in real terms at the end of the decade than in 1946-49.4 Technological advance was the key to this unprecedented increase in the productivity of US agriculture. The experience gave an exceptionally clear demonstration of the beneficial power of technology to extend the limits to growth posed by relatively fixed quantities of land and labour. Yet the experience gave rise also to some nagging, and in time strong, concerns about the environmental impacts of the technology. Initially the effects of pesticides on non-target plants and animals, and on humans, were the focus of concern. But eventually impacts of fertilizers, salinity and erosion on land, water and air quality also were included. The concern about environmental impacts of agricultural technologies is well taken in principle. These impacts are a sub-class of what economists call external costs. They are external in the sense that the farmer does not bear them. Consequently he has no incentive to take them into account in farm management decisions. Yet the costs are real to others in the society. The farmer’s failure to consider them results in a divergence between society’s interest and the farmer’s interest in the
12$X000 1983Butternorth 8 Co (Publishes)Ltd
99
US agriculture and the environment
management of his resources. This divergence justifies consideration of public policies to induce or require the farmer to give proper weight to the environmental impacts of his operations. The environmental movement of the 1960s and 1970s in the USA produced such policies. Their effectiveness so far has been much debated. Of greater interest, however, is how well they may serve in the future. The answer will depend in large measure on the future severity of the environmental pressures exerted by agriculture. The first part of this article, therefore, is an assessment of these presssures. It is based on analysis of prospective trends in agricultural output and technology. Given this assessment, the second part of thk paper is addressed to the question of which policies would be most effective in easing the emerging environmental pressures.
Trends in production The dominant element in future agricultural production in the USA will be rising foreign demand for wheat, feedgrains (maize, grain sorghum, oats and barley) and soybeans. 5 In research done at Resources for the Future,6 total production (by volume) of these crops is projected to rise by 75% from 1977-79 to 2010, with exports accounting for 78% of the increase. In 2010,55% of total production would be for export, compared with 37% in 1977-79. The projected annual percentage increase in exports is substantially less than in the 197Os, and in that sense is conservative. The projections assume slower income and population growth in both the developed and developing countries than in the 1970s; that growth of grain production in the developing countries will be higher than in the 197Os, but not enough continued from page 99 Sraristics 7980, Economic Research to keep up with rising domestic demand; no major changes in the Service, Statistical Bulletin No 679, Common Agricultural Policy of the European Community; that both the Washington, DC, 1982. Soviet Union and the People’s Republic of China remain significant *USDA, Agricultural Statistics, Govemof grain; and that US shares of world trade in grains and ment Printing Office, Washington, DC, importers soybeans remain at the levels of the late 1970s. 1972and 1980. 3USDA, op tit, Ref 1. ‘IJSDA, op cir, Ref 2. This assumes that demand for grain for ethanol productionwill not be a significant component of total demand in 2010. Legislationpassed in 1980 set a targetof 10 billion gallons of ethanol by 1990 for combination with gasoline to produce gasohol, implyingan enormousincreasein grain productionfor this purpose.However, gasohol presently is economical only by virtue of substantial federal and state subsidies. By the 1990s. coal and perhaps wood are likely to be more economical feedstocks for liquid fuel productii than grain based ethanol. It is unlikelythat the subsidies for gasohol will be maintainedat a level sufficientto keep it competitive.For an analysis of the present and future economics of gasoholproduction,see Fred Sanderson, ‘Benefits and costs of the US gasohol program’, Resources, No 67, July 1981, Resourcesfor the Future. Washinaton, DC. 6Pierre Crosson and Sterling Brubaker,
Trends in technology
Two key consequences of the technology which transformed US agriculture after the second world war were the rapid increases in the productivity of land and labour. The first was made possible by the development of cheap substitutes for the land: high yielding varieties of grains and soybeans, with hybrid maize the outstanding example; fertilizers and pesticides; and in the arid and semi-arid West cheap water for irrigation, reflecting subsidies, low opportunity costs, and low priced energy for pumping. The increase in the productivity of labour resulted primarily from the substitution of machinery, although herbicides also substituted for labour in weed control. The key factors determining the environmental impacts of agricultural technologies are the quantities and management of land and land substitutes. By comparison the amounts and management of labour and machinery are unimportant. Consequently the focus here is on factors affecting the future demands for land and for fertilizers, pesticides, and other substitutes for the land. Environmental Effects of US Agriculture, For analysis of these demands it is useful to think of agricultural Resources for the Future,Washington,DC, 1982. technologies as lying along a spectrum, with highly land-using techFOOD POLICYMay 1983
US agriculture and the environment
nologies (high ratio of land to land substitutes) at one end and highly land-saving technologies (low ratio of land to land substitutes) at the other. Historical perspective From 1951-55 to 1972, US farmers shifted rapidly toward the land-saving end of the spectrum of technologies, the ratio of all purchased inputs to cropland increasing by 2.7% annually. The quantity of fertilizer, the key land-saving input, rose in this period at an annual rate of 7% relative to cropland. The amount of cropland declined at an annual rate of 0.9%. From 1972 to 1979 the shift toward land-saving technologies continued, but at a much slower pace, the ratio of all purchased inputs to cropland rising only 0.8% annually. The increase in fertilizer relative to cropland declined to an annual rate of 1.3%, and the amount of cropland rose by 2.7% annually.’ The marked trend toward land-saving technologies prior to the early 1970s and subsequent break in trend are explained primarily by the behaviour of prices of key land-saving inputs, particularly fertilizers and energy, and by government policies: From 1951-55 to 1972 fertilizer prices fell at an annual rate of 0.6% relative to crop prices received by farmers and of 1.9% relative to prices of all purchased inputs (excluding labour). From 1972 to 1979, however, fertilizer prices rose at an annual rate of 0.9% relative to crop prices and by 0.2% annually relative to prices of all purchased inputs. The price of energy behaved in a similar fashion before and after 1972, except that it rose much faster in the latter period. These movements in fertilizer and energy prices must have been important in slowing the shift toward land-saving technologies after 1972.8 A change in government policies also was important. Through most of the post-war period to 1972 the federal government encouraged farmers to hold some land out of crop production as a way of supporting crop prices. These policies encouraged farmers to expand their use of fertilizers and other land substitutes. With the rapid run-up in crop prices in 1973 and 1974 the policies were abandoned. Although prices subsequently declined and land set aside programmes were re-instituted in 1978 and again in 1982, the programmes have been weaker than before. And land in crops has continued to increase, reaching an all time record in 1981. A consequence of the slower shift to land-saving technologies after 1972 was that crop production per acre (yields) grew more slowly after that date than in the two preceding decades. In every year from 1973 through 1981 actual crop yields were less than yields found by extrapolating the trend established in 1950-1972. The slower growth of yields is the expected result of the slower shift toward land-saving technologies. Yield growth also was depressed, however, by the incorporation of about 60 million acres of less productive cropland after 1972. Future trenak Real prices of fertilizer and energy are expected to continue to rise over the next several decades, and water in the arid and semi-arid western USA to become more costly. Rising energy prices will increase the cost of me eata in this A the preceding pumping groundwater and increased competition for water for urban and paragrah are fromUSDA (1992). other non-agricultural uses will raise its opportunity cost in irrigation. The price data are from USDA (1972 and These price trends suggest that US farmers will continue to select 1990). FOOD POLICYMey 1983
US agriculture and the environment
Srosson and Brubaker, op tit, Ref 6. ‘O/bid. “Ibid. 12Pierre Crosson, Conservation Tillage and Conventional Tillage: a Comparative Assessment, Soil Conservation Society of America, Ankeny, IA, 1961.
102
technologies from the more land-using end of the spectrum, as they have done since 1972. Fertilizer and energy use per acre will continue to rise, and additional land will be irrigated, but the rates of increase will be more like those in the 1970s than in the 1950s and 1960s9 The implication is that in the future yields are more likely to grow as they did after 1972 than in the two preceding decades. Taking this as a guide, Crosson and BrubakerlO made projections of yields of wheat, feedgrains, and soybeans in 2010 which, when divided into the projected production of these crops for that year, indicated an increase of about 60 million acres of cropland relative to the late 1970s. Some small amount of the additional cropland would be irrigated. Fertilizers applied to cropland are projected to increase by about 70% from levels of the late 197Os, and fertilizer for all purposes about 80%. These are much smaller rates of increase than from 1950 to 1980 and, as indicated, the increase per acre of cropland is smaller still. Cotton currently accounts for about 40% of all insecticides applied to crops in the USA and maize for about 20%. For reasons developed in detail elsewhere’l I expect a sharp decline in per acre application of insecticides to cotton, and some decline also for corn. For some years cotton production has been shifting for economic reasons from the Southeast and Mississippi Delta, where per acre use of insecticides is high, to Texas where it is low. This shift is expected to continue, and it would cause the average application rate to fall even if rates in the South-east and Delta remained at present high levels. However, these rates seem likely to fall also. There is a consensus among knowledgeable people in those areas that the use of ‘scouts’ to monitor insect infestations, development of insect resistant varieties, and other practices under the rubric of integrated pest management (IPM) have high promise for diminished reliance on insecticides to control insect pests of cotton. Scouting and other IPM practices also are beginning to be used to control insect pests of maize, although the potential for widespread use is not as clearly established as it is for cotton. With use of insecticides on cotton likely to decrease sharply, and with some decline for maize also in prospect, US farmers are expected to use a smaller amount of insecticides on crops in 2010 than in the late 197Os, despite the increase in cropland. In contrast, use of herbicides on crops is likely to increase substantially. Nothing comparable to IPM for cotton insect control is on the horizon for weed control, so there is no reason to expect a decline in per acre use of herbicides. Consequently the expansion of cropland would itself tend to increase use of herbicides. In addition, however, conservation tillage, which requires relatively heavy per acre use of herbicides to control weeds, is likely to spread. Conservation tillage uses less fuel and labour than conventional tillage, and these savings more than compensate for the greater use of herbicides. The result is an economic advantage for conservation tillage in areas where its yields are comparable to those of conventional tillage. There are enough such areas to expect conservation tillage to be used on 5040% of US cropland by 2010, compared to about 25% in 1981.*2
Environmental
impacts
The
projected increases in amounts of cropland and of fertilizers and herbicides raise the possibility of increased environmental damage. The FOOD POLICY May 1983
US agriculture and the environment
additional land poses an erosion threat and more fertilizers and herbicides may increase pressure on water quality and other aspects of the environment.l3 Lack of data prevents quantitative estimates of the social costs of these environmental damages. Instead I ask two questions: are the damages presently so severe as to require new policies or modification of existing policies for dealing with them?; and, given the projections of resource use, are future damages likely to be more or less severe than at present? Fertilizer Comprehensive assessments of nitrate-nitrogen in surface water14 and in groundwater15 indicate that in neither case is this now a major national problem. Although it is stated in the Council on Environmental Quality (CEQ) report that nitrogen fertilizer is an important source of groundwater contamination, data presented in the report indicate that this is limited to a few small hotspots around the country. Nitrogen and particularly phosphorus in run-off from farmers’ fields may accelerate eutrophication of lakes, ponds and reservoirs. The CEQ cites a survey by the Environmentat Protection Agency (EPA) which found many eutrophic, and a few hypereutrophic, water bodies around the country. But the CEQ report conveys no sense that eutrophication is a major national problem. In any case, nutrients in municipal, industrial and other non-agricultural wastes contribute much more to eutrophication than fertilizers in run-off. l6 The projected increase in fertilizers implies some increase in the amounts of these nutrients which reach water bodies. However, higher prices of fertilizer will give farmers strong incentives to use these materials more efficiently. Consequently losses to water bodies are likely to increase much less than in proportion to the increase in amounts applied. While concentrations of nitrate-nitrogen in groundwater are likely to continue above Public Health Service standards (10 ppm) in various places around the country, I do not expect this to emerge as a significant national problem. Herbicides
Tram a national perspectivethe environmental impacts of irrigation, namely increasing soil and water salinity, are relatively minor. They are ignored here to save space. For a treatment of these impacts, see Crossonand Brubaker,op tit, Ref 6, Chap 7. Environmentalimpacts of insecticides are expected to become less severe because of the pmqxtive decline in use of these materials. Consequently these impactsare not considered. %amuel Aldrich, Nitrogen in Relation to Food, Environment end Energy, Special publication 61, Agricultural Experiment Station, University of Illinois,Urbana, 1961. %ouncil on EnvironmentalQuality, The Tenth Annual Repoti of the CEQ, Govemment Printing Office, Washington, DC, 1979. Vbid, p 95. ~Zrosson, op tit, Fief 12.
FOOD POLICYM8y 1983
In general herbicides have low toxicity to humans. Paraquat, widely used with conservation tillage, is an exception. There is some suggestion that 2,4,5-T and 2,4-D may increase the risk of cancer and of birth defects or other reproductive abnormalities. The evidence is far from conclusive, however, and the issue is much disputed. In any case the EPA monitors the use of these materials and has the legislative authority to regulate or prohibit their use should it become clear that they pose a serious threat. The restrictions imposed by the EPA in 1980 on use of 2,4,5-T is evidence of this. Concern has been expressed about the effects of herbicides on soil microorganisms. While there is not total agreement on this, the consensus appears to be that the evidence does not indicate lasting damage. l7 The apparent lack of serious environmental damage from herbicides suggests that the projected sizeable increase in amount of these materials will not pose a major threat. This judgment must be taken with caution, however. Not all avenues by which herbicides may impact the environment have been investigated. Moreover, some kinds of damage may occur only when threshholds of use are passed. If such threshholds exist, the large projected increase in use may pass some of them. 103
US agriculture and the environment
Erosion Erosion causes off-farm damages such as impaired water quality and siltation of reservoirs, lakes and harbours. It also causes on-farm damages by reducing the productivity of the land. There is no reliable information about the present importance of either of these types of damage. There are various estimates of the costs of dredging rivers and harbours and of lost reservoir capacity because of siltation, but it is not clear how much erosion from farmland contributes to this. In any case such estimates leave out losses in recreational values resulting from murky water. Concern about the effects of erosion on the productivity of US farmland has been expressed for decades, and it provided the impetus for federal and state soil conservation programmes dating from the 1930s. While continued erosion of any particular piece of land undoubtedly will eventually reduce its productivity, the effects of the erosion experienced so far on the productivity of the agricultural land base as a whole is quite obscure. Whatever these effects, they were swamped by the rapid technological advance which began after the second world war. Moreover, the productivity of even severely eroded land usually can be restored by putting it for some years to alfalfa or similar crops and applying manure. Because of these uncertainties, no clear judgments about the present severity of off-farm and on-farm damages of erosion is possible. Accordingly there is no solid basis for judging the adequacy of present erosion control policies. Whatever the present severity of the erosion problem there is reason to believe it will get substantially worse. Work done for Resources for the Future by Iowa State University indicates that the projected increase in cropland of some 60 million acres would increase erosion by water from cropland from 1.9 billion tons in 1977 to 3.5 billion tons in 2010. The increase per acre would be from 4.7 tons to 7.4 tons. A water quality model developed at Resources for the Future by Leonard Gianessi and Henry Peskin indicates that this amount of erosion would roughly double the sediment delivered to the nation’s water bodies. la If erosion increases on the projected scale, it probably will be viewed as a major threat to water quality, and also to the productivity of the land. In comparison, the threat from fertilizers and herbicides will appear secondary. The effectiveness of current and alternative erosion control policies, therefore, is likely to become a central issue.
A policyrationale
18crosson and Btubaker,op tit, Ref6. 104
The prospective erosion problem is a consequence of the projection of 60 million additional acres of land needed to produce grains and soybeans. Given the projections of demand for these crops, the need for additional land is a direct result of the projections of yields. If yields grow significantly faster than projected, the need for additional cropland would be less and the prospective erosion problem less severe. Indeed, if grain and soybean yields were to grow at the rates established in the 19% and 196Os, little if any additional land would be required. And with the spread of conservation tillage the erosion problem would probably be less severe than at present. Yield growth thus is a critical element in the projected scenario. There are a couple of reasons why yields could grow faster than projected without any change in current policies. Responding simply to the FOOD POLICY May 1983
US agriculture and the environment
opportunity for profit opened up by scientific advance, private firms may develop economical new technologies with higher yield potential than those assumed in the projections. Work in genetic engineering, such as recombinant DNA research on plants, is an example. This type of research already is under way. Although it does not now appear to offer high pay-off in the foreseeable future, breakthroughs could occur within the thirty year projection period used here. Should this happen within the next ten to fifteen years, yields by 2010 could be much higher than projected. The rising demand for cropland probably will increase its economic cost to farmers. This, combined with productivity losses caused by erosion, would increase the economic value of land-saving technologies. This could stimulate research by private firms to develop such technologies. Thus, should the projected scenario of increasing land scarcity and erosion begin to unfold, corrective responses may be triggered in the private sector which would obviate the need for new policies. These are real possibilities. There are a couple of reasons, however, for thinking that private sector responses will be insufficient to deal with the erosion problem. The first is that some promising lines of research, such as on increased photosynthetic efficiency and biological nitrogen fixation, require breakthroughs in basic science before they could lead to technologies that farmers can use. Private investment in this kind of research is likely to be less than the socially desirable amount because it is difficult for the firm making the investment to capture enough of the gains from it. It is significant that private firms are actively engaged in development of technologies based on knowledge of recombinant DNA, but they were not involved in the basic research that produced that knowledge. The second reason is that farmers have little incentive to control erosion to reduce its off-farm damages. Since, with rare exceptions, the waters receiving the eroded soil are not privately owned, those damaged cannot exact compensation from the farmer through private market channels. Their only recourse is through the political process. Thus, although the play of market forces probably will induce technological and managerial responses tending to reduce erosion, the responses are unlikely to be on a scale fully consistent with the social interest in erosion control. There is a rationale for public intervention. Three broad avenues should be considered: restrain the growth of crop demand, particularly demand for exports; strengthen policies to induce farmers to adopt erosion control practices; and, encourage development of land-saving (yield-increasing) technologies and of technologies which permit incorporation of more cropland without corresponding increases in erosion.
Restraining demand
‘g/bid.
FOODPOLICY May1983
The scenario projected in Crosson and Brubaker19 implies that real prices of US grains and soybeans will rise from present levels. At issue here are measures which would result in even higher prices thus causing demand for these crops to fall below the projected levels. An argument can be made that whatever crop prices may be, they ought to be increased to cover environmental costs since these typically are not fully reflected in commodity prices. A commodity tax might be imposed to cover these costs. This approach has merit in principle, but in 105
US agriculture and the environment
practice it would face severe difficulties. Two problems immediately stand out. One is that environmental costs are hard to measure. Even the more obvious ones, such as damages from erosion, are not easily calculated in dollars and cents. And the more subtle and diffused ones, eg some damages from pesticides, are even more elusive. The second major difficulty is political. Some crops cause more environmental damages than others, eg in general maize is a far more erosive crop than wheat. Maize then could justifiably be taxed more than wheat to reflect this difference. However, all maize farmers would be equally disadvantaged by the tax even though some cause less erosion than others. The lesser offenders would see the tax as inequitable, as indeed it would be. They thus would have a strong case against the tax. Whether they could block imposition of the tax would depend upon their political strength, something which could vary from group to group and from time to time. The general point is that because there are wide differences among farmers in the damage they do to the environment, a control instrument that does not recognize these differences, such as a commodity tax, will encounter strong political opposition and be difficult to defend. Any programme to restrain the growth of demand inevitably would give special attention to exports since this is the dynamic element in demand growth. Why should the American people suffer higher economic and environmental costs of agricultural production to satisfy demands of foreigners, particularly when commodity prices do not fully reflect environmental costs? The question is legitimate if one feels a stronger responsibility to one’s own people than to foreigners, as most do. However, it is not at all clear that the long-run interests of the USA would be served by somehow limiting the growth of exports. Doing this would infringe the US commitment to free trade, and while no commitment is beyond modification, this one has served the nation well. Departing from it to limit agricultural exports would raise questions abroad about the thrust of US trade policy and weaken US efforts to promote a more generally open world trading system. Apart from whether limiting exports would serve the nation’s longterm interests, measures to impose limits probably would encounter strong political opposition. Farmers and farm interests stand to gain from expanding exports. Although their numbers are much diminished, they clearly continue to command attention from top policy makers. The Reagan administration’s eagerness to lift the partial embargo on grain exports to the Soviet Union in part reflected a genuine commitment to free market principles, but it clearly was a response also to political pressure from farming interests. Probably the most effective way of limiting the expansion of exports, and the one most consistent with long-run US interests, is to encourage agricultural development in the developing countries. Because of rising population and income in these countries, their demand for food is growing rapidly. They already are important importers of US farm output, and they will be increasingly important over the next few decades. These countries have made much progress in increasing agricultural production, but demand continues to surge ahead of domestic supply. The USA and other developed countries already have made important contributions to agricultural development in the LDCs, eg through support of the system of international food research institu106
FOOD POLICYMay 1983
US agriculture and the environment
tions and through capital contributions to building irrigation systems and other infrastructure. Much more could be done, however. Research and other efforts to stimulate faster growth of feedgrain production in particular could moderate the growth of demand for US feedgrain exports, relieving a major source of mounting pressure on the nation’s resource base. Foreign aid, never the politician’s delight, finds even less favour nowadays in the US Congress and in the Reagan administration. Still, it survives in principle and in practice, and both bilateral and multilateral mechanisms exist for delivering it. There is room for improvement in how this is done, particularly in persuading developing country governments to strengthen incentives for farmers to adopt new technology. Still, the USA and other developed countries have learned much about how to improve the effectiveness of foreign aid resources. Mobilizing support for expanded aid to LDC agriculture would not be easy. Still, when compared with other measures to restrain the growth of demand for US agricultural production, an aid policy probably would encounter less political opposition and be more consistent with the US commitment to freer trade and freer markets.
Strengthening erosion control policies Section 208 of the Federal Water Pollution Control Act Amendments of 1972 gives the EPA authority to take measures necessary to make the nation’s waters ‘fishable and swimmable’ by 1983. Under Section 208 each state is required to draw up plans for achieving the water quality goal, and the plans must be approved by the EPA Administrator. Since erosion is a major source of water pollution, it would appear that the EPA could insist that the state 208 plans specify measures for reducing erosion to levels consistent with the water quality objective. Although the EPA may have this authority it has chosen not to actively exercise it. The agency has allowed the states great latitude in drawing up 208 plans and has accepted reliance by the states on voluntary measures to achieve plan goals. These measures include so-called Best Management Practices (BMPs) that farmers can adopt to reduce erosion and other pollutants in the interest of improving water quality. For erosion control the BMPs for the most part are the various soil conservation tillage practices long favoured by the US Soil Conservation Service (SCS), an agency of the Department of Agriculture. In addition, various forms of conservation tillage also may qualify as BMPs. The objective of 208 planning is to improve water quality. In principle at least, the plans include erosion control measures only insofar as they promote the water quality objective. However, measures which reduce erosion to improve water quality often will also reduce productivity losses from erosion. It is legitimate, therefore, to regard 208 planning as a policy instrument for dealing with both the off-farm and on-farm damages of erosion, even though the latter is not formally within the 208 purview. As indicated, state 208 plans rely on measures to induce farmers voluntarily to adopt erosion control practices. The key question now about 208 planning is whether the voluntary approach will be adequate to deal with the erosion problem should it emerge on the scale projected above. In thinking about the effectiveness of this approach it is important to keep in mind the distinction between on-farm and off-farm erosion damages. Under the Constitution the US legal system gives great leeway
FOODPOLlCYMay1983
107
US agriculture and the environment
to property owners in management of their property. In the case of farmers, the state generally has not intervened in management decisions so long as they do not cause or threaten to cause specific injury to others. So far at least, the possible injury to the interests of future generations from erosion-caused losses of productivity has not induced state intervention to enforce erosion control. The soil conservation programmes promoted by the SCS have had maintenance of productivity as their prime objective. The voluntary approach using financial inducements, eg cost sharing, was appropriate to this objective. The rationale for the approach is that when the damage is confined to the farm, the farmer should not be expected to pay for erosion control measures not in his own perceived economic interest. If society believes that additional measures are necessary to protect the long-run social interest in the productivity of the land, society must expect to pay for them. When off-farm damages of erosion are at issue, the principle that the polluter can be held to account for off-site damages to others legitimately comes into play. The principle is well established in law and administrative procedures, eg those of the EPA. While the principle is sweepingly applied to industrial firms, it has not been applied to farmers to control off-farm damages of erosion. It is argued that industrial firms can pass on pollution control costs, but that farmers, being in a highly competitive industry, cannot. Therefore the ‘polluter pays’ principle should not apply to farmers. I see no merit in principle in this argument, although there may be practical reasons for not enforcing the ‘polluter pays’ principle against farmers. Where off-farm erosion damages are small relative to administrative and/or legal costs of enforcing the principle, then the voluntary approach to control may make sense. This suggests that the question to ask about control of off-farm erosion damages is a practical one, not one of principle: will the voluntary approach based on financial inducements such as cost sharing be more cost-effective than enforcement of the ‘polluter pays’ principle? I don’t know the answer. I suspect, however, that if the erosion problem threatens to emerge on the projected scale, controlling off-farm damages through cost-sharing will be expensive. Even if current restraints on federal and state budgets are loosened, it would be difficult, in my judgment, to mobilize political support for cost-sharing on the required scale. Since the ‘polluter pays’ principle now is generally accepted, the public probably would ask why it should not apply to farmers as well as to industrial and municipal operations. If the strictly voluntary approach were to founder for lack of sufficient political support, what would be the alternatives? A possibility would be an effluent tax on erosion which causes off-farm damages. Effluent taxes are consistent with the ‘polluter pays’ principle and have the virtue of treating the environmental media as valuable resources whose services must be paid for. Taxes on eroded soil causing off-farm damages would force farmers to take steps to reduce erosion or reimburse society for the damages. So far the notion of effluent taxes has proved more attractive in principle than in practice. Proposals to tax erosion would provoke strong opposition from farmers. If the opposition were overcome, implementation of a soil loss tax probably would be costly, given the large number of farmers involved and the detailed information needed about the farming operations of each of them. Still, if off-farm erosion damages threaten to FOOD POLICY May 1983
US agricuhre
and the environment
rise high enough the soil loss tax approach may prove more cost-effective than the alternatives. Programmes which are basically voluntary but which impose important costs on the farmer if he refuses to participate may also have merit. The so-called cross-compliance approach is an example. The idea underlying cross-compliance is that a farmer who refuses to adopt erosion control practices would be denied participation in other programmes of value to him, eg price supports. No farmer would be required to adopt erosion control practices, but failure to do so would be costly. Obviously the strength of the cross-compliance approach would depend upon the value to the farmer of participating in other agricultural support programmes. I find it hard to avoid the conclusion that if the erosion problem emerges on the projected scale, achievement of adequate control with programmes now in place or under discussion will prove extremely difficult. The traditional voluntary approach based on financial inducements, while appropriate to the productivity maintenance objective, probably will prove expensive. Where the objective is water quality, voluntary approaches are inappropriate in principle, which probably would make it difficult to mobilize the political support necessary to fund their high cost. Attempts to achieve water quality goals by applying the ‘polluter pays’ principle, while appropriate, also would be expensive and would encounter massive resistance from farmers. So what is to be done? I do not argue that the various voluntary programmes should be abandoned. They clearly have value and their effectiveness could be improved, eg by focusing them on those relatively few farmers now responsible for most of the erosion. In addition, more thought should be given to ways of applying the ‘polluter pays’ principle that would make it more palatable to farmers. However, if erosion emerges on the projected scale, neither voluntary nor regulatory approaches are likely to achieve adequate control. Policies to develop new technologies and practices which reduce the scale of the problem should be considered.
New technologies and practices
Vbid.
FOOD POLICYMay 1983
Two main lines of research on new technologies appear most promising. One would seek to develop higher yielding technologies than those implicit in the scenario projected by Crosson and Brubaker.z’J Faster growth in crop yields would reduce the demand for cropland, making it possible to concentrate production on less erosive land. The second line of research would seek to overcome the present economic limits to the spread of conservation tillage. Conservation tillage leaves residue from the previous crop on the soil surface. The residue absorbs much of the energy of falling rain and run-off, greatly reducing erosion. Research on extending the economic limits of conservation tillage therefore has promise for achieving a reduction in erosion without transgressing the farmer’s economic interest in the management of his land. The key to development of higher yielding (land-saving) technologies is finding economical substitutes for fertilizer, fossil energy, and irrigation water, since in the projected scenario it is rising prices of these inputs which propels farmers toward more land-using technologies. Improvements in photosynthesis in main crops would substitute the sun’s energy for that from fossil sources and increased biological nitrogen fixation would substitute for nitrogen fertilizer. Increased research in 109
US agriculture and the environment
these areas would appear to be an appropriate response to key emerging resource scarcities. Progress in both areas is slow, however, and a substantial pay-off clearly is not just over the horizon. Whether there are equally appropriate lines of research that promise earlier returns I am not prepared to say. Yields with conservation tillage do not compare favourably with those of conventional tillage on poorly drained soils, or where weeds cannot be adequately controlled with herbicides, or in the northern tier of states because the growing season is too short. These limits define targets for research. Development of shorter season varieties would extend the northern limits of conservation tillage; seeds resistant to diseases fostered by moisture would encourage adoption of the technology on less well drained soils. Perennial weeds present special problems for conservation tillage because they are hard to manage with presently available herbicides. Development of new herbicides effective against perennials would overcome an important obstacle to more widespread adoption of the technology. The main advantage of a new technologies strategy relative to present erosion control programmes in the USA is that it aims to let the market harmonize the social interest and the farmer’s interest in erosion control. One need not have a philosophical preference for market solutions to recognize the market’s advantages of flexibility and speed of response compared with management by government intervention. The latter is clumsy and inefficient by comparison. The reason is not hard to find. Farmers have better information than anyone else about the highly variable soil, climatic and economic conditions bearing on their operations. The market permits effective use of this information. But the market solution will be acceptable only if it serves society’s interest in erosion control as well as the farmer%. A carefully conceived and sustained research programme to develop economically attractive technologies along the lines suggested above may be the most promising way to achieve this coincidence of interest.
FOOD POLICYMay 1983