systemic barriers to sustainable farming
DESCRIPTION
The widespread rental of farmland is one of several barriers to wider adoption of sustainable row crop farming methodsTRANSCRIPT
Can The Systemic Barriers to Sustainable Farming Be Addressed?
Steve Savage, Ph.D.Presented at the Ag 2.0 ConferenceToronto, Canada, November 8, 2011
1
Focus For This Talk: US, Rain-fed, Row Crops
Farming Sustainability Challenges
• Rising food demand
• Need to avoid land-use-change
• Need to mitigate environmental consequences
• Need to deal with greater climatic variation
Sustainable Practices For Rain-Fed Row Crops
Elite Genetics
Precision Fertilization
Effective Pest Control
Diverse Crop Rotation
Reduced Tillage
Cover Crops
Controlled Wheel Traffic
Sustainable Practice
Long-term Soil Quality Enhancement
• Environmental Benefits (beyond resource use efficiency)– Reduced erosion/sedimentation/surface water pollution– Reduced ground water pollution– Reduced nitrous oxide emissions
• Practical Outcomes– Improved water capture and storage (drought-proofing, yield
stability)– Improved aeration (increased yield)– Improved fertility (increased yield, cost savings)– Earlier spring access (increased yield)
5
How widely have these practices been adopted?
* * * * * Elite Genetics
* * * Precision Fertilization
* * * * Effective Pest Control
* Diverse Crop Rotation
* * Reduced Tillage
* Cover Crops
* Controlled Wheel Traffic
Sustainable PracticeAdoption
Some Barriers To Adoption of Long-term Soil Enhancement Strategies
• Capital Expenses
• Transitional Yield Risk
• Negative Past Experience
• Delayed Economic Returns
Can sustainability “Pay Its Own Way?”
Short-Term Longer-Term
* * * * * Elite Genetics
* * * Precision Fertilization
* * * * Effective Pest Control
* Diverse Crop Rotation
* * Reduced Tillage
* Cover Crops
* Controlled Wheel Traffic
Economic BenefitSustainable PracticeAdoption
Grower Economics Are Dominated by Annual Cost and Risk Factors
Annual Input Costs
Other Annual Expenses
Annual Risks Assumed
Seed Crop Financing Input Price Shifts
Fertilizer Land RentPlanting/Emergence
Weather
Crop ProtectionCrop Insurance
PremiumsGrowing Season
Weather
FuelEquipment
MaintenanceHarvest Season
Weather
Custom Services Crop Consulting Pest Pressures
Labor Equipment Payments Commodity Prices
Grower Economics Are Dominated by Annual Cost and Risk Factors
Annual Input Costs
Other Annual Expenses
Annual Risks Assumed
Seed Crop Financing Input Price Shifts
Fertilizer Land RentPlanting/Emergence
Weather
Crop ProtectionCrop Insurance
PremiumsGrowing Season
Weather
FuelEquipment
MaintenanceHarvest Season
Weather
Custom Services Crop Consulting Pest Pressures
Labor Equipment Payments Commodity Prices
Land Tenure: a Fundamental Barrier to Long-term Sustainability Practices
USDA Census of Ag 2007
How Big Is The Farmland Leasing “Industry?”
All US Acres Rented 2007
0
5
10
15
20
25
30
35
40
45
Rent Per Acre (2008-11 Average)
MM
Re
nte
d A
cre
s in
C
ate
go
ry
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$MM
Ren
t T
ota
l F
or
Cat
ego
ry
217MM rented acres, total $14.7B in rent27.4MM acres rented at >$150/acre, $4.9B in rent
USDA Census of Ag 2007NASS County Level Rent Data
High Value Rental Land Is Concentrated in Certain States
Top 15 States For Farm Rental Receipts 2011
$2,437
$2,329
$1,234
$938
$936
$799
$766
$709
$647
$554
$550
$347
$284
$252
$227
$0 $500 $1,000 $1,500 $2,000 $2,500
IOWA
ILLINOIS
MINNESOTA
NEBRASKA
INDIANA
SOUTH DAKOTA
NORTH DAKOTA
KANSAS
MISSOURI
OHIO
TEXAS
WISCONSIN
MICHIGAN
KENTUCKY
OKLAHOMA
Million Dollars
Top 1582% acres90% value150MM acres$13billion
Rent vs Crop Value In The Heart of the Corn Belt
Illinois
y = 0.393x - 76.136
R2 = 0.8424
$0
$50
$100
$150
$200
$250
$200 $400 $600 $800
Average Income From Main Crops ($/acre)
Av
era
ge
Re
nt
($/a
cre
)
Indiana
y = 0.3165x - 47.23
R2 = 0.7379
$0
$50
$100
$150
$200
$250
$200 $400 $600 $800
Average Income From Main Crops ($/acre)A
ve
rag
e R
en
t ($
/ac
re)
Iowa
y = 0.2185x + 37.638
R2 = 0.6673
$0
$50
$100
$150
$200
$250
$200 $400 $600 $800
Average Income From Main Crops ($/acre)
Av
era
ge
Re
nt
($/a
cre
)
Minnesota
y = 0.3859x - 81.267
R2 = 0.8633
$0
$50
$100
$150
$200
$250
$200 $400 $600 $800
Average Income From Main Crops ($/acre)
Av
era
ge
Re
nt
($/a
cre
)
NASS county level land rent data
NASS production and value for Corn, Soy, Sorghum, Wheat
Rent vs Crop Value In Other Corn Belt States
Missouri
y = 0.2604x - 22.115
R2 = 0.4295
$0
$50
$100
$150
$200
$250
$200 $400 $600 $800
Average Income From Main Crops ($/acre)
Av
era
ge
Re
nt
($/a
cre
)
Nebraska
y = 0.449x - 110.15
R2 = 0.885
$0
$50
$100
$150
$200
$250
$200 $400 $600 $800
Average Income From Main Crops ($/acre)
Av
era
ge
Re
nt
($/a
cre
)
South Dakota
y = 0.3927x - 82.554
R2 = 0.8506
$0
$50
$100
$150
$200
$250
$200 $400 $600 $800
Average Income From Main Crops ($/acre)
Av
era
ge
Re
nt
($/a
cre
)
North Dakota
y = 0.2989x - 48.509
R2 = 0.7884
$0
$50
$100
$150
$200
$250
$200 $400 $600 $800
Average Income From Main Crops ($/acre)
Av
era
ge
Re
nt
($/a
cre
)
Land Rents Are Mainly Driven By Productive Potential
Selected Corn Belt Counties
y = 0.3869x - 81.593
R2 = 0.8234
$0
$50
$100
$150
$200
$250
$0 $200 $400 $600 $800
Value Of Main Crops ($/acre)
Av
era
ge
Re
nt
($/a
cre
)
Typical Land Rents Represent A Significant Share of Gross Crop Value
Selected Corn Belt Counties
0
1
2
3
4
5
6
7
8
9
10
Percent of Average Major Crop Value As Rent
% o
f C
ou
nti
es NASS county level
land rent data
NASS production and value for Corn, Soy, Sorghum, Wheat
Land rents have risen significantly in recent years
US Farmland Rentals 2009 and 2011
0
200
400
600
800
1,000
1,200
1,400
1,600
Rent Dollars Per Acre
Re
nta
l Pa
ym
en
ts (
$M
M)
2009
2011
2009: 180.7 MM acres rented, $13.1 billion total rent, average $72.40/acre2011: 182.3 MM acres rented, $14.5 billion total rent, average $79.72/acre
2007 rented acreage in the counties with 2009 and 2011 rent data
Recent Rent Trends in Key States
Rent Trends
$80
$100
$120
$140
$160
$180
$200
2007 2008 2009 2010 2011 2012
Sta
te A
ve
rag
e $
/Ac
re R
en
t
IA
IL
IN
MN
OH
NEMO
Longer-term Trend Data Is Available for Some States
Rent Trend for the Top 40 Iowa Counties
50
100
150
200
250
300
1994 1999 2004 2009
Av
era
ge
Re
nt
($/A
cre
)
A shift seems to have begun ~2004 in North Dakota
North Dakota Land Rents and Values
0
5
10
15
20
25
30
1985 1990 1995 2000 2005 2010 2015
Ra
tio
of
La
nd
Va
lue
To
Re
nt
What Needs To Change To Favor Long-term Sustainable Practices?
Annual Input Costs
Other Annual Expenses
Annual Risks Assumed
Seed Crop Financing Input Price Shifts
Fertilizer Land RentPlanting/Emergence
Weather
Crop ProtectionCrop Insurance
PremiumsGrowing Season
Weather
FuelEquipment
MaintenanceHarvest Season
Weather
Custom Services Crop Consulting Pest Pressures
Labor Equipment Payments Commodity Prices
Are these systemic issues being addressed?
Approach
Government payments
Environmental Services Markets
Downstream Customer Initiatives
Farm management companies
Land Investment for Improvement
Sustainable Farm Lease .org
Lease Design
Insurance
Lending
Expert Advice
Sketch of A Sustainable Farming Support System
24
Landowners
Transition Specialists
Sustainability Support Entity
Environmental Groups
Grower Organizations
Sustainable Farm Operators
Lease Design
Insurance
Lending
Expert Advice
Investors
Obvious Challenges
• Educational
• Confidence Building
• Equitable Value Sharing
• Quantifying the Improvement Trajectory
Conclusions
• Sustainability is, by definition, something that requires the long-term view
• The economic reality of a row crop farming enterprise is dominated by short-term demands and signals
• The widespread rental of farmland is a major barrier to sustainability
• Many approaches do not fully address this fundamental issue of long-term vs short –term economics
• An alternative system is needed
26