Can The Systemic Barriers to Sustainable Farming Be Addressed? Steve Savage, Ph.D. Presented at the Ag 2.0 Conference Toronto, Canada, November 8, 2011
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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 Sustainable Practice Elite Genetics Precision Fertilization Fertilization Effective Pest Control Diverse Crop Rotation Reduced Tillage Cover Crops Controlled Wheel Traffic
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)
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How widely have these practices been adopted? Adoption
*****
Sustainable Practice Elite Genetics
***
Precision Fertilization
****
Effective Pest Control
*
Diverse Crop Rotation
**
Reduced Tillage
*
Cover Crops
*
Controlled Wheel Traffic
Some Barriers To Adoption of Longterm Soil Enhancement Strategies • Capital Expenses • Transitional Yield Risk • Negative Past Experience • Delayed Economic Returns
Can sustainability “Pay Its Own Way?” Adoption
*****
Sustainable Practice Elite Genetics
***
Precision Fertilization
****
Effective Pest Control
*
Diverse Crop Rotation
**
Reduced Tillage
*
Cover Crops
*
Controlled Wheel Traffic
Economic Benefit Short-Term Short-Term Longer-Term Longer-Term
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 Fertilize r
Land Rent
Planting/Emergence Weather
Crop Protection
Crop Insurance Premiums
Growing Season Weather
Fuel
Equipment Maintenance
Harvest Season Weather
Custom Services
Crop Consulting
Pest Pressures
Labor
Equipment Payments 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 Fertilize r
Land Rent
Planting/Emergence Weather
Crop Protection
Crop Insurance Premiums
Growing Season Weather
Fuel
Equipment Maintenance
Harvest Season Weather
Custom Services
Crop Consulting
Pest Pressures
Labor
Equipment Payments Payments
Commodity Prices
Land Tenure: a Fundamental Barrier to Long-term Sustainability Practices
How Big Is The Farmland Leasing “Industry?” All US Acres Rented 2007 45
$1,400
40
$1,200
35 n i s e r y 30 c r A o 25 d g e e t t 20 n a e C R 15 M M 10
$1,000 $800 $600 $400 $200
5 0
$-
0 3 0 5 0 7 0 9 0 0 0 0 0 0 0 0 1 1 1 3 1 5 1 7 1 9 2 1 3 $ $ $ $ $ 1 $ $ $ $ $ $ $ 2 USDA Census of Ag 2007 NASS County Level Rent Data
Rent Per Acre (2008-11 Average)
217MM rented acres, total $14.7B in rent
y r o g e t a C r o F l a t o T t n e R M M $
High Value Rental Land Is Concentrated in Certain States T op 15 States For Farm F arm Rental Receipts Receipts 2011 OKLAHOMA
$227
KENTUCKY
$252
Top 15 82% acres 90% value 150MM acres $13billion
$284
MICHIGAN
$347
WISCONSIN TEXAS
$550
OHIO
$554 $647
MISSOURI
$709
KANSAS
$766
NORTH DAKOTA
$799
SOUTH DAKOTA INDIANA
$936
NEBRASKA
$938 $1,234
MINNESOTA
$2,329
ILLINOIS
$2,437
IOWA
$0
$500
$1,000
$1,500
Million Dollars
$2,000
$2,500
Rent vs Crop Value In The Heart of the Corn Belt Illinois
Indiana $250
$250 ) e r $200 c a / $ ( t $150 n e R e $100 g a r e $50 v A
) e $200 r c a / $ ( t $150 n e R e $100 g a r e $50 v A
y = 0.393x - 76.136 R2 = 0.8424
$0
y = 0.3165x - 47.23 R2 = 0.7379
NASS county level land rent data
$0
$ 2 00
$ 4 00
$ 60 0
$ 80 0
$ 2 00
Average Income From Main Crops ($/acre)
$ 60 0
$ 80 0
Average Income From Main Crops ($/acre)
Iowa
Minnesota
$250
$250
) e $200 r c a / $ ( $150 t n e R e $100 g a r e $50 v A
) e $200 r c a / $ ( $150 t n e R e $100 g a r e $50 v A
y = 0.2185x + 37.638 R2 = 0.6673
$0 $ 20 0
$ 40 0
y = 0.3859x - 81.267 R2 = 0.8633
$0 $4 0 0
$6 0 0
$8 0 0
$ 2 00
$4 0 0
$6 00
$8 0 0
NASS production and value for Corn, Soy, Sorghum, Wheat
Rent vs Crop Value In Other Corn Belt States North Dakota
Missouri
$250
$250
) e $200 r c a / $ ( t $150 n e R e $100 g a r e $50 v A
) e $200 r c a / $ ( t $150 n e R e $100 g a r e $50 v A
y = 0.2989x - 48.509 2
R = 0.7884
y = 0.2604x - 22.115 R2 = 0.4295
$0
$0 $ 20 0
$40 0
$ 600
$ 80 0
$200
$800
South Dakota
Nebraska $250
y = 0.449x - 110.15 2
) e $200 r c a / $ ( $150 t n e R e $100 g a r e $50 v A
$600
Average Income From Main Crops ($/acre)
Average Income From Main Crops ($/acre)
$250
$400
R = 0.885
) e $200 r c a / $ ( t $150 n e R e $100 g a r e $50 v A
$0
y = 0.3927x - 82.554 2
R = 0.8506
$0
$200
$400
$600
$800
Average Income From Main Crops ($/acre)
$ 20 0
$ 400
$60 0
$ 8 00
Average Income From Main Crops ($/acre)
Land Rents Are Mainly Driven By Productive Potential Selected Corn Belt Counties $250 y = 0.3869x - 81.593 R2 = 0.8234
) $200 e r c a / $ ( $150 t n e R e $100 g a r e v $50 A
$0 $0
$ 2 00
$400
$600
Value Of Main Crops ($/acre)
$800
Typical Land Rents Represent A Significant Share of Gross Crop Value Selected Corn Cor n Belt Counties Counties 10 9 8
NASS county level land rent data
s 7 e i t 6 n u o 5 C f 4 o % 3
NASS production and value for Corn, Soy, Sorghum, Wheat
2 1 0
0
3
6
5 1 8 2 1 2 4 2 7 3 0 3 3 3 6 3 9 9 1 2 1
Percent of Average Major Major Crop Value V alue As Rent
Land rents have risen significantly in recent years US Farmland Rentals 2009 and 2011 1,600 ) 1,400 M M $ 1,200 ( s t n 1,000 e m 800 y a P 600 l a t n 400 e R 200
2009 2011
0 0 1
0 3
0 5
0 7
0 9
0 3 0 5 0 7 0 9 0 1 1 1 1 1 1
0 1 2
0 5 0 3 2 2
Rent Doll Do llars ars Per Acre
2009: 180.7 MM acres rented, $13.1 billion total rent, average $72.40/acre 2011: 2011: 182.3 MM acres rented, $14.5 billion total rent, average $79.72/acre
Recent Rent Trends in Key States Rent Trends Tr ends $200 t n e R e r c A / $ e g a r e v A e t a t S
IA IL
$180 $160
IN $140
MN
$120
OH $100
NE MO
$80 20 07
20 08
2 009
20 10
2 011
2 012
Longer-term Trend Data Is Available for Some States Rent Trend Tr end for the Top T op 40 Iowa Counties 300
250
) e r c A / $ 200 ( t n e R e 150 g a r e v A
100
50 1994
1999
2004
2009
A shift seems to have begun ~2004 ~ 2004 in North Dakota North Dakota Land La nd Rents and Values 30
t 25 n e R o T 20 e u l a V15 d n a L 10 f o o i t a 5 R 0
1 98 5
1 99 0
19 95
2 00 0
20 05
20 10
2 01 5
What Needs To Change To Favor Longterm Sustainable Practices? Annual Input Costs
Other Annual Expenses
Annual Risks Assumed
Seed
Crop Financing
Input Price Shifts
Fertilizer
Land Rent
Planting/Emergence Weather
Crop Protection
Crop Insurance Premiums
Growing Season Weather
Fuel
Equipment Maintenance
Harvest Season Weather
Custom Services
Crop Consulting
Pest Pressures
Labor
Equipment Payments Payments
Commodity Prices
Are these systemic issues being addressed? Approach Government payments Environmental Services Markets
Lease Design Lending
Downstream Customer Initiatives Farm Fa rm management companies Land Investment for Improvement Sustainable Farm Lease .org
Insurance Expert Advice
Sketch of A Sustainable Farming Support System
Investors
Landowners
Environmental Groups Lease Design
Sustainability Support Entity
Lending Insurance Expert Advice
Transition Specialists
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Sustainable Farm Operators
Grower Organizations
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
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