Agricultural Productivity and Sustainability: Evidence from Low Input Farming in Argentina

Agricultural Productivity and Sustainability: Evidence from Low Input Farming in Argentina Jorge D. de Prada1, Boris Bravo-Ureta2 and Farhed Shah3 Paper prepared for presentation at the American Agricultural Economics Association Annual Meeting, Montreal, Canada, July 27-30, 2003 1 Graduate Assistant, Department of Agricultural and Resource Economics, University of Connecticut, 1376 Storrs Road, Storrs CT 06269- 4021, U.S.A. E-mail: [email protected] 2 Executive Director Office of International Affairs, and Professor, Department of Agricultural and Resource Economics, University of Connecticut, 843 Bolton Rd., Storrs, CT 06269-1182, U.S.A. E-mail: [email protected]. 3 Associate Professor, Department of Agricultural and Resource Economics, University of Connecticut, 1376 Storrs Road, Storrs CT 06269- 4021, U.S.A. E-mail: [email protected] Copyright 2003 by Jorge D. de Prada, Boris Bravo-Ureta and Farhed Shah. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. Agricultural Productivity and Sustainability: Evidence from Low Input Farming in Argentina Jorge de Prada, Boris Bravo-Ureta and Farhed Shah University of Connecticut Abstract: The tradeoff between short-term agricultural productivity and sustainability is examined with a statistical analysis of evidence from low input agriculture in Argentina. Estimation results show that more intensive land use, corporate leasing of land, and larger farm size are likely to increase current revenues, but at the cost of sustainability. Keywords: Agricultural Productivity; Sustainable Agriculture; Low Input Farming; Developing Countries; Argentina. Acknowledgements: We appreciate the support given by the agreement between Universidad Nacional de Río Cuarto and University of Connecticut and are especially grateful to Professors Alberto Cantero Gutierrez, Horacio Gil and Liliana Cristina Issaly for discussion of the initial idea. We would also want to thank Kazu Kawashima for his helpful comments. 2 1. Introduction One of the major challenges facing agriculture worldwide is how to feed an increasing population while improving environmental services and social equity. There is a debate in the literature regarding the role of market institutions in promoting agricultural productivity and sustainability in developing countries. Some authors, following the lead of the International Monetary Fund, are pushing for reforms that would allow market forces to allocate scarce resources and enhance farm productivity (e.g., Hazell, 1998). However, there are also others (e.g., van Dam 1999) who believe that the practice of these recommendations has increased social inequality and moved agricultural practices away from the ideals of sustainability. Parallel to the international discussion about sustainable development, and partly in response to increasing public pressure on environmental issues, developed countries have also been introducing frameworks for sustainable agriculture (de Koeijer 1995, Gold, 1999). One example from the U.S. is the low input sustainable agriculture (LISA) program, which was subsequently incorporated in the Sustainable Agriculture Research and Education Act of 1990. Unlike traditional industrialized agriculture, this policy promotes the use of reduced chemical inputs, such as pesticides, fertilizer and fossil energy, and more ecological management to produce food and fiber (Pimentel et al., 1989, Gold 1999). Nevertheless, there is concern that the use of less inputs may reduce farm productivity and competitiveness. The experience of Argentina may shed some light on this policy debate since agriculture in this country is currently driven by market forces and has historically been based on low chemical inputs. During the 1990s, a market friendly structural reform in line with the ‘Washington Consensus’ took place (Chisari et al., 1996). For all practical 3 purposes, international prices have been the main force driving agricultural modernization in the country over the last decade (Schnepf et al., 2001). This has resulted in higher agricultural output, but there are some authors who have expressed alarm at the increasing use of pesticides and chemical fertilizers and claimed that these trends are not sustainable. Furthermore, farming systems are gradually changing from mixed-livestock and crop based systems to more specialized systems involving simple crop rotations and with a relatively greater use of chemical inputs (Viglizzo et al., 2001). This paper attempts to make an empirical contribution to the above policy debate by reviewing evidence from Córdoba, Argentina, where a transformation of low input agriculture is taking place. We explore how factors that are leading to agricultural modernization in the area, such as land use, land tenure, and farm size, are impacting agricultural productivity and sustainability. The economics literature relating to the role of the afore-mentioned factors is quite controversial. For example, McConnell (1983) hypothesized that farmers would select land use and management strategies to offset the cost of soil erosion and that land tenure arrangements would be an important determinant of farmer behavior in this regard. This author also assumed that corporation looking at long terms profit would practice soil conservation in the same ways as farmers with similar planning periods. However, the available evidence from U.S. agriculture is somewhat mixed. For example, Miranda (1992) finds no-support for the theory, while Soule et al., (2000) claim that the theory is consistent with empirical evidence if the period of return of soil conservation practices and specific characteristics of land tenure are accounted properly. 4 In developing countries, the controversy is even greater. For example, in Argentina, some authors believe that market driven forces and the internationalization of agriculture have induced farmers to become more efficient and competitive (Ghida Daza, 2000; Schnepf et al,. 2001); however, in practice, farmers have ignored crop rotation based on pasture to get increased short-term profits, and this can have significant effects on soil erosion and crop productivity in the long-run (Miranda 1992). Some authors also contend that the new type of agriculture has reduced sustainability because many of the land operators are now corporations who rent land and do not care about conservation or environmental issues. Moreover, there is also a higher rate of poverty among some farm groups (e.g. van Dam, 1999, Pengue, 2000). However, the empirical support for these kinds of arguments is mostly anecdotal. We propose to provide a more rigorous analysis by adopting a production function approach to relate land use, land tenure, and farm size with the total value of crop output and agricultural sustainability. We test directly the impact of those factors on crop production, and make inferences related to sustainability issues by comparing different farming systems and practices. Byiringiro and Reordan (1996) use a similar approach to test the impacts of soil degradation, soil conservation effort, and farm size on marginal products of land and labor. The rest of the paper is divided into four sections. First, a conceptual model is developed, focusing on the factors that affect total productivity and sustainability. Second, characteristics of the farmers and other aspects of the data set are presented, followed by a discussion of empirical procedures. Third, the results for the models are described. The final section offers some concluding remarks. 5 2. Conceptual framework The production function is taken to be: Yi = f(Xij; Lij, Zik, Dl) (1) th where Yi represents the total value of all crop outputs (i.e., crop revenue) for the i farmer, Xj is a vector of inputs including land and labor, Lj is a vector that includes land use, land tenancy and farm size which are the variables of particular interest in the analysis; Zk represents the vector of control variables, and Dl are dummy variables that account for agro-ecological regions. Based on economic theory, we expect that inputs such as cropland1 and labor used for crop productions will have a positive impact on crop revenue. The variables Lij, Zik, can be thought as shifters of crop revenue. Given the fact that there is enough variability among farming systems, land tenancy, and farm size, we can estimate the effects of these factors on crop revenue. At the same time, we can infer how land use and management practices cause different level of soil erosion, water runoff, and water pollution, which are considered the main off-farm damages. Impact of farming systems on crop revenues Farming systems have been changing from diversified type to more specialized and intensive land use systems that are based on row crops (Viglizzo et al., 1995 and Viglizzo et al., 2001) and monoculture (for example soybean, or simple rotation, such as soybean wheat and soybean corn). Farming systems that are more diversified, include livestock activities, and rely on perennial pasture and row and small grain crops, usually are 1 Cropland is a type of land that can be used for small grain and row crops, pastures or any other land use with a few limitations. 6 considered more environmentally friendly and sustainable compared with monoculture or two crops rotations (Viglizzo et al., 1995, USDA, 2000). Cropland used for pasture as part of long-term rotation with row crops provide on-site

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