An Examination of the Economics of Sustainable and Conventional Horticulture

An Examination of the Economics of Sustainable and Conventional Horticulture Robin G. Brumfield1 ADDITIONAL INDEX WORDS. costs and returns, alternative agriculture, organic agriculture SUMMARY. Since World War II, U.S. agriculture has reduced production costs by substituting petrochemicals for labor. Adverse impacts from chemical intensive agriculture include increased pest levels, groundwater and surface water contamination, soil erosion, and concerns about harmful levels of pesticide residues. Sustainable farming programs such as integrated crop management (ICM) and organic farming encourage farmers to use systems that reduce the adverse impacts of chemical agriculture. However, before farmers adopt an alternative system, they must determine that economic benefits from the alternative farming activities exceed the costs incurred. Unfortunately, relatively few studies have compared the cost of organic crop production with conventional production systems. Results of these studies are mixed. In some studies, organic systems are more profitable than conventional systems with organic price premiums, but are not economically viable without price premiums. In one long-term study, the organic system was more profitable than a conventional one if the cost of family labor was ignored, but less profitable if it was included. In some studies, net returns were higher for ICM than for conventional or organic systems, but in others, they were higher. Results also vary on a crop by crop basis. t the beginning of the 20th Century, the United States was primarily an agrarian society. After World AWar II, however, agriculture followed the rest of the U.S. economy and adopted an industrial workplace model (Ikerd, 1996). The industrial model reduced the cost of production through economic incentives that incorporated economies of scale, comparative advantage, opportunity costs, specialization, automation, and simplification into work activities. These concepts provided a focus for the U.S. land grant system where researchers, producers, and agricultural support industries worked to increase productivity and reduce costs. U.S. agricultural productivity increased dramatically. In 1940, 17% of the population was engaged in agricultural production. Today, less than 2% of the U.S. population works in agriculture and less than 10% of our disposable income is spent on food. Department of Agricultural, Food, and Resource Economics, Rutgers, The State University of New Jersey, 55 Dudley Road, New Brunswick, NJ 08901-8520. The cost of publishing this paper was defrayed in part by the payment of page charges. Under postal regulations, this paper therefore must be hereby marked advertisement solely to indicate this fact. 1Specialist in farm management. ● October–December 2000 10(4) 687 Average U.S. farm size increased to conventional agriculture. Ulti- tainable agriculture to mean an inte- from 168 acres (68 ha) in 1990 to 487 mately, sustainable agriculture became grated system of plant and animal pro- acres (197 ha) by 1997 (USDA, 2000). the term used in policy areas related to duction practices having a site-specific United States agricultural productiv- questions of the environment and re- application that will over the long term: ity increased dramatically because of source conservation and the term or- satisfy human food and fiber needs; increased mechanization, new tech- ganic was used in the marketplace as a enhance environmental quality and the nologies, increased chemical and fer- label to differentiate among agricul- natural resource base upon which the tilizer use, and specialization. Govern- tural commodities (Klonsky and agricultural economy depends; make ment policies have also favored this Tourte, 1998). Ecolabling has gained the most efficient use of nonrenewable shift toward maximizing production. widespread acceptance in Western resources and on-farm resources and The industrialization of agricul- Europe, and initiatives have begun in integrate, where appropriate, natural ture and the development of synthetic Virginia and New York in the United biological cycles and controls; sustain chemicals and fertilizers allowed farm- States. Eco-labels are used to differen- the economic viability of farm opera- ers to increase yields and reduce risks. tiate products that are produced using tions; and enhance the quality of life These increased yields resulted in lower sustainable production practices such for farmers and society as a whole per-unit costs (Brumfield, 1996). Al- as IPM and low-input agriculture (Estes (Government Printing Office, 1990). though increased yields are a benefit to et al., 1999). Economists have proposed vari- both producers and consumers, sev- The organic movement empha- ous approaches to paying for unin- eral disadvantages have resulted from sized the relationship between agricul- tended costs of chemical based agri- the use of agricultural chemicals. As ture and resource conservation by culture. Lichtenberg (1992) proposed farmers increased rates and frequency emphasizing the limited use of nonre- three alternatives to regulation: liabil- of application of chemicals, target in- newable resources. Regulation of agri- ity, information, and taxes. Lichtenberg sects have developed resistance to par- cultural methods that focus on natural concluded that liability already was ticular chemicals, and some pest popu- systems and ecological processes is dif- being used for pesticide regulation for lations have increased dramatically ficult to accomplish because these poor product performance. However, (National Research Council, 1986; methods often are conceptual and open it becomes a poor policy instrument Office of Technology Assessment, to interpretation. Thus regulation of when environmental damage or health 1995). Other unintended costs of in- organic production became a list of and safety issues are concerned, and it dustrial agriculture include topsoil acceptable and unacceptable inputs is costly. He concluded that informa- depletion, groundwater contamination (Klonsky and Tourte, 1998), with most tion would be most effective in the (U.S. General Accounting Office, states having certification programs area of farm worker safety. Taxes tend 1991), damage to wildlife for organically certified products. Cer- to influence application rates on a con- (Lichtenberg, 1992), decline in the tification assures consumers that the tinuous basis, but cannot alter timing number of family farms, erosion of product was produced using organic of applications. Abler (1992) favored rural community economies (Feenstra methods and assures producers that market-based solutions to unintended et al., 1996), applicator health risks the term organic is not used unscrupu- side effects of chemical agriculture. (Lichtenberg, 1992), and concerns lously (Lohr, 1998). To avoid farming People can refuse to work with pesti- about chemical residues in foods by neglect or the overuse of organic cides that they view as unsafe, farmers (Hanson et al., 1990; Lichtenberg, chemicals, the Organic Foods Produc- can refuse to buy unsafe pesticides, 1992). tion Act of 1990 requires farm plans. and consumers can refuse to buy pro- In the late 1970s and early 1980s, Sustainable agriculture is a new duce they perceive as unsafe. Farmers environmental concerns spurred au- paradigm in which farmers and con- would use safer chemicals, and compe- thors such as Hodges (1978, 1982) to sumers recognize unintended side ef- tition would force reductions in per endorse organic agriculture as an alter- fects are likely through some produc- unit prices, which would be passed native to pesticide-based agriculture. tion practices. Scaller’s 1988 article in along to consumers. Harper (1992) In the popular press, authors such as Agricultural Outlook compared alter- argued that in developing policy tools Rachel Carson (1962), and later, native and conventional agriculture and to account for unintended negative Wendell Berry (1981, 1984, 1986) explained the increased public atten- side effects of pesticide use, both indi- criticized the widespread use of agri- tion paid to alternative agriculture. He vidual risks and aggregate health risks cultural chemicals, the industrializa- listed factors that would affect the should be taken into account. She tion of agriculture, and the sociologi- adoption of alternative agriculture: stated that both benefits and risks of cal impacts of post-World War II agri- commodity and input prices, farm and pesticides are overestimated. She also cultural methods. Many people began environmental policies, infrastructure proposed developing models that take to believe that the price we pay for and markets, transition, and research into account technological change and food does not reflect all the costs of and education. With initial appropria- economic adoption if and when pesti- production (Ikerd, 1990, 1996). By tion in 1987, Low Input Sustainable cides are no longer freely available or the 1980s, a host of systems including Agriculture (LISA) was USDA’s re- acceptable to consumers. It appears low input agriculture, alternative agri- search and education grants program. that a combination of policy tools is culture, integrated pest management, The 1990 Farm Bill expanded the likely to be used. integrated crop management, biody- program and subsequently renamed it Organic food sales are only 1% to namic agriculture, agroecology, regen- the Sustainable Agriculture Research 1.5% of retail food sales (Raterman, erative agriculture, and organic agri-

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