Land Degradation and Agricultural Productivity
ERS economists have been collaborating with soil scientists and geographers at other institutions to examine how land quality and land degradation affect agricultural productivity and food security. ERS published a summary report, Linking Land Quality, Agricultural Productivity, and Food Security (AER-823) in June 2003, and a more detailed discussion has now been published as a book: Land Quality, Agricultural Productivity, and Food Security: Biophysical Processes and Economic Choices at Local, Regional, and Global Levels, edited by Keith Wiebe (Edward Elgar Publishing). The authors find that land degradation generates productivity losses that are relatively small in most areas and at the global level because farmers generally have incentives to address degradation and its impacts. But land degradation does pose problems in areas where soils are fragile and markets function poorly. Key to addressing these challenges are measures to strengthen property rights, infrastructure, education, and research to enhance farmers’ incentives to invest in sustaining land quality.
Characteristics and Production Costs
As part of a series of reports on the costs of agricultural production and the variation in costs across different segments of the U.S. farm population, ERS has published two new reports on the dairy and rice sectors. Characteristics and Production Costs of U.S. Dairy Operations (SB-974-6) reports that total costs of producing milk in 2000 ranged from an average of $11.58 per hundredweight (cwt) of milk sold in the Fruitful Rim-West region to $18.23 per cwt in the Eastern Uplands. Costs were generally lower on large farms than on small farms. About 72 percent of surveyed farms covered their operating costs at the average farm price of milk in 2000 ($12.19 per cwt). Fewer were able to cover the full range of costs associated with production (including ownership costs and the opportunity cost of farmers’ labor). Characteristics and Production Costs of U.S. Rice Farms (SB-974-7) reports that total costs of producing rice in 2000 averaged $6.00 per hundredweight but varied widely by region and other characteristics. Costs were generally lower in the Arkansas non-Delta region than in California and the Gulf Coast region. The link between farm size and production costs is weaker for rice than it is for other commodities. When Government payments are added to the value of production, 97 percent of rice farms were able to cover operating costs and about 84 percent of farms covered both their operating and ownership costs of rice production in 2000.
Coping With Risk in Agriculture
Concern about risk and the ability of farmers to cope with risk has served as an important backdrop for Government agricultural support programs since the Great Depression. In the last decade, Government programs that directly target risk have been expanded to include counter-cyclical payments and increased subsidies on yield and revenue insurance. In addition, Congress periodically approves ad hoc disaster assistance. These policies have revived interest in classic economic questions about how well private markets would provide risk-coping tools to farmers in the absence of Government policies and to what extent Government programs actually alleviate the costs of coping with risk. A new ERS report, Risk, Government Programs, and the Environment (TB-1908), provides a brief overview of the relevant Government programs, characterizes the different kinds of production alternatives available to farmers, and identifies a range of technical problems that need to be overcome before a robust picture can be painted of how those alternatives affect risk, returns, and environmental quality.