Factors influencing the economic potential for alternative farming systems: Case analyses in South Dakota

Abstract

Results of calculations on the economic potential for alternative (low input, sustainable) farming systems in a small grain-row crop region of the Northern Plains are reported. Two sets of alternative farming systems, in which no chemical fertilizers or herbicides are used, are compared with various conventional and reduced till systems. In Farming Systems Study I (FSS1), an alternative rotation consisting of oats, alfalfa, soybeans, and corn is compared with conventional and ridge till rotation systems composed of corn, soybeans, and spring wheat. In Farming Systems Study II (FSS2), three systems with an emphasis on small grains are compared. An alternative system rotation consisting of oats, sweet clover, soybeans, and spring wheat is compared with conventional and minimum till rotation systems comprised of soybeans, spring wheat, and barley. Results of baseline economic analyses show that alternative farming systems can be competitive with more conventional systems in at least some situations. The alternative systems entail markedly lower direct costs, and the alternative system in FSS2 has approximately the same net returns as the comparable conventional and minimum till systems. The FSS1 alternative system has positive but somewhat lower net returns than the comparable conventional and ridge till systems. Sensitivity analyses were conducted with alternative system crop yields, chemical fertilizer and herbicide prices, and varying assumptions about future Federal farm program support levels and acreage set aside requirements. The yield sensitivity analyses show that one alternative farming system requires yields about 5-10 percent above those of the comparable conventional system to produce the same net returns. However, the other alternative system is competitive with a conventional system even with yields 5 percent lower. Analyses varying chemical fertilizer and herbicide prices reveal that the alternative farming system in FSS1 becomes competitive with more conventional systems when fertilizer and herbicide prices rise by 50 percent. The alternative farming system in FSS2 is already competitive at current fertilizer and herbicide prices. In some cases, sensitivity analyses with Federal farm program provisions indicate that reductions in farm program benefits increase the economic competitiveness of alternative farming systems. However, important exceptions occur. Results indicate that not only the level of future farm program benefits, but also the form of program provisions and compliance requirements, will affect the relative competitiveness of alternative farming systems.

Economic Factors Affecting Diversified Farming Systems

“…Because DFS often employ intercropping or multicropping systems in order to take advantage of complementarities between crops, prevent soil erosion, and foster biodiversity, they are also less-easily mechanized and therefore are more labor-intensive than planting monocultures. In the same way, the use of chemical pesticides and fertilizers and GMOs is often cheaper than manual weeding or biological pest control or IPM technologies (Dobbs et al 1988). In more developed countries where the costs of labor are high, in developing countries where labor markets are incomplete (i.e., where transactions costs of matching willing workers with employers are high) (Binswanger and Deininger 1997), and wherever local and regional labor shortages are a key limiting factor for agricultural production (as is becoming the case in the United States; see Devadoss and Luckstead 2008), farmers will require developments in precision agricultural technologies that allow for more efficient intercropping and planting on smaller scales if they are to adopt DFS systems.…”

Planting flexibility: Implications for agricultural sustainability

“…Agricultural production needs to be analyzed as an integrated economic and environmental system to determine the relative efficiency of alternative systems, the relationships between environmental quality and economic performance, the tradeoffs among environmental attributes, and the regional variation in economic and environmental effects. Many analyses assert that positive environmental effects are to be expected if increased crop diversification occurs [Dobbs et al, 1988;Faeth, 1995;Painter and Young, 1994]. However, because environmental effects are site-specific, a uniform national agricultural policy has different effects across regions.…”

Mandatory supply controls versus flexibility policy options for encouraging sustainable farming systems

“…Research at South Dakota State University (SDSU) on the implications of Federal farm policy for sustainable agriculture began in the mid-1980s with budget simulations of synthetic whole farms based on agronomic coefficients derived from early stages of farming systems work at the University's Northeast Research Station (Dobbs et al, 1988). The profitability of sustainable ("alternative"), conventional, and reduced tillage systems were compared in that research, using the Federal farm program and market prices prevailing in 1987 as a baseline, and simulating the effects of lower support (target) prices and of complete elimination of the farm program.…”

“…Thus, acreage controls probably affect yield and input application rates, besides the effect on profits associated with crop mix, brought out in our case analyses. Dobbs et al (1988) pointed out circumstances in which acreage set-aside requirements appear compatible with sustainable practices, and even may encourage them. This can happen when non-harvested legumes such as sweet and red clover, which are part of some sustainable cropping systems, satisfy farm program setaside requirements.…”