Economic Analysis and Policy Development To Support Multiple Social, Economic and Environmental Benefits Produced by Farms

Final Report for LNC99-146

Project Type: Research and Education
Funds awarded in 1999: $92,840.00
Projected End Date: 12/31/2001
Matching Non-Federal Funds: $405,000.00
Region: North Central
State: Minnesota
Project Coordinator:
Mara Krinke
Land Stewardship Project
George Boody
Land Stewardship Project
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Project Information


Different farming systems produce varying kinds and levels of environmental, social, and economic benefits. We compared estimated benefits produced by current and potential farming systems in two Minnesota watersheds, including lack of soil movement, water quality, greenhouse gas emissions, wildlife habitat, and institutional relationships. This project used contingent valuation and avoided costs methods to value selected non-market benefits. Based on the research, we developed recommendations for policy analysis and proposals that would reward farmers who produce public benefits on their farms. Major findings are documented in the appended Executive Summary.


1. Farming systems need to be diversified to meet national objectives relative to working landscapes. The dire links between agriculture, biodiversity, and national concerns such as the hypoxic zone in the Gulf of Mexico are increasingly documented. Nearly half of endangered species are threatened due to agriculture (Wilcove et al. 1998). Research has associated Midwestern farming with excessive nutrients in the Gulf (CAST 1999 and Randall et al. 1998). MacKay (2001) and others have written about the need to cultivate biodiversity through stewardship practices, and similarly, Altieri (1999) addresses the importance of the ecosystem that biodiversity supports in sustainable food systems. Scientists convened through the Mississippi Riverwise Partnership in December 2000 reached a consensus that society must design and implement more diversified agricultural systems in the Corn Belt and create strategically placed and functioning wetlands (Riverwise 2001). The adoption of landscape level changes as well as best management practices in corn and soybeans, are proposed by Mitch et al. (2001) and Randall (2001) among others. The Environmental Protection Agency has issued environmental goals of contaminant reduction that will require changes in the dominant farming systems (NOAA 2001).

2. Different farm policies are needed to achieve national objectives. There is a growing call for making stewardship incentives a primary component of farm policy. At a meeting sponsored by the Minnesota Board of Water and Soil Resources (BWSR) on farm bill policy in 2001, many thought we should create a feasible transition from existing commodity programs to a green payment program and that we should pay for the production of environmental goods and services (BWSR 2001). Similarly, meetings held by the Soil and Water Conservation Society (SWCS) found that participants see the need for "making stewardship a fundamental justification for public support of agriculture" (SWCS 2001). The Minnesota Department of Natural Resources (MN DNR 2001) and BSWR (MN BWSR 2001) each have issued recommendations in support of the concepts of the Conservation Security Plan (CSP), as has the International Association of Fish and Wildlife Agencies (Wildlife Management Institute 2001). A review of policies by the Economic Research Service concluded that much better coordination is needed between conservation and income support policies (ERS 2000).

The public is beginning to make its collective voice heard as consumers of agricultural products and as beneficiaries -- or not -- of management decisions. For example, the public increasingly wants to know more about their food and how it is produced (Meter et al. 2001). Being able to explain the actual benefits fosters a willingness to spend taxpayer dollars for stewardship (Welle 2001), and public involvement in agricultural policy has benefits for agriculture. For example, the Citizens Advisory Committee (MINNESOTA POLLUTION CONTROL AGENCY 1994) developed a range of proposals from river buffers that later became the Conservation Reserve Enhancement Program (CREP) initiative in Minnesota. A similar effort is underway in the southeast region of the state, where MBA Phase I results are being included in the justification for measured landscape scale efforts to slow erosion, nutrient, and farmer losses in the region. Some European countries are ahead of the United States with regard to citizen-derived stewardship policies and ways in which to measure their success (DeVries 2000 and Vorley 2001). For example, the French government supports "the multi-functional nature of agriculture" with Rural Farming Contracts between the state and a local commission that includes farmer commitments and regional priorities for land and water use, job creation, farm diversification, and biodiversity.

3. The literature is reviewed more extensively in a copy of the full project publication called "Multiple Benefits of Agriculture Project: An Economic Environmental and Social Analysis." It is available at the website:

Project Objectives:

A. Design a study that will measure the economic benefits produced in two Minnesota watersheds by agriculture specializing in cash grains or livestock, and integrated farming systems that produce both crops and livestock. The project will evaluate how public and private policies foster the production of multiple economic, social, and environmental benefits.

B. Calculate and compare the economic value of benefits from commodity-based production to that of integrated farming systems in two watersheds in Minnesota. This study will look beyond the economic value of commodities produced on these farms to consider non-market benefits with economic values that can be ascertained.

C. Analyze and evaluate selected policies at the national, state, and local levels for their ability to foster production of multiple benefits. Certain public policies in Europe have been designed to reward farmers for practicing what they call multifunctional agriculture. This study will look at U.S. policy options to encourage production of non-market benefits that could directly modify farming practices in these watersheds, if enacted. These could include policies related to the sequestration of carbon, the trading of nutrient credits, and flood retention of water quality regulations. Policies related to social and environmental consequences not tied to direct market values will be taken into account also.

D. Develop recommendations and disseminate information on the findings to at least 1,000 people. A compelling case needs to be made for why farmers adopt multifunctional sustainable agriculture changes and why policy makers should create such policies. We want to inform people in the North Central region and policy makers in our nation's capitol about the results of our work.

This project focused on evaluating selected economic, environmental and social benefits produced by a variety of farming systems as a basis for new policy proposals to promote the adoption of integrated farming systems. These new policies would help farmers better manage the risks in a transition to integrated, sustainable farming systems. We also addressed consumer willingness to pay for multiple benefits from farmland as a part of the project.


Click linked name(s) to expand/collapse or show everyone's info
  • Larry Gates
  • Frances Homans
  • Dr. Steve Light
  • Dr. Patrick Welle


Materials and methods:

Our analysis compared estimated benefits produced by current and potential farming systems in two Minnesota watersheds. From the differences in soil erosion, water quality, greenhouse gas emissions, wildlife habitat, and institutional relationships between the different farming systems, we will develop policy recommendations that will support the production of public benefits from agriculture.

Interdisciplinary teams of staff, researchers, and advisors oversaw the project. Through the active participation of a 14-member steering committee and with a review by a 12-member technical advisory committee, we established a methodology and strategy for the analysis. The steering committee continues to meet to guide the research. The steering committee was composed of farmers and rural residents, nonprofit staff, academics, and agency professionals. The technical advisory committee was made up of experts in different disciplines (agency staff, academics, and consultants) as well as leaders in the Wells Creek and Chippewa River watersheds. Thus we have involved academics, practitioners, farmers, and rural citizens in structuring the analysis and estimating results. We also included staff from the Minnesota Department of Natural Resources to guide us in environmental analysis and government issues.

We sought to use published and locally obtained data on environmental, social, and economic outputs when possible. In both watersheds, data on stream health, water quality, and farming practices was readily available. We have used those resources when possible. Bird and fish surveys have been available in some cases. We have worked with local Soil and Water Conservation Districts, County Extension agents, Department of Natural Resources staff, and university researchers to procure available data.

The scenarios for possible future land use provide the basis for the multiple benefits of agriculture analysis. The goal of the scenario development was to create three or four alternate future states for analysis of the varying levels of environmental, economic, and social benefits that would result from alternative futures. The scenarios are citizen-driven, based on written materials created by watershed residents and through in-person focus groups and interviews. Focus groups were assembled by project staff and consultants, and were asked to provide general outlines of their desires and expectations for future agricultural land use in the watersheds. Watershed residents were asked about their preferences about how the neighboring landscape might look in the future. Residents were also asked to make predictions about what would happen to the environment and communities under the different scenarios. From these discussions, we developed four main scenarios, which vary slightly between the watersheds to account for local conditions.

Based on the focus groups and the work of the Core Working Group, four scenarios were further developed for analysis. These scenarios are intended to illustrate the range of environmental, social, and economic effects that result from changes in farming practices. They are not intended to be prescriptive for land use in the watersheds. Rather, they were designed to show the variety of effects that can result from specific changes in management. Table WC- 3 and C-3 contain detailed descriptions of the crop and land use practices adopted for each of the scenarios.

The four scenarios were:
The extension of current trends scenario is characterized by fewer and larger farms with increasing acreage in row crops and no significant trend towards the application of best management practices. The trend toward leasing land continues, to neighbors or management companies. Without incentives to control external effects of farming, there will likely continue to be negative environmental outcomes such as erosion, nitrification, and habitat loss. Small, more diversified farms are the other surviving forms of agriculture.

The adoption of best management practices (BMPs) scenario includes the introduction of conservation tillage, 100 foot buffers around streams, and recommended nutrient application rates on all farmland. The assumptions for this scenario were taken from current recommendations from extension agents, county Soil and Water Conservation District staff, and a variety of conservation programs. The purpose of this scenario is to show what levels of benefits can be gained with currently recommended management practices in existing cropping systems.

An increased diversity on the agricultural landscape characterizes the expanded community and economic diversity scenario. In modeling different versions of this scenario, we include increased crop diversity and shifted to a five-year rotation, shifted grazing systems to management intensive rotational grazing systems, and introduced wetland restoration in appropriate areas. Buffers around streams are used in a working landscape.

Where feasible, a continuous cover on working farms characterizes the managed year-round cover scenario. Management intensive rotational grazing, cover cropping and land managed for hunting preserves are common land uses in this scenario. Prairie and wetland restorations are included in the scenario. Expanded (300') buffers around streams are used in a working landscape.

To estimate environmental outputs from farms in the watersheds, we used the Agricultural Drainage and Pesticide Transport (ADAPT) model, a biophysical modeling tool that provides estimates of soil erosion, nutrient loss, and other physical outputs from different farming systems.

We analyzed the potential fish and wildlife impacts from changes in sedimentation and land use under the assistance of researchers at the University of Minnesota. These estimates were compared to published literature and current fish and wildlife surveys to qualitatively describe potential changes in habitat and animal success. We compared the total number of lethal and sublethal events between current conditions and each of the four land use scenarios for each watershed to determine changes in the effects of sediment concentrations on fish as land use and farming practices changed in the watersheds. We tested for differences between the mean annual days with lethal and sublethal sediment concentrations using analysis of variance (ANOVA), and compared individual means among treatments if a significant difference was detected (p<0.05). To build a better understanding about the institutions and social networks in the watersheds, project members conducted interviews and focus groups with farmers and other watershed residents. These interviews helped us define a list of the current institutions active in the watersheds and to characterize the relationships among those institutions. Further interviews with farmers allowed us to illustrate the flows of inputs and outputs from farms, including information, fertilizer, feed, labor, commodities, and other farm products. We used several methods of economic valuation to support the analysis, including contingent valuation and measurement of avoided costs. Economists at Bemidji State University sent a mail survey to a randomly selected sample of Minnesota households. Screening of an initial sample of 1,000 to exclude businesses, deceased, non-residents, and those without a valid mailing address yielded 834 potential respondents. We yielded an effective response rate of 47.2 % from the 394 booklets that were completed and returned. Also personal interviews were conducted with the help of several consultants in the two watersheds that were studied intensively in the other components of this project. Sixty-four personal interviews were conducted in the Wells Creek Watershed and 61 were completed in the Chippewa River Watershed, for a total of 125 additional responses from Minnesota citizens. The survey asked Minnesota residents to state how much they would be willing to pay, in the form of higher prices or taxes, a policy that will produce improved environmental outcomes from farms. A National Policy Group, composed of nonprofit and government leaders, was assembled. While comments from various members of the group were extremely useful, we were not able to fully utilize the potential of this group. Policy recommendations were developed with the assistance of LSP's federal farm advisory committee and, when possible, by contacts with watershed residents. Participation of project partners:
University of Minnesota. We had paid staff and three advisory staff actively working on the project. John Westra is a researcher in the Department of Applied Economics. Dr. Westra conducted the biophysical modeling using the Agricultural Drainage and Pesticide Transport (ADAPT) model. He was supervised by Dr. Frances Homans of the Department of Applied Economics and assisted by Prasanna Gowda in the Soils Department. Julie Henry is a graduate student in the Department of Fisheries and Wildlife, and conducted a literature review and research on the fish and wildlife effects of changes in agricultural practices. Ms. Henry was supervised by Bruce Vondracek of the Department of Fisheries and Wildlife.

Bemidji State University. Through the SARE grant, Bemidji State University was funded for a graduate assistant and some duplication costs. Dr. Patrick Welle of Bemidji State University developed the contingent valuation survey for the project. Dr. Welle has been assisted by graduate students and paid consultants in preparing the survey and conducting in-person interviews in the two watersheds.

Institute for Agriculture and Trade Policy. Steve Light of the Institute for Agriculture and Trade Policy worked with watershed residents to develop the alternative scenarios for the analysis. Marin Byrne researched avoided costs for the project relative to flood mitigation.

Consultants. The project hired several consultants to assist with specific parts of the research. Kristen Corselius conducted interviews with producers in the watershed to form the basis of an institutional analysis. Gordon McIntosh from the University of Minnesota in Morris developed a paper analyzing the potential greenhouse gas impacts from Minnesota agriculture. We have also hired consultants to interview respondents for the contingent valuation survey. These consultants have been paid using matching funds from the state of Minnesota. Finally, farmer participants are periodically offered stipends to compensate for their contribution of time to the project.

Research results and discussion:

The Wells Creek watershed lies in southeastern Minnesota, a region characterized by blufflands, with a low valley, rolling hills, and an upper flat land area. The watershed is comprised of 52,000 acres and is home to approximately 1,500 people (700 farms and residences). The creek drains into the Mississippi River north of Lake City near historic Frontenac and Frontenac State Park.

The Chippewa River watershed lies in western Minnesota. The watershed is comprised of 1.3 million acres and is home to approximately 37,300 people. Sixty percent of the Chippewa River watershed is in agricultural use, and over 75% of the land is tiled. We are studying a small portion of the watershed, approximately 40,000 acres stretching north and west of Montevideo, Minnesota. This area of the watershed has several streams and a few rolling hills. The land is tiled at a higher rate than the watershed average. The Chippewa River runs through the watershed near its eastern edge.

Estimates for sediment and nutrients are presented for each the four scenarios by running the ADAPT model with different proportions of each type of land use or farming practice. Buffer strips, wetlands, and government set-aside programs are modeled as grassland with no animals. This methodology is likely to create conservative estimates of the erosion and nutrient reduction potential of the different scenarios that include these types of conservation practices because the literature suggests far more benefit can be realized from well managed wetlands or buffer strips than from grassland. Sensitivity analyses were conducted on each of the four scenarios to test variations in the assumptions regarding land use changes. The aggregated values four the scenarios are compared to the baseline estimates for each watershed.

Field Edge Sediment and Nutrient Losses
Comparing farming practices on different types of soil, the delivery of sediment and nutrients to water can vary widely. Tables in the project publication show the differences between the farming systems within and between the two study areas. The differences are due to different soil types and variations on practices for the same crops between watersheds. The erosion numbers for the different farming systems appear lower than the Wells Creek watershed in part because the model only predicts water-based erosion and Wells Creek is more highly sloping.

Watershed Level Estimates and Scenario Results
Under current conditions, approximately 39,615 tons of sediment, 3,001 pounds of nitrogen and 7,547 pounds of phosphorous are predicted to reach the mouth of Wells Creek each year. Changing farming practices, as demonstrated in Scenarios A through D, lead to changes in the sediment, nitrogen, and phosphorus added to Wells Creek each year. Increasing diversity, managed grassland, and judicious use of buffer strips lead to dramatic (over 80%) decreases in sediment deposition in the river from water-based erosion. In Wells Creek, adoption of best management practices (scenario B) would help meet national goals for hypoxia (40% in-stream reduction of nitrogen).

Under current conditions, approximately 1,956 tons of sediment, 13,966 pounds of nitrogen and 5,108 pounds of phosphorous are predicted to reach the mouth of Chippewa River from this study area each year. Changing farming practices, as demonstrated in Scenarios A through D, leads to reductions in the sediment, nitrogen, and phosphorus added to the Chippewa River each year. Increasing diversity, managed grassland, and judicious use of buffer strips lead to more than a 50% decrease in sediment deposition in the river from water-based erosion. In the Chippewa, adoption of best management practices (scenario B) would not be adequate to meet national goals for hypoxia (30-40% in-stream reduction of nitrogen). Meeting such a goal for this study area would require the adoption of more diverse farming systems as shown in scenarios C and D. These scenarios would also provide considerable phosphorous reduction potential. Scenarios B, C and D would each meet goals for reduction of phosphorous in the Minnesota River.

Fish Health
With respect to fish health, we found that water temperature and sediment are both likely to limit trout abundance and reproduction in Wells Creek. Land use changes that provide more permanent cover in the watershed and increase vegetation in riparian areas, such as those hypothesized in scenarios C and D, may shift the fish community to one more characteristic of a cold water stream. As for the Chippewa River, lowering sediment concentrations should benefit the warm water fish community and could shift fish populations to encompass a greater diversity and abundance of sensitive species. However, due to differences in fish community tolerances to suspended sediment, as well as topographical differences between the Wells Creek and Chippewa River watersheds, more drastic land use change may be needed in the Chippewa drainage to see a measurable change in the fish community.

Modeled Greenhouse Gas Emissions in the Watersheds
Calculations of the greenhouse gas emissions, in carbon equivalents, for the current and potential farming practices in the watersheds are presented in Table WC-5/ C-5. Reductions as high as 63% from the baseline are predicted in the Chippewa Study Area if Scenario D2 were to be adopted and the number of animals in the watershed were held constant. In Wells Creek Watershed, reductions would be smaller because dairy animals generate more methane than beef animals. If the number of dairy animals were increased by 15% in the Wells Creek Watershed, overall greenhouse gas emissions would increase by almost 56%.

Contingent Valuation
Contingent valuation employs a survey that describes the prospective policy and its effects. The survey also indicates to the respondent how much adoption of the policy would cost their household in terms of higher taxes and higher prices for goods and services. Citizens' willingness to pay for the benefits of the policy is elicited from their responses on how they would vote in a referendum on this policy, given its effects and financial consequences. A statistical valuation function enables estimation of mean household willingness to pay.

Results from economic analyses are discussed in a later section of this report.

Social impacts
The number of farms decreased by 15% in Chippewa County and by 12% in Goodhue County between 1990 and 2000. The population is aging in Chippewa County, with 21% over the age of 65. A full discussion of changes in human and social capital will be included in a subsequent report that is being written and will be published with other funds (see result 4 below).

Social scientists also reviewed documents and/or interviewed people from 30 entities affecting the Wells Creek Watershed and 35 entities influencing the Chippewa Study Area. Scientists found that most institutions in both watersheds tend to replicate the currently dominant production and marketing systems. In both watersheds, the current institutional network structure around ecosystem health does not include input dealers, processors, or marketers. Alternative organizations exist but are not sufficiently linked to all major educational, social, and business institutions. Most alternative farmers turn toward institutions outside the local watershed to get information and sometimes inputs for the farms. A full discussion of this will be included in a subsequent report that is being written and will be published with other funds (see result 4 below).

A graduate student/project consultant interviewed a range of conventional and alternative farms to create resource flow diagrams and illustrate how farms relate to communities. Five farms in the Chippewa Study Area and four in the Wells Creek Watershed were interviewed. Both conventional and alternative farmers expressed a need for more institutional and market choices in their areas. We found in one case that a larger and smaller farm exchanged resources with each other. Farmers implied that innovation on the farm is more likely to occur if local institutions are willing to change along with the farmers.

Other results
Other results in the biophysical, social, and non-market economic impacts can be found in the full publication and will not be addressed here.

Research conclusions:

Simultaneously addressing the social issues and major environmental problems resulting from conventional farming will require the adoption of a new vision in agricultural policy. We believe that providing income to producers to maintain or enhance non-market, public, environmental, and social benefits can form the foundation for such new policies. The interest in this different way of thinking about farm policy is there. Recent federal Farm Bill developments and recently published results from the Multiple Benefits of Agriculture (MBA) research point to a transition in the offing.

We have learned through MBA Phase I research and modeling efforts that:
1. Different agricultural systems produce different types and levels of benefits. Sustainable agricultural systems often result in higher actual levels of environmental benefits to society, as shown by analytical monitoring. For example, Phase I modeling shows that significant environmental pollutant reductions and other environmental enhancements can be successfully predicted in a variety of geographic areas.

2. The public is willing to pay increased taxes or market place costs, ranging from $100 to $200 per household (in Minnesota), for significant environmental protection and restoration from agriculture.

3. The concept of "multiple benefits from agriculture" has resonance with policy makers and leaders in the United States and abroad.

4. The relationship between farmers and institutions will need to be realigned in order to achieve significant changes, even if new policies are passed.

5. Rural development will need to assist farmers and local communities to create markets for the diversified crops and animal products that characterize sustainable agriculture. Farmers need this new infrastructure to make the move away from the current short list of subsidized commodities.

These results, among many others, lay the groundwork for policies that provide sufficient income to induce real changes on American farms. Other recommendations being addressed by Congress, the Land Stewardship Project's Federal Farm Policy Committee, and by the academic community pursuing sustainable agriculture in its myriad avenues, include:
* a priority not only on production but on environmental and social consequences of production;
* criteria for payment that are tied to local priorities but directed by national ones of biological, social, and financial consequence;
* incentives based on graduated payments according to increased levels of both ongoing and newly adopted stewardship farming on working lands;
* a gentle emphasis on results, not just practices;
* the redirection of research, extension, and technical assistance to promote integrated farming systems and diversified marketing;
* much greater public involvement in local and national goal-setting around issues of environmental stewardship;
* policies that are practical, efficient, and flexible;
* policies that are administratively reasonable;
* policies that are applicable on multiple scales (local, regional, national).

Results from this analysis provided insights into potential impacts of new conservation proposals such as the Conservation Security Program. Several policy makers in Congress and in agencies have shown an interest in the results of the analysis. Some of those are participating in a second phase of the project in which we will develop and demonstrate more specific policy proposals.

Further, we are seeing changes at the University of Minnesota, in part due to this work and continued efforts by the Land Stewardship Project, to study the effects of management intensive rotational grazing. We modified the Agricultural Drainage and Pesticide Transport (ADAPT) model, a dominant model for estimating the effects of agricultural practices on sedimentation and nutrient runoff, to account for animal impacts, specifically from management intensive grazing systems. The environmental benefits of management intensive rotational grazing appear to be strong and therefore are capturing the attention of university researchers. These researchers will have influence over future research and policy discussions.

Economic Analysis

Economic benefits resulting from the different scenarios were estimated in several ways as described below. All of these and the returns to farmers from the different scenarios will be detailed in the published report.

Avoided costs from reducing sediment in the streams
Estimates of the cost/ton of sediment in streams were utilized with predicted in-stream sediment levels from ADAPT. In Wells Creek, the baseline costs of $213,131/year were estimated to decrease by as much as 84% if Scenario D were adopted. In the Chippewa Study area, the baseline of $10,525 could be reduced by as much as 50% in Scenario D.

Avoided flood damages
Many of the options posed in the scenarios have potential to reduce runoff and flooding (see tables WC-2 and C-2 for changes in runoff by system). Scenario D, with a large increase in perennial cover, could have a significant impact.

Staff at IATP gathered information on avoided costs, which will be included in the final report and published separately this fall. Increased wetland area, proposed in scenarios C and D for both watersheds, could reduce flooding for average storm events. In Wells Creek, which covers a total of 40,172 acres, this involves increasing wetland acreage from 52 to 587, an increase of 535 acres. This would be an increase of about 1.3% of the total acreage in wetlands, for a total of 1.5%. In Chippewa, which covers a total of 44,445 acres, this involves increasing wetland acreage from 381 to 1,614, an increase of 1,233 acres. This would be an increase of about 2.8% of the total acreage in wetlands, to a total of 3.6%. Using published estimates of benefit, such wetland restoration could result in reductions in peak flow and flood flow volumes of approximately 4.8% and 1.8%, respectively, for Wells Creek, and 10.4% and 3.9%, respectively, for the Chippewa River study area.

According to Goodhue County Assistant County Engineer Ken Bjornstad, flood related costs in Wells Creek have included bridge replacement and maintenance, shoulder washout repair, and ditch clean out. County accountant Sheila Bystrom provided numbers for a storm in June of 1998. Along three county roads within the watershed, the county spent $173 to inspect and identify damage, $5,381 to clear debris, and $167 for shoulder repair. Mr. Bjornstad pointed out that any numbers the county could provide would be a drop in the bucket compared to the real expense.

In Chippewa County (which contains the majority of the Chippewa Watershed), County Ditch Inspector Ken Nash echoed this sentiment, adding that many damage costs are hidden because the damages are not addressed. He said this often occurs because farmers are reticent to allow repairs to be made on their property, as previous repairs may not have prevented the problem from reoccurring. While Nash couldn't provide a breakdown of costs, he estimated that Chippewa County as a whole spent $54,000 in clean-up and repair after a 1997 flood event, of which probably $15,000 was attributable to work in the Chippewa watershed.

Steve Kubista of Chippewa County Emergency Management pointed out another cost of flooding. Several years ago, after a 7"-12" July rain, the county had to replace a number of culverts. He mentioned that spring flood waters often back up over roads if the culverts are still frozen, and that this sometimes requires gravel to be hauled in, at additional costs.

Estimating the economic value of environmental benefits through contingent valuation
This study evaluated the benefits that respondents derived from two different levels of multiple benefits. This study devoted most of its attention to a "baseline" policy scenario yielding a 50% reduction in most environmental impacts from agriculture. This was the level described in the interviews and half of the mail surveys, with the other half of the mail surveys describing a 10% level of reductions in environmental impacts.

For the baseline policy scenario, the mail survey resulted in an estimated annual household willingness to pay of $201. The personal interview results show a much higher willingness to pay of $394, possibly indicating "yea-saying" behavior from the personal nature of the interview procedure. It is consistent with the literature that personal interviews lead to higher estimates than responses to mail surveys.

Using the more conservative mail-survey estimate, a state-wide willingness to pay can be computed by multiplying the per-household figure ($201) by the number of households (1.8 million in 1999) to yield an annual state willingness to pay of $362 million. Given a state population of 4.75 million (1999 estimate) this translates into a figure of approximately $76.21 per person annually or $0.21 per person per day.

Farmer Adoption

Farmers were not specifically asked to adopt any practices through this work. It is more helpful to outline the participation of farmers and many other people in the project who helped the project produce valid results.

This project garnered participation and support from a wide variety of groups and people. Participation has ranged from watershed residents, the steering committee, technical advisory group, Land Stewardship Project's Federal Policy Committee, a local chapter of the League of Women Voters, a project National Policy Committee, and other interested persons reached through the media and through personal contacts. The information that follows includes a description of these groups.

In the watersheds, project staff attended multiple organizing meetings to present information about the project and to develop relationships with farmers and activists in the areas. Following these meetings, focus groups were developed to get resident input into the project, to discuss the relative social, economic, and environmental impacts resulting from different agricultural systems, and to design the scenarios for the analysis. Table 1 presents the level of participation in each watershed for the focus groups. The first series of focus groups (two in the Chippewa River watershed) was held to get a picture of the goals of watershed groups. These goals were already present in written form for the Wells Creek watershed. The second series of focus groups (two in the Chippewa River watershed, two in the Wells Creek watershed) was held for scenario development.

Core Working Group:
Fourteen people (George Boody, Land Stewardship Project; Dan French, Dairy Farmer; Larry Gates, Minnesota Department of Natural Resources; Mary Hanks, Minnesota Department of Agriculture; Frances Homans, University of Minnesota, Department of Applied Economics; Paul Homme, Farmer; Mara Krinke, Project Coordinator, Land Stewardship Project; Steve Light, Institute for Agriculture and Trade Policy; Mark Schultz, Land Stewardship Project; Kathleen Storms, School Sisters of Notre Dame; Bruce Vondracek, University of Minnesota, Department of Fisheries and Wildlife; Pat Welle, Bemidji State University; John Westra, University of Minnesota, Department of Applied Economics; and Wynne Wright, University of Minnesota, Morris).

Other project participants:
Kevin Bellmont, consultant conducting interviews in the Chippewa River watershed; Kristen Corselius, consultant conducting institutional analysis; Dr. Jan Flora, Iowa State University; Carole Johnson, consultant conducting interviews in the Chippewa River watershed; Julie Henry, Department of Fisheries and Wildlife, University of Minnesota; and Dr. Gordon McIntosh, developed greenhouse gas report, Department of Physics, University of Minnesota, Morris.

Technical Advisory Group:
Fourteen people (Mr. Jim Anderson, MN Pollution Control Agency; Dr. Julie Bunn, Macalester College Department of Economics; Dr. Paul Faeth, World Resources Institute; Dr. Cornelia Flora, Iowa State University; Dr. John Ikerd, University of Missouri College of Agriculture, Food and Natural Resources; Mr. Paul Johnson, Retired; Beth Knudsen, Wells Creek Watershed Partnership; Ken Meter, Crossroads Resource Center; Dr. David Mulla, University of Minnesota Dept of Soil, Water and Climate; Dr. Kent Olson, University of Minnesota Dept of Applied Economics; Kylene Olson, Chippewa River Watershed Project; Dr. Bill Vorley, Sustainable Agriculture and Rural Livelihoods Programme, International Institute for Environment & Development).

Past project participants:
Brad DeVries, Land Stewardship Project; Jason Edens, Graduate Assistant, Bemidji State University; and Dave Strunk, Graduate Assistant, Bemidji State University.

Newsletter Recipients (includes members of above groups):

Producers surveyed for the biophysical study (survey about farming practices conducted by John Westra at the University of Minnesota):

As of December 5, 18 producers in the Wells Creek watershed, 12 in the Chippewa River watershed, and four others have been surveyed.

Contingent valuation survey work:
* Interviews with watershed residents included 75 people in each watershed. Total will number 150 (Note: interviews are expected to be complete in January or February and approximately half are complete).
* Focus groups were conducted in the two watersheds and in the metro area. Almost 50 people participated in these focus groups.
* Pre-tests of the survey were conducted with approximately 10 additional people.
* Eight hundred and fifty Minnesotans received a state-wide contingent valuation survey for the project in January 2001.

Participation Summary

Educational & Outreach Activities

Participation Summary:

Education/outreach description:

A variety of dissemination strategies have been used, including presentations, publications, and electronic methods. We are including well over 100 people in the project. Each person who has participated in a watershed focus group or otherwise expressed interest in the project (through meetings, media, or other contact) is included on the project mailing list. This list is used to generate the bi-monthly mailing for the project newsletter, "The Multiple Benefits of Agriculture."

LSP staff and other Phase I participants made presentations on Phase I results to: League of Women Voters, Woodbury- Cottage Grove chapter; University of Minnesota's Enhanced Landscape, Human and Animal Health Symposium; Land Stewardship Project Staff and Board; Land Stewardship Project's Federal Policy Committee; Presentation at an international conference on Multifunctional Agriculture; the Soil and Water Conservation Districts’ state meeting; a USDA ARS Economics conference in Washington D.C.; Fires of Hope meetings in Philadelphia and Delevan; the Taproot Seminar in California; the United States Society for Ecological Economics conference in Duluth; the Rural Summit annual conference in Duluth; the Greener Fields ecolabeling meeting in St. Louis; Foundation Earth staff in St. Louis; the Midwest Fish and Wildlife annual conference in Des Moines; a Natural Resources Conservation Service Minnesota staff meeting in St. Paul; the Minnesota Farm Services Agency state director, Board of Water and Soil Resources executive staff; staff of the Northeast Midwest Institute in Washington D.C.; The Basin Alliance for the Lower Mississippi in Minnesota; The Sustainable Farming Association of Southeastern Minnesota chapter; the Wells Creek Watershed Partnership Technical Committee; the Working Landscapes Conference in Delevan; and The Pew Ocean Commission's hearing on hypoxia in Des Moines.

The release of the Phase I report last October was covered by press throughout the Upper Midwest in November, including coverage on WCCO radio, AgriNews, and Successful Farming. More media work is planned.

The full report has been disseminated to more than 300 individuals to date. In addition it is available on our web site and a summary was published in the Land Stewardship Letter and distributed to 2,500 people.

* Other presentations about the project at meetings: Fires of Hope meetings in April 2001 and November 7, 2001 to about 30 people; Working Landscapes Conference on November 9 in Delvan, WI; a meeting with policy makers from Minnesota convened by the Minnesota Project on the Conservation Security Act; National Fish and Wildlife Conference in December 7, 2001; and the Pew Ocean Commissions hearing in Des Moines Iowa on December 10, 2001.

Project Outcomes


Areas needing additional study

Policy Implications and Recommendations
The role of policy is to promote change and to guide people to optimal outcomes. Our current federal agricultural policies have subsidized the production of a selected set of commodities. Production of those commodities through monocultural systems has contributed to serious environmental problems. Moreover, despite policy aims to the contrary, we have experienced a significant decrease in the number of agricultural producers. Conservation policies have attempted to mitigate environmental problems through technical assistance, cost-share programs to improve farming practices and for land retirement programs. About 70% of conservation spending since 1985 has been for land retirement programs. However, these programs do not help farmers on working landscapes who produce public benefits. Land retirement programs sometimes exacerbate negative economic impacts from the loss of independent family farmers. New policies should assist producers to maintain or enhance non-market public environmental and social benefits. Successfully addressing social issues and simultaneously addressing major environmental problems will require a new vision for U.S. agricultural policy.

The Multiple Benefits of Agriculture project is recommending further development of a policy framework that purposefully differentiates between agricultural market and non-market public goods. By public goods we mean those benefits society deems it needs but does not pay for by the exchange of goods and money through the marketplace. The results of our Phase I research strongly suggest six key policy elements that need to be further developed:

1. Pay farmers for public, environmental, and social benefits from their farms (including existing stewards) Project data predict that important environmental benefits would accrue from adoption of best management practices and changing farming systems, with the magnitude of benefits dependent on the ecosystem and the kind of farming system. However, current farm policy that supports production of a few program crops strongly discourages changes in farming systems.

Our analysis of social impacts from agriculture suggests that the current system imposes significant negative impacts on rural communities. It is less clear that changing farming systems would be sufficient to cause positive improvements in rural community economies and social systems. However, changes implied in Scenario C (i.e., regional food systems, local processing facilities, agri-tourism, etc.) would be beneficial in helping achieve a diversification of the economy as it relates to agriculture, which may lead to greater community resilience.

2. Provide income, as well as cost-share payments, to farmers through graduated payment programs to create incentives for significant improvements in stewardship. Our data show that under current crop markets, farmers could make more income from utilizing the practices outlined in Scenario D than they do in the baseline. However, that would not be the case if they had to buy new equipment, learn management of the new systems, or if market prices for high quality hay declined because the increased supply reduced prices. When current government income payments are taken into account for Midwestern farmers, most who are participate in the farm program would lose net income or drop into a negative income status without government income payments. There are few incentives to change. Farmers around the country who adopt integrated farming systems that lead to significant non-market public benefits may lose income due to changes such as placing land in wetlands or growing non-subsidized crops. During a transitional period -- until the systems become understood and markets are functioning for alternate goods -- farm income would likely decrease in the short run.

We need to develop policy mechanisms that provide incentives for farmers to adopt farming systems that result in non-market environmental and social public goods above a reasonable minimum standard. Incentives should include reimbursing farmers for changing farming systems, land retirement where needed, and ongoing income supplement for the provision of public goods. Farmers who already use stewardship-based systems should have access to the income provisions, not just those who are changing systems to meet the new standards. To achieve significant non-market environmental improvements from agriculture may require income to substitute for foregone payments as well as cost-share payments to help cover the cost of installing new systems. It will be important to clearly distinguish between public benefits provided by farms that reduce potential market income to the farmer and those benefits that are a consequence of adopting farming systems with lower production costs. It will also be important to find effective ways to decouple these incentives from land values.

The results of scenarios clearly show that there are more public benefits gained by moving from best management practices in dominant crop systems in the Corn Belt to more diversified systems that include perennial components. Our findings illustrate the value of implementing graduated payment approaches to stewardship incentives based on the degree of public benefits provided.

3. Pay on basis of results. The effects of BMPs or changes in farming systems depend on ecology, topography, and climate. Our scenario data show that the impacts of farming systems will depend on the region, with variations in results due to ecology, topography, climate, and drainage patterns. We need to develop approaches that provide income payments on the basis of results, not simply the installation of practices. Such approaches will need to be administratively feasible (which also means feasible for farmers), cost effective, and replicable. It may be useful to utilize modeling and valuation of selected non-market benefits as a way to assess progress.

4. Create new markets for diversified crops through rural development funding. Instead of subsidizing a given crop or farming system for marketable commodities, rural development programs could help create markets for alternative crops such as small grains or biomass fuels grown in rotations that are good for the land. Re-emphasizing or recreating regional markets as part of the total trading mix would offer an opportunity for farmers to convey an overall picture of the farm and thus more effectively sell their food products. New cooperative and other business arrangements to create alternative supply chains between farmers must be promoted to help independent farmers participate in volume based markets.

5. Institutions need to change along with farmers to more effectively promote stewardship and diversified marketing. The changes in policy being proposed here are significant and can not be achieved without changes in institutional structure, function, and funding. Farmers we interviewed were clear about the need for assistance to change to more diversified production and marketing. They are more likely to change if they see the institutions changing along with them.

6. Government policy should be based on a clear set of national goals and adapted to local conditions with local goals. The latter will require the participation by a wider variety of stakeholders than usually participate in current government farm programs. In part this has begun with NRCS state technical committees.

7. Create conditions for fair market prices and fair access to markets. As is evident in our study, and in general, U.S. farmers are receiving extremely low prices for some products through the marketplace. For farmers to survive economically, they must be able to sell products for an adequate profit. Changes in how the marketplace is regulated are needed to make it fair and accessible for independent family-based farms. U.S. policies should also be reviewed for their impact on farmers providing multiple benefits in third-world countries.

To achieve these changes will require the harnessing of imagination and creativity, the products of thought and thoughtful practice. There are no easy answers to returning the diversity and heterogeneity of the landscape to benefit both humans and nature. The path holds great promise as well as uncertainties, but humans have always sailed and succeeded on uncertain seas.


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Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.