Alternative Agriculture (1989)

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1 Agriculture and the Economy Go' NE OF THE STRENGTHS OF U.S. AGRICULTURE iS the willingness of farm- ers to adopt proven alternatives. This constant evolution and adop- tion of new practices has helped the United States become a global leader in agricultural research, technology, and production. Many of today's com- mon practices were the alternative practices of the postwar era. One exam- ple is monocultural production, which synthetic chemical fertilizers and pesticides made possible. The widespread adoption of these alternatives, referred to internationally as the "Green Revolution," led to dramatic in- creases in per acre yield and overall agricultural production in the United States and many other countries. The historical pattern is clear: today's alternatives are tomorrow's conven- tions. The committee believes that this is true for many of the agricultural alternatives described in this report. For example, some farming systems such as corn and soybean production using ridge tiliage, rotations, and mechanical cultivation include new and old practices and satisfy this com- mittee's definition of alternative agriculture (see the boxed article, "Defini- tion of Alternative Agricultures. Nonetheless, much can be done to im- prove most production systems and to accelerate the widespread adoption of farming methods specifically designed to achieve the goals listed. This chapter describes the changes in agriculture that have taken place over the past 40 years in terms of technology and input use, a range of fecleral government programs, the economy, and international trade. Since the 1940s, agriculture has become more specialized and dependent on purchased off-farm inputs. Technologr has facilitated specialization and constantly increasing yields, with fewer larger farms producing more food than ever before. Federal policy has responded to the farmer's needs in the context of conflicting signals such as high per acre yield goals, surplus 25

26 ALTERNATIVE AGRICULTURE production capacity, environmental considerations, and increased foreign competition. Although there has been some improvement In the farm econ- omy since the recession of the m~-l9SOs, unprecedented levels of federal government support have financed much of this recovery. Disparities re- ma~n In productive capacities, income, and regional rural economies, even though total net farm income has reached record levels. Farming is at the center of the food and fiber sector of the economy. Farmers are the sole consumers of agricultural inputs and the principal producers of the crops that support the multibiDion doDar food and fiber industry. The production, processing, and sale of food and fiber currently represent about 17.5 percent of the gross national product (GNP) or about $700 billion In economic activity (Figure 1-1), the second largest sector of 700 600 500 ._ ._ In Cal 200 100 Total food and fiber sector ~ / /AII other food-related services 400 ~ / Ad processing Transportation, trade and retailing O 1 975 1977 1979 1981 1983 1985 1987 YEAR FIGURE 1-1 Food and fiber sector of the U.S. GNP. SOURCE: U.S. Department of Agriculture. 1987. Measuring the Size of the U.S. Food and Fiber System. Agricultural Economic Report No. 566. Economic Research Service. Washington, D.C.

AGRICULTURE AND THE ECONOMY 27 DEFINITION OF ALTERNATIVE AGRICULTURE Alternative agriculture is any system of food or fiber production that systematically pursues the following goals: . More thorough incorporation of natural processes such as nutrient cycles, nitrogen fixation, and pest-predator relationships into the agricultural production process; Reduction in the use of off-farm inputs with the greatest potential to harm the environment or the health of farmers and consumers; Greater productive use of the biological and genetic potential of plant and animal species; Improvement of the match between cropping patterns and the pro- ductive potential and physical limitations of agricultural lands to ensure long-term sustainability of current production levels; and Profitable and efficient production with emphasis on improved farm management and conservation of soil, water, energy, and biological resources. . GNP next to manufacturing (U.S. Department of Agriculture, 1987f) (Figure 1-2). Farming, however, accounts for only about 2 percent of total GNP; inputs such as seed, equipment, and chemicals account for another 2 per- cent; and processing, marketing, and retail sales account for nearly 14 percent (U.S. Department of Agriculture, 1986e). TRADE Exports of agricultural commodities exploded during the 1970s, from about $7.3 billion in 1970 to $43.3 billion in 1981. Five major crops led the way: corn, cotton, rice, soybeans, and wheat (Figure 1-3). By 1981 the United States controlled 39 percent of total world agricultural trade and more than 70 percent of world trade in coarse grains, greater than 10 times the share of its nearest competitor, Argentina. During the 1970s, harvested wheat acreage increased by more than the total harvested wheat acreage of Canada (U.S. Department of Agriculture, 1986a; U.S. Office of Technology Assessment, 1986a). Economic growth in developing nations, the opening of Pacific Rim markets, grain trade with the Soviet Union, and a favorable exchange rate that fueled increased demand made this growth possible. A deliberate domestic policy designed to remove production controls helped the United States profit from these favorable conditions. The expansion of cultivated acres of wheat and feed grains, favorable tax provisions and market prices, and readily available credit helped increase the domestic supply of major commodities such as wheat, soybeans, corn, and other coarse grains. Agriculture maintained a favorable annual trade balance,

28 800 700 600 an 500 o ._ ._ Q ._ - cn 400 o 300 200 100 o ALTERNATIVE AGRICULTURE Manufacturing _ Food and fiber . Finance, insurance, and real estate _ ~ , ,, ,: , ., ;- ·2~~2~ 2 ............. , ,., ,,,, ,, Government enter Transportation and .:.:.:.:.:.:.:.: .:.: :: :.:.:.:. :.:.:.:.::.:.: :.:.:.:.:.:.:.: :~: :::: :.::. estate SECTORS FIGURE 1-2 GNP by sector, 1985. Food and fiber sector includes farm sector; food processing; manufacturing; transportation, trade, and retailing; food; and all other nonfarm sectors. SOURCE: U.S. Department of Commerce. 1987. Survey of Current Business. Washington, D.C. while almost aD other sectors of the economy experienced growing deficits From 19Si to 1986, many factors contributed to a decline in agricultural exports. The loan rates in the federal commodity programs (the price that the government guarantees farmers) were rigidly set well above interna- tional market prices. This meant that most farmers sold their grain to the government at the loan rate (in practice many turn over their grain for forgiveness of the loan), instead of on the domestic or international market,

o AGRICULTURE AND THE ECONOMY 9 8 7 6 - ~n o ,_ ._ ~ 5 G cn 4 3 2 1 29 1~\ Wit, !/J COTTON ~ ~ _ ,, i,,. I ~ I \ / \ / \- l l _— ~ , At' \\ 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1968 1970 1972 1974 1976 1978 1980 1982 1984 19861987 FISCAL YEAR FIGURE 1-3 Value of selected agricultural exports. SOURCES: U.S. Department of Agriculture. 1983. Foreign Agricultural Trade of the United States—Annual Supplement—Fiscal Year 1982. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1987. Foreign Agricultural Trade of the United States—Annual Supplement—Fiscal Year 1986. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1988. Foreign Agricultural Trade of the United States: November/December 1987. Economic Research Service. Washington, D.C.

30 ALTERNATIVE AGRICULTURE where prices were lower. The U.S. government ended up buying and stor- ing the largest domestic grain surpluses in history. To compound this, the early 1980s brought global recession, increased production capacity in de- veloping countries, an overvalued doDar, restrictive import policies and export subsidies by major competitors, foreign clebt, and surpluses in major commodities. Agricultural exports fen from $43 billion in 1981 to about $26 billion in 1986 (Figure 1-5~. In 1987, the volume of agricultural exports increased for the first time in 7 years (Figure 1-6~. The increase was largely due to a decline in the value of the doDar, faring world market prices, reduction in federal program loan rates, and implementation of the export programs of the Food Security Act of 1985 (U.S. Congress, 1985~. Export programs designed to counter foreign subsidies, guarantee credit, ant! promote products accounted for 60 to 70 percent of wheat exports, greater than half of the vegetable of] exports, and about 40 percent of all rice exports in fiscal year (FY) 1987. Most feed grain and cotton exports were made outside these export programs (U.S. Depart- ment of Agriculture, l98Sb). The value of agricultural exports, however, 60 30 u, o ._ — -30 -60 en ~ -90 o -120 -150 -180 Agricultural exports Total trade balance Agricultural trade balance Nonagricultural trade balance 1 1 1 1 1 1 1 1 1 1 1 1 1970 1972 1974 1976 1978 1980 1982 1984 1986 1987 YEAR FIGURE 1-4 U.S. agricultural export trends and foreign trade balances. SOURCES: U.S. Department of Agriculture. 1988. 1988 Agricultural Chartbook. Agriculture Handbook No. 673. Washington, D.C.; U.S. Department of Agriculture. 1988. The U.S. Farm Sector: How Agricultural Exports are Shaping Rural Economics in the 1980's. Agricultural Information Bulletin 541. Economic Research Service. Washington, D.C.

AGRICULTURE AND THE ECONOMY 50 An ¢ 20 Oilseeds and products Total Other Fruits, nuts, ~ ~ ~,ottnn and veaetahle~ 31 / Animals and products YEAR FIGURE 1-5 Value of U.S. agricultural exports by commodity. SOURCE: U.S. Department of Agriculture. 1988. 1988 Agricultural Chartbook. Agriculture Handbook No. 673. Washington, D.C. 180 Cl) o ._ 150 ·p 120 ._ - cn by o LL] 30 Total Other Cotton Fruits, nuts, /~//~/,~ /and vegetables O 1979 1 981 Animals and products 1983 1985 1987 YEAR FIGURE 1-6 Volume of U.S. agricultural exports by commodity. SOURCE: U.S. Department of Agriculture. 1988. 1988 Agricultural Chartbook. Agriculture Handbook No. 673. Washington, D.C.

32 45 40 35 oh o ._ · _ G co oh 20 o ~ 15 30 10 5 ALTERNATIVE AGRICULTURE {:.:~:~.:.:.:.~:~::.:::X ~ Agricultural expel /~ ~~ ~~ - I; /.~:: : .: :.::::: agricultural trade surplus :.:.:.: : :: :.:.:.: _~ 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 FISCAL YEAR FIGURE 1-7 Agricultural exports, imports, and trade balance. Figures for 1988 are forecast. SOURCES: U.S. Department of Agriculture. 1987. National Food Review. The U.S. Food System—From Production to Consumption. NFR-37. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1988. 1988 Agricultural Chartbook. Agriculture Handbook No. 673. Washington, D.C. increased only 7 percent, from $26 billion to about $28 billion in 1987. Exports are expected to continue to increase to around $33 billion in 1988. Imports, which have increased steadily since 1972, are expected to remain constant at about $20 billion, resulting in an increase in the agricultural tracle surplus to about $13 billion in 1983 (Figure 1-7~. AGRICULTURAL INDUSTRIES Mechanization and specialization increases, declining use of labor, and closer links with the input and output industries have characterized U.S. agriculture since World War Il. Agricultural productivity measured as out- put per unit of labor has surpassed that of the nonfarm business sector for more than a decade (Figure 1-~. Adjusted for inflation, inputs purchased to produce farm output have increased from approximately $50 billion in the early 1960s to over $80 billion in the early 19SOs. At no other time in U.S. history have agricultural products generated more income after they

AGRICULTURE AND THE ECONOMY 33 leave the farm. During the same period, economic activity in these indus- tries rose from approximately $235 billion to about $450 billion (U.S. De- partment of Agriculture, 1986e). Twenty-one million people were employed in the food and fiber economy in 1985, down from 24.5 million people in 1947 (Figure 1-9~. But as a percentage of the total work force, 41 percent in 1947 were employed in the food and fiber industry compared to IS.5 percent in 1985. Increases in employment in other sectors of the economy were largely responsible for this drop. The percentage of those in the food and fiber sectors working off the farm increased from about 60 percent in 1947 to nearly 90 percent in 1985. During the same period, the size of the work force involved in farming fell from about 17 percent, or 10 million workers, to about 2 percent, or 2.5 minion workers (U.S. Department of Agriculture, 1987g). The number of farmers has declined while the total U.S. population has increased from 151.3 million in 1950 to 226.5 minion in 1980. The population of employed workers increased from 56.2 minion in 1950 to 97.6 minion in 150 135 120 105 90 75 _ , ~ , ~ by"/ \ / Nonfarm business sector ~ I ! Farm sector / - 60 I I ~ ; 1967 1969 1971 1973 1975 1977 1979 1981 ~ 983 1985 YEAR FIGURE 1-8 Agricultural productivity measured by output per unit of labor. SOURCE: U.S. Department of Agriculture. 1987. National Food Review. The U.S. Food System—From Production to Consumption. NFR-37. Economic Research Service. Washington, D.C.

34 ALTERNATIVE AGRICULTURE 120 _ oh o - 80 _ ._ _ _ 100 c', 60 111 Y 40 o 20 o 01 Farm sector Food and fiber sector :::::::::1 Civilian labor force 60.2 24.5 -~L 64.5 8.0 24.0 _ 115.5 21.4 1 947 1 954 YEAR 1 985 FIGURE l-9 Distribution of food and fiber system employment in the national economy. SOURCE: U.S. Department of Agriculture. 1987. National Food Review. The U.S. Food System— From Production to Consumption. NFR-37. Economic Research Service. Washington, D.C. 1980. In contrast, farmers accounted for 6.9 million of all employed workers (or 12.2 percent) in 1950, and only 2.3 million employed workers (or 2.S percent) in 1986 (U.S. Department of Agriculture, 1987c). Using about the same amount of cropland, fewer farmers are feeding an ever-growing pop- ulation (Figure 1-10~. This has been made possible by great increases in per acre yields resulting from the development and widespread adoption of fertilizers and synthetic chemical pesticides, improvements in machinery, and high-yielcling varieties of major grain crops. Average yields have in- creased 2 percent per acre annually since 1948 (U.S. Department of Agricul- ture, 1986b). Average yields per acre of corn, soybeans, and wheat increased from 38.2, 21.7, and 16.5 bushels per acre in 1930 to ITS, 34.1, and 37.5 bushels per acre in 1985, respectively. Cotton yields increased from 269 pounds per acre in 1950 to 630 pounds per acre in 1985 (U.S. Department of Agriculture, 1972, 1986d, 1987g). Average annual milk production per cow increased from 5,314 pounds in 1950 to 13,786 pounds in 1987 (CaTifor- nia Department of Food and Agriculture, 195S, 1972, 1987~. Poultry produc- tion rose from about 5 million birds in 1960 to nearly 20 million birds in 1987 (U.S. Department of Agriculture, 19891. These great increases in yield and production have helped keep the price of food in the United States low as a percentage of per capita income. Americans spend only about 15 percent of their total personal disposable income on food. This figure is down from about 16.5 percent 10 years ago, largely because of the relatively rapid rise in personal income. The percent- age of income spent on food varies greatly with income. Families with

AGRICULTURE AND THE ECONOMY 400 - cn o ._ ._ G 300 `~, 200 LIJ A: 100 r mer fallow a..:.:.:..:.:.: - ma ~ ~ . ~ ~ ~ . A, ~< . Cropland han/este~ ~ ~ . ~ l ~ ~ . 1~ . ~ ~ Tote , ~ _' 1945 1955 1965 YEAR 35 1975 1 985 FIGURE l-lO Cropland harvested since 1945. SOURCE: U.S. Department of Agriculture. 1988. 1988 Agricultural Chartbook. Agriculture Handbook No. 673. Washington, D.C. before-tax annual incomes of less than $5,000 spend 49.7 percent of those incomes on food; families with incomes greater than $40,000 spend S.7 percent (U.S. Department of Agriculture, 1986g, 1987g). Western Europe- ans, in contrast, spent an average of 23.8 percent of household disposable income on food in 1983. Families in many less-developed countries spend well over 50 percent (U.S. Department of Agriculture, 1986h). Since 1980, the consumer price index (CPl) for food has risen more slowly than the CPI for all other items (U.S. Department of Agriculture, 1986g) (Figure 1-11~. A decreasing amount of the total spent on food reaches farmers (Figure 1-12~. This is a result of two factors: (1) the increased consumption of prepackaged foods and corresponding costs for processing, packaging, mar- keting, and retailing and (2) the increasing percentage of meals consumed away from home. In 1987, consumers spent about $380 billion for foods produced on farms in the United States (Figure 1-13~. Preliminary 1987 data show that farmers received about $90 billion or 25 percent of the $380 billion spent on all food the rest went to the food industry (Figure 1-14~. As con- sumers spend more on food, marketers and processors have gained signifi- cant revenue. The financial returns to the farmer have remained roughly constant, but represent a shrinking piece of a growing pie. Food marketing

36 350 a) ~ 300 Q ._ an 250 Q CO 200 150 ALTERNATIVE AGRICULTURE _ CPI, A' all items ~ ,,, CPI, i' food ,#' I 1 1 1 1 1 1 1 1 1 1985 1987 1 1 1975 1977 1979 1981 1983 YEAR FIGURE 1-11 Consumer prices for food versus all other consumer goods. SOURCE: U.S. Department of Agriculture. 1986. Food Cost Review, 1985. Agricultural Economic Report No. 559. Economic Research Service. Washington, D.C. 300 = 250 a) cot a) 200 en 111 = 150 J 100 cr co - 50 Em share of retail prices J Retail prices O I I l 1950 1 1 1 1 1 ~ 1955 1960 100 o An :~ m C) m 50 n1 cn AD 3 1965 1970 YEAR 1975 1980 85 87 o FIGURE 1-12 Index of retail price for a market basket of farm foods and the value received by farmers. SOURCE: U.S. Department of Agriculture. 1986. Food Cost Review, 1985. Agricultural Economic Report No. 559. Economic Research Service. Washington, D.C.

AGRICULTURE AND THE ECONOMY 37 direct labor costs represented about 50 percent of the total $260 billion accounted for by the food industry (U.S. Department of Agriculture, 1986g). The value received at the farm for food sold in supermarkets and grocery stores declined to about 31 percent of this total, down from 34 percent in 1984 and 37 percent in 1980. Farmers receive only 16 percent of the total value of food consumed away from home. Expenditures on food consumed away from home increased from $84.3 billion in 1930 to $133.3 billion in 1986 (U.S. Department of Agriculture, 1986g). Inputs The scientific and technological revolution in agriculture began after WorIcl War T and accelerated after World War TI. The first step in this process was the replacement of draft animals and human labor with tractors and other machinery. This conversion was virtually complete by 1960 and has contin- ued with the introduction of larger, faster, and more powerful equipment. The power of an average tractor increased from 35 horsepower in 1963 to 60 horsepower in 1933 (U.S. Department of Agriculture, 1986f). Since 1940, the labor required to farm an acre has declined 75 percent while farm output per acre has doubled. As a result, farm labor is 3 times as productive. Farming employed 17 percent of the labor force in 1940 and about 2 percent in 1936. In contrast, employment in farm input industries such as agro- chemical production, transportation, food processing, and machinery man- ufacturing has grown significantly during this period. 400 300 0 ._ Q G c`' 200 o ~ 100 Consumer expenditures 1~ Gil//////,> Marketing share of consumer expenditures /////// O ;~ 1976 1978 1980 1982 1984 1986 YEAR FIGURE 1-13 Marketing share of consumer expenditures, farm value, and consumer expenditures for farm foods. SOURCE: U.S. Department of Agriculture. 1988. 1988 Agricultural Chartbook. Agriculture Handbook No. 673. Washington, D.C.

38 ALTERNATIVE AGRICULTURE Farm value 25 ¢ Marketing bill: Packaging 8 ¢ Transportation 4.5¢ /~\ Before-tax Profits 3 ~ - /: ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ A Fuel and power 3.5 ¢ Depreciation 4¢ Advertising 4.5¢ t~,7 ~\\~/////~ Rent 3¢ :~ / Interest (net) 2¢ A/ / Repairs 1.5 ¢ / Other 7¢ Labor 34¢ 1 FIGURE 1-14 What a dollar spent on food paid for in 1987. SOURCE: U.S. Department of Agriculture. 1988. 1988 Agricultural Chartbook. Agriculture Handbook No. 673. Washington, D.C. Fertilizers and pesticides currently account for a far greater share of input costs for most major crops than they did 30 years ago. This is primarily the result of widespread adoption of high-yielding seeds that are more respon- sive to fertilizer applications and continuous cropping that has created favorable pest habitats in certain crops. A number of federal programs and policies have encouraged the use of these seed varieties, specialized crop- ping practices, and fertilizer inputs. For many major commoclities, fertilizer and pesticide costs far exceed other variable costs such as seeds and fuel (Figure 1-151. The national average coot of fertilizers and ne.~ticid~ for corn production in ~Y86 was about 55 percent ot variable costs and 34 percent of total costs. For soybeans, the figures were 49 and 25 percent ant! for wheat, 40 and 23 percent. The increasing use of these inputs has been associated with significant yield increases in major crops. For alternative systems to be successful and widely adopted, they must not result in significant overall reductions in yield or profits. The feasibility of alternative systems is dis- cussed in Chapters 3 and 4 and in the case studies. FIGURE 1-15 (at right) National average cost of pesticides and fertilizers, seed, and fuel as a percentage of total variable costs and total variable and fixed costs by major crop, 1986. SOURCE: U.S. Department of Agriculture. 1987. Economic Indicators of the Farm Sector: Costs of Production, 1986. ECIFS 6-1. Washington, D.C.

AGRICULTURE AND THE ECONOMY 90 80 70 60 50 By lo C) IL 40 30 20 10 o - o o C: to ._ o in ._ In y ~ a) a) ~ ~ 2 ~ — o In VARIABLE COSTS 39 Fuel Seed ...... ..... ·:.: :.: ~ Pesticides and fertilizers . . . - — l ~ ,... ~ ._ o In ._ CD VARIABLE AND FIXED COSTS In *A Cal ~ a) a) ~ Q _ o CO

40 ALTERNATIVE AGRICULTURE Fertilizers Application of the three principal plant nutrients nitrogen, phosphorus, and potassium has increased steadily over the past 40 years. The biggest change has been in the use of nitrogen. Previously, farmers provided most nitrogen to their crops by rotating corn and small grains with leguminous crops. But as they shifted to growing nitrogen-responsive varieties of corn continuously or in short rotations with soybeans the demand for nitrogen has increased. Corn alone accounts for 44 percent of all directly applied fertilizers in agriculture, while wheat, cotton, and soybeans receive 18 per- cent combined (U.S. Department of Agriculture, 1987d). The use of nitrogen, phosphorus, and potassium was roughly equivalent in 1960 at 2.7, 2.5, and 2.1 million tons, respectively (Figure 1-16~. By the peak of annual fertilizer use in 1981 their respective totals were 11.9, 5.4, and 6.3 million tons. Since 1981, the total use of fertilizer has declined to slightly more than 19 million tons. This reduction primarily reflects the large number of acres currently held out of production by government programs. Nitrogen fertilizer use on a per acre basis continues to rise or remain steady for most crops (Figure 1-17~. The increased use of nitrogen fertilizer since 1964 has largely been in corn and wheat (Figure 1-18~. These two crops accounted for 35 percent of all fertilizer use in 1964 and 54 percent in 1985. Fertilizer prices are sensitive to demand. They increased in the 1970s, peaked in 1981, declined through 1987, and began to increase in 1988. Total net fertilizer sales rose from $1.6 billion in 1970 to $~.6 billion in 1981, falling to $6.4 billion in 1985 (U.S. Department of Agriculture, 1987b). Anhydrous ammonia is often applied as a source of nitrogen. The material is stored in liquid form in pressurized tanks. It is usually released into the soil in 6- to 8-inch deep trenches formed by chisel-type blades. The ammonia reacts with soil moisture to form the ammonium ion, which is held on the mineral and organic exchange complex. The blades have been retracted from the soil to demonstrate the release of ammonia. Credit: Soil Conservation Service, U.S. Depart- ment of Agriculture.

AGRICULTURE AND THE ECONOMY <,, 24 o . _ ._ 20 16 co Z 12 o 7 CC 7 8 , - 1 960 41 Total /~ \\ / - \ A Nitrogen r\ - .w .~ Potassium Phosphorus 1965 1970 1975 1980 1985 YEAR FIGURE 1-16 Total consumption of primary plant nutrients. SOURCE: U.S. Department of Agriculture. 1987. Fertilizer Use and Price Statistics, 1960-85. Statistical Bulletin No. 750. Economic Research Service. Washington, D.C. 140 _ 120 _ 100 6 `~ 60 o E A 80 40 20 Corn / _ , \ O 1 1964 1 967 " \ Cotton Wheat Soybeans 1970 1973 1976 1979 1982 1985 1987 YEAR FIGURE I-17 Nitrogen application rates per acre on major crops. SOURCE: U.S. Department of Agriculture. 1987. Fertilizer Use and Price Statistics, 1960-85. Statistical Bulletin No. 750. Economic Research Service. Washington, D.C.

42 6 cn 5 _ ._ ~ A ._ - 4 en in 3 o Z 2 1 ALTERNATIVE AGRICULTURE Other crops , ~' A.7 . ~ Corn Wheat ,^- _, Cotton ~ Soybeans o 1964 1967 1970 1973 1976 1979 1982 1 985 YEAR FIGURE 1-18 Total use of nitrogen fertilizer on major crops. SOURCE: U.S. Department of Agriculture. 1987. Fertilizer Use and Price Statistics, 1960-85. Statistical Bulletin No. 750. Economic Research Service. Washington, D.C. The increased use of commercial fertilizer during the last four decades has helped to increase dramatically the per acre yields of agronomic and horticultural crops. Fertilizers make possible continuous production of ma- jor crops such as corn and wheat, decrease dependence on animal manures and leguminous nitrogen for row-crop production, and facilitate the substi- tution of capital for relatively more expensive inputs such as labor and land, consequently reducing labor and land requirements to produce a unit of a crop. Heavy use of most nitrogen and some other fertilizers, however, can lead to soil acidification, other changes in soil properties, and offsite envi- ronmental problems. Fertilizers are often overapplied. When this happens, the total amount of plant nutrients available to growing crops not only exceeds the need or ability of the plant to absorb them but exceeds the economic optimum as well. Estimates of crop absorption of applied nitro- gen range from 25 to 70 percent and generally vary as a function of plant growth and health and the method and timing of nitrogen application. Crops are much more likely to make-fuller use of properly timed applica- tions of nitrogen. Unused nitrogen can be immobilized, denitrified, washed into streams or lakes, or leached from the soil into unclerground water and the subsoil Johnson and Wittwer, 1984; Legg and Meisinger, 1982~. Pesticides The use of synthetic organic pesticides such as dichIoro dipheny! trichio- roethane (DDT), benzene hexachloride (BHC), and (2,4-Dichlorophenoxy) acetic acid (2,4-D) began with great expectations in the 1940s. For the first

AGRICULTURE AND THE ECONOMY About two-thirds of all insecticides and fun- gicides are applied aerially; most herbicides in row crops are applied by spray rigs pulled by tractors. Citrus groves, such as the one shown above, may be aerially treated 10 to 20 times per season with insecticides, fungicides, and protestant oils. Helicopters are often used be- cause the turbulence from the main rotor tends to push the pesticides down toward the _.Y :. .. crop. Fixed-wing aircraft are more commonly used in field crops such as wheat and cotton. Tractor spray rigs (bottom] are often used to apply herbicides in row crops because plant- ing, fertilizing, and spraying can be accom- plished in one pass through the field. Credits: U.S. Department of Agriculture {top]; John Colwell from Grant Heilman (bottom]. a:::

44 ALTERNATIVE AGRICULTURE time, satisfactory control of agricultural pests seemed possible. Substituting lower-priced chemicals for higher-priced, labor-intensive weed and insect control methods and pest-reducing practices such as rotations immediately reduced labor needs and increased the effectiveness of control and yields. Ultimately, pesticides reinforced agricultural trends such as increasing farm size and decreasing diversification. The total pounds of pesticide active ingredients applied on farms in- creased 170 percent between 1964 and 1982, while total acres uncler culti- vation remained relatively constant. Herbicide use led the way, from 210 million pounds in 1971 to a peak of 455 million pounds in 1982 (U.S. Department of Agriculture, 1984) (Figure 1-19~. In 1935, 95 percent of the corn and soybean acreage was treated with herbicides, compared to about 40 percent in 1970. As a percentage of total pesticide pounds applied, herbicides rose from 33 percent in 1966 to 90 percent in 1986 (U.S. Depart- ment of Agriculture, 1970, 1986c; U.S. Environmental Protection Agency, 1986b). During that time, insecticide use declined while fungicide use held steady. Total pesticide use has declined from more than 500 million pounds of active ingredients in 1982 to about 430 million pounds in 1987. Land idled from production and the introduction of newer products that are applied at a lower rate per acre are largely responsible for this decline (U.S. Department of Agriculture, l98Sa). The total dollar value of the domestic agricultural pesticide market is about $4.0 billion. Herbicides represent the largest share of the market at about $2.5 billion, followed by insecticides at about $1.0 billion, and fungi- cides at about $265 million (National Agricultural Chemicals Association, 1987~. Because of the size of the herbicide market and increased understand- ing of plant physiology and biochemistry, herbicides are the most dynamic sector of the pesticide industry. A number of new active ingredients were introduced in 1986 and 1987 (Figure 1-20~. As a result, the herbicide market is currently highly competitive, particularly for use on corn, soybeans, wheat, and cotton. The greatest volume of pesticides is applied to field crops. About 90 percent of all herbicides and insecticides are applied to just four crops: corn, cotton, soybeans, and wheat (U.S. Department of Agriculture, 1986c) (Fig- ures 1-21 and 1-22~. In 1986, corn alone accounted for 55 percent of all herbicides and 44 percent of all insecticides used on field crops. Corn replaced cotton as the leader in insecticide use in 1982. Nearly half the total pounds of pesticides applied in the nation are user! in corn production (U.S. Department of Agriculture, 1986c). Soybeans receive about 25 percent of all herbicides, and cotton about 25 percent of all insecticides. Insecticides are also widely used in alfalfa, tree fru*, nut, and vegetable production. Fungicides are primarily used as a seed treatment and to protect fruits and vegetables during production and after harvest. Fungicide use in pea- nuts and wheat declined between 1976 and 1986, primarily as a result of improved varieties and integrated pest management (IPM) systems, al- though total fungicide use remained steady (U.S. Department of Agricul-

AGRICULTURE AND THE ECONOMY 500 450 400 350 co o ._ = ._ ~ 300 ._ - cn Z 250 o 200 150 100 _ _ _ / / / Heroic 7 / Fungicides Insecticides O ~ 1 966 1 970 1 975 1 980 1 985 86 87 YEAR 45 FIGURE I-19 Herbicide, insecticide, and fungicide use estimates. SOURCES: U.S. Department of Agriculture. 1974. Farmers' Use of Pesticides in 1971. Agricultural Economic Report No. 252. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1978. Farmers' Use of Pesticides in 1976. Agricultural Economic Report No. 418. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1983. Inputs—Outlook and Situation Report. IDS-2. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1984. Inputs—Outlook and Situation Report. IDS-6. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1987. Agricultural Resources—Inputs— Situation and Outlook Report. AR-5. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1988. Agricultural Resources—Inputs—Situation and Outlook Report. AR-9. Economic Research Service. Washington, D.C.

46 ALTERNATIVE AGRICULTURE sure, 1987b). Fungicides now account for less than 10 percent of all pesti- cides applied in agriculture. The introduction and acceptance of new fungicides has been relatively slow compared with those of herbicides and insecticides (see Figure 1-20~. Only five fungicides introduced since 1975 have gained more than 5 percent of the market for any major food crop. Target pests tend to develop resis- tance to most new, more specific fungicides. Consequently, these fungicides work best in combination with older broad-spectrum substances. This is particularly true in humid areas with great pest pressure such as the South and East. In these regions, current methods of production would not be possible without chemical fungicides. The adoption of IPM strategies and the increased use of synthetic pyre- throid insecticides, which are applied at about one-tenth to one-fourth the rate of traditional insecticides, have significantly reduced the total pounds of insecticides applied. This decreased use is particularly true for certain crops. Reductions in insecticide use are mainly derived from IPM programs 11 10 9 ~ 8 LL LL 7 CD 111 6 CI: L1J m is 5 4 3 2 , 1 _ ~ / ~ I \ .J \.\' L \.~1 Insecticide ——- - - Herbicide — — Fungicide A 1.,~ ,~ \, ' a., \ ' 1 \ ~ \1\ ~1- \. ! O , , , ~ l I I I I I I I ·~-_J 1973 74 75 76 77 78 79 80 81 82 83 84 85 86 1987 YEAR FIGURE 1-20 Number of herbicides, insecticides, and fungicides registered under FIFRA, 1973-1987. SOURCE: U.S. Environmental Protection Agency. 1988. Chemicals Registered for the First Time as Pesticidal Active Ingredients under FIFRA (including 2 (C)~7~(A) Registrations). Washington, D.C.

AGRICULTURE AND THE ECONOMY 250 200 In o 150 ._ oh He 3 100 50 / / / / / / Cotton l o 1966 1970 1975 1980 1985 86 87 YEAR 47 FIGURE 1-21 Herbicide use estimates on corn, cotton, soybeans, and wheat. SOURCES: U.S. Department of Agriculture. 1974. Farmers' Use of Pesticides in 1971. Agricultural Economic Report No. 252. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1978. Farmers' Use of Pesticides in 1976. Agricultural Economic Report No. 418. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1983. Inputs— Outlook and Situation Report. IDS-2. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1984. Inputs—Outlook and Situation Report. IDS-6. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1987. Agricultural Resources—Inputs—Situation and Outlook Report. AR-5. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1988. Agricultural Resources—Inputs— Situation and Outlook Report. AR-9. Economic Research Service. Washington, D.C.

48 ALTERNATIVE AGRICULTURE 80 70 60 In 50 .o ._ _ 40 in z 2 So 20 10 Cotton Corn - - 0~/hoono _ _ _ O 1966 1970 1975 ~' ~~ ~ _¢eat 1 I L: 1980 1985 87 YEAR FIGURE 1-22 Insecticide use estimates on corn, cotton, soybeans, and wheat. SOURCES: U.S. Department of Agriculture. 1974. Farmers' Use of Pesticides in 1971. Agricultural Economic Report No. 252. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1978. Farmers' Use of Pesticides in 1976. Agricultural Economic Report No. 418. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1983. Inputs— Outlook and Situation Report. IDS-2. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1984. Inputs—Outlook and Situation Report. IDS-6. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1987. Agricultural Resources—Inputs—Situation and Outlook Report. AR-5. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1988. Agricultural Resources—Inputs— Situation and Outlook Report. AR-9. Economic Research Service. Washington, D.C.

AGRICULTURE AND THE ECONOMY 49 in cotton, alfalfa, peanuts, and apples. Largely because of the success of IPM in cotton, insecticide applications to field and forage crops declined 45 percent between 1976 and 1982. Antibiotics Livestock and poultry producers have used antibiotics in animal produc- tion for the past 35 years. Antibiotic use in agriculture increased from 440,000 pounds in 1953 to 9.9 minion pounds in 1985 (Figure 1-23~. The most common agricultural use of these drugs is their subtherapeutic incor- poration into animal feed. Use of antibiotics in animal feed improves the feed efficiency and growth rate of livestock. Approximately 80 percent of the poultry, 75 percent of the swine, 60 percent of the beef cattle, and 75 percent of the dairy calves raised in the United States have been fed antibi- otics at some time in their lives. About 36 percent of the antibiotics pro- duced in the United States each year are fed or administered to animals (Hays et al., 1986; Institute of Medicine, 1989~. 50 40 Hi) ° 30 ._ - cn z 3 20 CL 10 o Total production .~ I/ it/ / Medicinal use in / ~~< humans and animals _~ ~ ~,— Agricultural use I I I I I I I 1 1 ' I I 1 1 1 1 1 I, 1950 1955 1960 1965 1970 1975 1980 1985 YEAR FIGURE 1-23 U.S. antibiotic production and use in animal feed. Only total production was recorded after 1979. SOURCES: U.S. International Trade Commission. 1987. Synthetic Organic Chemicals: United States Production and Sales. Washington, D.C.; National Research Council. 1980. The Effects on Human Health of Subtherapeutic Use of Antimicrobials in Animal Feeds. Washington, D.C.: National Academy Press.

50 ALTERNATIVE AGRICULTURE The routine feeding of antibiotics to control disease has facilitated special- ization, the use of feediots and confinement facilities, and the concentration of many animals under one manager in a small area (Council for Agricul- tural Science and Technology, 1981~. While there is disagreement on the necessity of feeding antibiotics as a simple function of confinement, there is ample documentation that control of diseases more prevalent in close confinement facilities will increase animal performance (Curtis, 1983~. The routine use of feed antimicrobials in confined animal units is a common practice in most regions. Concerns that feeding animals subtherapeutic doses of antibiotics could lead to antibiotic-resistant bacteria led the U.S. Food and Drug Administra- tion (FDA) in 1977 to propose regulations revoking nearly all approved subtherapeutic uses of penicillin and the most common forms of tetracy- cline. Final action remains delayed pending the results and analysis of additional research requested by the Congress (Hays et al., 1986~. Results to date show that food animals appear to be the largest single source of resistant salmonellae, although documented incidence of the development of resistant strains and their transmission to humans is rare. In the interim, subtherapeutic feeding of antibiotics has increased (see Figure 1-23~. In Europe and Japan, concerns about overuse and misuse of antibiotics and the potential for bacterial resistance have led to restrictions limiting antibi- otics to use by veterinarians or by prescription. Proposals in the United States to limit drug use to the discretion of veterinarians have met with opposition from livestock producers and drug manufacturers. Irrigation Agriculture accounts for 85 percent of all consumptive use of water, which is use that makes water unavailable for immediate reuse because of evapo- ration, transpiration, incorporation into crops or animals, or return to groundwater or surface water sources. Ninety-four percent of agricultural water is used for irrigation, 2 percent for domestic use, and about 4 percent for livestock. On average, agricultural irrigation used about 138 billion gal- lons of water per day in 1985. During the growing season this level can exceed 500 billion gallons per day (U.S. Department of Agriculture, 1987a). From 1950 to 197S, 25 minion additional acres came under irrigation (U.S. Department of Agriculture, 1936b) (Figure 1-24~. Total irrigated acreage peaked at slightly more than 50 million acres in 197S, declining to just under 45 million acres in 1983. Since then, total irrigated acreage has remained steady, although the composition has changed slightly; irrigated acreage in the West has declined, while irrigated acreage in the East has increased. Ninety-four percent of all irrigated acres are in 17 western and 3 southeast- ern states. Total irrigation water withdrawals (the amount of water used for irrigation) declined in 1935 for the first time since 1950 (U.S. Department of Agriculture, 1987a). Irrigation in some areas makes farming possible; in others it supplements

AGRICULTURE AND THE ECONOMY 55 50 In o — 45 ._ - cn LL tar 40 35 30 - - - - 51 Actu;l,/ - Trend _~ 25r 1 1 1 1 1 1 1 1 1950 1955 1960 1965 1970 1975 1980 1985 1988 YEAR FIGURE 1-24 Irrigated agricultural land. SOURCES: U.S. Department of Agriculture. 1988. 1988 Agricultural Chartbook. Agriculture Handbook No. 673. Washington, D.C.; U.S. Department of Agriculture. 1986. Agricultural Resources—Cropland, Water, and Conservation—Situation and Outlook Report. AR-4. Economic Research Service. Washington, D.C. rainfall. In ah cases the use of irrigation results in higher and more consis- tent yields than regional and national average nonirrigated yields (Table 1- 1~. In many cases the results are dramatic (U.S. Department of Agriculture, 1986b). The 13 percent of cropland that is irrigated accounts for more than 30 percent of the value of crops produced. The high unit value of many crops produced with irrigation, as well as the high yields for irrigated grain crops, are responsible for this disparity. The use of groundwater for irrigation increased 160 percent from 1945 to 1980. Surface water used for irrigation increased 50 percent during that time. The rapid expansion of irrigated acreage during the 1970s relied almost exclusively on the pumping of groundwater. Center pivot irrigation systems, which rely on groundwater, accounted for the largest increase of irrigated acreage of any irrigation system. These systems were used on 3.4 million acres in 1974 and 9.2 minion acres in 1983. Nebraska experienced a 1 million acre increase in center pivot irrigation between 1974 and 1983 and currently accounts for 51 percent of aD irrigated corn acreage (U.S. Depart- ment of Agriculture, 1985c, 1987h). Increased pumping costs due to over- drawing of aquifers and increased energy costs associated with deregulation of natural gas used for pumping in Texas and Oklahoma have caused the recent decline in irrigated acres. Energy costs for on-farm pumping of groundwater rose 352 percent between 1974 and 1983 (U.S. Department of Agriculture, 1985c). ~ . ~

52 TABLE t-1 Average Dryland and Irrigated Yields ALTERNATIVE AGRICULTURE Dryland Yieldsa Irrigated Yieldsb Ratio of Irrigated Crop (per acre) (per acre) to Dryland Yields Corn for grain 106.0 137.0 1.29 (bushels) Wheat 32.0 69.0 2.16 (bushels) Sorghum for grain 54.0 93.0 1.72 (bushels) Barley 48.0 81.0 1.69 (bushels) Cotton 0.9 1.7 1.89 (bales) Soybeans 31.0 36.0 1.16 (bushels) Potatoes 83.0 333.0 4.01 (hundredweight) aIn the contiguous United States, 1982. bFrom 20 principal irrigated states with 95 percent of all irrigated acres, 1984. SOURCES: U.S. Department of Agriculture. 1986. Agricultural Resources—Cropland, Water, and Conservation—Situation and Outlook Report. AR-4. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1987. U.S. Irrigation—Extent and Economic Importance. Agriculture Information Bulletin No. 523. Economic Research Service. Washington, D.C. By 1984, irrigators obtained roughly equal amounts of water from under- ground and surface sources. About 44 percent of all irrigation water is from on-farm groundwater pumping, about 12 percent is from on-farm surface water supplies, and about 44 percent is from off-farm suppliers such as irrigation districts and private water companies (U.S. Department of Agri- culture, 1986b). More than 85 percent of the additional irrigated acres in the past 30 years has been on land not served by the Bureau of Reclamation. The principal factors behind the increase in irrigated acres over the past two decades have been private investment stimulated by federal policies, which have included high commodity support prices, tax incentives that include investment credits and accelerated depreciation for equipment, water deple- tion allowances, and cheap credit. During the 1970s, about 80 percent of irrigation investment involved private funds. Most of the recent increases in irrigation have come in crops supported by the Commodity Cred* Corporation (CCC). Irrigation of these crops, primarily corn and wheat, increased by more than ~ million acres in the Great Plains between 1954 and 1982. This had a great impact on the pro- auction of these crops because irrigation generally boosts yields from 40 to 100 percent over similar nonirrigated acreage (U.S. Department of Agricul- ture, 1986b) (see Table 1-~. Corn and wheat have developed large surpluses in recent years. Increased productivity on irrigated lands has significantly contributed to these surpluses.

AGRICULTURE AND THE ECONOMY 53 Federal efforts to reduce production are often hampered by programs or policies that encourage irrigation and its resulting high per acre yields. Between 1976 and 1985, an average of 3.7 minion acres served by the Bureau of Reclamation were producing crops already in surplus. In 1986, growers producing surplus crops on the lanct received more than $200 minion in federally subsidized water, in addition to federal income and price supports (U.S. Congress, 1987~. About 12 percent of ad corn and nearly 7 percent of aD wheat acres are irrigated (Table I-21. The yield on irrigated corn acres is about 29 percent greater than national average dryland yields; for wheat, the yield is Il6 percent greater. The 29 percent increase in yield on the 9.6 minion irrigated acres of corn produced 298 minion additional bushels of corn compared with national average ,vielcis on the same acres. Irrigated wheat acres pro- duced nearly 170 minion bushels over the average yield on the 4.6 minion irrigated acres. The difference between irrigated and nonirrigatec! yields in regions where irrigation is common is far greater than this. Thus, the increase in production over actual nonuTigated corn and wheat production In these regions is likely to be higher than the 298 and 170 minion bushed TABLE 1-2 Harvested Irrigated Cropland and Pastureland,a 1982 Irrigated Share Acreage (percent) of Share (percent) of Type of Land (in thousands) Crop Irrigated Total Irrigated Acres Croplandb Corn 9,604 12.3 19.3 Sorghum 2,295 17.0 4.6 Wheat 4,650 6.6 9.3 Barley and oats 2,098 11.8 4.2 Rice 3,233 100.0 6.5 Cotton 3,424 35.0 6.9 Soybeans 2,321 3.6 4.7 Irish potatoes 812 64.0 1.6 Hay 8,507 15.0 17.1 Vegetables and melons 2,024 60.7 4.1 Orchard crops 3,343 70.4 6.7 Sugar beets 550 53.2 1.1 Others 2,428 17.9 4.9 Subtotals 45,289 13.4 91.0 Pastureland 4,499 0.9 9.0 Totald 49,788 6.1 100.0 aIn the contiguous United States. bCropland is land on farms used for crops. qncludes peanuts; dry tobacco; edible beans; and the minor acreage crops of rye, flax, sunflower, sugarcane, and dry edible peas. Figures may not add due to rounding. Irrigated cropland total includes 932,000 acres of double- cropped land. SOURCE: U.S. Department of Agriculture. 1987. U.S. Irrigation—Extent and Economic Importance. Agriculture Information Bulletin No. 523. Economic Research Service. Washington, D.C.

54 ALTERNATIVE AGRICULTURE figures. In many cases, these acres would not be planted without irrigation. Irrigation, in turn, often would not be profitable without government tax policies, low-cost credit, and high price supports and income support pay- ments for these crops. Irrigation is expected to expand in the East and other areas to supplement rainfall, increase yields, and reduce yield variability. In the arid West and Great Plains, however, irrigation will probably stabilize or decline for the remainder of the century because of the cost of water projects and compe- tition with urban users for supply. Improved management and conservation practices will probably sustain irrigated agriculture in these areas. But de- clining commodity prices, changes in the tax code, and the rising demand for other uses of water in arid areas will curtail new investment in irrigated agriculture in regions where irrigated agriculture flourished in the past. v ~ THE STRUCTURE OF AGRICULTURE The total number of farms, which are defined as places with actual or potential sales of agricultural products of $1,000 or more, declined from 5.9 million in 1945 to slightly more than 2.2 million in 1985 (U.S. Department of Agriculture, 1987c). It is noteworthy, however, that even in the farm recession of the mid-1980s, the decline in the number of farms between 1980 and 1986 (a loss of 220,000 farms, or 11 percent of all farms) was far less than that which occurred in the 1950s (1.6 minion farms, or 28 percent of all farms) or the 1960s (960,000 farms, or 24 percent of all farms) (U.S. Department of Agriculture, 1987c). Total harvested acres have remained relatively constant at approximately 340 million acres, indicating that aver- age farm size has almost tripled. Although individuals and their families operate most farms, the growth in average farm size has been largely at the expense of the small farm with a full-time operator. Fifteen to 20 percent of all farms produce more than 80 percent of all output. Three-quarters of all farm households generate off-farm income. Increases in farm size have been accompanied and made possible by increased specialization and substitution of purchased inputs for labor and land. At the end of World War Il. most farms in the Midwest, Great Lakes, Northeast, and parts of the South were diversified crop-livestock opera- tions. High-density animal confinement was rare. Most farmers produced forage and feed grains for their animals, which required longer crop rota- tions and less use of some purchased inputs, particularly fertilizers. Most farmers returned animal manure to the land. Far fewer insecticides and almost no herbicides were used. Pests were controlled through rotations, cultivation, and a variety of cultural and biological means. Cattle and hog production clearly illustrate the relationship among in- creasing specialization; changing distribution of farm income among large and small producers and regions; and changing cropping patterns, farm size, and management techniques. Specialization and the increased use of feedlots and confinement rearing have made cattle rearing possible

AGRICULTURE AND THE ECONOMY 55 Most beef cattle are fed or finished in feed- lots, where they eat high-energy grain ra- tions. Cattle enter feedlots between the ages of 7 and 12 months, weighing between 450 and 800 pounds. Most cattle are slaughtered between the ages of 15 and 24 months, weighing between 1,000 and 1,200 pounds. Low-cost feed grains and consumer prefer- ence for marbled thigher fat} grain-fed beef led to the proliferation of feedlots in the 1960s and 1970s. Large feedlots offer economies of scale but may also create problems with dis- ease control and manure disposal. Credit: Grant Heilman. throughout the nation. Beef cattle and hog production have become concen- trated in large enterprises. Although the Corn Belt accounted for almost 50 percent of cattle feed in 1950, this fell to 22 percent in 1979. Meanwhile, the Central and Southern Plains and the Southwest increased production from 500 to 1,000 percent. Part-time beef cattle operations with sales of $20,000 to $100,000 captured 56 percent of the market in 1969, while very large operations with sales greater than $500,000 had only 22 percent of the market (Figure 1-25~. By 1982, the very large operations controlled 62 percent of the market; part- time operations accounted for only 12 percent (U.S. Office of Technology Assessment, 1986b). Hog production is showing the same trend. Part-time farm sales went from 61 percent in 1969 to 28 percent in 1982. The share of large and very large operators increased from about 5 percent to about 40

56 ALTERNATIVE AGRICULTURE 70 60 C' 50 40 an ~ 30 an o 20 10 o Small 1~1 Part-time - ~3 Moderate Large Very large _ ~ 1111 1 L OIL 1 , ~ . ~ ~ A: 1 969 1974 YEAR 1 978 1 982 FIGURE 1-25 Percentage of cattle sales by size of operation (in 1969 dollars). Size of operation is determined by annual cattle sales: small, <$20,000; part-time, $20,000-99,999; moderate, $100,000-199,999; large, 2$200,000-499,999; very large, 2$500,000+. SOURCE: Office of Technology Assessment. 1986. Technology, Public Policy, and the Changing Structure of American Agriculture. Washington, D.C. 70 60 50 40 an LL Cat 30 en · 20 as: 0 10 o 2.- ~ L a Small ~3 Part-time [23 Moderate Large Very large , _ ,, . ,, ,... " 1 982 1 969 1974 1978 YEAR FIGURE 1-26 Percentage of hog and pig sales by size of operation (in 1969 dollars). Size of operation is determined by annual hog and pig sales: small, <$20,000; part-time, $20,000- 99,999; moderate, $100,000-199,999; large, $200,000~99,999; very large, 2 $500,000+ . SOURCE: Office of Technology Assessment. 1986. Technology, Public Policy, and the Changing Structure of American Agriculture. Washington, D.C.

AGRICULTURE AND THE ECONOMY 57 percent of sales during that time (Figure 1-26~. The dairy industry's small- farm market share declined from 66 to 41 percent between 1969 and 1982. The commercial broiler industry has moved almost entirely to vertical inte- gration, with virtually all chickens going from egg to market without chang- ing ownership. The egg and turkey industries are also moving in this direc- tion. REGIONAL DISTINCTIONS The diversity of climatic, environmental, and economic conditions in the United States makes it essential to look beyond aggregate national agricul- tural trends and focus on the specifics of various regions. Needs and prob- lems differ considerably among regions, and any effort to understand U.S. agriculture must address these differences. Types of farms and management also differ across the nation. The agricultural practices and needs of the coastal regions and southern Darts of the country are mute different from those of the north and west. Dry, hot areas that depend on irrigation stand in contrast to cooler, more humid regions dependent on rainfall. The U.S. Department of Agriculture (USDA) has identified nine represen- tative agricultural regions based on data from the 1980 Census and the 1982 Census of Agriculture (Figure 1-27~. Three basic criteria were used to iden- tify these revisions the commodities produced and the resource base; the percentage of farms with sales between certain levels; and the degree of agricultural and nonagricultural economic integration. Although these `_ v v v · · . ~ . ~ . ~ , ~ - r regions omit large parts of the country, they illustrate important differences among principal agricultural areas. The USDA identified the following rep- resentative regions: · California Metro Coastal Plains · Core Corn Belt Delta · Eastern Highlands Southeast Piedmont · Western Corn Belt-Northern Plains · Western Great Plains · Wisconsin-Minnesota Dairy Area Farm size and average sales per farm vary by region. In the Eastern Highlands, the average farm is 121 acres; on the Great Plains, the average farm is 2,334 acres (Table 1-3~. Average annual farm sales are also quite different, ranging from $13,064 and $35,396, respectively, in the Eastern Highlands and the Southeast Piedmont, to $94,030 and $167,124, respec- tively, in the Western Great Plains and the California Metro. In the Core Corn Belt, the Wisconsin-Minnesota Dairy Area, and the Western Com Belt- Northern Plains regions, farms reporting sales of $40,000 to $250,000 ac- count for between 50 and 65 percent of farm sales (Table 1-4~. In California, 12 percent of aD farms with sales more than $250,000 account for 85 percent of farm sales. At the same time, however, in California, the greatest per- centage of farms have sales between $1,000 and $9,999.

58 ~D .c _ ~ ~ ~ c c ~ — _ ~ <t >~° ~a ~D O— o _ ~ ~ o _ C ' - ~ <D (D E ~ s ~ ~ ~ ~ - Q ~ E E · ~ 3 ' E ' \ ~ j~ ~ ~ E I · · i, _ _ ° ~ `-m c ~ ~ ~ ~ ' ~ ' 8 2 E e E E ' E o E ~ a7 0 O) Q ~ S S ~ tD ~ O ~— ~S ~ Ct E <3 E ° c' Q ~q os ~D C _ ~ C _ m3 c8= - 0 'c —° — ~ ~ ~ ~ ~ ~ c C ~ Q—_ . C~ C C c ID od a5 _ ~ > C 4~ o,~s E ~ ~ ~ C ~ a' c CL ~ C s E ~ E c ~ o O s c~s— ~ — 4, — C o ~ s ~ s o ~ E s—o ~ >. E ' ~ e ~ ' 8 ~ ~ D ~ E ~ ° i E o ~ · E ~ e ,, ~ ~ i E 1 ~ ~ ' i ~ (q - '- ' ~ _ ~ E,: ~ ~ ~,~ ',, 0 {., s ~ E ° ~——~ ' _ C C ~ _ ~ (D C — Q ~D 0 C S - ~ ~— E .° ~ E == ' ~S - Q .'—, al~a) ~1 ~ @, E c o-O o O _ 2 8 o C' co ~,, ~ OQ O o - 00~ ~ ~ ~ ~ ° E ° ~ ~ C] 0 0 0 ~a) C }. ~ ~ O .= ~ ~ o ~4 o ~ ._ . V) O UO LU ~ ~ ~Y ~ o LL ~ 4~D ~ C ~. ~ - ~ C~ E ~, E ~ ~ Q ° ~ E ~ 0 E E E . ° 3 ' ° 9 E E ° -~ ~ s, E, E · s

AGRICULTURE AND THE ECONOMY TABLE I-3 Diversity of U.S. Farming Regions 59 Percentage of Farm Income as Share Average Farm Operators Average Sales of Total Income of Farm Size With Full-Time, per Farm Farm Population Region (acres) Off-Farm Jobs (dollars) (percent) Wisconsin- M~nnesota Dairy Area 202 28 58,585 35.4 Core Corn Belt 294 28 73,944 37.4 Delta 481 29 87,042 29.5 Eastern Highlands 121 46 13,064 15.4 Western Great Plains 2,334 24 94,080 37.8 Western Corn Belt-Northern Plains 622 17 86,111 47.2 Coastal Plains 260 37 64,500 20.8 Southeast Piedmont 143 50 35,396 18.0 California Metro 362 41 167,124 25.2 United States 440 38 58,857 27.0 SOURCE: U.S. Department of Agriculture. 1988. Regional Characteristics of U.S. Farms and Farmers in the 1980's. ERS Staff Report No. AGES880128. Economic Research Service. Washington, D.C. All regions depend significantly on income from major program crops (those for which federal price and income support programs exist) or live- stock operations that rely on feed grains and oilseeds produced by crop farms (Table 1-5~. Even California has a significant stake in the farm pro- grams. Rice, cotton, wheat, corn, and dairy farmers in the state account for about 40 percent of gross agricultural income. Some regions depend on one program commodity, while others are more diversified. Only California shows diversity and moderate dependence on program crops. The effect of commodity policy on regional economies, land use patterns, and farm structure is very different from region to region. These differences are accentuated by the diversity or interdependence of agricultural opera- tions within regions. For example, the effect of a change in corn prices is quite different depending on whether a person is a corn producer, a hog farmer who is a corn consumer, or a farmer producing corn and hogs. The effect of farm policy on the overall regional economy is, in turn, a function of the importance of agriculture to the region and the nature and scope of agricultural input, food processing and marketing, and transportation in- dustries. In no region was the total farm income more than 50 percent of the total income of the farm population (see Table 1-3~. The percentage was the highest in the Western Corn Belt-Northern Plains region at 47.2 percent, followed by the Western Great Plains at 37.S percent, the Core Corn Belt at 1

60 ~ a, .~ o o U ~ C o . On In 5 U in, ·= - cn ._ On - .U - In U. In - m In .5 1 ADZ In U' ~ C CO U) ~ CtS ·— o o U U 5 ~ ~ ~ of on - ~ ~ ~ ~ ~ ~ ~ ~ C~ ~ ~ ~ . . . . . . . . . . . . Cat ~ ~ ~ o Cal Go ~ eF ~ Cal Cat ~ ~ ~ - . Go A Go Go ~; ~ ~ ~ ~ oo c~ w ~ c~ ~ ~ o . . . . . . . . . . . ~ ~ ~ ~ o oo ~ o ~ ~ w ~ ~ n ~ ~ ~ t:s w ~ o ~: ~~ - ~ - ~ . [r] c~ IO ~ ~ 0 u~ ~ 0 oo ~ _ u~ ~ ~ ~ ~ un ~cn ~ ~ ~ c~ ~ ~ ~ ~ ~ ~ ~ o- o ~ ~ ~ ~ u~ ~ ~ ~ ~ ~ ~ .- u, u) ~ ~ ~ o 'o w ~ ~ ~ ~ ~ . . . . . . . . . . . — ~ ~ ~ ~ ~ ~ o w ~ ~ ~ ~ on oo ~ oo ~ u) ~ ~ o o ~ ~ ~ . . . . . . . . . . . ~ o cn cn ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ o cn v u' .- oo ~ ~ ~ ~ ~ ~ o ~ ~ o o ~ . . . . . . . . . . . . — ~ ~ ~ ~ ~ o o co~ ~ oo oo ~ - , ~ ~ ~ ~ w w ~ ~ o . . . . . . . . . . . — a~ ~ ~ ~ ~ ~ tS ~ ~ ~ ~ ~ .= o ~ ~ ~ ~ o~ ~ ~ ~ ~ w O~ u -~- ~w~ ~a ~ ~ ~ ~ ~ ~ C~ C~ . .~. ~ 0 O ~ ~ ~ ~ ~ ~ W W W ~ '~ =~83~~ ~ ~ ~ ~ ~ . O (3, _ ~ ~ ~ ~ §~°';°'°~'~°'°'°'~°'5°t °= ~Y=2

61 ~5 co o l LL m u) U ~ ~ ~ U .= 0 00 on o z o = Cot In Us ~ At, ~ ~ at . _~ ~~ t~ ~ 6 ~ ~ C ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 9 o ~ I U ~ ~—~ ~ E ~ X ~ ~9 ~ ° I ~ ~ in ~ oo (~) O ~ (I) ~ U ~ ~ ~ ~ ~ G ~ O ~ ~ ~ ~ 5 ~ia.P5~ ~ <~: o O In ~ ) ~~ ~~ ~ `m —c, E i ~ ~ ° - U UP ~ v In ~5 ~ a: U) CZ] - Us d4 ~ ~ On - i ~ ~ ~ o ~ ~ ~ ~ ~ ~ ~ ~ o ~ ~ U U ~ U m~ U ~ ~ ~ m`- U) o _ U ~ ~ ~4 .= ~n

62 ALTERNATIVE AGRICULTURE 37.4 percent, and the Wisconsin-Minnesota Dairy Area at 35.4 percent. Those figures do not include income from rents and interest, which average from 7 to 11 percent for all regions. They also mask the degree to which individual households within regions rely on income from farming. Ap- proximately 46 percent of all U.S. farm households derive 50 percent or more of their income from farming. Nonetheless, these figures reflect the O~rowing importance of off-farm income to the economic well-being of farm families. They indicate that farm families are like most other families—both adults work. Two of these four regions, the Wisconsin-Minnesota Dairy Area and the Western Great Plains, as weD as the Southeast Piedmont, generate more than 50 percent of their gross farm income from the sale of one commodity (see Table 1-5~. The significance of this dependence is far less in the Southeast Piedmont region because agriculture is less vital to the regional economy. The Delta states, on the other hand, appear more diversified but nonethe- less remain dependent on federal commodity programs. Soybeans, for which the government sets a support price or loan rate, and three commod- ity program crops cotton, rice, and wheat generate more than 85 percent of all agricultural dross income in the region. Prospective chances in com- ~. ——O— - __ =~ _ _ O__~ --- --Of -A -- - 0 .. . . . ~ . .. ~ . — ~ ,, modesty programs and market demand for these crops win directly attect growers and the region's economy because agricultural input and output industries are significant sources of income. The Western Corn Belt-Northern Plains and Core Corn Belt show the direct and indirect influence that farm policies can have on regions depen- dent on the farm sector economy. Farmers in these regions derive a large part of gross farm income from beef cattle, hogs, feed corn, and soybeans. Changes affecting one commodity are felt across the entire agricultural economy. Higher feed =~rain prices win increase the average feed prices for livestock producers, which may influence meat prices and, ultimately, con- sumer demand. For many producers who raise crops and livestock, the results will be mixed. Because these regions depend on farming as a prin- cipal source of overall income, the fortunes of the agricultural economy are felt throughout the regional economy. This was clearly demonstrated in the farm recession of the mid-19SOs. Feed =~rain producers and suppliers of machinery and inputs to these farmers were stressed; livestock producers benefited from the availability of relatively inexpensive feed. By contrast, California farmers are less influenced by federal commodity programs, particularly farmers specializing in fruit and vegetable produc- tion. More than half of California's agricultural gross income is from non- program crops. Those growers, however, are concerned with other federal and state policies affecting the viability of their operations, including mar- keting orders, trade policy, food safety regulations, and environmental pol- icies. Federal cosmetic and grading standards for fruit and vegetables sig- nificantly influence pest management practices. Producers of these specialty high-value crops dominate the California agricultural economy, generating additional economic activity in the form of processing, packaging, market-

AGRICULTURE AND THE ECONOMY 63 ing, and transportation. As a result of widespread production of high-value crops and significant agriculture-urban integration, average farm income and per acre value of agricultural land and buildings are high compared to those in other regions (Tables 1-3 and 1-6~. The median income of the farm population is well above the average U.S. household income in three regions: the Wisconsin-Minnesota Dairy Area, Core Corn Belt, and California Metro. In four regions, the California Metro, Core Corn Belt, Delta, and Southeast Piedmont, the median farm house- hold income is higher than that of all other households in the region. The Delta and Eastern Highlands had the lowest median income for farm house- holds of the nine regions. In the Delta, however, median farm income was 11 percent higher than the median income for ah Delta households. Median farm income in the Eastern Highlands was only slightly less than aD Eastern Highlands households. Agriculture causes environmental problems in all nine regions. Surface water pollution from fertilizers, pesticides, sediment, and manure is the most serious problem, although not uniformly distributed throughout ma- jor agricultural regions. Contamination of groundwater with pesticides and nitrate from agricultural fertilizers appears to be the most pervasive prob- lem, occurring in all major agricultural regions: the Core Corn Belt, Wiscon- sin-Minnesota Dairy Area, Western Great Plains, Western Corn Belt-North- ern Plains, Delta, California Metro, and Coastal Plains (U.S. Department of Agriculture, 1987e). The most severe overall water quality problems have been identified in the California Metro, Core Corn Belt, Delta, and the Coastal Plains. Soil erosion remains a concern on some soils in some regions. Food safety concerns are affecting agricultural production practices in Cali- fornia and to a lesser degree in other fruit- and vegetable-producing regions. These concerns are also affecting individual beef and dairy producers in many regions. Of the nine regions considered, irrigation problems appear to be most serious in the California Metro and the Western Great Plains. Agricultural practices and systems and the importance of alternative prac- tices are quite different in each region. In California, agriculture is extremely diverse. Thus, the scope of alternative production practices is great and variable. California agriculture is also confronted with the greatest range of environmental and public health concerns associated with modern conven- tional agricultural production practices. In the Core Corn Belt, the farm sector recession and the presence of nitrates and pesticides in the ground- water are among several factors influencing farmers to adopt alternative crop nutrient and pest management practices. The relatively small number of crops produced in the Core Corn Belt, however, makes the search for alternatives easier. Problems associated with food safety, for example, are of less relevance in this predominantly feed-producing region. Relatively few research and policy studies on regional alternative systems have been undertaken. Those that have often focus on a particular crop or policy and do not attempt to fully account for the complexity of farm management decision making. In some areas, research on and experience ..

64 · - U, ._ - - o ." On - In ._ CO ._ - ·= '1 1 o - ~4 - m Z to of U ~ ~ 0 -i In - ~ o., In ~ o U U. .5 1 5~= U z U. a. !~m In ~ a: (e ._ - a, U U ~ .5 ~ ~ C,0 o _ -a oo ~ o o oo ~ Oi =' oo oo o ~ o ~o ~ ~' u~ c~ p~ ~ ~o a; Co un <; o z o := ~n cn ~: L~ u, o oo - 4 - .5 CO Ct U) CD 3 ~4 o ._ .cn u Ct o ._ ~o ~ U o ._ <} `_ o ~v _. ._ c,n .= C~ a ~ . ~ ~; .g O 0 `,~

AGRICULTURE AND THE ECONOMY 65 with the implementation of alternative systems for certain crops has been significant, such as IPM and biological pest control in fruit and vegetable production in California. This is not the case for most crops and regions, however. In the future, federal research and commodity program policies wiD need to take into account the diversity in agricultural needs, priorities, and systems and the physical and biological limitations of different regions and farms within these regions. THE POWER OF POLICY Government policy influences the direction of agriculture through a vari- ety of agricultural, economic, and regulatory programs and policies. The most important of these are the commodity price and income support programs, tax policy, credit policy, research programs, trade and domestic economic policy, soil and water conservation programs, and the U.S. Envi- ronmental Protection Agency's (EPA) pesticide and water-quality regula- tions. The government's major influence on agriculture is through eco- nomic policy and the setting of prices and mandates regarding how land can be used by farmers wishing to participate in government programs. Regulatory policies that influence the cost and availability of alternative technologies and science and education priorities indirectly but powerfully affect agriculture. Recently, the impact of commodity programs on farm management deci- sions has become more visible. In 1986, total federal farm program outlays (including direct payments to farmers, export subsidies, storage costs, and nonrecourse loans) equaled nearly 50 percent of net cash farm income. This declined to about 40 percent in 1987 (Figure I-28~. At the same time, net farm income reached record levels of $37.5 billion in 1986 and $46.3 billion in 1987, due in part to the large subsidies paid to most growers participating in federal commodity programs (Figure 1-29~. Direct payments to growers set records in 1986 and again in 1987 of $11.S and $16.7 billion, respectively. In 1986, 50 percent of income for wheat growers was in the form of a federal producer subsidy, such as direct payment or restricted foreign access to the domestic market (U.S. Department of Agriculture, 198Sc). Federal farm commodity programs win continue to play a central role in shaping farm management decisions in agricultural regions dependent on these pro- grams. Farm programs have enormous influence on the crops that are grown and on the choice of management practices. Prices under the commodity programs are often far above world market prices. Consequently, most farmers fee] compeDed to preserve or build their farm commodity program base acres acres that determine program eligibility and future income. The land-use decisions of farmers operating about two-thirds of the harvested croplancl in the United States are strongly influenced by program rules and · ~ Incentives. Price and income support programs for major commodities also influence growers not in the programs. For example, pork producers do not receive

66 in a) ._ n CO o Q X - cn - C >' ~ C CL ~ o — ._ —O CO ~ C ~ O o C c C O ~ ~ Cat Q o O ~ ID Cal C\5 - ~ O Z in O O O O O Dow Cal C\l ~ - ' ' ' ' ' ' ' ' "- -"'' ~ ' ' 1 - ~ L~.:.' - 2.' t-0~ L=- l~~\\\\\\~\~ 1~ . 10\\\\\\\\\\\\\ ~ (SUo!ll!q U!) su~loa o ~ o o ~ o 0 ~ U) .> ~ once ~ I- C,, \~ .U o ¢ U' so so · o~ ~ o ~ ~ u ct ~ · · ~- u° 3 ~ o L' - . b4-- o~ ~ ~ o 3~= z ~ ~, U o ~3 ~ ~ o =, ~ on ~ o ~ · un U. ~ ~ o ~ .E ~ . o =3 ~o z cs~ ~ ~ · =} ~ ·o ~ oo ~ , ~ LU ~ o ~ u ii .= a; u · - oC

AGRICULTURE AND THE ECONOMY 50 40 35 45 30 ~ 25 o 20 15 10 5 o 67 Net farm income I A,> _ it, - 1 ~ I I I I ~ I lo I I I I I I I I I I I J ,~ Direct government payments to producers | _~ - I r I I I I I I I 1 L I I I I 1945 1950 1955 1960 1965 YEAR 1970 1975 1980 1985 87 FIGURE 1-29 Net farm income and direct government payments to farmers. Net farm income includes all farm business income and expenses associated with dwellings located on farms; business income represents the profit from current production, with gross income adjusted to reflect net quantity changes in inventories. These adjustments offset sales from inventories carried over from the previous year and exclude changes in value of inventories existing on January 1. SOURCE: U.S. Department of Agriculture. 1987. Economic Indicators of the Farm Sector: National Financial Summary, 1986. ECIFS 6-2. Economic Research Service. Washington, D.C.

68 ALTERNATIVE AGRICULTURE any government income protection. But in the past they have payed higher feed prices because of high price supports on feed grains. Recently, how- ever, they have benefited from lower feed costs resulting from the feed grain program passed in the Food Security Act of 1985. Policy also influences land use in indirect ways. The federal dairy termi- nation program from 1985 to 1987 was designed to reduce overproduction of milk. Farmers were given the opportunity to leave the dairy business by selling their milking cows for slaughter or export. Almost 1 million cows or about 9 percent of the nation's milking herd were involved in the buy- out program. Farmers enrolled in the program were sucldenly without cows to feed and had to decide on new farm enterprises. Many of these farmers decided to produce hay for local cash markets instead of for on-farm use. This decision caused a steep decline in the prices received by other estab- lished hay producers. Lack of Long-llange National Program Goals Federal policy evolved as a patchwork of individual programs, each cre- ated to address individual problems. No coherent strategy or national goals unite the programs, nor is there much appreciation of what the programs do or should accomplish or how they interact. Many programs, such as soil conservation and export programs, have historically had conflicting objec- tives. As a result, many well-intentioned policies that made sense when adopted or when viewed in isolation make less sense in the overall context of U.S. agriculture's contemporary needs. The USDA itself has recognized this failing. EFarm] policy has always tended to follow events and changes rather than anticipate and lead them that is, the approach to developing policy has largely been reactive, dealing with one emergency after an- other. Times of a studied, deliberate approach to the design of a forward- looking farm policy, rather than adjustment of the previous statute, have been rare.... There is little doubt that some of the programs that have resulted from this ad hoc, crisis-oriented policymaking have subsequently exacerbated problems of farmers, or, over time, produced unintended and unwanted consequences for the farm sector as a whole (U.S. Department of Agri- culture, 1981, p. 101~. In more than half a century of operation, government policy has not only affected commodity prices and the level of output, but it has also shaped technological change, encouraged uneconomical capital investments in ma- chinery and facilities, inflated the value of land, subsidized crop production practices that have led to resource degradation such as soil erosion and surface ant! groundwater pollution, expancled the interstate highway sys- tem, contributed to the demise of the railway systems, financed irrigation

AGRICULTURE AND THE ECONOMY 69 projects, and promoted farm commodity exports. Together with other eco- nomic forces, government policy has had a far-reaching structural influence on agriculture, much of it unintended and unanticipated. Impact of Commodity Policy on Alternative Agriculture Federal commodity programs exist to stabilize, support, and protect crop prices and farmer income. Programs that idle land, set prices, make direct payments to farmers, and encourage and subsidize exports address these objectives. Most of the current commodity program concepts are derived from the Agriculture Adjustment Act of 1938, which established nonre- course loans, acreage allotments, and marketing allotments for most major crops (U.S. Department of Agriculture, 1985a). Two central components of federal commodity programs impede move- ment toward alternative agriculture: base acre requirements and cross-com- pliance provisions. All crop price and income support programs rely on the concept of an acreage base planted with a given commodity and a proven crop yield for those base acres. Generally, the crop acreage enrobed and the J ~ ' ~ lo_ lo-, · ~ ~ , ~ . . ~ ~ . ~ ~ ~ ~ ~ 1 . benefits received are related to the crop acreage planted and yield outameu in the past 5 years, although base acre yields are currently frozen at the 1981 to 1985 average. Most commodity program acreage is planted to maximize benefits. Farmers know that if they voluntarily reduce their planting (base acres) of a particular crop, they win not only forfeit benefits for that year, such as loan price and deficiency payments, but they win also lose future benefits by reducing their eligible acreage base (the subsequent 5-year av- erage). The cross-compliance provision of the Food Security Act of 1985 is de- signed to control government payments and production of program com- modities by attaching financial penalties to the expansion of program crop base acres. It serves as an effective financial barrier to diversification into other program crops, particularly if a farmer has no established base acres for those crops. Cross-compliance stipulates that to receive any benefits from an established crop acreage base, the farmer must not exceed his or her acreage base for any other program crop. The practical impact of this provision is profound, particularly if a farmer's acreage base for other crops is small or zero. For example, a farmer with corn base acreage and no other crop base acres would lose the right to participate in aZZ programs if any land on his or her farm was planted to other program crops such as wheat or rye (oats are currently exempt) as part of a rotation. If a farm had base acreage for two or more crops when cross-compliance went into effect in 1986, the farm must stay within the base acreage allotments applicable to both programs each year to retain full eligibility for commodity program payments in the future. The conservation compliance provisions of the Food Security Act of 1985 may also complicate a farmer's adoption of alternatives. These provisions require that between 85 minion and 90 minion acres of highly erodible

70 ALTERNATIVE AGRICULTURE cropland have approved conservation plans or be enrobed in the conserva- tion reserve program (CRP) by 1990. Plans must be fully implemented by 1995. About 28 minion acres are currently in the CRE For the remaining land, local soil conservation service specialists often recommend rotations in combination with conservation tiDage practices as the best way to reduce erosion. Without adjustments in the cross-compliance or base acres provi- sions, many farmers may be forced to implement more costly, less effective conservation systems to maintain fun eligibility for government program benefits. Between the need to maintain base acres and the cross-compliance provi- sion, farmers often face economic penalties for adopting beneficial prac- tices, such as corn and legume or small grain rotations or strip cropping. With few exceptions, only farmers outside the programs can currently adopt these cropping systems without financial penalties. The conflict between the conservation, cross-compliance, and base acres provisions of the farm programs must be resolved to allow farmers to adopt, without economic penalty, practices and rotations that reduce erosion, input costs, and the potential for off-site environmental contamination. Another incentive for farmers to remain enrolled in the commodity pro- grams is the deficiency uavments that farmers receive (see the boxed article "Commodity Programs: Definition of Terms". Since the 1940s, deficiency payments, or their previous equivalents, have been based on "proven yield," or the yield actuary achieved in recent years on base acres on a particular farm. For each base acre in the program, the payment in a given year is the product of the per bushed deficiency payment times the land's proven yield in bushels per acre. The deficiency payment is the difference between the target price and the loan rate or the market price, whichever difference is less. When market prices are low, this policy rewards producers who strive for maximum per acre yield rather than maximum net return in the market- place. The higher the farmer's established proven yield, the greater the deficiency payment received per acre. The prospect of higher payments has encouraged heavier use of fertiliz- ers, pesticides, and irrigation than can be justified by market forces in any given year. In effect, a high target price subsidizes the inefficient, potentially damaging use of inputs. It also encourages surplus production of the same crops that the commodity programs are in part designed to control, thus increasing government expenditures. This circumstance is illustrated by a hypothetical example from Figure 1-30: a farmer with 500 acres of wheat would produce 19,000 bushels at the market price. However, to generate additional income the farmer will produce 24,000 bushels at the target price. It costs the farmer more to produce the extra 5,000 bushels than they are worth on the market, but the taxpayer pays the difference to the farmer, in this case $10,000 (5,000 bushels x $2.00 per bushel deficiency payment). An important change in the Food Security Act of 1985 has begun to cut the direct link of higher yields with rising program payments by freezing yield levels eligible for payments at 90 percent of the 1981 to 1985 average. —D—~ — EM— r ~

AGRICULTURE AND THE ECONOMY 10 8 5 4 3 2 1 Marginal cost of / production Target price Average market vice (1986-87) 1 1 12 14 16 18 20 22 BUSHELS (in thousands) 71 24 26 28 FIGURE 1-30 Hypothetical cost of production for a wheat farm. SOURCE: Agricultural Policy Working Group. 1988. Decoupling: A New Direction in Global Farm Policy. Washington, D.C.: Agricultural Policy Working Group. Nonetheless, many farmers continue to pursue higher per acre yields in the belief that this freeze win be removed as part of the 1990 Farm BiD or some future legislation (Professional Farmers of America, 1988~. Commodity programs are a dominant force in domestic agriculture, with more than two-thircls of all U.S. cropland enrolled in these programs. The acreage enrolled in these programs has increased greatly since 1981, when export demand peaked, domestic market prices were high, and program participation was essentially zero. Program participation generally rises as market prices fall and per acre deficiency payments increase. This trend is clear for most commodities (Figures 1-31 through 1-34~. With between 80 and 95 percent of the nation's corn, sorghum, wheat, cotton, and rice acreage enrolled in federal commodity programs, the chances are slim for widespread adoption of alternative practices that involve rotations with nonprogram crops, such as leguminous hay or forage crops, or the planting of other program crops for which farmers have to establish base acres. Under the current program rules, farmers simply have too much to lose.

72 4 ~L1 3 I oh m Or: IIJ CL 2 CO CC o C) 1 o ALTERNATIVE AGRICULTURE 1 100 >market price ____" Target price 1970 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 YEAR 75 ~ Cot a) G 50 o 25 o FIGURE 1-31 Market price, target price, and percentage of corn growers participating in the corn commodity program. SOURCE: Data provided by the U.S. Department of Agriculture, Agricultural Stabilization and Conservation Service, Commodity Analysis Division, 1988. 4 LL ~ I An m Or llJ CL cn 2 o 1 o ~ ~ r - c7 100 It price A - Target price \ 1970 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 YEAR - 75 c, a, Q ._ of o 50 F C' CE 25 O FIGURE 1-32 Market price, target price, and percentage of sorghum growers participating in the sorghum commodity program. SOURCE: Data provided by the U.S. Department of Agriculture, Agricultural Stabilization and Conservation Service, Commodity Analysis Division, 1988.

AGRICULTURE AND THE ECONOMY 111 3 I m LL in J o C] O 73 5'~1 _ ~ 1970 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 YEAR 100 75 ~ Q ._ _ 50 O 25 '( _ O FIGURE 1-33 Market price, target price, and percentage of wheat growers participating in the wheat commodity program. SOURCE: Data provided by the U.S. Department of Agriculture, Agricultural Stabilization and Conservation Service, Commodity Analysis Division, 1988. 15r 13.5 C!, 1 IL 1 0.5 z I a: o C:) 9 ~ _ O- 1970 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 A Market price I \~f Target price \ YEAR 100 Q - o Cal _ 25 ~ O FIGURE 1-34 Market price, target price, and percentage of rice growers participating in the rice commodity program. SOURCE: Data provided by the U.S. Department of Agriculture, Agricultural Stabilization and Conservation Service, Commodity Analysis Division, 1988.

74 ALTERNATIVE AGRICULTURE COMMODITY PROGRAMS: DEFINITION OF TERMS The most expensive and influential government agricultural policies aim to support prices, adjust supplies, encourage exports, and maintain in- come for farmers producing wheat, corn, barley, sorghum, cotton, rice, sugar, tobacco, milk, and other program products. Following congres- sional direction, the U.S. Department of Agriculture {USDAJ sets a target price and a loan rate for wheat, corn, barley, sorghum, cotton, and rice and equivalent prices for sugar, tobacco, and milk each year. If the average market price of a commodity is below the stated target price, the government pays participating farmers the difference between the target price and the loan rate or the market price, whichever difference is less. This is called a deficiency payment. It is paid to farmers in addition to income received for market sale of their crop or for placing the crop under loan with the Commodity Credit Corporation (CCC]. The target price, designed to support farm income, is often set well above the market price and well above what it costs the majority of farmers to produce a crop (Figures 1-30, 1-35, and 1-36~. Deficiency payments are often a substantial share of gross farm in- come. The amount of the payment depends on a farmer's established per acre yield on a predetermined acreage base devoted to the crop. Direct deficiency payments may not exceed S50,000 per farmer, although Congress exempted some other types of payments in the Food Security Act of 1985 and provided separate limits on others. Many farmers have found ways to reorganize their holdings to avoid payment limitations. In addition, the government offers nonrecourse loans with a govern- ment-set loan rate, which acts as a government-guaranteed minimum price for the commodity. If the market price falls below the loan rate, a 5 T c`' 4 G ~ 3 Oh o C) Target price I 1 J 0.0 0.5 1.0 1.5 BUSHELS (in billions) 2.0 2.5 FIGURE 1-35 Wheat produced at less than the target price per bushel, 1981. SOURCE: Adapted from U.S. Department of Agriculture. 1985. Agricultural-Food Policy Review: Commodity Program Perspectives. Agricultural Economic Report No. 530. Economic Research Service. Washington, D.C. In Office of Technology Assessment. 1986. A Review of U.S. Competitiveness in Agricultural Trade—A Technical Memorandum. OTA-TM- TET-29. Washington, D.C.

AGRICULTURE AND THE ECONOMY farmer can forfeit crops placed under loan to the government in repay- ment of the loan. When the loan rate is set above the international market price, foreign producers can undercut the price of U.S. exports. In this case, most producers will take the higher price {the loan rate instead of the market price} and "sell" their crops to the government, which in turn stores them until market prices are well above loan rates or the crops are used in food aid programs. Most crops placed under CCC loan are sold at a net loss. High and rigid loan rates were a major factor in the agricultural export decline of 1981 to 1986. Under changes in the Food Security Act of 1985, loan rates for wheat, feed grains, soybeans, upland cotton, and rice were lowered to 75 to 85 percent of the average price received by farmers over the past 5 years, dropping out the high and the low years. Loan rates may not drop more than 5 percent from the previous year's rate, unless deemed necessary to make the U.S. crop more competitive. Using discretionary authority, the Secretary of Agriculture may not lower the loan rate more than 20 percent below the normally computed rate. Such discretionary reductions in the loan rate are not used to calculate subsequent rates. For 1986 the secretary was required to reduce the loan rate for wheat and feed grains by at least 10 percent; the actual reduction was the maximum allowed, 20 percent. In 1986 and 1987, Congress set the soy- bean loan rate at S5.02 per bushel. During 1988 through 1990, with the above formula in effect, the rate is not allowed to drop below S4.50 per bushel. Rice and cotton growers receive crop marketing loans that may be paid back at the loan rate or the prevailing market price, whichever is less. 5 IIJ I 4 Oh m lr [L ~ an cr of; 0 2 1 Target price Corn ~ 0.0 2.0 4.0 6.0 8.0 BUSHELS (in billions) FIGURE 1-36 Corn produced at less than the target price per bushel, 1981. SOURCE: Adapted from U.S. Department of Agriculture. 1985. Agricultural-Food Policy Review: Commodity Program Perspectives. Agricultural Economic Report No. 530. Economic Research Service. Washington, D.C. In Office of Technology Assessment. 1986. A Review of U.S. Competitiveness in Agricultural Trade—A Technical Memorandum. OTA-TM- TET-29. Washington, D.C. 75

76 ALTERNATIVE AGRICULTURE Tax Policy Income tax policies over the last two decades have significantly influenced agricultural practices, even though they are not generally considered part of the farm program. The increases in irrigated acreage and animal confine- ment facilities are two examples. Before passage of the Tax Reform Act of 1986, agriculture received investment credit and accelerated depreciation on physical plants and equipment. Additionally, favorable capital gains treat- ment allowed individual farmers to exclude from taxation 60 percent of income received from the sale of assets such as land, breeder stock, and certain unharvested crops. Favorable capital gains treatment provided incentives to purchase highly erodible fields and wetlands, rangelands, or forestiands at relatively low prices; convert these lands to croplancl; seD them at a prof*; and exclude 60 percent of the gain from taxation. The tax advantages of large-scale conver- sion of wetlands to cropland were estimated to be as much as $603 per acre, largely from the treatment of capital gains (Benfielcl et al., 1986~. Ironically, favored tax treatment of "conservation" investments stimulated conversion of rangeland and wetlands to cropland. The Tax Reform Act of 1986 elimi- nated special capital gains treatment for the conversion of highly erodible land or wetlands into cropland. The act also explicitly denies the deduction of expenses associated with draining or firing a wetland. Although the effects of recent changes in the tax code win not be fully understood for several years, the similar swampbuster and sodbuster provisions of the Food Security Act of 1985 and the Tax Reform Act of 1986 eliminated many financial incentives for farming practices that contributed to soil erosion and conversion of wetlands to farmIanc! (see the "Soil Conservation Programs" section in this chapter). Management decisions and capital expenditures profitable under the previous tax code are now less attractive. Much of the sharp rise in farm real estate prices in the 1970s can be attributed to a speculative boom driven by tax advantages and inflation, compounded by the higher earning power of farmland, which resulted from higher commodity prices. This boom collapsed in the 1980s as lower com- modity prices and rising real interest rates depressed land value (equity), in turn eroding the net worth of most farms. Lowered equity has affected not only those who had invested in land speculatively, which includes farmers and nonfarmers, but also farmers who bought land with the sole interest of farming it. Another effect of volatile land prices is consolidation of land holdings. Capital gains taxes, which helped make farm real estate speculation profit- able and thus destabilized land prices, reinforced the trend toward fewer and larger farms. When land prices rise above the value sustainable from current farm income, only buyers who have enough equity can compete for land that comes on the market. When land prices fad, farms with high debt- to-asset ratios and equity in the form of land can have greater difficulty securing capital at competitive interest rates. Those in more favorable posi- tions can increase their holdings by buying land at "distressed" prices.

AGRICULTURE AND THE ECONOMY 77 Increasing investment in physical plants and equipment, accompanied by a rapid decline in the use of labor, have been two of the most salient features of the agricultural economy for many decades. Since World War lI, the value of agricultural machinery and vehicles increased sevenfold in constant dol- lars to more than $100 billion. Use of labor decreased by a factor of five (U.S. Department of Agriculture, 1985b). Tax advantages and shelters avail- able through investment in agricultural facilities and equipment, such as irrigation systems, orchard plantings, and animal confinement structures, accelerated the use of certain technologies and altered the structure of many farming enterprises. Investment tax credos spurred the use of irrigation in the Great Plains with water from the OgaDala aquifer. More than 1 minion acres were brought under center pivot irrigation in Nebraska between 1973 and 1983. Convert- ing the sandhiDs of Nebraska to center-pivot-irrigated corn has been esti- mated to generate $175 per acre in tax advantages through a combination of the water-depletion allowance, accelerated depreciation, and investment tax credits (Benfield et al., 1986~. The water-depletion allowance permits farmers to claim a deduction if they can prove that they are irreversibly depleting certain groundwater reserves. Agricultural overuse is depleting the slowly recharging OgaDala aquifer in some locations. The Tax Reform Act of 1986 denies deduction of any expenses associated with preparing land for center pivot irrigation. Accelerated depreciation and investment tax credits also motivated the rapid growth of custom beef fee~ots, which started in the 1960s and in- creased through the early 1980s. These tax provisions are responsible for the surge of off-farm investment in hog confinement facilities in the Mid- west in the early 1980s. The Tax Reform Act of 1986 lengthened the depre- ciation period for single-purpose agricultural structures from 5 to 7 years. Tax code changes in 1988 further lengthened this depreciation to 10 years. Research and Education The primary goal of agricultural research and education policy has been to increase farm production and profitability while conserving the natural resource base. Achieving higher crop yields per acre has traditionally been viewed as the best way to do both. Emphasizing the attainment of higher yields per acre makes the greatest sense if land is the most limiting factor in production or if the cost of land is high on a per acre basis relative to other costs. Some high-value per acre specialty crop operations are exam- ples in which large investments for an irrigation system or pesticides can be justified economically. Because government programs do not support these crops, the intensity of input use is generally a function of the market demand and price paid for the crop. Much research conducted over the past 40 years has responded to the needs of farmers operating under a set of economic and policy incentives that encourage high yields. Much of the focus has been on chemical- and drug-related technologies to support specialized, high-yield operations and

78 ALTERNATIVE AGRICULTURE simplify farm management. Until recently, research has generally not delib- erately addressed the possibility of maintaining current levels of production with reduced levels of certain off-farm inputs, more intensive management, increased understanding of biological principles, or greater profitability per un* of production with reduced government support. Yet, increased international competition, the decline in world market prices for most commodities, and the relatively high percentage of total variable costs for inputs needed to achieve current high yields warrants a reassessment of farming practices, research, and the effects of policy on farm decision making. In general, further increases in yield are an ineffec- tive means of achieving greater profitability or international competitive- ness. For many crops like corn, cotton, wheat, and small grains, higher yields are often justified in terms of profitability only in the context of government support, particularly high target prices. The added costs of purchased inputs soon become more than the free market value of the aclded yield. Moreover, high-yield, specialized production systems can re- sult in more variable yields than diversified systems that also reduce per unit input costs (Helmers et al., 1986~. This is especially true when rainfall or other climatic conditions cleviate far from the norm (Goldstein and Young, 1987; Lockeretz et al., 1984~. Increased yield variability can also raise risk and capital costs. Farmers growing commodity program crops, however, are often willing to take this risk, because government commodity payments provide an economic safety net that does not depend on annual harvested production. Disaster relief and crop insurance benefits may also be available, further reducing the risk borne by farmers. In years when high yields are attained, farmers may have an opportunity to raise the proven yield that is used as the basis of future program benefits and insurance settlements. When high yields fail, disaster payments and insurance program mechanisms protect farmers. These pro- grams are expensive, however. The economic, agronomic, and environmen- tal consequences associated with these practices are leading to fundamental changes in the targets for agricultural research and education. Throughout the system, a new emphasis is being placed on identifying crops better suited to a region's natural resources and to reducing costs per unit of production, sometimes even at lower per acre yields. Other Programs and Policies Soil Conservation Programs Soil conservation and other federal farm policies have been linked since the Soil Conservation and Domestic Allotment Act of 1936. This connection was politically expedient. When pictures of the Dust Bowl were a symbol of the Great Depression, the public was willing to pay farmers to shift from erosion-prone crops to soil-conserving land uses. The soil-conserving crops such as hays and forages were not in surplus, while crops that generally

AGRICULTURE AND THE ECONOMY 79 require more tiDage and often result in higher rates of erosion, such as corn, wheat, and cotton, were in surplus. Reducing the acreage devoted to these crops provided an opportunity to reduce erosion through cover crops or other conservation measures. Since the 1940s, conservation programs have done better in times of depressed prices and surpluses and worse in periods of strong prices and expanding production. Voluntary compliance or participation has been an underlying principle of soil conservation programs since their inception. The government has historically relied on the "carrot," such as availability of free technical assis- tance, cost-sharing funds, and commodity program benefits, rather than the "stick" of mandatory compliance or penalties. The price and income support aspects of farm programs have dominated environmental and con- servation considerations. This was particularly apparent in the mid-1970s through the mid-1980s, when expanding production exacerbated erosion losses. As production expanded, there were no policies in place to slow the conversion of wetlands or highly erodible grasslands to cultivated crops. Nor were there policies to slow the resulting steady growth in commodity program base acreage allotments. Congress addressed this problem in the Food Security Act of 1985 by the adoption of the so-called sodbuster and swampbuster provisions. The sod- buster provision denies aD federal program benefits to farmers who plow highly erodible lands without first adopting a locally approved soil conser- vation plan. The swampbuster provision denies benefits to farmers who drain or otherwise convert certain wetlands to cultivated crop production. Soil and water conservation measures often require continuous refine- meet, maintenance, and good management to reduce erosion significantly and protect water quality. In periods of high commodity prices and strong demand, some farmers have planted grain crops on almost all available land, with few steps taken to reduce soil and water runoff. Farmers who have continued conservation practices in boom years lost opportunities to build base acreage and, in some cases, forfeited chances to improve their farms' proven per acre yield and payments. In response to this inequity, the Food Security Act of 1985 incorporated several mechanisms designed to simultaneously control surplus production and reduce soil erosion on the most highly erodible land. The CRP pays farmers to take their most highly erodibie land out of production for 10 years. Over 60 percent of the land now in the CRP is drawn from crop base acres. Nearly half of the base acres now in the CRP are from the wheat program (Table 1-7~. As of February 198S, 25.5 million acres had been idled under the CRP (Table 1-3~. Five million to 10 minion more acres are expected to be idled over the next 2 years. It is noteworthy that even though set-aside acreage from the commodity programs and the CRP idled nearly 70 million acres in 1987, excess production capacity of major commodities remained near its highest point at 16 percent of potential output (Figure 1-371. (Excess . , ~ ~ . , ~ . ~ ~ ~ .~ ~ ~ ~ . 1 ~ ~ ~ ~ ~ , production capacity is defined here as the difference between potential output and commercial demand at prevailing farm prices.) Another feature of the Food Security Act of 1985, the conservation com-

80 ALTERNATIVE AGRICULTURE TABLE 1-7 Commodity Base Acres Enrolled in CRP Through July 1987 Million Acres Base Total Base Acres Percentage of Acres Enrolled Base Acres Crop in 1985 in CRP Enrolled in CRP Barley 12.4 1.8 14.5 Sorghum 18.9 1.7 9.0 Oats 9.2 0.8 8.7 Wheat 91.7 6.8 7.4 Cotton 15.4 0.9 5.8 Corn 82.2 2.7 3.3 Rice 4.1 — — Peanuts 1.5a Tobacco 0.7a _ _ Total 236.1 14.7 6.2b NOTE: The dash indicates that the values were negligible. aAcres harvested. bThis figure represents the percentage of all crop base acres. SOURCE: U.S. Department of Agriculture. 1987. Agricultural Resources—Cropland, Water, and Conservation—Situation and Outlook Report. AR-8. Economic Research Service. Washington, D.C. TABLE 1-8 Regional Distribution of Acres Enrolled in CRP Through February 1988 Acres Share (percent) Percentage Enrolled of U.S. Acres of Region's Region (in millions) Enrolled Cropland Northeast 0.13 0.5 0.8 Lake States 2.07 8.1 4.7 Corn Belt 3.56 13.9 3.9 Northern Plains 6.04 23.7 6.5 Appalachia 0.86 3.4 3.8 Southeast 1.25 4.9 6.8 Delta States 0.78 3.0 3.5 Southern Plains 4.10 16.1 9.1 Mountain 5.22 20.4 12.1 Pacific 1.51 5.9 6.7 United States 25.53 100.0 6.1a aThis figure represents the percentage of all crop acres. SOURCE: U.S. Department of Agriculture. 1988. Agricultural Resources—Cropland, Water, and Conservation—Situation and Outlook Report. AR-12. Economic Research Service. Washington, D.C.

AGRICULTURE AND THE ECONOMY 81 pliance provision, will require farmers wishing to retain eligibility for gov- ernment program benefits to implement recommended conservation plans beginning in the 1990 growing season. To retain eligibility for any govem- ment program—diversion payments, deficiency payments, CCC commodity loans and storage payments, Farmers Home Administration (FmHA) loans, government loans for storage facilities, federal crop insurance, and conser- vation reserve payments farmers must manage ah highly erodible fields in accordance with an approved soil conservation plan by 1995. Between 80 minion and 95 minion acres win require these plans, although more than 25 minion of these acres are now in the CRE The impact of conservation compliance on farming practices is not known, although no-tiDage or conservation tiDage practices are often recommended for highly erodible land. In many instances, alternative farming systems 390 370 360 350 a' o ._ ._ _ 320 an LL G 340 330 310 300 290 270 260 250 ~ Conserving uses O Crop acres planted = ~ . ~ _ _ Excess pr d anti r ca pa city 1 11111111 1 1970 1975 1980 1985 YEAR 20 or al 15 g Z ~ O c,0 tin ~ O 10 t!: ~ ~~ O co cat oh lo X O 111 IL O FIGURE 1-37 U.S. crop acreage in conserving uses compared with excess production capacity. Major crops include wheat, feedgrains (corn, barley, sorghum, and oats), soybeans, and cotton. Excess production capacity is the difference between potential output and commercial demand at prevailing market prices. SOURCE: U.S. Department of Agriculture. 1988. 1988 Agricultural Chartbook. Agriculture Handbook No. 673. Washington, D.C. Revised data from Economic Research Service, USDA.

82 ALTERNATIVE AGRICULTURE may be used to sustain high levels of crop production and comply with the erosion control goals sought under conservation compliance. Future gov- ernment policy may provide new incentives for farmers to develop alterna- tive crop management systems that protect environmental quality and maintain current levels of production and farm incomes. Pesticide Licensing About 600 pesticide active ingredients are registered for use in the United States. Approximately 200 active ingredients, however, account for over 95 percent of aD agricultural pesticide use. Congressional policy and the EPA's application of current law regulating pesticides have resulted in a slow, deliberate pesticide regulatory process. From the inception of the EPA spe- cial review program in 1975 through September 30, 1987, the agency com- pleted 40 special reviews or risk-benefit analyses of the most hazardous pesticides. These reviews resulted in 5 cases where all agricultural uses were cancelled, 34 cases where some uses were cancelled or restrictions imposed, and 1 case where no action was taken. These cases do not include the cancellation of all food uses of aldrin, chlordane, chlordecone, DDT, dieldrin, and heptachlor, nor the voluntary cancellation of all or some uses of 21 other active ingredients that occurred outside the special review proc- ess (U.S. Environmental Protection Agency, 1987~. Between 1975 and 1987, these reviews took from 2 to 7 years to complete, with some important reviews still outstanding. Recently, however, the review process has been expedited and newly initiated reviews may now take an average of 1~/2 to 3 years (U.S. General Accounting Office, 1936~. Legal challenges commonly delay the final resolution of regulatory actions, as does the sheer size of the task in comparison to available EPA resources. Since the amendment of the Federal Insecticide, Fungicide and Rodenti- cide Act (FIFRA) in 1972, through 1987 the EPA registered 69 new insecti- cides, 60 new herbicides, and 31 new fungicides (U.S. Environmental Pro- tection Agency, 1938) (see Figure 1-20~. New products are generally subjected to stricter standards before they gain market entry than are exist- ing products with which they would compete. Typically, these pesticides are safer and more biologically benign. In some cases, new compounds that are safer than the existing products they might replace have been denied registrations, while more hazardous products were left on the market (Na- tional Research Council, 1987~. Current regulations are complex, sometimes inconsistent, and exceedingly difficult to implement. The Delaney Clause (1958) of the Federal Food, Drug and Cosmetic Act of 1954 offers the best example of inconsistency. This provision of the law forbids the residues of pesticides in any processed food that induce cancer in laboratory animals if those residues concentrate above the level aBowed on the raw food. The Delaney Clause, however, does not apply to raw foods with no processed form or to carcinogenic pesticides that do not concentrate in processed foods. Consequently, residues of the same carcinogenic pesticides are al-

AGRICULTURE AND THE ECONOMY 83 lowed on certain fresh and processed foods, but not in processed foods where they concentrate. Further, the EPA has applied the Delaney Clause only to new pesticides, thereby maintaining registrations for many older pesticides that pose risks acknowledged by the EPA to be greater than those posed by most new substitute chemicals (National Research Council, 1987~. The benefit-assessment methods employed by the EPA are also a concern. The EPA does not, as a matter of routine procedure, incorporate alternative or nonchemical pest control methods into its assessment of pesticide bene- fits when carrying out a regulatory review (U.S. Congress, 1988~. As a result, the benefits of currently used products are sometimes inflated, and the economic values of alternatives are not taken into account or formally recognized and acted upon. The most recent example of this is the EPA's review of the herbicide alachior. AlachIor is the most widely used pesticide in the nation. It is used to control grassy weeds on 30 percent of the corn and 25 percent of the soybeans produced in the United States. The benefits analysis in this review was confined solely to an economic comparison of the benefits of alachior with those of a similar herbicide, metolachIor (U.S. Environmental Protection Agency, 1986a). The comparative economic ben- efits and costs associated with the use of cultivation, tilIage, and planting techniques that are used effectively by many farmers to control similar weeds were not considered in the analysis (see the Spray, BreDahI, Sabot Hill, Kutztown, and Thompson case studies). According to John Moore, former EPA assistant administrator for pesticides and toxic substances, the alachior benefits assessment is representative of most EPA pesticide benefits assessments. These assessments routinely consider only the benefits of the most likely alternative pesticide, ignoring all other alternative control strat- egies (U.S. Congress, 1988~. Food Quality and Safety Food safety regulations and meat inspection programs are primarily de- signed to prevent health risks and acute illnesses from chemical and micro- bial contaminants in food. These regulations, however, do not enhance food quality. For example, meat-grading standards have traditionally rewarded producers of fatty beef. Cosmetic standards for fruits and vegetables can encourage late-season pesticide use that results in higher residues in food. Certain poultry slaughter practices result in a high prevalence of microbio- logical contamination. Methods of producing food with fewer of these in- herent risks are wed known and widely practiced (see the case studies in this report; Allen et al., 1987; National Research Council, 1985, 198Sb). The EPA reviews health and safety data and establishes tolerance levels for pesticide residues in foods that are thought to present minimal health risks. Foods with pesticide residues up to these levels are then allowed in the market. The FDA then monitors food for compliance with these toler- ances. For some types of risk, however, particularly cancer risk, there re- mains considerable debate about the certainty of the data and assumptions supporting calculations of acceptable risk. Moreover, the monitoring does

84 ALTERNATIVE AGRICULTURE not regularly check for many widely used pesticides, including a number of widely used compounds classified by the EPA as probable human carcino- gens (U.S. Congress, House, 1987~. Livestock are being fed an increasing amount of various by-products from the processing of agricultural commodities. This is particularly true in states like California and Florida that produce a great variety of commodities (National Research Council, 1983~. By-product feeds like citrus pulp, tomato pomace, and almond huDs are valuable livestock feeds with nutritive and economic value often comparable to that of feeds produced exclusively for animal use. Many of these feeds, however, have not been historically rec- ognized as animal feeds. Because of this, many pesticides used on these commodities do not have tolerances for residues in by-products used as animal feed or in the ensuing animal food product. The potential for the introduction of these pesticides into food-producing animals is unknown. While animal food products may contain residues of the pesticides found in nontraditional animal feeds, the EPA has generally not examined the fate of pesticides in animals consuming these feeds or the food products derived from them (National Research Council, 1987~. There is also concern about combinations of residues on food to which people may be regularly exposed (National Research Council, 198Sa). The EPA sets acceptable levels for residues in food for each pesticide separately, although many combinations of pesticides are regularly used and detected on food crops. Even though risks from pesticides are presumed to be addi- tive, acceptable levels of exposure are calculated assuming exposure to each pesticide in isolation. Some chemicals, moreover, may act synergistically. Current regulations and standards do not assess or incorporate margins of safety reflecting the possibility of synergistic or add*ive effects. The federal government also sets grading standards for farm products. Beef grading tended to equate high-fat content with high quality in Prime and Choice cuts for example, until recent changes in grading standards. Excessive consumption of animal fat is known to raise the likelihood of heart disease (National Research Council, 198Sb). Similarly, the USDA grad- ing standards and milk pricing standards reward producers for butterfat content of milk. Since the 1940s, however, butterfat consumption has de- clined dramatically, while consumption of low-fat and nonfat dairy products has increased. Consequently, the butterfat-based pricing system has re- sulted in large government-held surpluses of butter, despite the capability of producers through genetics and management to produce lower-fat products. SalmoneHae also remains a significant concern, particularly in poultry products. A National Research Council study reported that about one-third of aD poultry sold is contaminated with salmoneHae. Although salmoneHae is controlled by proper cooking and sanitation, not aD people follow rec- ommended food handing procedures. The possibility of resistant strains and human health problems following infection remains a concern (Institute of Medicine, 1989; National Research Council, 1985~.

AGRICULTURE AND THE ECONOMY 85 SUMMARY Agriculture produces the essential elements of the $700 billion food and fiber economy. Since World War IT, agriculture has become more specialized and dependent on off-farm inputs and has substantially increased per acre yield. Machinery, pesticides, irrigation water, fertilizers, and antibiotics have replacecl land, diversity, and labor as principal components of agricultural production. Fewer and larger farms produce more food and fiber than ever before. Government commodity income and price support programs, tax policy, and agricultural research heavily influence on-farm decision making in major sections of U.S. agriculture. Producing food to meet government criteria, however, often precludes farmers from responding to changing market conditions or imposes financial penalties for practices that improve food safety and environmental quality. In the midwestern states, government programs ant! subsidies have re- duced the risk of specialization and thus encouraged the separation of livestock operations from feed grain production. The result is a decline in two important agricultural practices: return of animal manures to the soil and rotation of cultivated crops with grass and leguminous forages. Feed grain production without livestock or legumes requires additional commer- cial fertilizer and often entails increased pesticide use to compensate for the lost pest control benefits of rotations. The increase in confinement livestock operations, particularly for swine and poultry, correlates with the subther- apeutic use of antibiotics to promote growth and to suppress disease inci- dence. Between 80 and 95 percent of program crop acreage is currently enrobed In the federal commodity programs. The base acres and cross- compliance provisions of these programs will penalize growers who want to adopt diversified crop rotations or integrated livestock feed and forage operations on this land. There are many economic and environmental problems to be solved that are associated with current conventional agricultural practices. However, a substantial number of growers practice many systems that provide solu- tions, in spite of actual disincentives or little support from federal pro- grams. Chapter 2 describes some of the major problems derived from con- ventional practices. Subsequent chapters describe the alternatives. REFERENCES Allen, W. A., E. G. Rajotte, R. F. Kazmierczak, Jr., M. T. Lambur, and G. W. Norton. 1987. The National Evaluation of Extension's Integrated Pest Management (IPM) Programs. VCES Publication 491-010. Blacksburg, Va.: Virginia Cooperative Extension Service. Benfield, F. K., I. R. Ward, and A. E. Kinsinger. 1986. Assessing the Tax Reform Act: Gains, Questions, and Unfinished Business. Washington, D.C.: Natural Resources Defense Council. California Department of Food and Agriculture. 1958. California Dairy Industry Statistics. Sacramento, Calif.: Crop and Livestock Reporting Service.

86 ALTERNATIVE AGRICULTURE California Department of Food and Agriculture. 1972. California Dairy Industry Statistics. Sacramento, Calif.: Crop and Livestock Reporting Service. California Department of Food and Agriculture. 1987. California Dairy Industry Statistics. Sacramento, Calif.: Crop and Livestock Reporting Service. Council for Agricultural Science and Technology. 1981. Antibiotics in Animal Feeds. Report No. 88. Ames, Iowa. Curtis, S. E. 1983. Environmental Management in Animal Agriculture. Ames, Iowa: The Iowa State University Press. Goldstein, W. A., and D. L. Young. 1987. An economic comparison of a conventional and a low-input cropping system in the Palouse. American Journal of Alternative Agriculture 2(Spring):51-56. Hays, V. W., D. Batson, and R. Gerrits. 1986. Public health implications of the use of antibi- otics in animal agriculture: Preface. Journal of Animal Science 62(Suppl. 3~:1-4. Helmers, G. A., M. R. Langemeier, and J. Atwood. 1986. An economic analysis of alternative cropping systems for east-central Nebraska. American Journal of Alternative Agriculture 1(4):153-158. Institute of Medicine. 1989. Human Health Risks with the Subtherapeutic Use of Penicillin or Tetracyclines in Animal Feed. Washington, D.C.: National Academy Press. Johnson, G. L., and S. H. Wittwer. 1984. Agricultural Technology Until 2030: Prospects, Priorities, and Policies. East Lansing, Mich.: Michigan State University Agricultural Ex- periment Station. Legg, J. O., and J. J. Meisinger. 1982. Soil Nutrition Budgets in Nitrogen in Agricultural Soils, F. J. Stevenson, ed. ASA Monograph No. 22. Madison, Wis.: American Society of Agron- omy, Crop Science Society of America, Soil Science Society of America. Lockeretz, W., G. Shearer, D. H. Kohl, and R. W. Klepper. 1984. Comparison of Organic and Conventional Farming in the Corn Belt. Pp. 37-48 in Organic Farming: Current Technol- ogy and Its Role in a Sustainable Agriculture, D. F. Bezdicek, and l. F. Power, eds. Madison, Wis.: American Society of Agronomy, Crop Science Society of America, Soil Science Society of America. National Agricultural Chemicals Association. 1987. 1986 Industry Profile Survey. Washington, D.C.: Ernst and Whinney. National Research Council. 1983. Underutilized Resources as Animal Feedstuffs. Washington, D.C.: National Academy Press. National Research Council. 1985. Meat and Poultry Inspection: The Scientific Basis of the Nation's Program. Washington, D.C.: National Academy Press. National Research Council. 1987. Regulating Pesticides in Food: The Delaney Paradox. Wash- ington, D.C.: National Academy Press. National Research Council. 1988a. Complex Mixtures: Methods for In Vivo Toxicity Testing. Washington, D.C.: National Academy Press. National Research Council. 1988b. Designing Foods: Animal Product Options in the Market- place. Washington, D.C.: National Academy Press. Professional Farmers of America. 1988. Pro Farmer's Guide to Working with ASCS. Cedar Falls, Iowa: Professional Farmers of America. U.S. Congress. 1985. The Food Security Act of 1985. Public Law 99-198. Washington, D.C. U.S. Congress, House. Committee on Energy and Commerce. 1987. Hearing on Pesticides in Food. 100th Cong., 1st sess. Serial No. 100-7, pp. 37-39. U.S. Congress, House. Committee on Interior and Insular Affairs, Subcommittee on Water and Power Resources. 1987. Congressman George Miller's questions and Dr. Wayne N. Marchant's responses to testimony on irrigation subsidy legislation. H.R. 100-1443. May 22. 100th Cong., 1st sess. U.S. Congress, House. Committee on Government Operations. 1988. Hearing on Low Input Farming Systems: Benefits and Barriers. H.R. 100-1097. October 20. 100th Cong., 2nd sess. U.S. Department of Agriculture. 1970. Quantities of Pesticides Used by Farmers in 1966. Agricultural Economic Report No. 179. Economic Research Service. Washington, D.C.

AGRICULTURE AND THE ECONOMY 87 U.S. Department of Agriculture. 1972. Agricultural Statistics. Tables 1, 38, 84, and 189. Washington, D.C. U.S. Department of Agriculture. 1981. A Time to Choose: Summary Report on the Structure of Agriculture. Washington, D.C. U.S. Department of Agriculture. 1984. Inputs—Outlook and Situation Report. IDS-6. Eco- nomic Research Service. Washington, D.C. U.S. Department of Agriculture. 1985a. Agricultural-Food Policy Review: Commodity Pro- gram Perspectives. Agricultural Economic Report No. 530. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1985b. Economic Indicators of the Farm Sector: Production and Efficiency Statistics, 1983. ECIFS 3-5. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1985c. Energy and U.S. Agriculture: Irrigation Pumping, 1974-1983. Agricultural Economic Report No. 545. Economic Research Service. Washing- ton, D.C. U.S. Department of Agriculture. 1986a. 1986 Agricultural Chartbook. Agriculture Handbook No. 663. Washington, D.C. U.S. Department of Agriculture. 1986b. Agricultural Resources—Cropland, Water, and Con- servation—Situation and Outlook Report. AR-4. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1986c. Agricultural Resources—Inputs—Outlook and Situa- tion Report. AR-1. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1986d. Agricultural Statistics. Tables 2, 38, 81, and 166. Washington, D.C. U.S. Department of Agriculture. 1986e. Agriculture's Links to the National Economy: Income and Employment. Agriculture Information Bulletin No. 504. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1986f. Cropland Use and Supply—Outlook and Situation Report. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1986g. Food Cost Review, 1985. Agricultural Economic Re- port No. 559. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1986h. U.S. and World Food, Beverages, and Tobacco Expen- ditures, 1970-1983. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1987a. Agricultural Resources—Cropland, Water, and Con- servation—Situation and Outlook Report. AR-8. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1987b. Agricultural Resources—Inputs—Situation and Out- look Report. AR-5. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1987c. Economic Indicators of the Farm Sector: National Financial Summary, 1986. ECIFS 6-2. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1987d. Fertilizer Use and Price Statistics, 1960-1985. Statis- tical Bulletin No. 750. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1987e. The Magnitude and Costs of Groundwater Contami- nation from Agricultural Chemicals: A National Perspective. Staff Report AGES870318. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1987f. Measuring the Size of the U.S. Food and Fiber System. Agricultural Economic Report No. 566. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1987g. National Food Review: The U.S. Food System from Production to Consumption. NFR-37. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1987h. U.S. Irrigation: Extent and Economic Importance. Agriculture Information Bulletin No. 523. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1988a. 1988 Agricultural Chartbook. Agriculture Handbook No. 673. Washington, D.C. U.S. Department of Agriculture. 1988b. Agricultural Outlook. AO-141. Economic Research Service. Washington, D.C.

88 ALTERNATIVE AGRICULTURE U.S. Department of Agriculture. 1988c. Outlook '88 Charts: 64th Annual Agricultural Outlook Conference. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1989. Data from National Agricultural Statistics Service, retained in data base of the Livestock, Dairy, and Poultry Branch, Commodity Economics Division, Economic Research Service. Washington, D.C. U.S. Environmental Protection Agency. 1986a. Alachlor: Special Review Technical Support Document. Washington, D.C. U.S. Environmental Protection Agency. 1986b. Pesticide Industry Sales and Usage: 1985 Market Estimates. Washington, D.C. U.S. Environmental Protection Agency. 1987. Fiscal Year 87 Report on the Status of Chemicals in the Special Review Program, Registration Standards Program, Data Call-In Program, and Other Registration Activities. Washington, D.C. U.S. Environmental Protection Agency. 1988. Chemicals Registered for the First Time as Pesticidal Active Ingredients under FIFRA (including 3 (C)~7~(A) Registrations). Washing- ton, D.C. U.S. General Accounting Office. 1986. Pesticides: EPA's Formidable Task to Assess and Regulate Their Risks. GAO/RCED-86-125. Washington, D.C. U.S. Office of Technology Assessment. 1986a. A Review of U.S. Competitiveness in Agricul- tural Trade: A Technical Memorandum. OTA-TM-TET-29. Washington, D.C. U.S. Office of Technology Assessment. 1986b. Technology, Public Policy, and the Changing Structure of American Agriculture. OTA-F-285. Washington, D.C.