Economic Impact of Organic Production Systems

From the National Research Council recent report Toward Sustainable Agricultural Systems in the 21st Century come these factoids related to the economic impact of organic productions systems:

... Production costs per acre for the organic system were lower. Total labor for the organic system was higher, but because it was spread more equally through the growing season, the organic system had fewer off-farm hired workers.
- p. 228

... despite the lower yields of organic crops compared to conventional crops, organic systems can still be more profitable than conventional systems because of lower input costs and organic price premiums. When organic premiums were not included, conventional systems were generally more profitable.
- p. 229

... Organic practices tend to be more labor intensive (Klepper et al., 1977; Pimental et al., 2005) and often need more intensive management time (Porter et al., 2003) than conventional agriculture. In general, unpaid family members provide a larger proportion of the overall farm labor (Tegegne et al., 2001; Macombe, 2007; MacRae et al., 2007). As a result, the economic performance of organic farming systems can depend heavily on the input costs attributed to unpaid family labor (Hanson et al., 1997; Brumfield et al., 2000).
- p. 229

So, to push forward some discussion points:

• Organic production systems may create year round jobs better than conventional systems, thereby assisting the stability and growth of rural communities.
  
• Some organic producers may be profitable because they receive free labor.
  
• Organic needs a price premium in order to achieve profitability, to cover the additional labor costs (and other costs?). A price premium of 10% may be the magic number, but this is determined by the market pricing.
  
• Hiring people is always seen as a drain on the bottom line; however what we need is job creation.

Can we consider that hiring and paying people to work is good business?

Profitability of US Farm Sector

Another NRC factoid:

" Statistics on the aggregate profitability of the U.S. farm sector disguise considerable variation in the economic performance of individual farms. For example, in 2007, only 47 percent of all U.S. farms reported positive net farm income, a drop from 57 percent of all farms in 1987. Most farms that lost money were relatively small operations that relied principally on nonfarm sources of income. Most farms in the United States are essentially family businesses that rely mainly on farm family members for their labor force (Gasson and Errington, 1993; Hoppe et al., 2007), and the majority of farm families also gain income from off-farm work. Nonfarm work or transfer payments are commonly used to supplement income from the farm business. The proportion of farm operators who work off-farm increased from 44 percent in 1979 to 52 percent in 2004. The proportion of spouses working off-farm grew from 28 percent to 45 percent during the same period (Fernandez-Cornejo et al., 2007). The contribution of off-farm income to the total household income of U.S. farmers rose from about 50 percent in 1960 to more than 80 percent in 2004 (Fernandez-Cornejo et al., 2007)."

Source: Committee on Twenty-First Century Systems Agriculture, "Toward Sustainable Agricultural Systems in the 21st Century", National Research Council, 2010, p. 68, http://www.nap.edu/catalog/12832.html

Current state of small and mid-size farms

Another factoid from the NRC/NAS report:

" The mid-sized family farms (sales between $100,000 and $500,000) are examples of the prototypical “family farm” that has captured much of the public imagination and public policy debates over the future of American agriculture (Browne et al., 1992). According to the 2007 census, these mid-sized farms represented just under 10 percent of all U.S. farms, produced 16.5 percent of all farm sales, and managed another quarter of the nation’s farmland and nearly 30 percent of its cropland.

" Small and mid-sized family farms together owned two-thirds of the total value of farmland, buildings, and equipment and managed roughly 60 percent of all U.S. farmland and cropland in 2007."

Source: Committee on Twenty-First Century Systems Agriculture, "Toward Sustainable Agricultural Systems in the 21st Century", National Research Council, 2010, p. 49, http://www.nap.edu/catalog/12832.html

Feedlot cows produce more methane than pasture cows

As more researchers work to understand where ghg emissions occur in ag practices, we can begin to parse growing practices to determine which have a lower carbon footprint.

Environmental Health Perspectives posted recent research, Global Farm Animal Production and Global Warming: Impacting and Mitigating Climate Change, that does some of this parsing by combining the results of various related studies.

Here are some emerging facts from that article:

1. "Animal agriculture sector accounts for approximately 9% of total CO2 emissions, which are primarily the result of fertilizer production for feed crops, on-farm energy expenditures, feed transport, animal product processing and transport, and land use changes (Steinfeld et al. 2006)."
2. "Burning fossil fuels to produce fertilizers for feed crops may emit 41 million metric tons of CO2 per year (Steinfeld et al. 2006)."
3. " Farm animals and animal production facilities cover one-third of the planet's land surface, using more than two-thirds of all available agricultural land including the land used to grow feed crops (Haan et al. 1997). "
4. "Typically, cattle confined in feedlots or in intensive confinement dairy operations are fed an unnatural diet of concentrated high-protein feed consisting of corn and soybeans. Although cattle may gain weight rapidly when fed this diet (Pollan 2002), it can cause a range of illnesses (Smith 1998). This diet may also lead to increased methane emissions."
5. And this: "The standard diet fed to beef cattle confined in feedlots contributes to manure with a "high methane producing capacity" (U.S. EPA 1998). In contrast, cattle raised on pasture, eating a more natural, low-energy diet composed of grasses and other forages, produce manure with about half of the potential to generate methane (U.S. EPA 1998)."
   

So feedlot cattle appear to produce twice the methane as pasture due to the diet. I assume this does not include the any methane from fertilizer or feed growing practices.

The first response seems obvious: eat less meat. The counterpoint is that we need protein. We can of course grow more pasture beef, but at current consumption habits we would have to expand land use for cattle quite significantly if we consume meat at current levels. Also, as health efforts (partially) succeed in getting us to reduce our red meat consumption in this country, as economic progress grows in developing nations, particularly China and India, meat consumption increases potentially negating any ghg reduction we have accomplished.

Ugh. So what can we do?

Since the climate is a global issue the pathway forward needs to incorporate global, national, and local concerns:

1. Reduce feedlot cattle consumption everywhere.
2. Increase the production of pasture beef.
   
1. Which also decentralizes manure production and reduces the necessity of using fossil fuels to create fertilizers, and then transport them to buyers.
   
3. Generate large consumer awareness programs in developing nations that as they turn their diets towards more red meat consumption that they request pasture beef.
1. Other research shows that pasture beef has more omega 3 fatty acids than feedlot beef (will get source).
   
4. Encourage trade policies that incentivize the production of low carbon meat.
   

Secondary source (primary sources in brackets, available in article): Koneswaran G and Nierenberg D, Global Farm Animal Production and Global Warming: Impacting and Mitigating Climate Change, Environmental Health Perspectives Volume 116, Number 5, May 2008, www.ehponline.org/docs/2008/11034/abstract.html

Economics of Buying Local, Part 1

Buying local has caught on around the country. Good for people, good for communities, good for health, good for farmers, good for ag land preservation, good for air, land, water, climate .... The beat goes on.

But is it good for the economy?

Separating out the economic return of growing local food for local consumption is gaining momentum as more governments and communities measure the economic return of going local.

New Jersey is one state that has measured such efforts. The state supports a Jersey Fresh program with an annual expenditure from state funds. From the 2004 NJ Agriculture Annual Report comes this fact:

Jersey Fresh Economic Impact – Using federal funds, a study was conducted to determine the economic impact of the Jersey Fresh Promotional Program. The study showed that each dollar spent on the Jersey Fresh program increased farm revenues by $31.54. That increase boosted farm-related businesses by an additional $22.95 of sales in agricultural support industries. In total, each dollar spent on Jersey Fresh promotion resulted in $54.49 of increased economic output in the State.

With a current budget for Jersey Fresh being about $800,000, this means an increase in farm revenues of $25.2 million, and a total increase in economic output for the state of $43.6 million.

Pretty good return.

Source: New Jersey Agriculture 2004 Annual Report, Agricultural Statistics, New Jersey Department of Agriculture / National Agricultural Statistics Service, USDA, http://www.state.nj.us/agriculture/04AnnualReport.pdf

Study: Farmers market food costs less

An article in the Seattle Times today discussed research done by a Seattle University economics class that compared the cost for farmer market food with nearby markets. The results go against the perception. From the article:
"The farmers market was slightly less expensive pound for pound, on average, for 15 items that included Fuji apples, red potatoes, baby carrots, spinach and salad mix."

Full article is available at the Seattle Times, entitled "Farmers-market food costs less, class finds".

Nitrous Oxide in Ag, Part 2: Nitric Acid Production

I am trying to do a life cycle analysis of synthetic fertilizers and their impacts on climate change. I am having to do a rough analysis of production process and ingredients to start.

As previously discussed, Nitrous Oxide (N2O) is a major source of greenhouse gas emissions:

• Nitrous Oxide (N2O) emissions from ag make up over 75% of the U.S.'s total N2O emissions.
  
• N2O is found in ag primarily from fertilizer application and management of solid waste from animals.
• N2O has 296 times more impact on the climate than CO2.

Let's add a defintion by the EPA: "Nitric acid (HNO3) is an inorganic compound used primarily to make synthetic commercial fertilizers. It is also a major component in the production of adipic acid⎯a feedstock for nylon⎯and explosives."(1)

So this shows pretty solidly that synthetic fertilizer production has a major impact on climate change.

A few questions come to mind:

1. What are the source ingredients for Nitric Acid? Can we find a replacement for Nitric Acid and still grow enough food and materials?
2. What is the power source for the industrial plants?
   
3. What are the best substitutes and are there enough of them?
   
4. Which crops receive the most? Which the least?
   
5. What industrial processes have more impact on the climate?

To answer the last question first (since it is the easiest), we can turn to the EPA's U.S. Inventory Report chapter for Industrial Processes.

The top 10 Industrial Processes for Greenhouse Gas (GHG) emissions are listed below. The numbers represent teragrams (tg) of CO2 Eq, with 1Tg equal to 1 million metric ton (MMT CO2 Eq.)(2)

Top 10 GHG Emitting Industrial Processes (3)

1. Substitution of Ozone Depleting Substances (123.3)
2. Cement Manufacture (45.9)
3. Iron and Steel Production (45.2)
4. HCFC-22 Production (16.5)
5. Ammonia Manufacture & Urea Application (16.3)
6. Nitric Acid Production (15.7)
7. Lime Manufacture (13.7)
   
8. Electrical Transmission and Distribution (13.2)
9. Limestone and Dolomite Use (7.4)
10. Adipic Acid Production (6.0)

Major source ingredients for Nitric Acid production are:

• Ammonia
• Nitric oxide

And as we can see, ammonia manufacture is the #5 highest emitter.

Sources:
1) EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks,1990-2003", :1990 – 2003, April 2005, p.161.
2) U.S. Energy Information Administration, "Emissions of Greenhouse Gases in the United States 2000", Appendix F (Common Conversion Factors), 2000
3) EPA, "U.S. Greenhouse Gas Inventory Reports", Chapter 4 "Industrial Processes", April 2007, http://epa.gov/climatechange/emissions/usinventoryreport.html

Nitrous Oxide in Ag, Part 1: EPA definitions

As discussed earlier:

• Nitrous Oxide (N2O) emissions from ag make up over 75% of the U.S.'s total N2O emissions.
  
• N2O is found in ag primarily from fertilizer application and management of solid waste from animals.
• N2O has 296 times more impact on the climate than CO2.

So N2O has bad mojo on the climate, and the biggest source of U.S. emissions is from spreading fertilizers on the land.

As anyone who deals with government knows, a key issue is how terms are defined. So what is the definition used for ag lands as it pertains to this issue? The term used is "Agricultural Soil Management" (IPCC Source Category 4D), and the EPA defines this term this way: "Only direct emissions from agricultural lands (i.e., croplands and grasslands), along with emissions from PRP manure."
PRP is defined as "the deposition of manure on soils by animals on pasture, range, and paddock (PRP) (i.e., by animals whose manure is not managed)."

"Agricultural soils are responsible for the majority of U.S. N2O emissions. Estimated emissions from this source in 2003 were 253.5 Tg CO2 Eq. (818 Gg N2O)." (p. 19 in pdf)

So I want to know if this: do coventional ag practices have more or less N2O than organic or sustainable ag practices (e.g. low-till), and by how much?

As a starting point comes this quote from the EPA's Climate Change Inventory Report:
"Heavy utilization of synthetic nitrogen fertilizers in crop production typically results in significantly more N2O emissions from agricultural soils than that occurring from less intensive, low-tillage techniques."

But a few pages later in the report comes this:
"N2O emissions cannot be partitioned into the contribution of N2O from different N inputs (e.g., N2O emissions from synthetic fertilizer applications cannot be distinguished from those emissions resulting from manure applications). Therefore, it was not possible to separate out these individual contributors to N2O flux, as is suggested in the IPCC Guidelines." (pdf p.21)

To further refine the definitions, there are major crops and non-major crops.

• Major cropping systems are "corn, soybean, wheat, alfalfa hay, other hay, sorghum, and cotton" and "represent approximately 90 percent of total cropped land in the United States."
  
• Non-major crop types "include fruits, nuts, and vegetables, which account for approximately 5 percent of U.S. N fertilizer use (TFI 2000) and other crops not simulated by DAYCENT (barley, oats, tobacco, sugar cane, sugar beets, sunflower, millet, peanuts, etc.) which account for approximately 10 percent of total U.S. fertilizer use."

Source for quotes: EPA, "US Emissions Inventory 2005: Inventory of U.S. Greenhouse Gas Emissions and Sinks,1990-2003", Chapter 6 Agriculture, pp. 195-227.

Climate Change Impact on Harvest Yields

A recent (Feb 2007) report from Lawrence Livermore National Laboratory and the Dept. of Global Ecology at the Carnegie Institution investigated the impact that climate change has had on harvest yields for the world's main crops: wheat, maize, rice, soy, barley, sorghum ("Production of these crops accounts for over 40% of global cropland area, 55% of non-meat calories and over 70% of animal feed"(1)).

The short paper considered not only temperature and precipitation changes but also technological advances. While not all crops were impacted to the same amount (rice and soybeans less), they did come to the conclusion that "At the global scale, warming from 1981 to 2002 very likely offset some of the yield gains from technological advances, rising CO2 and other non-climatic factors." (2)

In other words, technology increased yields but climate change appears to have taken those gains away for some crops.

The question becomes: can agriculture technology continue to advance crop yields at the same rate it did during this period, or will the temperature and precipitation change faster than technology gains thereby decreasing overall yields at a time of increasing population?

Ouch.

Sources for (1) and (2): David B Lobell and Christopher B Field, "Global scale climate–crop yield relationships and the impacts of recent warming," Environmental Research Letters, Volume 2, Number 1, January-March 2007, http://www.iop.org/EJ/article/1748-9326/2/1/014002/erl7_1_014002.html

So how much energy do we use to make ... energy?

I am working hard to nail down The Number that represents how many calories of fuel energy it takes to make one calorie of food. My previous post about dinosaurs in your food describes how this Number is on average 10 calories of fuel to make one calorie of food.

So where does this number come from? Below is a narrative followed by references to the researchers mentioned.

I accept the 10:1 ratio because I have read various data sets and combed numerous papers and studies related to this issue. Further research on this issue is needed, something I am pursuing every day, and I will revisit this ratio if needed.

The ratio is based off of a complex number of variables: amount of energy used in the food system, definition of food system used, amount of calories per person per day to be considered, the role of import and exports, and what percentage of total U.S. energy is used by the food system.

Pimentel and, separately, Hall have estimated the average to be 10:1, while Heller/Keoleian has estimated 7.3:1. Heller/Keoleian say that the food system consumes 10.2 quadrillion Btu's (quads) of energy and provides 1.4 quads back out, based off a diet of 3,800 calories per person per day (because we produce more food than we need, eat too much of it, and then throw some away). If we use a 2,500 calorie diet, we would get an 11:1 ratio; a 2,000 calorie diet means a 13.8:1 ratio.

On the side, grain-fed beef requires thirty-five calories for every calorie of beef produced (Horrigan), and a can of diet soda that provides maybe 1 calorie of energy needs 2,200 calories to produce (70% tied up in the aluminum can)(Heller/Keoleian).

I am still dissecting Heller/Keoleian's comprehensive paper. Heller/Keoleian estimates food energy use at 10% of total U.S. energy. Hendrickson studied 8 different studies from the 1970's and found an average for food system energy use to be 15.6%. This suggests we are already reducing energy use in ag. The Earth Policy Institute (EPI) created some nice graphs showing total U.S. and farm energy use base off the more current numbers. In one graph EPI show the whole U.S. food system uses 10.25 quads of energy (10,250 quadrillion Btu's) and ag production accounts for 21% of energy use, or 2.125 quads. What

What I take from this is this: if Heller/Keoleian are correct that ag uses 10% of energy, this number would roughly align with the 1.691 quad number, but if we use the 21% figure that comes from Heller/Keoleian, the amount of embedded energy (and therefore the calorie ratio) is much higher than Heller/Keoleian report. I am trying to get hold of the Heller/Keoleian team to ask them about these discrepancies.

In the meantime I accept 10:1 to be an average ratio I can support. I will keep resarching this issue and updating as needed. Thanks to Cookson Beecher, a reporter with the Capitol Press (Olympia, WA), for asking me to source this fact.

====
Articles:

Heller and Keoleian's article "Life Cycle-Based Sustainability Indicators for Assessment of the U.S. Food System" is very comprehensive.

One article by Pimentel and Giampietro is "The Tightening Conflict: Population, Energy Use, and the Ecology of Agriculture".

Sustainable Table has a good article "Fossil Fuel and Energy Use" with strong references at the bottom.

Sources:
Hall, C. A. S., C. J. Cleveland, and R. Kaufmann, "Energy and Resource Quality" Wiley Interscience, New York: 1986.

Heller, Martin C., and Gregory A. Keoleian, "Life Cycle-Based Sustainability Indicators for Assessment of the U.S. Food System", Ann Arbor, MI: Center for Sustainable Systems, University of Michigan, 2000.

John Hendrickson, “Energy Use in the U.S. Food System: A Summary of Existing Research and Analysis” Sustainable Farming, Vol. 7, No 4, 1997

Horrigan, Leo, Robert S. Lawrence, and Polly Walker. "How Sustainable Agriculture Can Address the Environmental and Human Health Harms of Industrial Agriculture." Environmental Health Perspectives 110, no. 5 (May 5, 2002)

David Pimentel and Mary Pimentel, "Energy Use in Fruit, Vegetable, and Forage Production", in "Food, Energy, and Society", ed. D. Pimentel, and M. Pimentel, revised edition. University Press of Colorado, Niwot, CO, 1996,
pp. 131-147.

Change in Added Sugar Consumption

Here are some graphs I made from the servings.xls spreadsheet at the USDA Economic Research Service website that show the growth of per capita (per person) consumption of added sugars between 1970 and 2004.

Notes:
(1) Total added sugars includes all corn derived sweeteners plus edible syrups and honey, which showed up on the graph near zero so I did not include them.
(2) All corn sweeteners include High Fructose Corn Syrup, Glucose, Dextrose, and Corn Sweeteners.


Source for both: USDA/Economic Research Service 2006 data, http://www.ers.usda.gov/Data/FoodConsumption/

Energy Use on the Farm

A previous post mentioned an Earth Policy Institute report that discussed the amount of oil in food. From that same article comes this graphic showing what type of energy is used on the farm.

Source: Earth Policy Institute, Oil and Food: A Rising Security Challenge - DATA, May 9, 2005

Agriculture Irrigation Volumes

Seventy percent of all fresh water use is for one purpose: agricultural irrigation.

Irrigation water is being depleted in many of the world’s grain producing regions:
China: Four-fifths of China’s grain production is dependent on irrigation water.
India: Three-fifths of India’s grain production is dependent on irrigation water.
United States: One-fifth of U.S. grain production is dependent on irrigation water.

Aquifers in some parts of China are dropping at the rate of 10 feet per year. Some farmers are now pumping from a depth of 1,000 feet.
Aquifers in some parts of India are dropping at the rate of 20 feet per year. Some farmers are now pumping from a depth of 3,000 feet.

The Ogallala Aquifer in some regions of the Southwest (Texas, Oklahoma, Kansas) has water tables that have dropped more than 30 feet, causing some wells to go dry.

Source: Lester R. Brown, "Plan B 2.0", Earth Policy Institute
http://www.earth-policy.org/Books/PB2/index.htm

WA small farm stat

" About 89 percent of Washington farms fit the U.S. Department of Agriculture definition of small farms: less than $250,000 in gross annual sales, with the day-to-day labor and management provided by the farmer and/or the farm family that owns or leases the productive assets of the farm."

For comparison, the Small Business Administration considers any business with less than $500,000 in sales to be small.

Source: Washington State House of Representatives Office of Program Research Bill Analysis, Agriculture & Natural Resources Committee, HB 1311, " Continuing the small farm direct marketing assistance program."
http://www.leg.wa.gov/pub/billinfo/2007-08/Pdf/Bill%20Reports/House/1311.HBA%2007.pdf

Local food and school gardens in fed regs

On June 30th 2004 President Bush signed in to law the Child Nutrition and Women, Infants and Children (WIC) Reauthorization Act . The bill includes Farm to Cafeteria legislation under Section 122, entitled "Access to Local Foods and School Gardens", and includes language that focuses on encouraging local food production benefiting public schools, including school gardens. From the legislation:

The Secretary may provide assistance, through competitive matching grants and technical assistance, to schools and nonprofit entities for projects that (A) improve access to local foods in schools and institutions participating in programs under this Act and section 4 of the Child Nutrition Act of 1966 (42 U.S.C. 1773) through farm-to-cafeteria activities, including school gardens, that may include the acquisition of food and appropriate equipment and the provision of training and education; (B) are, at a minimum, designed to (i) procure local foods from small- and medium-sized farms for school meals; and (ii) support school garden programs; (C) support nutrition education activities or curriculum planning that incorporates the participation of school children in farm-based agricultural education activities, that may include school gardens; (D) develop a sustained commitment to farm-to-cafeteria projects in the community by linking schools, State departments of agriculture, agricultural producers, parents, and other community stakeholders .

There has yet been no funding for this section, but hope is there for the upcoming Farm and Food Bill discussions.