Designing and evaluating sustainable development pathways for semi‐subsistence crop–livestock systems: lessons from Kenya

Achieving the Sustainable Development Goals (SDGs) in African agriculture requires a better understanding why high levels of poverty and resource degradation persist in African agriculture despite decades of policy interventions and development projects. In this article, we hypothesize that policies need to account for the key features of the semi‐subsistence crop–livestock systems (CLS) in the region to become effective. The semi‐subsistence CLS are characterized by a high degree of biophysical and economic heterogeneity and a complex, diversified production system involving a combination of subsistence and cash crops with livestock. We investigated the potential for interventions proposed by the Government of Kenya to meet the SDGs by 2030. The analysis uses an integrated modeling approach designed to deal with the key features of these systems. A strategy that stimulates rural development, increases farm size to a sustainable level, and reduces distortions and inefficiencies in input and output markets could lead to a sustainable development pathway and achieve the SDGs for rural households dependent on CLS.     

Implications of biofuels mandates for the global livestock industry: a computable general equilibrium analysis

The rapid growth of biofuels production, particularly in the United States, the EU, and Brazil, has had important implications for the global livestock industry—both by raising the cost of feed grains and oilseeds and by forcing onto the market a large supply of biofuel by‐products, most of which end up in livestock feed rations. This article investigates the impact of an expanding biofuels industry on the mix and location of global livestock production. Surprisingly, we find that growth in the U.S. and EU biofuels industries results in larger absolute reductions in livestock production overseas than in those regions, due to the international transmission of grains prices which is offset locally by the lower cost of by‐products. We also find that nonruminant production is cut more than ruminant livestock, because it is less able to use biofuel by‐products in its feed rations. Implementing biofuel mandates increases cropland area, a large portion of which is estimated to come from reduced grazing lands. The biofuel producing regions are expected to reduce their coarse grains exports and increase imports of oilseeds and vegetable oils, while they increase their exports of processed feed materials. In sum, biofuel mandates have important consequences for livestock as well as crops, with net effects influenced by the important role of by‐products in substituting for feedstuffs.     

Outsourcing and efficiency: the case of Spanish citrus farming

Outsourcing in agriculture has traditionally been seen as a managerial strategy of smaller farms to achieve higher levels of efficiency. In this article, we provide empirical evidence supporting the existence of a positive relationship between outsourcing and efficiency in Spanish citrus farming. Outsourcing is measured by the proportion of outsourced labor and capital in farms' total use of these production factors, i.e., the higher the proportion of outsourced inputs, the higher the degree of outsourcing. Making use of data envelopment analysis techniques, we compute input‐specific reductions required to achieve technical efficiency at the farm level. Our results show that attainment of technical efficiency leads to a reduction in the use of both farms' own and outsourced production factors. Furthermore, the degree of outsourcing increases as farms move to their technically efficient productive plans. In addition, outsourcing labor and capital allows farms to achieve efficiency regardless of their size. In our view, this result has a clear implication for policy makers. Instead of trying to improve Spanish citrus farms' competitiveness by pursuing an increase of their average size, policy measures should be adopted to enhance farmers' managerial skills and the efficiency of those external service firms and co‐operatives that are effectively performing basic cultivation tasks.     

Empirical evaluation of nonpoint pollution policies under agent heterogeneity: regulating intensive dairy production in the Waikato region of New Zealand*

Models used for policy evaluation rarely consider firm heterogeneity, despite its importance for instrument design. This study considers agent heterogeneity explicitly in the evaluation of policies for nonpoint pollution control through the integration of decomposition and calibration procedures for programming models. The application concerns the regulation of nitrate leaching from intensive dairy production in the Waikato region of New Zealand. Failing to represent firm heterogeneity leads to widely different estimates of mitigation costs, relative to where heterogeneity is considered. Variation in baseline emissions and the slopes of abatement cost curves between firms renders a differentiated policy less costly than a uniform standard. However, the relative values of these policies are not broadly different, as firms required to do the most abatement – intensive farms with large baseline pollutant loads – can do so more cheaply, on average.     

The role of common pool problems in irrigation inefficiency: a case study in groundwater pumping in Mexico

Groundwater depletion is a serious problem in Mexico. Several policy alternatives are currently being considered in order to improve the efficiency of irrigation water use so that extraction of groundwater is diminished. An understanding and quantification of different sources of inefficiency in groundwater extraction is critical for policy design. Survey data from a geographically extensive sample of irrigators is used to gauge the importance of common pool problems on input‐specific irrigation inefficiency. Results show that mechanisms of electricity cost sharing implemented in many wells have a sizable impact on inefficiency of irrigation application. Moreover, irrigation is very inelastic to its own unitary cost. Therefore, results suggest that policies aimed at eliminating electricity cost‐sharing mechanisms would be significantly more effective than electricity price‐based policies in reducing irrigation application. Results also show that well sharing does not affect groundwater pumping significantly, suggesting either a limited effect of individual pumping on water level or absence of strategic pumping by farmers sharing the wells.     

Cost‐effective regulation of nonpoint emissions from pastoral agriculture: a stochastic analysis

Nutrient emissions from pastoral agriculture are a global cause of declining water quality. Their management is complicated through variability arising from climate and soil influences. This paper compares the implications of input‐based policies and direct restrictions on leaching to achieve 10 and 20 per cent reductions in nitrogen (N) load, in the context of pasture‐based New Zealand dairy farms. The most important mitigation practices on these farms are de‐intensification (involving reductions in N fertiliser application and stocking rate) and the application of nitrification inhibitors. A stylised conceptual model, incorporating both sources of variability, is used to identify the implications of alternative policies. Direct restriction of estimated N leaching is the most cost‐effective policy to reduce N leaching by 10 and 20 per cent. These results indicate the general insufficiency of input‐based mechanisms for water quality improvement, given the low correlation between input use and leaching, possible substitution with unrestricted inputs and their failure to motivate the use of mitigation strategies. Additionally, model output indicates that inherent variability in water quality, mainly due to climate influences, can dominate the benefits of regulatory action in any given year.     

EFFICIENT COMPLIANCE WITH AGRICULTURAL NITRATE POLLUTION STANDARDS

Non-point pollutants such as nitrates are difficult to monitor and hence control. This paper considers nitrate abatement policies for the Tyne catchment in northern England. The analysis is based on an aggregate-level LP model which predicts producers' production decisions and estimates the resulting spatial distribution of nitrogen applications and nitrate emissions. The policy evaluation compares a catchment-level nitrate emission quota, a catchment-level nitrogen input quota and nitrogen input quotas targeted at individual land classes as alternative measures to achieve nitrate concentration standards. The results indicate that targeted nitrogen input quotas provide a feasible and relatively efficient abatement policy when a lack of information on individual farms prevents the use of the least cost emission tax.     

Marginal Abatement Cost Curves for UK Agricultural Greenhouse Gas Emissions

This article addresses the challenge of developing a ‘bottom‐up’ marginal abatement cost curve (MACC) for greenhouse gas (GHG) emissions from UK agriculture. An MACC illustrates the costs of specific crop, soil and livestock abatement measures against a ‘business as usual’ scenario. The results indicate that in 2022 under a specific policy scenario, around 5.38 Mt CO₂ equivalent (e) could be abated at negative or zero cost. A further 17% of agricultural GHG emissions (7.85 Mt CO₂e) could be abated at a lower unit cost than the UK Government’s 2022 shadow price of carbon [£34 (tCO₂e)^?1]. The article discusses a range of methodological hurdles that complicate cost‐effectiveness appraisal of abatement in agriculture relative to other sectors.     

Integrated assessment of water framework directive nitrate reduction measures

This article illustrates a statistical approach for deriving farm economic impacts of policy options aiming to reduce nitrate diffuse pollution. Building upon Fezzi et al. (2008) , who assess the costs of Water Framework Directive‐related measures on farm accounts data, we estimate regression models allowing such costs to be predicted for any region for which land use patterns and livestock numbers are known. We derive economic impacts in terms of changes in farm gross margin for (a) reducing inorganic fertilizer application, (b) reducing livestock stocking rates, and (c) converting arable land to ungrazed grassland. A case study of the agriculturally diverse Yorkshire Derwent catchment, in the North of England, demonstrates the overall approach. In addition, for this illustration, we combine these cost estimates with prediction of the water quality changes arising from each measure, derived via an integrated hydrological model of the Derwent. This allows a comparison of cost‐effectiveness. Finally, we implement our spatially explicit approach to target the measures to specific subcatchments identified as being of particular environmental policy interest.     

Land degradation, drought and food security in a less-favoured area in the Ethiopian highlands: a bio-economic model with market imperfections

This paper presents a bio‐economic model of Andit Tid, a severely degraded crop‐livestock farming system with high population density and good market access in the highlands of Ethiopia. Land degradation, population growth, stagnant technology, and drought threaten food security in the area. Drought or weather risk appears to have increased in recent years. The bio‐economic model is used to analyse the combined effects of land degradation, population growth, market imperfections and increased risk of drought on household production, welfare and food security. We find that the indirect effects of drought on household welfare through the impact on crop and livestock prices are larger than the direct production effects of drought. Provision and adoption of credit for fertiliser, although risky in itself, may lead to increased grain production and improved household welfare and food security. Provision of credit may have a negative effect on conservation incentives but this effect may be mitigated by linking a conservation requirement to the provision of credit for fertiliser.     

Estimating the range of economic impacts on farms of nutrient leaching reduction policies

Declining agricultural incomes, increasing concern over rural poverty and sporadic crises such as those of Bovine Spongiform Encephalopathy (BSE) and Foot and Mouth Disease mean that the imposition of further costs on U.K. agriculture are likely to be politically and socially sensitive. Such additional costs are however on the agenda with the implementation of the Water Framework Directive (WFD; European Commission, 2000 ). The WFD aims to achieve “good ecological status” in EU water bodies reducing, inter alia, diffuse pollution from agriculture. In this study, we assess four possible WFD measures proposed to the U.K. Department for Environment, Food, and Rural Affairs: reducing inorganic fertilizer application, conversion of arable land to ungrazed grassland, reducing livestock stocking rates, and reducing livestock dietary N and P intakes. For each measure, changes in farm gross margins (FGMs) are estimated using a dataset of over 2000 farms. In contrast to previous analyses, which have focussed upon mean responses on stylized farms, our approach allows the analysis of the range of impacts across a wide variety of real‐world farms and farm types. Findings reveal high variability in impacts. Cost‐effectiveness analysis indicates that, on average, cropping farms seem capable of reducing nutrient leaching in a more cost‐efficient way than livestock or dairy enterprises.     

Cost-effectiveness of alternative green payment policies for conservation technology adoption with heterogeneous land quality

This paper quantitatively analyses the cost‐effectiveness of alternative green payment policies designed to achieve a targeted level of pollution control by heterogeneous microunits. These green payment policies include cost‐share subsidies that share the fixed costs of adoption of a conservation technology and/or input reduction subsidies to reduce the use of a polluting input. The paper shows that unlike a pollution tax that achieves abatement through three mechanisms, a negative extensive margin effect, a negative intensive margin effect and a technology switching effect, a cost‐share subsidy and an input reduction subsidy are much more restricted in the types of incentives they provide for conservation of polluting inputs and adoption of a conservation technology to control pollution. Moreover, they may lead to varying levels of expansion of land under production. Costs of abatement with alternative policies and implications for production and government payments are compared using a simulation model for controlling drainage from irrigated cotton production in California, with drip irrigation as a conservation technology.     

Structural adjustment and soil degradation in Tanzania A CGE model approach with endogenous soil productivity

In this paper, a model of the nitrogen cycle in the soil is incorporated in a Computable General Equilibrium (CGE) model of the Tanzanian economy, thus establishing a two‐way link between the environment and the economy. For a given level of natural soil productivity, profit‐maximising farmers choose input levels – and hence production volumes – which in turn influence soil productivity in the following years through the recycling of nitrogen from the residues of roots and stover and the degree of erosion. The model is used to simulate the effects of typical structural adjustment policies like a reduction in agro‐chemicals’ subsidies, reduced implicit export tax rate etc. After 10 years, the result of a joint implementation is a 9% higher Gross Domestic Product (GDP) level compared to the baseline scenario. The effect of soil degradation is found to represent a reduction in the GDP level of more than 5% for the same time period.     

Energy substitutability in transition agriculture: estimates and implications for Hungary

Subsidised energy prices in pre‐transition Hungary had led to excessive energy intensity in the agricultural sector. Transition has resulted in steep input price increases. In this study, Allen and Morishima elasticities of substitution are estimated to study the effects of these price changes on energy use, chemical input use, capital formation and employment. Panel data methods, Generalised Method of Moments (GMM) and instrument exogeneity tests are used to specify and estimate technology and substitution elasticities. Results indicate that indirect price policy may be effective in controlling energy consumption. The sustained increases in energy and chemical input prices have worked together to restrict energy and chemical input use, and the substitutability between energy, capital and labour has prevented the capital shrinkage and agricultural unemployment situations from being worse. The Hungarian push towards lower energy intensity may be best pursued through sustained energy price increases rather than capital subsidies.     

The impact of farm credit in Pakistan

Both informal and formal loans matter in agriculture. However, formal lenders provide many more production loans than informal lenders, often at a cost (mostly loan default cost) higher than what they can recover. For example, the Agricultural Development Bank of Pakistan (ADBP), providing about 90% of formal loans in rural areas, incurs high loan default costs. Yet, like other governments, the Government of Pakistan supports the formal scheme on the grounds that lending to agriculture is a high risk activity because of covariate risk. Hence, such policies are often based on a market failure argument. As farm credit schemes are subsidised, policy makers must know if these schemes are worth supporting. Using a recent large household survey data from rural Pakistan (Rural Financial Market Studies or RFMS), we have attempted to estimate the effectiveness of the ADBP as a credit delivery institution. A two‐stage method that takes the endogeneity of borrowing into account is used to estimate credit impact. Results reveal that ADBP contributes to household welfare and that its impact is higher for smallholders than for large holders. Nevertheless, large holders receive the bulk of ADBP finance. The ADBP is, thus, not a cost‐effective institution in delivering rural finance. Its cost‐effectiveness can be improved by reducing its loan default cost and partially by targeting smallholders in agriculture where credit yields better results.     

Can smallholder farmers adapt to climate variability,and how effective are policy interventions? Agent‐based simulation results for Ethiopia

Climate variability with unexpected droughts and floods causes serious production losses and worsens food security, especially in Sub‐Saharan Africa. This study applies stochastic bioeconomic modeling to analyze smallholder adaptation to climate and price variability in Ethiopia. It uses the agent‐based simulation package Mathematical Programming‐based Multi‐Agent Systems (MPMAS) to capture nonseparable production and consumption decisions at household level, considering livestock and eucalyptus sales for consumption smoothing, as well as farmer responses to policy interventions. We find the promotion of new maize and wheat varieties to be an effective adaptation option, on average, especially when accompanied by policy interventions such as credit and fertilizer subsidy. We also find that the effectiveness of available adaptation options is quite different across the heterogeneous smallholder population in Ethiopia. This implies that policy assessments based on average farm households may mislead policy makers to adhere to interventions that are beneficial on average albeit ineffective in addressing the particular needs of poor and food insecure farmers.     

Land size and productivity in the livestock sector: evidence from pastoral areas in China

This article explores the relationship between land size and productivity in the livestock sector. Household panel data from pastoral areas in northwestern China were analysed. Results suggest an inverse relationship (IR) between land size and the number of livestock per ha. IR can be largely explained by labour input intensity, which is negatively correlated with land size. We find that household’s labour demand is not separable from household’s labour supply and households’ decisions to rent land and hire labour for grazing are significantly related to the labour–land endowment ratio. These findings are consistent with the Chayanovian explanation that labour input intensity varies with farm size due to unobserved interhousehold variation in shadow wage rates. In addition, participation in the labour market does not significantly influence the IR for the employer, while the practice of land renting reduces, but does not eliminate, the IR for the lease. These findings point towards the potential for using factor markets to optimise pasture‐based livestock production scale, and the need to promote the factor market development to achieve efficiency in resource use.     

On the nature and magnitude of cost economies in hog production

In this article, we assess the impact of farm size on production cost and evaluate the marginal costs and margins by considering that input prices may change with the scale of production. By using French hog farm data, we estimate a system of equations including a feed price function, input demand functions, and an output supply function based on a technology approximated by a combined generalized Leontief‐Quadratic form. Our results suggest that the marginal costs are over‐estimated when the adjustment of the feed unit prices to a change in farm size is not controlled for. More specifically, the cost economies for large farms (enjoying the highest profits) arise primarily from lower feed prices, with technological scale economies having little impact. In contrast, farms with no hired labor exhibit technological scale economies and reach higher price‐cost margins compared to larger farms.     

CAP MTR versus environmentally targeted agricultural policy in marginal arable areas: impact analysis combining simulation and survey data

On June 2003 the final version of the Common Agricultural Policy Mid‐Term Review (CAP MTR) was published. The driving forces of this policy change include inter alia the compliance with World Trade Organization (WTO) negotiations' requirements, improvement of social support for agricultural policy, adjustment to budget constraints and adaptation of agricultural practices to environmental requirements. This article reviews how this policy performs in marginal areas regarding one of those objectives: the provision of environmental outputs related to agricultural activity. As an alternative to this reform, a policy based on agri‐environmental measures designed to maximize environmental outputs, is proposed. Both options are evaluated from a cost‐effectiveness point of view. Data from a farm survey and a positive mathematical programming model for a cereal steppes agro‐system in Spain are combined in order to simulate the effects of this reform and our alternative instrument on several environmental indicators. Results show that in marginal areas, where land abandonment is a clear threat, more environmental output can be achieved for the same cost, while maintaining, if not increasing, the levels of achievement for the other goals.     

Determinants, differentiation, and development of short-term marginal costs in dairy production: an empirical analysis for selected regions of the EU

This work provides evidence on the determinants, cost differentiation, and development of short‐term marginal costs of dairy farms in important production regions of the European Union. The empirical study is based on the estimation of multi‐input multi‐output Symmetric Generalized McFadden cost functions using an unbalanced panel data set of the European Farm Accountancy Data Network. The results show considerable regional differences in the impact of the outputs, input prices, and fixed factors on marginal costs. Strong evidence can be found that marginal costs decrease over time and is further underlined by the development of derived regional aggregated short‐term supply curves. Marginal cost elasticities and correlation coefficients validate the hypotheses that a high degree of farm specialization, large milk output, and low milk prices are associated with lower marginal costs. Furthermore, the marginal cost spread in the data sample is analyzed. We show that milk output, milk yield, herd size, labor input, and fodder production can be attributed to significant marginal cost differentiation of farms, whereas for crop and animal output, grassland, stock of other animals, and depreciation only minor differentiation can be found.