Introduction:

Going Green. Ever consider the economic implications of environmental awareness? Studies have found that environmental consciousness is increasing. Sixty nine percent of the general public believes that environmental issues have some impact on their lives (Schlegelmilch). This increase in environmental awareness has had many environmental effects as well as economic effects on the supply and demand in the agriculture industry. This blog is designed to examine eleven different economic effects of going green.










To read Schlegelmilch's article click HERE

Sources:

Schlegelmilch, Bodo B. "The Link between Green Purchasing Decisions and Measures of Environmental Conciousness." The
               American Graduate School of International Management, n.d. Web.
Picture Sources:
google.images.com/agriculture. Web. 17 Dec. 2012

Ecosystem Services:

An ecosystem service is the collective benefits from sources and processes supplied by natural resources. The agriculture industry specifically, is economically dependent on ecosystem services. Some of the vital services include “including pollination, biological pest control, maintenance of soil structure and fertility, nutrient cycling and hydrological services”. Biological pest control can directly substitute pesticides. This ecosystem service has saved farmers a minimum of $239 million from 2007-2008 towards stopping solely one pest. Overall, natural pest control is estimated to value 13.6 billion dollars annually. Studies show that insect predators account for around 33% of natural pest control; this means insects have been estimated at $4.5 billion dollars in pest control annually. Pollination is another important ecosystem service provided by the environment. Around 75% of crops specified for consumption require pollination primarily from insects. The economic impact of pollination on world food production in 162 countries has been estimated at $2.02 billion. Water quality and quantity is also a vital ecosystem service that drives the economy of the agricultural industry. Currently 70% of global water use goes to agriculture. The final ecosystem service works in conjunction with good water supply, well-aerated and nutrient rich soils are also fundamental to nutrient acquisition and water retention in crops. (Power)

To read Power's full essay: rstb.royalsocietypublishing.org/content/365/1554/2959.full

       The Great Plains Aquifer(The High Plains Aquifer) is one example of an
        ecosystem service that is used for agriculture today. Many farmers in the
       Midwest draw water from the aquifer for irrigation.

Sources:

Power, Alison G. "Ecosystem Services and Agriculture: Tradeoffs and Synergies." Ecosystem Services and Agriculture:
             Tradeoffs and Synergies. Department of Ecology and Evolutionary Biology at Cornell University, 2010. Print.
Picture Source:
"Physical/Cultural Setting." USGS High Plains Aquifer WLMS:. N.p., n.d. Web. 17 Dec. 2012.
 

10 principals of economics and agriculture:

1.    People face tradeoffs— “Society should not stop protecting the environment just because environmental regulations reduce our material standard of living” (Principal 1). The agriculture industry faces the tradeoff between economic incentives and environmental incentives.

2.       The cost of something is what you give up to get  it—The opportunity cost of producing crops includes resources necessary to produce (including water, fertilizers, pesticides, etc.), as well as, the time it takes for the crops to grow and care needed to grow them.

3.       Rational people think at the margins—“Mak[ing] decisions by evaluating costs and benefits of marginal changes” (Mankiw). The agriculture industry must make decisions at the margin about whether to implement sustainable methods or changing their practices.

4.        People respond to incentives—Farmers receive incentives from the government to farm using sustainable methods. The increased demand for environmental friendly products is another incentive for famers to practice sustainable farming.

5.       Trade can make everyone better off—Certain countries have the proper environments to grow certain foods. Trade allows countries to specialize in food production.

6.       Markets are usually a good way to organize economic activity—A market is a group of buyers and sellers. A market economy allows the buyers to determine what firms produce based on what they buy. With an increase in environmental consciousness the increase in demand for sustainable food products have driven agricultural industry to shift towards sustainable methods. 

7.       Governments can sometimes improve market outcomes—The government can provide subsidies to farmers to promote sustainable products. It is also then their job to monitor Market failure. (See Market Failure Post for more detail).

8.       A country’s standard of living depends on its ability to produce goods & services—If a country can produce enough food to sustain itself it can have a higher standard of living because it is not reliant on another country for resources. Countries can also use excess crop production as exports. Along with other economic activity the export and self reliance on agriculture increases countries GDP.

9.       Prices rise when the government prints too much money—Although not directly related to the agriculture industry, inflation causes a shift increasing the price for the resources used by farmers and therefore the price of crops increases.

10.   Society faces a short-run tradeoff between inflation and unemployment-- Although not directly related farmers feel the effects of inflation and unemployment.

For further information about the ten principals of economics read chapter one in The Principals of Economics by Gregory Mankiw

To listen to a lecture concerning the ten principals of economics click the link > http://www.youtube.com/watch?v=VVp8UGjECt4

Sources:

Mankiw, Gregory N. "Ten Principals of Economics." The Principals of Economics. N.p.: South Western, 2009. N. pag. Print. 
"Principle 1: People Face Tradeoffs." Help for Principles of Economics, Economics, Homework Help. N.p., n.d. Web.

                16 Dec. 2012.
Video Source:
"Principles of Economics, Translated." YouTube. YouTube, 25 Feb. 2007. Web. 17 Dec. 2012.

Market Failure:

Market failure is “the inability of markets to reflect the full social costs or benefits of a good, service, or state of the world" (A Breif). Market failure occurs in the purchase of many agricultural goods because the prices do not fully reflect the costs or benefits, of a good, on the economy. Many stores are attempting to correct market failure. Whole Foods is one example of a store working towards reflecting the environmental costs of agricultural goods (Whole Foods). Many of the products at Whole foods are labeled with environmental information such as pesticide free, locally grown, or organic farming. Whole Foods also labels products as rainforest safe or dolphin safe; these labels allow the consumer to understand the entire cost of the product on the environment and reduce market failure. Further, more and more consumers look for these sustainable practices (for more information concerning increased demand for sustainable products see “Supply and Demand” post).

To learn more about what markets such as Whole Foods is doing to prevent market failure visit:  http://www.wholefoodsmarket.com/mission-values/whole-trade-program/certifier-partners 

Sources:

"A Brief Introduction to Environmental Economics." (n.d.): n. pag. Web.

"Kitchen Kismet." Whole Foods Market. N.p., n.d. Web. 16 Dec. 2012.
Picture Sources:
"Kitchen Kismet." Whole Foods Market. N.p., n.d. Web. 16 Dec. 2012.

Economics of sustainable farming:

Large scale industrial farming is the most efficient economically, producing a lot of very cheap food. However, industrial farming carries high costs to the environment such as: air and water pollution, soil erosion, loss of nutrients in the soil and more. These impacts will affect the crop yield in the future. This is where sustainable farming comes in, although the initial costs and maintenance is higher when farming sustainably, the environmental benefits offset the cost. There are many different sustainable methods one can use to maximize environmental benefits and economic viability. One method of sustainable farming is crop rotation, the variation of crops grown in a given field annually. The main benefit of crop rotation is the replenishment of nutrients in the soil. Crop rotation not only benefits the soil but was proven in one study to increase yield by 28%. However, due to the nature of varying crops, the farmer is unable to grow the most profitable crop every other year on the rotation. Another method of sustainable farming is No-till farming, where the farmer does not till the field in between crops. This method has been linked with a 4% increase in corn yields after a few years. This method reduces erosion and provides nutrients to the soil. Unlike many other sustainable methods there are few economic tradeoffs associated with this method. Another method is Integrated pest management (IPM) is the introduction of certain insects into a field to kill unwanted pests. 51 different studies found a 15% decrease in the amount of bugs in the field and a net increase in production. This method is associated with a large initial cost of introducing the insects but will provided a net increase in production in the long run. There are many different method of sustainable farming other than these examples and each contains its own benefits and costs.

To learn more about the importance of nutrient rich soils, and learn about a different technique to maintain the soil, Click Here to watch> http://www.iaea.org/newscenter/multimedia/videos/gc56/180912/bettersoil/index.html

To read more about sustainable agriculture, Click Here> www.foodroutes.net/doclib/21/MakingMoneyMakingSense.pdf

Sources:

Coreselis, Kristen, Suszanne Wisniewski, and Mark Ritchie. "Sustainable Agriculture: Making Money, Making Sense." The
               Institute for Agriculture and Trade Policy, Mar. 2001. Web. 16 Dec. 2012.
Video Source:
"IAEA Video Clips - More Food With Better Soil - Using Isotope Techniques To Improve
             Soil Quality." IAEA Video Clips - More Food With Better Soil - Using Isotope Techniques
             To Improve Soil Quality. N.p., n.d. Web. 17 Dec. 2012.
 

Supply, demand, Market (for sustainable goods):

As more and more people are becoming concerned about the environment the demand for organic and sustainably grown crops is increasing. Due to this increase in demand the firms are increasing their supply. According to the USDA, farmers have been increasing the amount of land they dedicate to organic farming by 15% each year (Grace). Market concentration also affects the supply. Currently the market is very concentrated. In “2007, four corporations slaughtered 83.5 percent of the nation’s beef, 66 percent of the pork and 58.5 percent of the poultry” (Grace). This concentration of the market has the effect of reducing the competition in the agricultural markets, as well as, reducing the price paid to farmers. Due to the control of the market by four large farms, an independent farmer may try to sell his beef to corporate buyer, however, only one or two firms want to buy his good. This reduces the price the farmer is likely to be paid. (For supply and demand information concerning genetically modified crops see genetic engineering: market)

     The chart above shows how the amount of Organic foods sold per year is increasing. The
     demand for organic and sustainably grown food is increasing.

 

 http://www.gracelinks.org/ > To explore more about sustainable options for food, water, energy
 

Sources:

"Grace Communications Foundation." Food Economics. N.p., n.d. Web. 16 Dec. 2012.

Picture Sources: 

"Sustainable Agriculture | Mideco." Mideco. N.p., n.d. Web. 17 Dec. 2012.

Effect on jobs:

This picture represents one of the jobs created due to increased sustainable farming.

 

One of the most important factors in maintaining a healthy economy is low unemployment. In late 2011 out unemployment rate was holding steady at about 9.1%. As many farms switch to sustainable agriculture they are also creating new jobs because sustainable methods of farming generally require more man-power than industrial settings. Local farming jobs cannot be outsourced, and increase the amount of money circulating in their region. Farm workers don’t need a lot of schooling; however, workers face physically demanding work and seasonal unemployment. Further, there are a variety of other jobs created due to local sustainable farms, according to Mari Pierce-Quionez, “job creation may potentially lie in the promotion of jobs in the local distribution, processing, and wholesaling sectors.” Good jobs related to food production, distribution, and sale provide opportunities to low-skilled workers that might have otherwise not been available, pay enough to support a family, have safe working conditions, and provide plenty of space for independence as a worker and opportunity for professional growth. Sustainable agriculture positively affects the economy through job creation, decreasing unemployment, and adding money to local regions into circulation.

To read the full article: http://sustainablecitiescollective.com/maripqz/29480/job-creating-potential-local-food-systems

Sources:
Pierce-Quinonez, Mari. "The Job Creating Potential of Local Food Systems." Sustainable Cities Collective RSS. N.p., 21 Sept.

                  2011. Web. 16 Dec. 2012.
Picture Sources:

"Urban Farming | GreenFuse Photos: Garden, Farm & Food Photography." Urban Farming | GreenFuse Photos:

                  Garden, Farm & Food Photography. N.p., n.d. Web. 17 Dec. 2012.

Genetic engineering: Affects on Farmers

The graph above shows how the profit from genetically modified crops has been increasing since 2000. However, between 2007-2008 the revenues dropped. This drop may be due to increased consumer concern for the environment.

Scientists have worked to genetically engineer plants for various reasons including: “to improve the shelf-life of produce, improve crop nitrogen fixation, and bolster control of agricultural pests.” Most plants grown today include genetic variations to protect against insects and traits that protect the plants against herbicides. We see economic effects of genetic engineering at two levels. The first level affected is the supply, the farmers. The genetically modified traits that allow plants to resist insects leads to increased outputs and a reduction in the cost of pesticides needed. The second popular modification is the herbicide resistant genes.  These genes are intended to make damage control cheaper and easier, not to increase outputs. Both genes can improve the cost efficiency of harvesting. Insect resistant crops have a reduced demand for inputs such as, pesticide, machinery, fuel, and water. Herbicide resistant crops historically have led to and increased use of no-tilling farming, which changes the types of equipment needed but reduces the amount of fuel, effort, and soil erosion. However, these benefits do come with a cost to the farmers; since 1994 seed prices have increased 140%.

 To read the full article: http://www.choicesmagazine.org/magazine/print.php?article=129

 

Sources:

 Zilberman, David, Jorge Fernandez-Cornejo, Steve E. Sexton, and Michele Marra. "The Economic Impact of Genetically

                    Engineered Crops." Choices n.d.: n. pag. The Economic Impact of Genetically Engineered Crops. Print.
Picture Sources:
"Biotechnology is Technology." Search Results. N.p., n.d. Web. 17 Dec. 2012.
 

Genetic engineering: Affects on Markets

How do the costs and benefits of genetic engineering affect the consumers? Due to increased crop yields the supply of crops has increased substantially. This change in supply affects the price and product. The farmers gain anywhere from 5-40% profitability, depending on the price, yield, and seed cost. The innovators of the genetically modified seeds generally get between 10-70% of those benefits. Of course, some of those benefits are transposed to the consumers. Studies in the US show that the consumers share the benefits of anywhere from 6-60%! The share of benefits accumulated by consumers is greater with genetically modified plants that those plants that are not modified which creates a very inelastic demand, characterized by “a small increase in supply reduces prices substantially.” However farmers who use non-modified plants are being affected by the increased use of genetic modification as well, because herbicide resistant plants are causing the price of herbicides to increase, and insect resistant plants are causing pesticides to increase.  Further, as environmental awareness has been increasing, the demand for genetically modified plants has been in decline.

          This picture compares genetically modified corn(left) to natural corn(right).

To read more about genetically modified crops and its effects on the market read the full article here: http://www.choicesmagazine.org/magazine/print.php?article=129

Sources:

Zilberman, David, Jorge Fernandez-Cornejo, Steve E. Sexton, and Michele Marra. "The Economic Impact of Genetically

                  Engineered Crops." Choices n.d.: n. pag. The Economic Impact of Genetically Engineered Crops. Print.

Picture Sources:

"Genetically Modified Corn." POS Software Advice. N.p., n.d. Web. 17 Dec. 2012.

Renewable energy in agriculture industry:Biofuels

 As people become more and more involved in creating sustainable methods of production across all industries the amount of research and viability of renewable energy sources has been on the rise. Many companies are looking for renewable energy sources from the sun, wind, hydroelectric, and geothermal sources to provide energy. The agriculture industry is no different. Many, especially larger, agricultural firms are looking into more sustainable ways to fuel their farms. One solution that many farmers are considering is using biofuels to run their machinery. Although, it is a larger investment in the short-term to buy equipment that is compatible with the fuels, the long-term benefits have been proven. Biofuels will help the economy in two main ways, one is job production. Biofuels will spur local employment; By 2004 the ethanol industry had created more than 147,000 jobs. Second, biofuels have become viable substitutes for fossil fuels. Once we can replace fossil fuels with biofuels not only are we able to reduce our CO2 emmissions but we can reduce the price and instability of our fuel sources.

          This graph shows the U.S. Biofuels Plan. Each color represents a type of biofuel. The

          dark green color represents ethonal products.  Biomass-based diesel would be the type

          primarily used by farmers. As you can see the U.S. plans to increase the amount of

          biofuels consumes to over 35billion gallons in 2022.

 For More material on the Renewable Energy and Sustainable Agriculture Symposium:

http://www.sare.org/Learning-Center/Conference-Materials/Renewable-Energy-and-Sustainable-Agriculture-Symposium

Sources:
Werner, Carol. "Renewable Energy and Sustainable Agriculture Symposium." / Conference Materials / Learning
             Center /SARE Nationwide. Environmental and Energy Studies Institute, n.d. Web. 17 Dec. 2012.
Picture Sources:
"The Resilient Earth." Killing Biofuels. N.p., n.d. Web. 17 Dec. 2012.

Government involvement: subsidies

Agriculture is a highly volatile yet necessary industry. Due to unpredictability of temperature, precipitation, insect levels farmers rely on the support and backup of the government (Grace). On average between the years 1999-2005 farmers produced $1.19 billion in food commodities; they spend $1.24 billion to raise those commodities. This means that from 1999-2005 farmers were losing $51 million a year to grow food crops. These looses make farmers highly dependent on the over $184 million of subsidies given to farmers each year. Studies in other regions have found that government subsidies have been 50-100% of the profit made by farmers. By the end of 2002 many farmers in the Midwest relied solely on non-production income to pay for costs of farming each year (Food Facts). Currently the government is subsidizing mainly grain and “the variety and quantity of nutrient-dense ³specialty crops´ including fruits and vegetables has been kept limited ± whilehuman and environmental health, the economy, and small and medium-sized farmers havesuffered” (Moltzen). Hopefully in the near future we see the government shift towards helping sustainable agriculture with extra-incentives.

For more information about Kelly Moltzen's analysis concerning current agricultural policy check out her paper at: http://www.academia.edu/403705/Subsidies_and_Specialty_Crops_An_Analysis_of_the_Current_State_of_U.S._Agricultural_Policy

To learn more about government subsidies in biotech and agriculture watch a video for organiccomsumers.org: http://www.youtube.com/watch?v=AaLMKfV6zl4

Sources:
"Food Facts: Results from Marketing and Food Systems Research." Leopold Center for Sustainable Agriculture. N.p., n.d.
             Web. 17 Dec. 2012.

"Grace Communications Foundation." Food Economics. N.p., n.d. Web. 16 Dec. 2012.
Moltzen, Kelly. "Subsidies and "Specialty" Crops: An Analysis of the Current State of U.S. Agricultural Policy | Kelly
              Moltzen - Academia.edu." Subsidies and "Specialty" Crops: An Analysis of the Current State of U.S. Agricultural Policy |
             Kelly Moltzen -Academia.edu. N.p., n.d. Print.
Video Sources:
"OrganicConsumers.org." YouTube. YouTube, n.d. Web. 17 Dec. 2012.