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An Economic Analysis of Three Soil Improvement Practices in the Columbia Basin, Washington State

An Economic Analysis of Three Soil Improvement Practices in the Columbia Basin, Washington State

TB47E
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Peter Tozer, Institute of Agriculture and Environment, Massey University, New Zealand, Suzette Galinato, IMPACT Center, School of Economic Sciences, Washington State University, Pullman, WA, Andrew McGuire, Grant County Extension Office, Washington State University, Moses Lake, WA, David Granatstein, Center for Sustaining Agriculture and Natural Resources, Wenatchee, WA
Compost, cover crops, or no-till/min-till? Get a cost and benefits comparison of all three in this publication.
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Abstract

Soil improvement practices are ways to maintain or improve soil quality and thereby soil productivity. The objective in this research was to estimate the costs and benefits of three soil improvement practices in the Columbia Basin of Washington State: compost application, cover crops, and no-till/min-till. Focus group information formed the basis of three partial budgets to estimate changes in costs and returns due to the soil improvement practices. Partial budgets showed that two of the three practices generated positive changes in profit that were mostly due to savings in replant costs or reduced fumigation costs, and the third incurred a marginal negative value. Other non-cash benefits or costs not included in the partial budgets, but which could have a significant impact on the overall profitability of the cropping system, were increases in land value as soil productivity increased, the value of carbon sequestered, and learning and knowledge acquisition costs; all three can affect net returns. The challenge with these types of costs and benefits is how to incorporate them into a partial budget format.

Introduction

Global interest in the soil resource is currently increasing, as concerns about this resource and its ability to support food production are more widely recognized. Often, the terms “soil quality” or “soil health” are used to denote the importance of the physical, chemical, and biological aspects of soil, in contrast to the historical focus on chemical soil testing only. Soil improvement denotes activities taken in agricultural systems to optimize the function of soil for crop production. The published literature on the topic is vast due to the numerous types of practices, soil types and crops, and climatic zones in which these practices are used. The crop yield responses to the various experimental treatments or research reported in the literature, or changes in various soil quality measures (e.g., bulk density, soil organic matter, etc.) are usually the main focus of these reports. Very few publications focus on the economic costs or benefits of soil improvement.

 

Specific economic analysis of soil improvement practices is usually limited to a form of gross margin budget analysis or ad hoc approaches to measuring economic benefit (i.e., analysis based on a specific situation or set of assumptions about production practices). As an example, Wyland et al. (1996) used a budget approach; however, the economic component of their research contained very little information regarding differences in returns or costs.

As noted above, many soil improvement studies utilize an ad hoc approach to the economic analysis. This could be because the differences across soil improvement practices affect the economic data required to analyze the practice. For example, cover cropping systems utilize machinery and equipment that is typical across most farming systems, but additional variable inputs including seed and fertilizer for the cover crop are required and need to be included in the analysis. In contrast, reduced tillage systems require more specialized or heavier equipment suited to the system or soil type, incurring extra capital costs, but have similar seed or fertilizer requirements to a more “traditional” cropping system, thus an economic analysis may not need to include any additional variable input costs, except for fuel due to slower working rates.

Another problem is that many economic analyses fail to account for two subsets of costs or benefits. In most analyses, the researcher measures the direct costs (i.e., seed, fertilizer, fuel, chemicals, or machinery costs) that vary across soil improvement treatments. However, most analyses usually do not capture indirect costs or benefits, i.e., risk reduction related to crop productivity over time due to topsoil loss, or non-priced costs or benefits that cannot be valued directly, such as land rental changes due to changes in soil quality resulting from adoption or non-adoption of soil improvement practices, or the costs of learning about the improvement adopted. From an economic perspective, these costs or benefits may be critical to the success or failure of a soil improvement practice since failing to acknowledge either or both of these can under- or overestimate the costs and benefits of the practices.

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