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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

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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.

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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,

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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,

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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 StatesAnnual SupplementFiscal Year 1982. Economic Research Service. Washington, D.C.; U.S. Department of Agriculture. 1987. Foreign Agricultural Trade of the United StatesAnnual SupplementFiscal 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.

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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.

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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.

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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 SystemFrom 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

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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 SystemFrom Production to Consumption. NFR-37. Economic Research Service. Washington, D.C.

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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

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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

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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

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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-

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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 ResourcesCropland, Water, and ConservationSituation 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 ResourcesCropland, Water, and ConservationSituation and Outlook Report. AR-12. Economic Research Service. Washington, D.C.

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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 programdiversion 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.

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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-

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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

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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~.

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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.

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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.

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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. InputsOutlook 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 ResourcesCropland, Water, and Con- servationSituation and Outlook Report. AR-4. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1986c. Agricultural ResourcesInputsOutlook 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 SupplyOutlook 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 ResourcesCropland, Water, and Con- servationSituation and Outlook Report. AR-8. Economic Research Service. Washington, D.C. U.S. Department of Agriculture. 1987b. Agricultural ResourcesInputsSituation 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.

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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.