Economics of Beneficial Management Practices Adoption by Beef Producers in Southern Alberta

Abstract

Beneficial Management Practices (BMPs) are a means by which the provision of ecosystem services and sustainability of agricultural production systems may be enhanced. However, achieving widespread adoption of BMPs may require policy intervention because studies have shown that the adoption and implementation of many BMPs are costly. The research carried out in this project involves an analysis to assess the economics of adoption by southern Alberta cow-calf producers for a specified set of BMPs The BMPs examined in this study are intended to improve water quality, soil quality and other environmental attributes. The analysis is conducted for a representative mixed crop-beef farm assumed to be located in the Dark Brown soil zone of Alberta. Stochastic crop prices and yields as well as stochastic beef prices are incorporated in the analysis, along with participation in public business risk management programs (e.g., crop insurance). The study uses dynamic Monte Carlo Simulation and Net Present Value analysis methods to estimate farm-level costs and benefits of BMPs. The BMPs examined in the study include rotational grazing, crop residue management, enhancing tame pasture productivity through incorporation of legumes (alfalfa), manure management, and conservation of natural areas (i.e., retirement of native pasture area). Results obtained from the analysis are mixed. Manure management results in a relatively small annual benefit per acre of land affected. The effects of rotational grazing and enhancing tame pasture productivity through incorporation of legumes depend on the degree to which tame pasture productivity is improved by the BMP. Conservation of natural areas and crop residue management BMPs result in a net cost per acre of land affected. Overall, economic incentives may be necessary to motivate producers to adopt BMPs that are costly. Conversely, information programs may be all the policy required in the cases of BMPs that are economically feasible on their own.