Tape #342 - Cost: Traditional and Alternative

CLAYBORNE CRAINE: All right. Good afternoon. I told you I didn’t need this microphone. I appreciate all of you that are participating in this. I’ve got some bad news and some good news, as they say. The woman that was the economist from Italy has done a study on the comparisons of traditional costs versus, I’m sorry is there a translator here that translates Texan? I speak a little funny. That’s all right. You’ll have to excuse my humor, it’s weird. She is not been able to make the trip unfortunately. But she also didn’t send her study, which we would have also loved to have had. We have two people here today from USDA, Bill McCormick, who I’ll introduce in a minute to talk about how the economic research service at USDA develops their cost production studies, and how they weigh those in. And, then Jill Alborne, who has done a, is fairly new with USDA, but has done a lot of work as far as alternative marketing in sustainable agriculture. But the real people that we’re depending on to provide some input is the people that are here at this meeting. Obviously, you’ve got some experience or you wouldn’t be here. And, that’s where the value in these meetings come from. I have no idea what those people are doing backstage, I ask them, they said they didn’t know either. But they’re making a lot of noise. We’ll just have to work with it. Does anybody, they need another speed on that drill, I can tell you that. My name is Clayborne Craine, I’m with the utility services in the USDA. And my job at USDA is do whatever I’m told, when I’m told to do it. And I usually what I’m told, but sometimes I’m a little slow on when I get it done. Are there any questions or comments anybody has before I bring Bill McCormick up? Well, if you’ll come up. Bill’s going to talk to us a little bit about how we put together -- go ahead.

PARTICIPANT: Inaudible.

CLAYBORNE CRAINE: Far as I can tell. Bill had a good ten minutes on me. So, remember that in your evaluations.

PARTICIPANT: Inaudible.

CLAYBORNE CRAINE: If you need to sit the overhead on the floor to check your projector, go ahead. Bill, did you have overheads to use? Okay. Just get the projection on the air and we can get it adjusted. Let me ask a couple of questions while we’re working with these technical problems. What did you have in mind, what thoughts came to your mind when you saw this on your schedule as a breakout session when they’re talking about alternative versus traditional cost?

Now, I’ll walk the microphone on to you. Hold up your hand, anybody that wants to comment.

PARTICIPANT: Whether it would be economically feasible, can you stay in business?

CLAYBORNE CRAINE: Well, I think that’s something that we’re all interested in, that’s can we stay in business. I can tell from your face, you’re just dying to say something.

PARTICIPANT: You asked what we thought when we saw it. An example that I had in mind would be something like is it cost productive to switch from maybe grass fed livestock or, I’m sorry, just the opposite, grain fed livestock over to a system of grass fed.

CLAYBORNE CRAINE: Okay.

PARTICIPANT: I’m interested in the cost comparison.

CLAYBORNE CRAINE: You’re interested in the cost comparison? Okay.

PARTICIPANT: Ryan Grov from Australia, debating whether we should go to high input producing more grain or stay at the traditional methods of fellow cultivation.

CLAYBORNE CRAINE: Okay. In this case, your talking about strictly crop production versus animal production or milk production.

PARTICIPANT: I’m from Brazil USA, and I’m thinking that it’s the handwriting on the wall, that our dairy producers on the dairy farm are not going to make it in traditional ways, we’re going to have to become a lease cost producer. And I hear folks in Idaho and Utah and California say that we’ve got a corner on the market, you guys can’t touch us, and I hear grazers say that there’ll be a market, an niche market, for some of the smaller of us. I guess I just don’t know. So, I came to hear.

PARTICIPANT: Inaudible.

BILL McBRIDE: So, everybody can see that. Oh, it’s clear.

First thing I want to correct, I was introduced as Bill McCormick, that’s close. My name is actually Bill McBride. I’m an economist with the USDA Economic Research Service. I’ve been here about 9 years, now. Working mainly in the farm cost and return program at ERS.

First of all, I want to apologize in that, I really, I mean I just listened to what you all said about what you expected out of this session. I really don’t have anything along those lines. Basically, all I can provide you with is kind of a background on what we do at USDA in terms of our cost of estimation program, and how we go about estimating farm costs in the United States. So, so while I don’t have any real specific information on alternative production systems, I can provide some background on what what USDA cost and return program is. And hopefully some other speakers will fill in fill in the deficiencies.

First of all, the kind of the general title --

CLAYBORNE CRAINE: Just a second. Ask if anybody needs interpretation that’s not getting it right now.

BILL McBRIDE: Okay. Does anybody need any kind of interpretation, language interpretation that is not getting it at this moment?

Okay. Are we all right then? Okay.

I’ll just go ahead and proceed and I’m just going to be brief, anyway. I just want to talk a little bit about what we do at USDA. The basic title of this is the farm survey data we collect and how we use it for economic analysis. At USDA there are two agencies that are responsible for the collection and analysis of farm survey data. First of all the National and Statistics Service, the major agency in USDA that is responsible for the collection of farm data. We work very closely with NAS, and my agency, the Economic Research Service, and our main responsibility is the summarization and analysis of economic data. The basic tool that we use that we work closely with NAS, in terms of trying to collect this data, is called the Agricultural Research Management Study. Basically, it’s a survey. It’s a survey of all farm operations in the United States. The ARMS is a compilation of several survey’s at USDA that were actually folded together in 1996 in order to improve the efficiency of our survey program and mainly to reduce respondent burden by having fewer contacts with producers. The ARMS is a national survey covering all farm operations that we define as having a $1,000 in value, farm value of sales, so it’s a very comprehensive survey. In fact, it takes very little, very little agricultural production in order to achieve $1,000 in value of sales. A lot of people can grow this in a very small area. So, it’s a very comprehensive survey of agricultural production in the United States. One of the most unique features about arms is that we use what’s called a complex sample design. What this does, it allows us to make population estimates about about the set of farms in the US. That is, each farm represents a number of similar farms and with the survey we can develop what’s known as as an expansion factor and thus make estimates for the entire population of farms in the US. One of the characteristics is that we we go after different pieces of information by interviewing different populations. For example, we have one version that covers the entire farm population. We have other versions that focus on specific commodities. We have corn versions. We have wheat versions, that come up every so often. So that we can make our cost and return estimates. These are the ones we really use to make our estimates of cost and production. And finally, the type of data we collect, general whole farm information, farm finances, commodity cost of production, resource use, input use, and demographic information. So the ARMS is our basic data source that is done every year at USDA to provide the financial and economic information that we use to support our policy and research programs.

Let me move now to a more narrow focus. One of the part we use our for is our cost of production program. And what do we do in our cost of production program. Basically, I’ve kind of divided the reasons why we do cost of production into two categories. First of all, we have what are called legislative requirements, these are defined by Congress that they tell us what kind of information do they want to know about the farm sect. What commodities they want to know the cost of production for. And finally, we have certain goals that are at the Economic Research Service, our agency goals, and these refer to the specific research programs that we do. And, I’ll talk more in detail in just a minute about what these are.

First of all, let me talk a minute about the history of cost of production in terms to the legislative requirements. Cause it has a kind of interesting history in why we even do this at the national level. Why taxpayers actually support a very expensive survey, I might add, this survey is about 4 to 5 million dollars a year. So, we better have some good uses for it. Back in 1973, Congress decided that we needed to know more about the costs of growing the major commodities in the US. There was a lot of debate at this time about what levels price support for farmers should be set at. In fact, that’s really what spurred the initial thoughts about collecting cost of production program, so that, so that we have some idea at what level corn price supports, wheat price supports, should be set to provide farmers the ability to cover costs, and to generate a fair, quote fair return to there resources. So, in 1973 the legislation defined what cost we were going to estimate for what commodities, mainly the major feed grains, and dairy. And what specific methodologies we were going to use. How were we going to define costs? 1977 was kind of a critical year in the sense that at this point Congress decided to actually link the cost of production, excuse me, link the price support that farmers received to cost of production estimates. That is, they would tie, through formulas, the specific target price to whatever we estimate at USDA for cost of production. So, actually, you have to think about this really being the high point in terms of use of cost of production for policy purposes directly impacts the setting of national farm policy. There were certain problems from an economic standpoint in doing this. So, in 1981 it was decided that well, we’ll use these as just simply as guides. And this is kind of where cost of production kind of falls in terms of a less important use, you might say, in terms of setting price and income supports for farm policy. But also, at that point, a review board was established in order to examine the methods used and how we were doing it. So, it was always under very close scrutiny. And finally, more recently, the role of cost of production has diminished but still you see in 1996 Congress continues to authorize the collection of cost of production data and the reporting by USDA. So, it’s still deemed an important activity, but it’s role, as you can see, has changed over time. And that’s kind of reflected in terms of our agency goals and what we do with the data. You can see that cost of production is supporting research in several program areas that we have at ERS. First of all farm structure, in fact, one thing that, one important uses of COP, cost of production, is to examine how costs vary by farm size. There’s been a lot of concern in US agriculture about the disadvantages associated with small farms. And the pressures put on them by large farms. And part of our research program is to see how these costs vary by farm size and and are there real problems associated for our small farms. Another thing that’s the kind of more related to this program is the idea of technology adoption. One of the things we’re looking at is -- excuse me, go ahead.

PARTICIPANT: Inaudible.

BILL McBRIDE: I wish I had more. We do have some estimates. We do estimate -- let me put that up there -- Actually, I was trying to put something together in, let’s see -- in the last hour that I could show you. And this is one of the things I came across. And, I think this kind of is a is a little bit of, addresses what you were talking about. this was little project we did about the Great Plains. About wheat production in the Great Plains. In fact, recently, there’s been a lot of concern by producers in the Great Plains about the problems with lower low wheat prices. Wheat prices have been very low. And in fact, if you look at, if you look at the right hand side here, wheat prices have been what about $3.00 a bushel. Two and a quarter. You can see from this graph why there’s a lot of concern about low wheat prices, this graph what this shows is cost of production on the vertical axis and size of wheat operation on the bottom. At two and a quarter, the price you just quote, well, we see, basically nobody is covering costs. So, so this is the kind -- in the Great Plains, I want to add, this is the Great Plains, but this is an example of some of the information that we do provide people. This was actually for a staff request in response to concerns about the low wheat prices in the Great Plains. So, let me just -- I have another map or another graph on wheat I’ll show you in a minute, actually, it’s for the whole US. Let me just briefly touch on a couple of these other things we do. Technology adoption, we’re moving into looking at cost associated with such technologies as precision agriculture, genetically modified organisms, or biotechnology, these are the kinds of areas we’re looking at in terms of cost of production. Acreage adjustments looking at high cost versus low cost areas. One of the big issues with the 1996 farm bill was greater risk exposure on the part of producers due to phasing out of government programs. We’re looking at, not so much in cost of production, as in our whole farm work, but we are looking at risk management strategies. And, again, some other areas that ERS are using cost of production in terms of estimating competitiveness of trade between countries. So, those are what we try and use at ERS. Let me briefly kind of show you how we present cost of production. This may be difficult to see. I’ll just point out a couple of things. This is cost and return estimates. The first part shows the value of production. This is corn, corn estimates for 1996. The top table is basically a cash accounting of costs. These are actual expenditures applied, put out by producers for inputs during the 1996 calendar year, in this case. So, the top part’s cash costs, you can see we have variable cost seed, fertilizer, chemicals, the main variable input items. Overhead and other fixed costs. The bottom part is an economic cost accounting. And basically, this shows the opportunity cost of certain owned resources by farmers. For example, his labor, we charge what he could earn in a off-farm pursuit. Land. Land, what could be rented to other uses. These are resources that are likely, owned by the operator, but they have an economic cost. And this cost is represented by their opportunity cost. So this is kind of an example of what we include, where it’s very comprehensive in terms of accounting for all the costs associated with production of a commodity. Well, now, getting back to looking at some of the relationships, I want to show you this is one of the pieces of information that’s been very popular in terms of evaluating how the financial position of, in this case wheat producers, I believe. This is a distribution of production costs, based upon data we collected in 1994, and what you see on the vertical axis is the cost of production, the total economic costs, as I’ve just defined them in the account, and on the bottom axis it shows what percent, you can believe this is percent of farms or percent of production, is produced at various loads. Now, let’s think about, again, this price that you quoted me at $2.25 a bushel, I believe that’s what you said, it’s about $2.25, $2.50. So, if you go to the vertical axis and you draw a line from the right to where it intersects. Oh, let’s see, actual yield, that would have been the yield in ‘94. This expected yield line is more of a long term average a year that we see. But, if you go up to about 2, 2 25 and you draw a line over to that, that second line down, you see in this case only about at $2.25 per bushel only about 15 to 20% of producers are covering total economic costs. So, you can see why why this is a kind of an interesting in terms of what are the problems out there. You go up to, let’s say $4.00 a bushel. You know, then it’s more like actually maybe 70% of producers are covering costs. So information like this provides policy makers with some ideas about what kind of financial pressure producers are under at various price levels. So this has been a big part of our program in terms of evaluating the financial condition of different types of producers. One more thing before I close, I’ll just put out that we take this just a little step further here and and and this is, let me focus on this table here a minute. What we do here, is as you saw on the chart we have producers at one end of the distribution, producers at the other end. What this shows it shows some of the characteristics of those producers. For example, the low cost producers would have been the ones on the very right end of that distribution. One characteristic you’d see about them is that they’re obviously much larger operations. 459 wheat acres planted as opposed to 267. We also report different production practice. I think, I think this chart here was actually produced in the Great Plains as part of our Great Plains project. So, so a lot of that is reflective of what’s going on in the Plains region. But, but basically I just wanted to put this up to show that we are looking at, one thing we do, is try to look at some of the detailed, we look at some production practices used by different producer groups, and, and, and just give you a general characteristics of different farms. This is this is basically all that I really had to present. Does anybody have any questions, is there anybody like to ask me about what we do at USDA? I realize this hasn’t been specifically related to the topic at hand here, but I thank you for your patience and ....

CLAYBORNE CRAINE: Let me ask one question. How much of your work, from most of what I’m seeing here, doing here, is that traditional farming and methods, how much work is ERS doing comparing cost of production on what’s commonly referred to as alternative methods, what input -- I mean that’s what it means to me, and anyone here can disagree with me, if that’s not correct, that’s why I asked the previous question.

BILL McBRIDE: You know, when you mentioned alternative, you know, my initial response was more of cutting edge technologies in terms of precision agriculture, in terms of biotechnology, you know, but it sounds to me like the conference is focused more in terms of low input sustainable programs. And actually, we have not really been geared, our program has not really been geared to focus in that direction very much. We’ve done more at the other end, you might think.

PARTICIPANT: ... the studies done on it would have been through universities ....

BILL McBRIDE: That’s correct. I would say, I don’t know how much they have done, but they’ve done more than we have, I’m sure.

PARTICIPANT: ... an actual cost of production with producers here in the states?

BILL McBRIDE: Well, what we do is we do a survey and we ask -- well, the actual, the survey is done. That’s that’s a good point. You know when I put that distribution together, each point on there is a cost of production for a given producer. So, when we go out and he hand enumerate the survey, and we do produce, and I guess your question may be are we providing the producers with this information. Is that, is that more of what you’re --

PARTICIPANT: .... taking his actual figures --

BILL McBRIDE: Well, that’s what the survey is intended to do. We have a mass enumerator set down and we hope that he has books that he will provide us with the information and fill in the questionnaire out of his books.

Yes?

PARTICIPANT: Inaudible.

BILL McBRIDE: Have you been surveyed? Is that what you’re saying?

PARTICIPANT: The government didn’t like my figures or the producers figures, they didn’t like the truth.

BILL McBRIDE: Oh, they. The question was basically do the producers actually see, just to summarize it, do they see the numbers that we produce for their farms. We do got out and we collect information on individual farms, but do the producers actually see the numbers that we collect summarized. Is this basically --

PARTICIPANT: Inaudible.

BILL McBRIDE: Yes. The question was does our does our information come straight from his farm records, or his accounts. And the question is yes, that we do hand enumerate every interview. And, in the numeration process we hope to a farmer we’ll utilize his records in answering the questions.

PARTICIPANT: Basically, when those surveys are carried out, you can’t really mandate that the farmer (becomes inaudible).

BILL McBRIDE: The, we, the survey, we can’t mandate that the farmer even answers the survey. It’s, oh, the response rates are 65, 70%, so, a lot of people don’t at the highest.

PARTICIPANT: Inaudible.

BILL McBRIDE: Yes.

PARTICIPANT: Inaudible.

BILL McBRIDE: Yes. This is a survey. Okay.

Well, thank you very much.

CLAYBORNE CRAINE: I apologize for the additional noise we have over here as sound effects. I talked to workmen, they say they have authorization to work, I already sent two people to see if we could get the work stopped during the course of the meeting, and it hadn’t happened yet. So, like many other things in life, we do the best with what we have. Are you having fun at the meeting here? I got a umph. You know meetings is our modern agriculture starting. Dave Barry did a piece several years ago on how the first meeting started with prehistoric people with the men going out to trying to chase down food, of course, men were running on two legs and were naked, and the food was on four legs and had fur and could run like antelope and actually it turned out it was an antelope, but they found out later. But the men got tired of chasing these antelope and so they decided they’d have a meeting around the campfire about the problem and they didn’t solve the problem, but they found it was far more comfortable then out chasing the antelope. And the women being the brighter of the species noticed after a couple of days of these meetings that nothing was happening. And, so they started complaining saying that there’s no food coming in, and the man said, well, that’s right, we’ll take that up at the next meeting. And, like I say, the women being the brighter of the two figured out that no food was going to come in, so they started going out looking for roots and berries, and hence, modern agriculture was born.

Sorry about that.

Our next speaker is Jill Auborne, who is the Director of Sustainable, you’re going to have to say it for me, Sustainable Research and Education. And she’s going to talk to you a little bit. I would, Jill, this is your call, but I think as people have questions, or if they, there’s something you don’t understand, or you want to develop a point further, raise the question at that time. Is that agreeable with you? Do you want the overhead on or off.

JILL AUBORNE: No, I don’t need that, thanks. Oops, careful there. Good way to start, trip your host.

I’d like this to be fairly informal. I’m a pinch hitter in this session. I am not an economist, I’ll admit that up front, but I do know, I think a little bit about the subject. I’d like to be very informal. I have some dialogue. I will use the microphone just because we have some competition over there. Can everybody hear me okay? I’m not an economist. My training is actually in ecology, but a lot of you probably know that economics and ecology have the same root. I think its the Greek work eucos, which means house, and if you believe as I do, that how we manage our house, our environment around us, our family economics all the way to our management of the environment, is really related. In at least the long term. I’m the Director, fairly newly the Director, since January of a 10 year old program within CSRES, which is the agency within the US Department of Agriculture that has the most complicated acronym, and least pronounceable. CSRES stands for Cooperative State Research Education and Extension Service. You don’t have to write that down, I have a handout I’ll give you, it spells out. But, as you mentioned earlier, Land Grant Universities around the country have done a lot of this research into the economics of alternative agriculture and CSRES is the agency within the Department of Agriculture that works closely with Land Grant Universities and other partners, groups, and individuals out around the country, that are doing research in sharing information through campus based education and through extension with farmers and ranchers and the public. I guess I’ll pass out right now --

CLAYBORNE CRAINE: Here, I’ll pass it.

JILL AUBORNE: Here, actually if you could pass all three of those around, that would be great.

I’m passing out three handouts. One is our SAR 1998 highlights. It’s an annual report on a program. And actually you can take, we can leave this stack here and you can take as many of those as you would like, if you have other people you would like to share them with. It describes our research and education grants programs, and highlights from 10 of the projects we’ve funded over the past couple of years. Now, sustainable agriculture in our definition does three things. And in order to be sustainable it must do these three things. Number one is improve profits. Number two is protect the environment. And number three is contribute to quality of life for farm families and communities. So, if you ask me the question does alternative agriculture or does sustainable agriculture pay, does it make economic sense. I’ll say, yes. Because by definition it must or it isn’t sustainable. I had the good fortune last November, I’m from the University of California, I’ve been at the USDA just since January. So, I’m new with this program. Had the good fortune last November in California to stand in the very cold drizzly, almost freezing rain, for something list 2 and half hours waiting for President Clinton to show up. I knew at that time I was moving to Washington to take a job with the Department of Agriculture. But, I thought in this great big city, I’d probably will never get the chance to get close to the president, and I was fortunate that he made a visit to Davis, California, which some of you may know, is in the heart of the central valley, the most productive agricultural area within California, certainly one of them. There’s a lot of large scale farming going on. And there’s an area there, the yellow bypass wetlands area, where farmers and agencies of the Department of Agriculture and a number of non-profit organizations, such as Ducks Unlimited, and other organizations had come together to create a flooded area, a wetlands area to increase the habitat for migrating water fowl, ducks and geese. President Clinton came out to announce and participate in the opening of this yellow wetlands area. And he said something, I had prepared a longer time for this talk, I have the actual quote. But, I’m going to have to paraphrase now, but it really stuck with me, he said, you know way back in history, if you go back a few decades, not all that far, we did harm to the environment because really we didn’t know any better. And then we learned more about the effects of some of our economics activities including agriculture, but certainly other things, we learned about the effects on the environment. But, we thought there was a real trade off between economic activity and protecting the environment. So, we still do harm to the environment, because we felt in order to grow the economy, to provide jobs, we had to do that. But now, we’re coming to realize that if you take the long term view and you look at the bigger picture with all of the extra analities included, that really long term ecology and economics are very closely aligned. If we’re going to have productive profitable agriculture, if we’re going to have a healthy economy, and jobs in the future, we really can only do so based on a sound healthy environment. So, again, please hear the President say, well, I truly believe in my heart, which is long term, big picture economics and the environment really have to go hand in hand. Now, that doesn’t mean that in the short term certain kinds of practices that we try to do in terms of protecting the environment necessarily always make a profit. But, it does mean that we, particularly we in research and extension, ought to be focusing our efforts on those activities that do both. So, sometimes a refer to myself as an eco-freak, and you just have to remember that’s economics for farmers as well as ecology.

The handouts have made it around now. I’d like for you to take a minute to look at this 10 years of SAR Publication. And, actually, I guess, let me look at the book first, and back up. I want to pay respect to my predecessor. One of the key, really the key person in the start of the SAR program 10 years ago, was called low input sustainable agriculture before it was called SAR. And somebody mentioned low input earlier as a definition of Sustainable Agriculture. Dr. Patrick Madden, was the original Director of the SAR program, or certainly one of the first. He, M-A-D-D-E-N, yes. He wrote the case studies, at least some of them, most of them for this book, Alternative Agriculture. This came out in 1989, Mary, was it, I think? This was a very influential book that the National Research Counsel is a very prestigious body that studies important topics and at a time when alternative agriculture or low input agriculture, whatever you’d like to call it, was not considered very mainstream. This book came out and took a serious scientific look at it. And the case studies in here, in particular, were particularly compelling. Patrick went around interviewing farmers around the country, rice growers in California, vegetable producers in the south, a number of different farmers and talked to them about what there practices were. Looked through their books with them, and talked with them about what was paying and what wasn’t. And a number of these case studies showed that not all of the time, but in a number of situations around the country, people were doing quite well reducing their chemical inputs. I’d say very early on, a reduction of the chemical inputs into agriculture the fertilizers and the pesticides, synthetic fertilizers and pesticide, was one of the priorities of alternative agriculture. Since the, I’d say we’ve branched out in sustainable agriculture, just studying a number of different kinds of technologies. Since Patrick was the first director of the LISA which became the SAR program. Being an economist and knowing the importance of those economic case studies, he set the tone in our program very early on, that every project that we fund, whether it’s looking at grazing technologies, or crop production technologies, or new kinds of marketing opportunities, every project should do economic analysis so we can say to farmers and ranchers and the public, does this pay or does it not. And if you look through this 10 years of SAR 1998 highlights, I just want to mention a couple of the projects here. The, on page 3, the first two pages are really kind of a general overview. If you look at page 3, there’s a project on cover crops and strip tilling, this is a project in Oregon, where vegetable farmers are looking at strip tilling, which is working a narrow band between wider strips of residue, still residue covered soil. And it says in there three fields enrolled these trials, a strip tilling system returned $100.00 per acre, more than the standard tillage system, increasing yield and reducing costs for the producers. So, there’s an example of an approach that for these vegetable growers in Oregon, did pay. The next one on that page is on Pasteur management. There aren’t a lot of specific economic figures given here, but it does say Pasteur management enabled the Woodbury’s, the couple in this study, to increase their livestock while leaving enough grass to maintain and improve the prairie, so it’s meeting the environmental goals, and allowing them to make a profit when most cow/calf operations were loosing money. So, again the environment was served, but economics also paid off. If you look on the next page you can see that we’re branching out, as I said, away from just environmentally sound production ------(tape ended)

...economics, the farmer of economics over organic farming. And you can read about them, the crops that they’ve done them on and how to order those publications in that one sheeter that I passed out. I’m not sure that there’s a general conclusion for many of those cost studies that I could draw, I think it probably shows that organic farming under some circumstances does pay very well. Under other circumstances, it clearly does not, in fact, what they do in those studies, is rather than say, yes, it pays or not it doesn’t, which is a silly generalization to make, it depends on the farm and the situation. They do a ranging analysis where they look at well, here are the factors that go into organic production, and then here is a range of yields that you might get, and here’s a range of prices that you might receive in the market place. And the individual producer looks at that cost study, and determines where on that chart he or she think they might fall out, based on what they think will can be and what they think they can get in the marketplace. And it allows the producer to work through the cost and returns for himself or herself. So, again, there is no blanket answer to, is organic farming profitable, although I would say the number of producers seem to be growing, the marketplace seems to be growing. So, certainly at today’s costs and returns, there certainly are a lot of organic producers out there making money. If you try to get into something that is less neatly defined, organic has a meaning in the marketplace. Defined by legislation in a number of states, and we hope soon to be defined by the Department of Agriculture nationally. To get beyond the specifics of organic and start looking at other whole farm systems, if it’s a little harder to specify what is the system that you’re comparing to conventional to alternative. Karen Clansky and Laura Torta, the people who did those organic cost studies are launching into a new study, in the central valley of California, looking at tree crop growers, and one study that’s funded by the National Research Initiative, and looking at a range of producers of different types of crops in, in a companion study that’s being funded by the Fun for America. They are looking at producers that are not necessarily organic producers. They’re looking at range of people who are using biologically intensive methods. Some of them may be organic, some of them clearly are not. So, they’re trying to look at more a range of producers than just organic versus conventional. And, they’re trying to get a little more sophisticated about, too. I think we generalize about farmers. We tend to say, this type of production will pay or it won’t pay. I think it depends very much upon the farm manager. And in that study Karen Clansky and Laura Torta and the folks they’re working with are going to be dividing up based on some questioning of growers about their management goals and their management styles, they’re going to be dividing the growers up into different groups based on their management goals and strategies and trying to get more sophisticated about what types of farming systems seem to be most successful with what types of managers. So, I think that’s one to watch and look for the results of in a couple of years.

Let’s see. The other handout I gave you, I’m pleased to see that Mary Gold is here from the Alternative Farming Systems Information Center from the National Agricultural Library. Because I handed out a page that came from Mary’s Center. A bibliography, a list of different publications that includes two bibliographies that they have done. On the economics of alternative agricultural, so if you really want to delve into this subject, get into the nitty gritty of the many studies that show under what circumstances alternative agriculture pays well or doesn’t. I would direct you to those bibliographies as well as the many other publications that HAZOP has, and many other bibliographies. And, Mary answers a lot of questions on these topics I know every day and it’s just a great resource, so I’ve put the phone number, sorry, Mary, you’re going to get a lot of calls, the phone number, the web site address, the e-mail address to contact information for the center there, you can go to that web site and you can actually pick up the text of those bibliographies, or you can order them in print if you don’t have access to the world wide web. So, I guess I will stop there and see if, I should’ve started with this I guess, but I’d like to hear more about where you all are coming from, what kinds of alternative agriculture strategies you’re interested in. I don’t think I’m the expert by any means in economics of any of these systems. But, between Mary and myself, maybe we know where we can point you towards people who are.

Thank you.

MARY GOLD: We’ve done one special literature search just on our data, the economic aspects of organic literature that I would be happy to send you, if you let me know. Also, the book that Jill has, there are many extra copies in our office, and if you’d let me know where to send it, I’ll send you a free copy of it.

JILL AUBORNE: Thanks, Mary.

Other questions.

PARTICIPANT: Is USDA going in the direction to support this type of alternative ag, because I know in the past, when there were certain farm programs, it wasn’t quite as easy to participate if you were operating with alternative methods. I mean, as far as certain FSA offices, they weren’t as friendly towards certain things. If you said, oh I’m not spraying that patch because we’re going to cut, we’re to mow it, you were not very well accepted in the office, you know, I mean, so that’s just, I think there’s been a little bit of prejudice against some of this with like Armed Services Agency’s and --

JILL AUBORNE: Yeah, I’m sure you’re right about how things have been in the past. I would say this situation is changing, has it completely reversed overnight, I don’t think so, but I’ll tell you a few other things that I have observed that have changed from say 10 years ago, when the SAR program started, and I think it was viewed as pretty much kind of one end of the spectrum maybe, a little bit fringe, that’s why this National Academy of Science Study was so important. I think to start to give it legitimacy. In just the time that I’ve been at the Department, since January, I’ve been impressed with a number of things going on. First off, you’re, the almost two years ago, year ago last September, Secretary Glickman signed a policy on sustainable development for the department. There was, before that, a working group within the department that was looking, bringing in farmers and other people to speak about sustainable agriculture to the whole department, really trying to spread the idea of sustainable agriculture beyond just small programs like SAR. There’s sustainable development counsel that came out of that work group and out of that policy, but the Secretary said, has as it’s charged, to basically infiltrate these concepts into everything the Department of Agriculture does. Now, that doesn’t happen over night. It’s going to take a little while. You mentioned specifically the farm services agency. There is within the SAR program a, we have some extension funds that are used for what we call the professional development program, to provide information and educational opportunities to cooperative extension people in the field and the people out in the counties who are working with farmers an ranchers to teach them more about sustainable agriculture, so they’ll be more comfortable sharing that information with farmers and ranchers. There are people from farm services agencies and risk management agencies, the folks who do the crop insurance, who are interested in participating in that program. So, I think, you know there’s change. It’s not across the board, it’s not organized, but there’s places, I think people the longer we’re around and the more desperate people are, I think when people are looking at those low wheat prices and mainstream producers are having trouble making a go of it doing things the way the way they have been doing them, everybody’s looking for some kind of alternative.

PARTICIPANT: Inaudible.

JILL AUBORNE: Absolutely. Absolutely. That’s the win that I think we’re all looking for, is the technologies, or the approaches, the systems that are lower cost, and also good for the environment. Absolutely. And it’s going to be different for different people. What will work for some people will not work with others. Yeah. Yeah. You’re absolutely right.

PARTICIPANT: Did I understand that you base a lot of your information on sustainable programs on research done by the land grant universities.

JILL AUBORNE: Yes and no.

PARTICIPANT: Well, the reason I ask that is that very often our corporation is asked to test alternative products that are coming on the market, biologicals and so forth. And they come to us because they got do the land grant universities and they try to get the products tested. And they are totally shut out because the large chemical corporations have all their research land totally embargoed for the next 5 to 6 years. And some of it is not even used, it’s just embargoed, so that there’s no place to test alternatives. And then when you take these alternative products to the farmers and say, well, will you do, use the international protocol for testing. Landimize lepreicated tests and there are farmers that will do that. And they write up the report because they’re very interested. And then you take it to a State Department of Agriculture for trying to get a license to sell, and you’re laughed right out of the office because it is not tested in a land grant university. And this is the frustration that I think a lot of these people are wanting to enter into alternative programs and use of alternative products are so frustrated and I’m from Pennsylvania, I used to be Deputy Security, I was in charged of licensing of products. And I know, we had it set up that they didn’t stand a prayer, and this hasn’t changed. And label cribbing over whether there’s a quarter inch high difference in the print on a label or how accurately a product is described keeps them off the market place and away from the farmers who would like to try them. And they represent an effort of low input cost.

JILL AUBORNE: I’m glad you brought that up. I introduced myself as being within the agency of USDA that works for the land grants. But actually in this SAR program, certainly 10 years ago when our program didn’t exist there was a recognition that the real innovation in alternative agriculture was happening outside of the universities. There were some exceptions, and I don’t want to totally blast the universities. But, certainly 10 years ago the hot beds of activity were things like, places like Rodell Research Center, private groups, practical farmers of Iowa, groups of farmers like that. And, the folks who started this program not only were smart enough to put economics first, but also were smart enough to take advantage of that situation and rather than just giving a lot of money to the universities from the get go the SAR program has given its grant to any organization that can demonstrate the ability to do research and education. And, in fact, the thing that we prefer is to give to partnerships of universities and private, either non-profit groups, for profit, producers and supply people. So we really encourage collaborative research tapping the intevation that the producers and the suppliers have out there, rather than just university only type of research. And I think that’s a bit unusual for research and education grants program. We also, we give, started in our north central region about 4 years ago, one of the types of grants that we give are small grants to individual producers to do their own on farm research and hold field days, and share the results with their neighbors. So I think, I’m not sure that that really addresses all of your concerns, because it’s, there’s still a lot of the alternative materials testing that I think is not going to happen in universities in part, yet maybe I’m part prejudice against these kinds of alternatives and it may also be in part too much to do and not enough time and resources to do it with. If you’ll look at the overall trend in farms for agriculture research and extension, hasn’t exactly been up in the last few years, and I think we are going to have to rely on the private sector, in our program we rely on the farmers and the ranchers to do a lot of on farm testing in partnership with the university people.

PARTICIPANT: There’s only one problem. If you want to introduce into the commercial market, any alternative product, you’re faced, USDA may be fine, but you’re faced with the independent regulatory legislation in all 50 states. And most of that was written back in the late 70s early 80s. And they close the door. And they haven’t amended that since they had there conference in Williamsburg back in, I believe it was -- remember that conference? Jack Anderson reported it in his column. And they were highly successful and those statutes are on the books. And it’s virtually impossible to get them off.

JILL AUBORNE: You want to say something? That’s not really something I’m too familiar with.

CLAYBORNE CRAINE: Of course, I always get a product into the market is a major problem. I think going back to get part of the tenor of this conversation is that we’ve seen, not everything’s perfect, anywhere. But, I think we’ve seen gains compared to where we were 10 years ago and 20 years ago. Each of the speakers introduced themselves and their professions, I’m a profession political hack. And I’ve hung around Washington about 20 years now. Can’t find my way home anymore. But I’ve seen a real difference in what is available. You’re going to have individual farm service offices and extension agents, and researchers and everything else either be totally against any kind of different methods or totally in favor of it, just like farmers are. I heard a man talking about trying to develop leadership in farmers, in fact, as y’all know that enviro farm organizations, leading farmers is a lot like herding cats, it’s kind of a hard thing to do. They’ll go with you if they think work farm, but if they’ve already got their mind up, made up, they’re not going to. One of the things that I think Jill has pointed out that is important to remember, there are things that work in different localities. Friend of mine, Laywood St. Clair, became in a few short years very successful vegetable farmer in southern Pennsylvania. He used to preach to me about falsehood, you know, an old sea bird like me is going up to southern Pennsylvania and is making a fairly decent living growing vegetables. Well, start with, Wood was smarter than average bear. He was a hard worker, but he was also close to some major markets. He couldn’t do what he was doing in North Dakota, because the markets aren’t there. What you have to do is to look at the balance of your cost, any changes you make, enter them, and what that has in your production and your net income. You can cut back on the amount that’s being spent on fertilizers, on chemicals, that Bill was talking about, and in some cases like the case in Oregon in your brochure. If it’s done right you’re going to see some good examples. First time you have bug infestation or something goes wrong that you don’t know what it is, those farmers are going to be looking for a way to bring themselves back in line to keep, not back in line, but bring the crop back to where it’s producing at a level that they get some money out of it, because very few of us have the luxury of being in farming just for the fun of it. It’s an expensive hobby, if that’s what it is for you.

The woman from Australia was talking about the comparison of high input agriculture on grain production. Can you talk to us a little bit about why you’re looking at changing your doing it the way some people in this, in the United States are thinking they should do it. Oh, she left me. I guess she decided she wasn’t going to hear what she wanted to hear. But, you look at, you look at what you’re going to get back from that production, you make a change. I’ve got a friend in Minnesota that’s doing, trying to do a grass fed dairy, and it’s it’s a tough way to go. He’s not getting rich in a hurry. Bill talked quite a bit about the study on wheat in the Great Plains, we have an old story, they saying out there that dry land wheat farmer won’t make as much money as one that irrigates, but it takes him a lot longer to go broke. And so those inputs are a big factor in to what you do, and you have to make the decision, one of the key things is some of the things you’ve talked about here is weighing what your input costs are and look at the market that you’re going to have. Does it make sense to plant wheat every year. Or if you’re from the area some of us are, do you have alternative from wheat or cotton or corn or whatever it is. Pennsylvania, with, even with the problems that you mentioned has long been a leader as far as organic farming. They’re doing a lot of it in California with great success. But you have to have access to a market. I worked for Texas Commission of Agriculture and we did a lot of work with groups of farmers looking for markets to that they could grow for. We found that we could get a lot more for the vegetables we grew if we grew oriental vegetables close to the city of Houston because there was a large Asian community there that was willing to pay extra money for those vegetables. We found that certain religions believed in slaughtering their animals a certain way, and would pay extra for the animals to be slaughtered meat that had been, animals that had been slaughtered in the proper way. Most farmers I know are happy to face east and slaughter their animals in a different way if they’ll bring in a couple of extra bucks a pound, because you’re meeting a market need that’s out there. Now, this is about cost, but the final analysis is what you can put in the bank. What is your what is your bottom line on that product. And if my father and I used to argue insistently. He said that the prices weren’t too low, the cost was just too high. If the cost of machinery would come down and cost of fertilizer would come down, and I said, well, you know, if you go up to those plants, lugging that machinery and talk to those guys into taking a lower wage and executives in those offices in taking lower wage, maybe you can get the cost of that machinery down, but it’s not going to happen. But, but what you can take home, as far as enough profit, is where your example is. And that’s where the work both the Jerry Buzz and Bill Buzz makes a real difference. One of the differences that we’re in now, is we used to base where we sent price supports, loans and target prices in this country on those numbers that were developed as far as cost of production. And of course, they were always averages. And you can stick one foot on a block of ice and stick the other foot in a pot of boiling water and your average may be comfortable, but I guarantee you neither foot is in very good shape. That’s changed. Or it’s changing to some extent, the way that’s not based that way anymore. But we are looking for those kinds of numbers, to figure out how we’re going to make a living in farming.

Are there questions/statements?

PARTICIPANT: I was just going to make a statement, that, going back to the original title, comparing the cost traditional versus alternative production, when you were summarizing the fact that it would be almost an individual situation, depending on where the farmer situation, his locality, and so on, also another point to make to that when you’re comparing costs there is producers that go from traditional production, so to speak, and during their transition to alternative production, they make actually have to spend extra money. The transitional period may cost them, but in the long run, it has turned out that it was cost effective. They had more of a profit. So, maybe during that transition it would be helpful, I suppose, for those people interested to have access to things like you were speaking about, the seragrans and things like this. But that’s also something to point out. It may actually cost a little more the first couple of years during that transition because it does take time.

JILL AUBORNE: That’s a really good point. A number of the of the projects that we’ve funded have found that, I know of two near Davis, California, that were looking at just that. That in the early years of the transition and there are two explanations that I’ve been given, and there may be many more, I think one goes to the fact that it takes them time to build up organic matter in the soil to diversity, build up their beneficial insects to have a tap, that kind of thing, to make the ecological system work. The other is, there are management factors, the learning curve. It takes a while to learn to farm in a different way. It’s certainly been true for researchers. I know that just learning to manage a research plot in a different way has been a challenge for some of the researchers that we’ve funded. So, I think that’s a very good point, that that transition period may be very different from the longer term once you’ve got it down and figured out and everything’s in balance, kind of a setting. I guess the other thing I would say too, is, you know, we’re calling this alternative agriculture, it’s alternative, it’s different. It’s something that we haven’t been doing for all that long. Sometimes we talk about being the best of the old principles, like crop rotation and all, but the best of the new ways of looking at them. And just by virtue of us not having to study those methods and refine them all that well, you can almost assume that by definition there are going to be some economic challenges there. If we had put the time and effort and money into studying these alternatives for the same amount of time that we had refined the conventional production system, we might have it more economically profitable. So, just the fact that something doesn’t necessarily pay the first time you try it or the first way you try it or right now, doesn’t mean that if we work on it and refine it, it won’t necessarily pay down the road. I think there also are a lot of questions if you look beyond the farm. It certainly bugs me to death that we brag about our cheap food in this country and the fact that we don’t pay farmers that much. And it seems to me we ought to be paying farmers who are stewarding the environment, who are preventing the pollution, who are doing the right thing for wildlife, and doing the right thing for consumers. I think we ought to be paying them more to do that kind of thing rather than putting our money into cleaning up the problems after they happen. So, I guess if I had my druthers, we’d do something about the price of our foods as well as the cost side.

Anyone else?

LYNN McBRIDE: I’m Lynn McBride.

PARTICIPANT: Inaudible.

LYNN McBRIDE: I just couldn’t sit back there without coming up here and thanking all of you for putting on this workshop, because I know at the last minute a lot of you were called here because of a cancellation, and we really appreciate the fact that you’re here, and just to let you guys know, cause I work here in Washington, it’s very difficult to get these busy people all together, and to have very busy schedules, and the fact that they were able to come out here today and speak to us all. I think we all need to thank them for, and the other part I wanted to mention, is we’re, they’ve just gone through another appropriation cycle, and as we know, every time of year, this time of year, there’s some productions in funding levels or funding levels remain flat, so a lot of what these people are asked to do, is more with less. And what we’ve discussed at this conference is what is the role of government in agriculture, what is the role of government, be it in the United States, or any where in the world. And I think when we see these folks and all that they do and the opportunities that they offered us, it really helps to answer that question, that there certainly is a role. And again, I just want to commend you for being here, and thank you very much.

CLAYBORNE CRAINE: I’d like to hear some input from some of the other countries on comments they have on what’s going on their countries as far as low input or high input agriculture, traditional versus alternative.

INTERPRETER: In Mexico there are many organizations, perhaps not in every state, that work with that do this and people don’t know what products should be used in order not to damage the environment. I think if we’re going to work together to protect the environment and we each did our part that we can make a much better world, but what we need is information. And those products that are good for the environment, that are ecologically the best, aren’t, you don’t receive more for those products in the market. So, we don’t have any way of moving to these products and maintaining our farms. We were at the table where people were talking about, they were talking about pesticides, but we still don’t know which pesticides are the ones that cause more damage. I think organizations that work with farmers from all parts and also with women farmers, especially. Need to be giving a lot more information to the farmers. Thank you.

PARTICIPANT: Hi, I’m Flenny Week from Australia. And I’m a fruit girl, I manage vineyard in southeast Australia, and you’re actually enjoying some of my products yesterday. So, I hope you liked them. I’ve got a couple of points to make, the first one would be that I don’t think you can talk about this, I don’t think you can have this discussion without broadening your definition of cost. I don’t think you can talk about cost purely in relation to the cost of inputs and the cost of outputs because there are environmental costs as well as human costs involved. So that’s the first point I’d make. And second, the discussion I’ve heard has been pretty narrow based. And the second thing is that, just to tell you a little bit about what I actually do, we have a fairly strong movement within the wine industry towards reducing our chemical inputs. Now, you would all appreciate that if you reduce any chemical inputs, it doesn’t actually mean that your having input into your industry, because in actual fact, if you do that, you have to do a lot more. Practicing up here, means that you have to actually have paper on the ground monitoring and monitoring is a constant job that changes as your pest cycle changes. For example, major paste in grapes in Australia has not been upper more. The steps that we take towards managing that problem is that we first of all monitor the moth flights, we graph them, when we’ve reached a peak, so we’re on our way down in terms of our moths, we know that we’ve had a pigmoth flat. We then go out and start looking for egg messes, as soon as we find the egg messes, we circle them and we tag the vines where we found them and we go back everyday and watch them develop. So we’re looking to see how many, what percentage are being pesticide, and that’s the first step in which we can intervene. We can actually release moths, and release small moths that have been developed to pesticide the egg messes. And what we do is we have them and we order them up from the lobar tree, they arrive in small card, we know the card in the vineyard, where we spray the wasps and out into the vineyard. And we look it at the same as your pasteurization. If we’re not happy with that, then we watch the egg messes develop when they hatch we go along and we count the actual hatchings, we then talk about what percentage or number of larvae we’re looking at per shoot, or per hundred shoots, or per thousand shoots, and we an economic threshold. If we exceed the economic threshold, then we go into the targeted spray, a biological control agent. And at that point we knock out our gloves. Monitoring doesn’t stop there, you then go back and you look at what percentage you’ve killed and how successful your spray was, and if it hasn’t been that successful, then you go in and you do it again. So, the actual system of using RPM is far more complex than getting out there on your tractor and putting out insecticide every two weeks. You have to know a lot more. You need a lot more information. You need a lot more education about it. Basically, the Australia wine industry complies with the lowest MRLS in the world. So, it doesn’t matter which country we’re exporting to, we will look for what the lowest MRL is on any particular chemical. In Australia, before you can use chemicals you have to have done a farm chemical users course and you have to register and before you can actually go out and purchase the chemical and put them to use. That doesn’t apply just to the manager, plus all the farm workers as well. Anyone who uses chemicals must have the registration and must be done the course. And, so there is a move in Australia towards reducing the amount of chemical use throughout. Another major pest problem would be danny moojo, we have weather stations and we follow the rule 10-10-24. If the weather station tells us that we’ve had conditions conducive to danny moojo, which is basically more than 10 mils of rain, temperature over 10 degrees, and 24 hours of witness. Then we know that we need to go and to actually monitor for all spots. If we get all spots then we go out and we spray with a targeted spray. The industry is moving a lot away from rotsprang. We longer are out there putting on too many preventive sprays, we monitor. And I think that’s the way it’s got to go. Thank you.

CLAYBORNE CRAINE: Thank you very much and thank you for the information. I think the point that you made on the focus of the debate is very important. Is that we do have an investment in the land and in the future of wherever we live and what we do is an important factor. Sometimes when we get our backs against the wall, a lot of farmers don’t feel like they have many alternatives, and if there are alternatives, they need to be made aware of them, and if it saves them money and proves the bottom line financially as well as ecologically, then you got a double plus. Jill, did you have any comments to finish up?

JILL AUBORNE: I would just second the point that we ought to be looking at probably more than just immediate cost and returns. I did bring along, and this probably’s just one paper of many, but the Wallace Institute, which is a non-profit organization based here, just outside of the city here, did a meeting, and this is not the only meeting on this topic, but I happen to have the proceedings here with me. So, understanding the true cost of food, considerations for a sustainable food system. And, I’d be happy to hang around if folks want to leave through this Kitty Smith, Kitty Rickledufer Smith, who was the head of the economics and policy studies at the Wallace Institute for a time, and now is back at ERS, brought a paper in here, really going through what economists should think about when they’re thinking about the cost of alternative systems, or whether it pays economically or not and really meaning to look through the extra nalities that we often don’t figure into our equations, the questions of well, who gains, who looses, a lot of the assumptions that are made, about what we mean by alternative agriculture, so I absolutely agree that there’s some big issues here beyond just the immediate cost and returns to the farmer, and this, proceedings of this conference is one source of information on those topics.

CLAYBORNE CRAINE: If no one has any further questions, or anything else you want to discuss, as far as I’m concerned, we can dismiss a whole 5 minutes early, unless that upsets you. Thank you very much.