Some economic dimensions to grassland preservation in the Northern - - PowerPoint PPT Presentation

“Some economic dimensions to grassland preservation in the Northern Great Plains.”

David A. Hennessy Michigan State University Tong Wang South Dakota State University

With acknowledgements to 2014 NIFA grant & team, Climate Science Center grant & team, Elton Smith Endowment

Support

• Hennessy, D.A., Feng, H., et al. 2014. “Adaptation of agroecosystems

to climate change at the edge of the U.S. Cornbelt—assessing different drivers in a spatially explicit network of infrastructure.” Agriculture and Food Research Initiative Competitive Grants Program, Agriculture and Natural Resources Science for Climate Variability and Change.

• Hennessy, D.A., Feng H. et al. 2015. “Understanding dynamics of land

use switching with satellite and field level data in context of climate variability.” North Central Climate Science Center, U.S. Geological Survey.

• Wang, Tong et al. 2017. “Saving grassland of the Great Plains: Is

management intensive grazing (MIG) a socioeconomically viable

• ption?” USDA NIFA.

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Hennessy: Two Topics

• “Land Conversion in the Prairie Pothole Region – Farmers’ motivations

and returns to conversion” Tong Wang, Mary Doidge, others Motives and conversion cost issues

• “Grassland Easement Evaluation and Acquisition: an Integrated

Framework.” Ruiqing Miao and H. Feng Ways to think about easement contracts and property rights

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Prairie Pothole Region

Source: USDA National Resources Conservation Service

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Surveys of farmers

Two surveys of farmers in the area, asking about their land conversion decisions 2015 mail survey 2016 focus group meetings/survey  Purpose of both was to gain insight into farmers’ land use decisions  What factors do they consider when converting or not?  How important are non-economic factors?

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2015 Survey

• Survey of N. & S.

Dakota farmers conducted in 2015

• Over 1,000 farmers

completed the survey

• 37 SD counties, 20

ND counties represented

• All but 1 farm were

east of Missouri River

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2015 Survey

Asked farmers about the factors determining land use decisions Factors broadly categorized into Prices & policies (Y1-Y2 crop and input prices, Y3 crop insur., Y4 labor avail.) Technology (Y5 drought-tol. seed, Y6 pest mgmt practices, Y7 yield genetics, Y8 better equipment) Env’t concerns (Y9 wildlife, Y10 weather/climate patterns) Farmers were asked whether factors had high, medium, low impact

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2015 survey results – impact of factors on land use decisions, STATED HIGH IMPACT

8 0% 10% 20% 30% 40% 50% 60% Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 low crop profile Medium Crop profile High Crop Profile

Market environment Technical Environ. I

Low profile: < 50% land in crops, high profile ≥90% in crops

Question: How much impact has each of the following farm- related issues had

• n changes you

have made in the way you use your agricultural land?

Crop prices Input prices Insurance Labor Drought

• tol. seed

Pest mgt Seed genetics Machines Wildlife Weather/ climate

2015 Survey, Weather

• Hidden in

aggregate weather response is clear south- north gradient

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2016 survey

• Subsequent survey conducted in

early 2016

• Focus of second survey was

farmers’ land use decisions

• Survey was conducted at focus

group meetings with ~20 farmers in each location

• All meeting locations were along

James River Valley, in areas of high grassland to cropland conversion in recent years

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2016 survey

• Survey asked farmers about
• Farm characteristics
• Farming practices
• Land conversion in the preceding ten years (since 2006)
• Farmers were asked open-ended questions about what they consider

when making land use and land conversion decisions

• Also collected information on conversion costs
• Reliable estimates unavailable from other sources
• Allow for estimates of returns to conversion

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2016 survey – summary

• Almost 60% had converted some of their land from either

CRP or grass to cropland in preceding ten years (45/76)

• 27% had converted grassland to cropland (21/76)
• Converted land had been in grass for an average of 29

years

• 6 instances of native grassland conversion
• Mean/median parcel size 269/153 ac. (range, 10-2,500
• ac. Mean = 153 ac. if 2,500 parcel removed)

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Conversion costs, (Jim Faulstich 2011 comment)

Mean per acre conversion cost Mean per acre conversion cost CRP to crop CRP to crop $74.15 Grass to crop Grass to crop $85.73

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§(Converted) Conversion costs for land converted, previous 10 years §(Didn’t) Costs estimates for land they would be most likely to convert § Conversion costs broken down (labor, capital, etc.)

Labor Labor Equipment quipment Materials Materials Other ther CRP to crop CRP to crop $15.10 $33.42 $26.69 $18.78 Grass to crop Grass to crop $15.41 $36.35 $30.74 $22.70

Change in land value after conversion

Change in Change in land value land value Change in Change in rental value rental value Change in Change in net net returns returns CRP to crop CRP to crop $862 $72 $79 Grass to crop Grass to crop $1,254 $79 $120

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Mean per acre conversion cost Mean per acre conversion cost CRP to crop CRP to crop $74.15 Grass to crop Grass to crop $85.73 § Reported conversion costs much less than increase in land value

§ CONVERSION COSTS COULD BE RECOVERED IN ~1 YEAR!!!!

Importance of factors

Mean comment frequency Mean comment frequency CRP to crop Grass to crop Converted Didn’t Converted Didn’t Profit/other economic concerns Profit/other economic concerns 0.87 0.82 1.10** 0.73** Land characteristics Land characteristics 0.53 0.67 0.33** 0.76** Farm operation Farm operation needs needs 0.20 0.30 0.29 0.27 Stewardship Stewardship 0.27 0.21 0.24 0.22 Lifestyle Lifestyle 0.13 0.20 0.19 0.18 Soil quality Soil quality 0.07 0.16 0.14 0.15 Risk Risk 0.00* 0.15* 0.10 0.13 Wildlife protection Wildlife protection 0.07 0.11 0.10 0.11 Landlord Landlord 0.02*** 0.20*** 0.10 0.04 Other Other 0.13 0.07 0.05 0.1415

Probability of converting

CRP to crop Grass to crop Total farm acres (/1,000) 0.072*** 0.048** Years farming (/10) 0.082

• 0.098**

Education 0.093*

• 0.153**

Importance of non-profit factors

• 0.051
• 0.057

All or majority acres owned 0.030 0.107 All or majority acres leased 0.199*** 0.106 Comment frequency Profit

• 0.014
• 0.007

Stewardship

• 0.254**
• 0.178***

Lifestyle

• 0.110*
• 0.070

Land characteristics

• 0.140**
• 0.129*

Observations 61 68

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Comparisons

Results from 2015 and 2016 surveys are consistent Profit and other economic factors reported to have the most influence on farmers’ land conversion decisions Concern for wildlife/environment reported to be comparatively less important Farmers who have not converted land to cropland suggest that land quality/cultivation potential is main impediment Also consistent with 2015 survey – marginal land more responsive to economic factors Stewardship weighs heavily on minds of many

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Policy Issues

Researchers are not asking right questions about wildlife/nonpecuniary/stewardship. Farmers have different views on ‘social responsibility’ than do others Care is needed to understand and manage motives. Programs seeking to monetize a matter of values may backfire Casual view of how USFWS easement managers do it is that they are on land owners’ wavelengths

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• What are grassland easements?
• See https://www.fws.gov/mountain‐prairie/realty/grassesmt.htm
• “legal agreement signed with the USA, through the U.S. FWS that

pays you to permanently keep your land in grass. … … Land covered by a grassland easement may not be cultivated. Mowing, haying, and grass seed harvesting must be delayed until after July 15 each year. This restriction is to help grassland nesting species, such as ducks and pheasants, complete their nesting before the grass is disturbed. Grazing is not restricted in anyway.”

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Thinking about Easements

Attenuated Property Rights

• Ownership delineates right to use a property, to earn income from it,

and to protect the above rights

• Economists generally view property rights as being important

determinants of investments levels. Investments won’t be made if income is not protected

• Property rights: a bundle where
• the law clarifies and
• easements separate. The law may separate mineral rights

(underground) from surface property rights

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Easements and Property Rights

• Utility easement: gives government or company certain

rights regarding utility maintenance, etc.

• Easement by necessity: right to access another property
• Public easement: for public use, sidewalks, parking, etc.
• Private easement: contractual agreement to cede certain
• rights. In our case, the right ceded is that of growing

anything other than grass.

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What is ceded?

• An option to grow

crops is ceded. The cost of ceding it depends on current and expected future market situations

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(Price Beef, Price Crops) = (0,0) Higher Price Crops Higher Price Beef

Plant to crops Graze

What is ceded?

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Plant to crops when prices are in price area A



Graze when prices are in price area B Land owners will want compensation for giving up right to switch land use whenever prices enter area A

AREA A AREA B AREA A AREA B

Thinking about Easements, Two Period Model

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Model timeline

period one period two

period-one known information cropping returns: grazing returns: conversion cost: easement payment: period-one possible actions: convert now; ease now; wait and see. period-two possible actions: convert now; ease now. period-one returns period-two returns period-two known information cropping returns: grazing returns: conversion cost: easement payment:

,1 c k



,1 g k



k



,1 k

P

,2 c k



,2 g k



k



,2 k

P

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Choices for different cost and risk situations Wait and see Ease now for high conversion costs, low comparative crop returns Convert now for high comparative crop returns, low conversion costs Conversion costs Cropping returns less grazing returns

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Impact of less cropping risk (say advent of crop insurance) Wait & see Ease now Convert now Conversion costs Cropping returns less grazing returns

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Figure 5. Impact of crop insurance subsidies Wait & see Ease now Convert now Conversion costs Cropping returns less grazing returns

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Impact of both crop insurance market + subsidies Wait & see Ease now Convert now Conversion costs Cropping returns less grazing returns

??

Other matters

• Bringing easement benefits, costs and conversion probability into an

integrated framework. Arora, Miao, Feng, Loesch

• “Climate change and future expansion of maize in the U.S. Northern

Great Plains.” Arora, Feng, Anderson Ran downloaded climate change data through yield and acreage allocation models

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• Factors affecting land use

decisions

• Grazing management to increase

economic profit and ecosystem resilience on grassland

Wang: Two topics on grassland preservation

Factors affecting land use decisions

Perception biases and land use decisions (presented at AAEA 2017)

• Q1: Are there systematic biases in farmer’s perception of land use

changes?

• Q2: How current perceptions are related to past land use decisions?
• Q3: How perceptions affect intended future land use decisions?

Measurement of Perception Biases

 Farmer perceived land use changes: Obtained from survey data  Actual land use changes: USDA Cropland Data Layer (CDL)

• Because CDL data is based on high-resolution satellite images,

there is a growing literature that uses the CDL data to analyze crop and land use trend. Perception Bias = Perceived change – actual change

Findings on Perception Bias (Q1)

On average, producers showed:

• an over-perception of increases in cropland acres
• an un-biased perception of change in grassland acres

Land use change variables N Mean Pr > |t| % change in corn and soybean acres, perception 1,008 9.799 <0.0001 % change in grassland acres, perception 1,003

• 7.545 <0.0001

% change in corn and soybean acres, actual 1,025 5.762 <0.0001 % change in grassland acres, actual 987

• 6.970 <0.0001

Perceptio eptions biase s biases of

• f c

change ge in c in cropland ar land area ea 1, 1,007 07 4.045 045 <0 <0.00 .0001 1 Perceptio eptions biase s biases of

• f c

change ge in gr in grassland ar and area ea 96 966 6

• 0.52

.525 0.265 2652 2

How previous land use decisions relate to current perceptions (Q2)

Parameters Coefficient Estimates Bias impact Conversion from grass to crop 0.428c Pro bias Farm acre

• 0.061

Years operating

• 0.006

Tenure index 0.222c Pro bias Education 0.066 Principal Occupation 0.002 CDL cropland % change 0.069c Pro bias CDL % grassland, 2006, 5 mi. radius 0.022c Pro bias % land in classes I-III, 5 mi. radius 0.017c Pro bias % land with slope ≤ 3, 5 mi. radius 0.001 Latitude 0.538c Pro bias Longitude

• 0.085

Percent Concordant 70.2%

Factors that affect current land use perceptions

0.1 0.2 0.3 0.4 0.5 0.6

Conversion from grass to crop Tenure index CDL cropland change (%) CDL grassland percentage, 5-mile radius, 2006 Land in classes I to III (%), 5 mile radius latitude

How current perception biases affect future land use change intentions (Q3)

Parameters Estimates Conversion impact Perception bias in cropland area change 0.052a Pro conversion Farm acre 0.044 Years operating

• 0.187

Tenure index

• 0.156

Education 0.067 Principal Occupation 0.420b Pro conversion CropScape cropland % change

• 0.092a

Anti conversion CropScape % grassland, 2006, 5 mi. radius 0.012 % land in classes I-III, 5 mi. radius 0.025b Pro conversion % land with slope ≤ 3, 5 mi. radius

• 0.003

Latitude

• 0.135

Longitude 0.572c Pro conversion Percent Concordant 72.8%

Factors that affect future land use change intentions

• 0.1

0.1 0.2 0.3 0.4 0.5 0.6 Perception bias in cropland change Principal occupation CDL cropland change (%) Land in classes I to III (%), 5 mile radius longitude

Major findings from perception paper (I)

• Perception biases exist in land use changes: farmers’ perceived

increase in cropland acres is twice as much as the actual change.

• Current perception are significantly connected with past land

use experience.

• Perception biases will affect future land use intentions.

Major findings from perception paper (II)

• In regions that have already experienced cropland

expansions, future conversions from grassland to cropland are less likely.

• Future land use conversion is more likely to occur

further west of the Dakotas.

• Future conversions are more likely to be carried out by

those who have off-farm jobs.

Grazing management to increase economic profit and ecosystem resilience on grassland

Common grazing management strategies

Continuous Grazing Rotational Grazing Multi‐paddock (MP), or Management Intensive Grazing (MIG)

In practice, the level of rotational grazing management is a continuum with varying level of intensity.

Time courses of palatable and unpalatable plant biomass under continuous and MP grazing

Time courses of palatable plant biomass under different stocking rates

USDA NIFA project (3/15/2017‐3/14/2020)

• Title: Saving grassland of the Great Plains: Is management

intensive grazing (MIG) a socioeconomically viable option?

• The overall goal of this multi-disciplinary effort is to

investigate:

• Economic, environmental and land use consequences of MIG

practice.

• Barriers for adoption and incentives to overcome such

barriers.

Producer surveys

• Land use conversion
• Economic factors
• Social conditions.
• Psychological effects

SWAT modeling

• Soil erosion
• Carbon sequestration
• Water quality
• Downstream flood risk

Economic analysis and simulation

• Short term profit evaluation
• Long term profit simulation

Policy evaluation

• Economic and environmental

complementarities/trade-offs

• Incentive program

participation

• Public policy effectiveness
• Obj. 5.

Examine

• verall social

efficiency

• Obj. 3 & 4.

Identify adoption incentives and barriers

• Obj. 1.

Evaluate economic profits

• Obj. 2.

Assess environmental

• utcomes

Objective 1: Evaluate Economic Profit

“Evaluating long-term economic and ecological consequences of continuous and multi-paddock grazing - a modeling approach”, Revise and Resubmitted to Agricultural Systems. Key findings:

• MIG increases long-term economic profit on large commercial ranches.
• The advantage of MIG is more pronounced under drought, longer grass dormancy period,

and higher prevalence of weeds.

• Smaller ranches and ranches under short-term leases are less likely to adopt MIG grazing.

Objective 2: Assess Environmental Outcomes

The Lower Prairie Dog Town Fork Red (LPDTFR) Watershed in Texas and the Apple Watershed in North Dakota were selected for assessing environmental impacts of MIG adoption.

• Obj. 3 & 4: identify adoption incentives and

barriers (ongoing survey)

Survey sample selection

Next steps:

• Complete SWAT model calibration and validation for both watersheds and perform grazing

management scenario buildup and analysis.

• Analyze survey data to find out:
• producers’ adoption status of rotational grazing and MIG
• whether there is a negative correlation between MIG adoption and cropland conversion.
• producers’ perception of the economic and environmental benefits of MIG
• major barriers for adoption
• proper cost-share or incentives for MIG adoption

Thank you! Questions?

Contact: Tong.wang@sdstate.edu Contact: hennes64@msu.edu