Implicit Prices for Resource Quality Investments in Quebec's Agricultural Land Market

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Abstracts: "Implicit Prices for Resource Quality Investments in Quebec's Agricultural Land Market". Public concern for the sustainability of agriculture has resulted in the development of policies and projects to protect the agricultural land resource for future generations. Whether public or private solutions are sought to protect our farmland resource, information about private market values are necessary. Without accurate information inappropriate or ineffective policy is a distinct possibility. Specifically, this research seeks to determine whether South-western Quebec's agricultural land market rewards entrepreneurs for investments in soil conservation and capital investments that are part of a sustainable agricultural farming system. Hedonic pricing models are used to derive implicit prices for various non-priced farm land characteristics. Results of an analysis based on survey data indicate that in fact the market does not reward investments in soil conservation investments.

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Since the end of the Second World War there has been a dramatic increase in food production in Western Industrial countries, due primarily to a substitution of capital, and to a lesser degree, land for labour. An unfortunate side effect has been that intensive agriculture has been shown to have a deleterious effect on the agricultural land resource with respect to topsoil depths, soil structure, organic matter content, nutrient levels and the soil's ability to resist erosion. Examples of this are encoded in the history of the dust bowl era and also in the topsoil depletion of our western prairies (Senate of Canada 1984). More recently, a comprehensive inventory of the soil degradation problems in Quebec was carried out by Tabi et al (1990). Although the causes of the degradation are different by region--predominantly wind in the Prairie Provinces and soil compaction in Quebec--the root cause is the same--the agricultural practices used by farmers to increase production.

In parts of Canada, these problems of the land resource have reached the point where there is doubt that the land can sustain production over the long term. This situation exacerbates the problems that farmers have with respect to the financial sustainability of their farms that in turn leads to increasing requests for government relief programmes. Although farmers have been provided with a myriad of alternative (and sustainable) farming practices, whether they are practiced or not depends on the economic outcome for the farmer. Two recent studies have looked at the economics of alternative cropping systems and their impact on the economic sustainability of farms in Quebec. Messele et al (2000) determined that lupins (Lupinus spp) could be economically substituted for soybeans in the diet of dairy cows. As the cultivation of lupins results in a decreased level of soil degradation compared to soybeans, it is argued that this will lead to increased soil conservation for those farmers switching to this crop. Di ssart et al (2000) investigated the impact on soil erosion resulting from the use of conservation tillage practices with the analysis being carried out at the farm level and also at the level of the watershed being studied. The results provide policy guidelines to aid government decision-making.

There has been much debate in the literature over soil erosion rates, its effect on agricultural productivity and its economic cost (Trimble and Crosson 2000; Crosson 1995; Pimental et al 1995a, 1995b). Pimental et al (1995a, 1995b) estimated the on-site cost of water and soil erosion to be $146 per ha for conventional corn land in the US. Other scientists argue that the soil erosion rates and loss of productivity rates used by Pimental et al (1995a, 1995b) were too large (Trimble and Crosson 2000; Crosson 1991, 1995). Pierre Crosson (1991) argues that the productivity loss in agriculture due to soil and water erosion is much lower. Comparing the results from three different models, he concluded that after 50 years of erosion in the cornbelt, yield of corn would decrease by 2 - 5 percent (Crosson 1991). …