Factors Affecting Perceived Improvements in Environmental Quality from Precision Farming

By Larkin, Sherry L.; Perruso, Larry et al. | Journal of Agricultural and Applied Economics, December 2005 | Go to article overview

Factors Affecting Perceived Improvements in Environmental Quality from Precision Farming


Larkin, Sherry L., Perruso, Larry, Marra, Michele C., Roberts, Roland K., et al., Journal of Agricultural and Applied Economics


This study identified the factors that influenced whether farmers in the Southeastern United States perceived an improvement in environmental quality from adopting precision farming technologies (PFTs). Farmers with larger farms or higher yields were more likely to believe that they observed positive externalities associated with PFTs. Farmers who found PFTs profitable or who believed input reduction was important had higher probabilities whereas those with higher incomes or who were more dependent on farm income were less likely to perceive such benefits. Interestingly, the importance of environmental quality and length of time using PFTs were not found to affect the probability of perceiving an improvement in environmental quality.

Key Words: precision agriculture, site-specific farming, variable rate application

JEL Classifications: C25, Q12, Q24.

Precision farming (also known as precision agriculture) entails the assessment of site-specific land and crop needs to develop management practices that are calibrated to the needs of each site within a field. The adoption of precision farming as a management practice thus involves both the identification of temporal and spatial variation and the subsequent use of the site-specific information to apply inputs at variable rates across a field. The suite of available precision farming technologies (PFTs) has the potential to increase profits, especially for the production of input-intensive crops (Roberts et al. 2004). The profitability of many of these technologies, especially in regard to their use for different crops and in different combinations, has not been categorically proven (Griffin et al.; Lambert and Lowenberg-DeBoer; Swinton and Lowenberg-DeBoer 2001). However, profitability may not be the sole motivation for PFT adoption. Farm managers and society may realize environmental benefits following the adoption of PFT-based crop production. For example, a recent study found that farmers were willing to forsake higher yields (by reducing input use) to avoid the risk of moderate environmental damage (Lohr, Parker, and Higley).

If an improvement in environmental quality from the adoption of precision farming technologies also benefits society and not just the farmer adopting the new production practices, we might expect a suboptimal PFT adoption rate. The adoption (or lack of adoption) of PFT may produce a positive (negative) externality. For example, a farmer who uses excess inputs might have a field with excessive runoff that could contribute to water pollution and impose a cost on society from increased human health problems or increased water treatment costs. Resources used in the production of such crops are being allocated inefficiently; the resulting market failure is causing negative environmental externalities.

What can be done to address these types of externalities? The value of the externality needs to be captured and internalized into the production process. If the use of traditional production practices is considered to cause a negative externality, the "polluter pays principle" supports a tax-based solution. Under this principle, the government sets emission standards that, when exceeded, result in a tax payment by the farmer. If the use of PFTs is considered to produce a positive externality, a subsidy program could be used to increase usage of these technologies, and thus improve environmental quality. If PFTs are not profitable, or the costs to impose the tax and monitor the standard exceed the expected benefits, the latter approach is necessary to solve the market failure problem.

As for the role of policy in this case, if precision farming practices produce socially desirable benefits (as opposed to private benefits) in the form of a cleaner environment (i.e., a positive externality) then policy makers could implement programs to subsidize the use of PFTs or establish credible market-based incentives. The Environmental Quality Incentives Program, the Conservation security Program, and the National Organic Program are examples of federal efforts to promote these types of practices in the United States.

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