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A comparative breakeven net return threshold to guide development of conservation technologies with application to perennial wheat

Listed author(s):
  • Reeling, Carson J.
  • Weir, A.E.
  • Swinton, Scott M.
  • Hayes, R.C.

In recent decades, public research into agricultural technology development has shifted is primary focus from farm profitability to environmental stewardship. While the orientation of technologies coming from the public sector has changed, the factors motivating adoption by farm businesses remain focused on profitability. This paper develops a comparative breakeven net return threshold for new conservation technologies that requires net returns to the farm enterprise after adoption of the new technology to at least equal their net returns before adoption. The framework is applied to the case study of perennial wheat, a wheat-grass hybrid that can survive and yield grain for multiple seasons. Its perenniality generates environmental benefits over annual wheat via improved soil conservation, water quality, and greenhouse gas sequestration. The framework is illustrated using data from the evaluation of a small set of perennial wheat breeding lines in Australia during 2009-11. We calculate a net return threshold and a potential environmental subsidy and evaluate the potential for changes in yield, price, and perenniality to enhance the commercial viability of PW. Increasing absolute grain yields seems to be the most promising option for further research and development. In all cases, increasing the price of PW through increasing grain quality without making additional improvements to other PW traits would require grain prices that exceed the range of currently feasible market levels. This paper generates a simple but versatile framework for the ex ante economic evaluation of new conservation technologies. The framework can be used to estimate a benchmark level of economic performance that must be achieved in order for a practice to be deemed economically attractive and ultimately adopted by producers. This framework can be used to inform technology developers of the most economically productive avenues for further refinement of their nascent technologies, thereby increasing the potential for their adoption by farmers.

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Paper provided by Agricultural and Applied Economics Association in its series 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington with number 124723.

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Date of creation: 2012
Handle: RePEc:ags:aaea12:124723
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  1. D'Souza, Gerard E. & Cyphers, Douglas & Phipps, Tim T., 1993. "Factors Affecting The Adoption Of Sustainable Agricultural Practices," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 22(2), October.
  2. David Pimentel, 2006. "Soil Erosion: A Food and Environmental Threat," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 8(1), pages 119-137, 02.
  3. Feather, Peter & Cooper, Joseph C., 1995. "Voluntary Incentives for Reducing Agricultural Nonpoint Source Water Pollution," Agricultural Information Bulletins 33619, United States Department of Agriculture, Economic Research Service.
  4. Nagy, Joseph G. & Sanders, John H., 1990. "Agricultural technology development and dissemination within a farming systems perspective," Agricultural Systems, Elsevier, vol. 32(4), pages 305-320.
  5. Adesina, Akinwumi A. & Baidu-Forson, Jojo, 1995. "Farmers' perceptions and adoption of new agricultural technology: evidence from analysis in Burkina Faso and Guinea, West Africa," Agricultural Economics, Blackwell, vol. 13(1), pages 1-9, October.
  6. D'souza, Gerard & Cyphers, Douglas & Phipps, Tim, 1993. "Factors Affecting the Adoption of Sustainable Agricultural Practices," Agricultural and Resource Economics Review, Cambridge University Press, vol. 22(02), pages 159-165, October.
  7. Bell, Lindsay W. & Byrne (nee Flugge), Felicity & Ewing, Mike A. & Wade, Len J., 2008. "A preliminary whole-farm economic analysis of perennial wheat in an Australian dryland farming system," Agricultural Systems, Elsevier, vol. 96(1-3), pages 166-174, March.
  8. Adesina, Akinwumi A. & Zinnah, Moses M., 1993. "Technology characteristics, farmers' perceptions and adoption decisions: A Tobit model application in Sierra Leone," Agricultural Economics, Blackwell, vol. 9(4), pages 297-311, December.
  9. Lichtenberg, Erik, 2004. "Cost-Responsiveness of Conservation Practice Adoption: A Revealed Preference Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(03), December.
  10. Allen M. Featherstone & Barry K. Goodwin, 1993. "Factors Influencing a Farmer's Decision to Invest in Long-Term Conservation Improvements," Land Economics, University of Wisconsin Press, vol. 69(1), pages 67-81.
  11. Knowler, Duncan & Bradshaw, Ben, 2007. "Farmers' adoption of conservation agriculture: A review and synthesis of recent research," Food Policy, Elsevier, vol. 32(1), pages 25-48, February.
  12. Christine A. Ervin & David E. Ervin, 1982. "Factors Affecting the Use of Soil Conservation Practices: Hypotheses, Evidence, and Policy Implications," Land Economics, University of Wisconsin Press, vol. 58(3), pages 277-292.
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