FARMLAND:  SOCIETY’S WINDFALL
by John R. Sheaffer and J. David Mullan

Introduction

Every acre of agricultural land can be managed to generate many societal benefits. As these benefits become more apparent, Congress is considering a new approach to farm policy. The Conservation Security Act of 2001 (S1731) proposed to compensate agricultural owners and operators for the environmental benefits that accrue from their activities which conserve soil, water, and other natural resources, such as wildlife and wetlands. Agricultural operations that would reduce air and water pollution, mitigate flooding, sequester carbon and restore wildlife habitats and receive compensation.  

The recognition of the benefits produced by agricultural land has stimulated programs to preserve agriculture in metropolitan areas through the purchase of development rights. The underlying assumption is that a farmer can continue to farm his land if receives some cash payment for the development he forgoes. One can question whether this single purpose “real estate transaction” will make agriculture sustainable in growing metropolitan areas. However, compensation for development rights does not compensate for the range of environmental benefits which accrue to society from a managed acre of farm land. These benefits can be identified and to a degree quantified and could form the basis for the payments active agricultural endeavors should receive annually.

Agricultural subsidies of $20 per acre do not reflect the cost of the benefits the acre produces. When this payment per acre is compared to the benefits the acre generated for society, the farmer would receive a token payment for the benefits he provides to the urban area.

Lake, Porter, and La Porte Counties in Northwest Indiana comprise an urban area approaching 800,000 in population and an agricultural area with over 500,000 acres in farms.

Benefits from Farmland

Table 1 shows the benefits that accrue from an acre of active farmland in Northwest Indiana. Each of the identified benefits is discussed in the following passages to illustrate how the benefit was derived and quantified.

Table 1:  Environmental Benefits from an Acre of Farmland in an Urban Area

1. Open Spaces
Farmland in Lake, Porter, and La Porte Counties, Indiana can be purchased for open space a price of $10,000 to $20,000 per acre. If this cost was amortized over 20 years at five percent interest, the annual cost would be $802. The cost of maintaining an acre of public open space ranges from $500 to $1,300 per acre. If the lowest estimate, $500, is added to the annual amortization cost, the annual cost of an acre of public open space would be $1,302. If the acre of farmland continued as agricultural open space these costs would be saved.

2. Recycled Plant Nutrients in Wastewater
An acre of farmland can produce several benefits. For example, it can be used to recycle plant nutrients in wastewater. In Northwest Indiana, an acre of farmland can recycle 1,173,064 gallons of reclaimed water per year (36 weeks x 1.2 inches per week x 27,154.25 gallons in an acre inch). Based on US EPA estimates, the operating costs of a recycling system is &0.52 per thousand gallons less than the operating costs of a Biological Nutrient Removal (BNR) treatment plant. Therefore, an acre of farmland used for the recycling and reusing of the plant nutrients will improve water quality in the streams and rivers which increases their recreational and aesthetic values. The value of this benefit can be estimated to be $610 per acre annually (1,173 x $0.52).

3. Drainage/Flood Control
An acre of farmland produces drainage and flood control benefits. These benefits can be quantified by using the federal TR-55 Manual to determine the difference between the runoff curve numbers (CN) for the four soil categories for an acre of small grain farmland versus an acre of developing urban area. A 24-hour 3.5 inch rain was assumed (Type 2 storm). The Type 2 storm is the most common in the United States covering part of the east coast and the entire Midwest. The TR-55 computer program (1986 SCS version), graphical peak charge option was used to determine the runoff values.

Table 2:  A Comparison of Runoff from a Developing Urban Area and Small Grain Farm in Northwest Indiana

Table 2 presents a comparison of the runoff from an acre of developing urban area and the small grain farmland in Northwest Indiana according to four different soil types. The acre of farmland detains/retains approximately one acre foot more storm water per year (325,851 gallons) than the developing urban area. This is a volume of 1,613 cubic yeads or a one-time cost of $4,033 (1,613 x $2.50). When this cost is amortized over 20 yearn at five percent interest, the annual cost would be $323.61.

4. Goundwater Recharge
This “storage” of stormwater not only benefits flood mitigation efforts, but also recharges groundwater supplies and augments low flow in streams during drought periods. An estimated 25 percent of the obtained/retained water recharged the groundwater. At an estimated value of $.50 per thousand gallons, an annual benefit of $41 would accrue to society (81.46 x $0.50).

5. Carbon Sequestering
The acre of managed farmland can yield 200 bushels of corn annually which will sequester 11 tons of carbon per year. Carbon credits currently can be sold at $15.00 per ton. At a value of $15.00 per ton, the value of carbon sequestering per acre is $165.00.

Conclusion

What a bargain for society which realizes $2,441 of benefits per acre and compensates the farmer $20 or less than 1 cent for each dollar of benefits. When these matters are taken into consideration, we find that farmers are subsidizing society rather than society subsidizing the farmer. If farmers were reimbursed for the benefits they provide, agriculture would be sustainable. Also, society is benefiting from a benefit/cost ratio of 100 to 1. It would be difficult to identify a federal program with such a favorable benefit/cost ratio.

For information on the Hammond Water Reuse Project or the Center for the Transformation of Waste Technology, call (630) 456-8585.  

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