Rising farm costs, marginal land cropping, and ecosystem service markets

Abstract

A growing challenge with industrialized agriculture is compensating farmers for devoting land towards producing ecosystem services, at a time when global food demands are accelerating. Here, we explore revenue thresholds that Payment for Ecosystem Service programs (PES) must approach to be competitive in present-day crop markets, amalgamating long-term North American data especially from Canada on input costs, crop yields, crop revenues after expenses, government subsidies, and land use. Two trends suggest that PES markets with stable revenues can be increasingly competitive, with inflation-adjusted farm input costs now 50x higher than a century earlier and increasingly high revenue instability including net losses for some crops in some years. Since 1994, crop revenues in some regions have averaged $39 acre− 1 US, peaking at $412 but losing money 25.3% of time. Importantly, these data show how government subsidies have been a major stabilizing force, increasing revenues by 37.6% while reducing the frequency of losses by 50% - societal compensation to North American farmers is already the norm. PES programs could be most feasible on marginal lands, which are often targeted for retirement due to higher input requirements. However, trends in Canada reveal that marginal land cropping has increased by 5.2 million acres since 1990 and now constitutes 28.8% of all cropland. Our work reinforces how revenue instability simultaneously creates and constrains opportunities for PES markets, favoring market competitiveness because of shrinking crop revenues but pressuring farmers to expand production, including on marginal lands, as they struggle to offset revenue shortfalls while attempting to capitalize on growing global food demands.