Ageing And Employment Policies: The Arable Crop Sector (Agriculture, Trade and the Environment)

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Foreword

T

he objective of this study is to improve understanding of the linkages between agriculture, trade and the environment in OECD countries by examining how they relate to the arable crop sector (grains, rice and oilseeds). Three of the main issues involved are: the environmental impacts of agricultural support measures and the consequences of further trade liberalisation; the trade impacts of policy measures to address environmental issues in agriculture; and the characteristics of policies that can best achieve environmental objectives in ways that are compatible with multilateral trade and environmental agreements. This study continues the analysis of agriculture, trade and environment linkages by the OECD Joint Working Party on Agriculture and the Environment. It is one of three studies carried out under the Analysing Approaches towards a more Sustainable Agriculture component of the 2003-04 Programme of Work of the OECD’s Committee for Agriculture. Two earlier studies examined the pig sector and the dairy sector (OECD, 2004a; 2003f). The arable crop sector provides a good case study for an analysis of these linkages. Farming systems vary. In some cases crops are grown on extensive areas of land, while in others the land is used much more intensively, with varying levels of input use, mechanisation and monoculture, and, consequently, with different environmental effects. There is wide variation in the form and level of support, including trade measures, provided to arable crop producers across OECD countries, between different arable crops, and over time. In addition, a number of OECD countries are reforming their policies and the arable crop sector features prominently in such reforms. Moreover, arable crops farmers are affected by a plethora of agri-environmental policies. This diversity of policy experience provides a rich variety of material to be examined and compared. The study was carried out in the Policies and Environment Division of the Directorate for Food, Agriculture and Fisheries, with Dimitris Diakosavvas as the principal author. Valuable contributions were provided by consultants Alison Burrell (Chapter 5), Marino Tsigas (Chapter 6) and Dave Ervin (Chapter 7). The US Economic Research Service, and Agriculture and Agri-Food Canada undertook the quantitative analysis reported in Section 6.3. Françoise Bénicourt and Theresa Poincet provided secretarial support, while Véronique de Saint-Martin assisted with statistical work. Colleagues in the OECD Secretariat, particularly Wilfrid Legg, Hsin Huang and Joe Dewbre (GTAP analysis), and Peter Kearns from the Environment Directorate (transgenic crops section), and Delegates from member countries provided many useful comments. AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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Table of Contents FOREWORD........................................................................................................3 ACRONYMS AND ABBREVIATIONS.............................................................9 TECHNICAL TERMS .......................................................................................10 HIGHLIGHTS ....................................................................................................11 SUMMARY AND CONCLUSIONS .................................................................13 INTRODUCTION ..............................................................................................27 CHAPTER 1. ECONOMIC AND STRUCTURAL ASPECTS OF THE ARABLE CROP SECTOR ..........................................................33 1.1. The arable crop sector in OECD countries ..........................................33 1.2. Developments in farm structures .........................................................37 1.2.1. Changes in number and size of farms........................................37 1.2.2. Regional concentration ..............................................................40 1.2.3. Sources of growth in production................................................41 1.2.4. Chemical inputs .........................................................................46 ANNEX 1.A. Selected Data ...............................................................................49 CHAPTER 2. ENVIRONMENTAL IMPACTS ASSOCIATED WITH PRODUCTION ............................................................................57 2.1. Soil-related impacts .............................................................................57 2.1.1. Soil erosion ................................................................................58 2.1.2. Nutrients ....................................................................................62 2.1.3. Waterlogging and salinisation ...................................................63 2.2. Water-related impacts..........................................................................65 2.2.1. Water use ...................................................................................65 2.2.2. Water pollution ..........................................................................66 2.3. Air quality............................................................................................68 2.4. Biodiversity .........................................................................................72 2.5. Management practice approaches to reduce environmental impacts of arable crop production.....................................................................73 2.5.1. Soil management and conservation systems..............................74 2.5.2. Nutrient Management ................................................................78 2.5.3. Integrated Pest Management......................................................79 2.5.4. Organic farming practices..........................................................80 2.5.5. Factors influencing adoption of environmentally benign farming practices .......................................................................83 AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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2.6. Transgenic crops and the environment ................................................84 2.6.1. How widespread are transgenic crops?......................................84 2.6.2. What are the environmental implications? ................................87 2.6.3. Environmental impact assessments ...........................................91 2.6.4. Current and future trends ...........................................................93 ANNEX 2.A. Selected Data ...............................................................................94 CHAPTER 3. AGRICULTURAL POLICIES AFFECTING THE ARABLE CROP SECTOR ..........................................................99 3.1. Introduction .........................................................................................99 3.2. Main policy instruments ......................................................................99 3.3. Levels of support ...............................................................................104 3.4. Composition of support policies........................................................110 3.5. Developments in market price support ..............................................111 3.6. Developments in domestic support policies ......................................112 3.6.1 Payments based on output.......................................................112 3.6.2. Payments based on area planted .............................................113 3.6.3 Counter-cyclical payments in the United States .....................115 3.6.4. Payments based on historical entitlements ..............................116 3.6.5. Payments based on input use ...................................................118 3.6.6. Payments based on input constraints .......................................119 3.6.7. Payments based on overall farm income .................................120 3.7. International trade measures ..............................................................120 3.7.1. Import measures ......................................................................120 3.7.2. Export measures ......................................................................123 3.8. Summary of agricultural policy reform in the arable crop sector ......124 ANNEX 3.A. Selected Data .............................................................................126 CHAPTER 4. POLICY MEASURES ADDRESSING ENVIRONMENTAL ISSUES IN THE ARABLE CROP SECTOR ............................143 4.1. Introduction .......................................................................................143 4.2. Economic instruments .......................................................................143 4.2.1. Payments based on farm fixed assets (excluding land retirement)......................................................144 4.2.2. Payments based on resource retirement...................................145 4.2.3. Payments based on farming practices......................................149 4.2.4. Environmental taxes ................................................................154 4.2.5. Tradeable rights/quotas............................................................155 4.3. Regulatory measures..........................................................................156 4.3.1. Regulations ..............................................................................156 4.3.2. Cross-compliance mechanisms................................................161

6 – AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

4.4. Advisory and institutional measures..................................................166 4.4.1. Research and development ......................................................166 4.4.2. Technical assistance and extension..........................................167 4.4.3. Product information .................................................................170 ANNEX 4.A. Selected Data .............................................................................172 CHAPTER 5. ENVIRONMENTAL EFFECTS OF AGRICULTURAL SUPPORT POLICIES FOR ARABLE CROPS.........................175 5.1. Introduction .......................................................................................175 5.2. Environmental effects of agricultural support policies......................176 5.2.1. Links between high arable support and negative environmental effects...............................................................176 5.2.2. Assessing the environmental effects of lower support.............180 5.2.3. Environmental effects of shifting from price support to direct payments .......................................................................187 5.3. Cross compliance...............................................................................191 5.3.1. Background..............................................................................191 5.3.2. Advantages and disadvantages of red ticket environmental cross compliance......................................................................193 5.3.3. Design of cross-compliance provisions ...................................195 5.3.4. Various options for linking income transfers and environmental objectives ........................................................199 5.4. Efficiency and cost effectiveness of cross compliance and alternatives ..................................................................................202 5.4.1. Efficiency and cost effectiveness of various programmes.......202 5.4.2. Participation, monitoring and non-compliance........................214 5.5. Assessment and conclusions..............................................................215 CHAPTER 6. ENVIRONMENTAL IMPACTS OF MULTILATERAL AGRICULTURAL TRADE LIBERALISATION ON ARABLE CROPS................................................................225 6.1. Introduction .......................................................................................225 6.2. Cross-country analysis.......................................................................228 6.2.1. The liberalisation scenarios .....................................................228 6.2.2. Methodology............................................................................229 6.2.3. Simulated environmental impacts of multilateral agricultural trade liberalisation ...................................................................230 6.2.4. Sensitivity analysis ..................................................................234 6.2.5. Caveats.....................................................................................234 6.3. Regional environmental impacts of agricultural trade liberalisation ...........235 6.3.1. Canada .....................................................................................235 6.3.2. United States...........................................................................240 ANNEX 6.A. The Applied General Equilibrium Trade Framework ................244 AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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ANNEX 6.B. Regional Models ........................................................................251 6.B.1. 6.B.2.

The US Regional Agricultural Programming Model (USMP) 251 The Canadian Regional Agricultural Model (CRAM) ............255

ANNEX 6.C. Selected Data..............................................................................260 CHAPTER 7. AN ANALYSIS OF THE TRADE EFFECTS OF AGRIENVIRONMENTAL PAYMENTS AND REGULATIONS ON ARABLE CROPS................................................................263 7.1. Introduction .......................................................................................263 7.2. Overview of agri-environmental policies for arable crop agriculture264 7.2.1. Payment programmes ..............................................................264 7.2.2. Regulatory approaches.............................................................265 7.2.3. Other measures ........................................................................266 7.3. Agri-environmental programmes and trade: theory and models .......267 7.3.1. Welfare theory .........................................................................268 7.4. Effects of agri-environmental programme payments on trade...........270 7.4.1. Trade and agricultural policy context ......................................270 7.4.2. Previous analyses.....................................................................272 7.4.3. Simulating potential trade effects of agri-environmental payments..................................................................................274 7.5. Effects of agri-environmental regulations on factor costs and trade .275 7.5.1. Previous analyses.....................................................................276 7.5.2. Simulating potential trade effects of agri-environmental regulations ...............................................................................280 7.6. Suggestions for enhancing the effectiveness of agri-environmental policies on arable crops .....................................................................284 7.6.1. Reactive or proactive policy approach?...................................285 7.6.2. Some lessons from analysis and experience ............................286 ANNEX 7.A. Equations Used to Estimate the Trade Effects of Agri-environmental Programmes...............................................291 7.A.1. 7.A.2. 7.A.3. 7.A.4.

Small country import impact of agri-regulation on factor that increases the factor price (marginal cost) .........................293 Large country imports..............................................................294 Small country trade impact of agri-environmental regulation that increases average variable cost .........................................294 Product regulation case............................................................295

BIBLIOGRAPHY.............................................................................................299


ACRONYMS AND ABBREVIATIONS AP 2002 ARP AAFC AAPS ABARE AUDIT CAP CRP CSP CCP DEFRA DP EFTA ERS ENS ESAS EQIP EC EEA EU FSRI FAIR FAO IEEP LEI LDP MLAP NRI NAFTA PFCP PROCAMPO RFISP REPS

Federal Agricultural Law 2002 (Politique agricole 2002), Switzerland Acreage Reduction Program, United States Agriculture and Agri-Food Canada Arable Area Payments Scheme, EU Australian Bureau of Agricultural and Resource Economics National Land and Water Resources Audit, Australia Common Agricultural Policy, European Union Conservation Reserve Program, United States Conservation Security Program, United States Counter-cyclical Payments, United States Department of Environment, Food and Rural Affairs, United Kingdom Direct Payments, United States European Free Trade Association (Iceland, Liechtenstein, Norway, Switzerland) Economic Research Service of the USDA Environmental News Service Environmentally Sensitive Areas Scheme, United Kingdom Environmental Quality Incentives Program, United States European Commission European Environment Agency European Union Farm Security and Rural Investment Act, United States Federal Agricultural Improvement and Reform Act, United States Food and Agriculture Organization of the United Nations Institute for European Environmental Policy, London Agriculture Economics Research Institute (Landbouw Economisch Instituut), the Netherlands Loan Deficiency Payments, United States Market Loss Assistance Payments, United States National Resources Inventory, United States North American Free Trade Agreement Production Flexibility Contract Payments, United States Direct support for the countryside (Programa de Apoyos Directos al Campo), Mexico Rice Farming Income Stabilisation Programme, Japan Rural Environment Protection Scheme, Ireland

AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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SAPARD

UNFCCC USDA USITC URAA WRP WHO WTO

Special Accession Programme for Agriculture and Rural Development (European Union, Czech Republic, Hungary, Poland, Slovak Republic) United Nations Framework Convention on Climate Change United States Department of Agriculture United States International Trade Commission Uruguay Round Agreement on Agriculture Wetland Reserve Program, United States World Health Organization World Trade Organization

TECHNICAL TERMS AEI CRAM ESA ESU GMO GTAP GFP GHG HEL LFA LMO NPC PSE SFP TRQ USMP UAA

Agri-Environmental Indicators Canadian Regional Agricultural Model Environmentally Sensitive Areas European Standard Unit, EU Genetically Modified Organisms Global Trade Analysis Project Good Farming Practices Greenhouse Gas Highly Erodible Land Less Favoured Areas, EU Living Modified Organisms Nominal Protection Coefficient Producer Support Estimate Single Farm Payment, EU Tariff Rate Quotas US Regional Agricultural Programming Model Utilised Agricultural Area


HIGHLIGHTS

x

Policy concerns over the environmental effects of arable crop farming (grains, rice and oilseeds) have increased over the last two decades, due largely to more intensive use of land; and a rise in the value placed on many environmental services provided by agriculture.

x

The main environmental issues associated with the production of arable crops include: soil (erosion, nutrients, waterlogging and salinisation); water (use and pollution); air quality (greenhouse gas emissions); landscape and biodiversity (such as pasture conversion to cropland or land abandonment).

x

Environmental impacts vary across countries and regions, depending on the specific resource base and on prevailing farming practices and policies. Significant problems occur in many regions, but their scope and severity vary and tend to be greater where production pressure is concentrated and natural resources are vulnerable.

x

Agri-environmental indicators related to arable crops present a mixed picture of improvements and degradation in different countries. Soil erosion in the United States has decreased, while water-use issues continue to be a cause of serious concern in parts of Australia, the United States and some EU countries. Lack of crop biodiversity is a concern in certain countries, although some have diversified and produce a greater variety of crops. Arable crop farming is a less important cause of air pollution than livestock production, accounting for only 6% of greenhouse gas emissions from agriculture.

x

A plethora of policy approaches has been adopted, reflecting the diversity of agri-environmental conditions in OECD countries. Most agri-environmental measures are not targeted at a particular arable crop sector or at a specific environmental outcome, but focus mostly on controlling the quality and quantity of production inputs, as exemplified by temporary or permanent land retirement.

x

Payments based on: (i) farm fixed assets; (ii) resource retirement; and (iii) farming practices currently have the largest potential to influence production and trade, based on the level of support afforded to the arable crop sectors, although in certain cases some regulations also exert significant effects.

x

Support for arable crops is high relative to other agricultural sectors, varies greatly between countries and crops, and is mainly provided through policy instruments that are the most production and trade distorting.

x

Although the cause-effect linkages between support levels and environmental pressures are complex, correlation does not necessarily imply causation.

x

At the aggregate country level, the environmental effects of further multilateral agricultural trade liberalisation are likely to be small. Only under the full trade liberalisation scenario would chemical intensity in certain arable crop sectors in Australia and New Zealand increase by more than 10%.

x

The production and trade effects of overall support, agri-environmental payments and regulations warrant further empirical analysis.


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SUMMARY AND CONCLUSIONS Trade and environment issues in agriculture have gained increasing prominence at international and national levels alike. The present report analyses the linkages between agriculture, trade and environment in OECD countries for the arable crop sector (grains, rice and oilseeds). The report first provides some background material on economic and environmental aspects associated with arable crop farming and discusses the policies – both agricultural support and environmental policies – affecting the arable crop sector. It then analyses some of the cause-effect linkages between policies, including trade policies and regulations, and the environment. What are the main environmental impacts associated with arable crop farming? Environmental impacts on soil, water, air quality, biodiversity and landscape are important …

Arable cultivation systems are among the most important factors influencing soil quality. While chemical inputs, such as fertilisers, herbicides and other pesticides, make a major contribution to arable crop productivity, they also create environmental problems in some regions across OECD countries. Nitrates and phosphates are the main nutrient pollutants of water courses resulting from arable farming. Increased monocultures and the reduction of mixed arable and livestock farms also have an adverse effect on biodiversity. Although recent empirical studies in some countries suggest that farm productivity losses due to erosion are relatively small, soil erosion is a widespread problem in several OECD countries. Arable crop production is an important user of water, particularly in the case of rice, which can increase diversity of habitats and farmland species. In parts of Australia, the United States and in some EU countries water-use issues are of particular concern. Nitrous oxide, carbon dioxide and methane are the main greenhouse gases arising from arable crop farming. Nitrous oxide originates from fertilised agricultural soil, while methane emissions are caused primarily by wetland rice cultivation. The impacts on biodiversity of the ecosystem are diverse. Although in some countries lack of crop


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… and crop-mix, farm practices and structures, and government policies are the main driving forces.

Adoption of transgenic crops has been rapid …

… and their cultivation could have positive environmental effects …

biodiversity is a matter of concern, agri-environmental indicators related to arable crops suggest that the number of new crop varieties has been increased in several countries. The environmental impacts of arable crop production vary across OECD countries for at least three reasons. First, they depend on the quality and quantity of natural resources used in, or affected by, arable crop production. For example, growing wheat in a semi-arid region may cause wind-induced soil erosion and particles in the air. In a country that relies heavily on irrigation, however, the primary effects are likely to concern water use and quality. Second, the impacts vary according to the technologies employed to produce crops. Reduced tillage systems, for example, decrease erosion and greenhouse gas emissions, but may require an increased use of pesticides, which can cause degradation in certain situations. Third, the impacts will depend upon the country’s relative demands for different types of environmental quality. If the demand and willingness to pay for a particular environmental outcome are high (e.g. mixed use landscape), then measures may be needed to ensure its provision. Regional concentration and increased specialisation of arable crop production due to economies of scale have in some regions encouraged monocultures and reduction in the number of mixed farms, with important implications for land use, landscape and biodiversity. Since their commercialisation in the mid-1990s, the area grown with transgenic crops worldwide has witnessed a remarkable increase. Seven countries (the United States, Argentina, Canada, Brazil, China, India and South Africa), four crops (soybeans, cotton, maize and rapeseed) and two traits (resistant to certain insects and tolerant of certain herbicides) account for almost the totality of the global transgenic area. Almost two-thirds of the area under transgenic crops is in the United States. Cultivation of transgenic crops could have positive environmental effects, depending on the crop and trait under consideration. These include gains in using environmentally benign methods of managing certain weeds and pests, and reducing the need for chemical inputs.


… but there are environmental concerns as well.

All OECD countries have a system of regulatory oversight in place for assessing the environmental safety of transgenic crops, taking into account the risks associated with the transgenic behaviour of the same crop species and other related crops. Introducing insect-resistant substances could encourage insects to develop resistance. Transgenic crops may increase or decrease crop genetic diversity and the diversity associated with other crops, depending on: the diversity of transgenic crops; the diversity of the transgenic crops into which the gene is inserted; and on the production methods used.

Adoption of environmentally benign production practices is slow.

Various production practices have been developed over the past fifteen years to minimise the environmental effects of agricultural production. Among the foremost of those concerning arable crop farming are Soil Management and Conservation Systems, such as rotational cropping systems and tillage practices, Integrated Plant Nutrient Systems and Integrated Pest Management practices. These practices and technologies are interrelated and complementary, seeking to attain the dual goals of increased productivity and reduced environmental impact. Yet experience suggests that, despite their higher rate of returns, wide-scale adoption has not yet occurred across OECD countries. Farmers operating larger arable crop holdings usually adopt new technologies more rapidly than farmers operating small farms, and have a larger incentive and capacity to deal with environmental problems. Evidence from some countries suggests that the higher productivity per hectare has not been accompanied by a corresponding increase in environmental damage. There are several barriers hindering the adoption and diffusion of environmentally benign production practices, including a lack of knowledge of ecological systems and of the way in which agricultural practices impact on them, and structural factors such as the level of management skill required in order to use these systems appropriately.


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What are the key economic and structural characteristics of arable crop farming? The arable crop sector uses significant amounts of land and chemical inputs …

The arable crop sector occupies approximately one-third of the OECD’s agricultural area, and contributes to around one-half of the OECD’s total agricultural output. OECD countries are responsible for approximately 80% of global trade in cereals. For the arable crops analysed in this report, maize and rice are the most intensively fertilised in terms of applications per hectare, while sunflower is the least fertiliser-dependent arable crop. Maize and rice are also high users of water. The most frequently applied nutrient in arable crop farming is nitrogen. In the majority of OECD countries, most of the nitrogen consumed by the agricultural sector as a whole is used by arable crops.

… is becoming larger in size, more capitalintensive and specialised …

Available data underscore the great diversity in area allocated to arable crop per holding across OECD countries, as well as the differences in rates of change over time. Average farm size in 2000 ranged from 0.8 hectares per farm in Japan to 1 654 hectares per farm in Australia, with the EU15 average around at 14 hectares per farm. Arable crop production is also characterised by regional concentration within countries, reflecting local resource endowment, climate, soil types and policies. The number of arable farms and the area used for arable crop farming have declined over the last two decades in OECD countries as a whole, but average farm size has increased, as the number of farms has fallen by more than farmland. In several OECD member countries, however, the number of larger, more capital-intensive and specialised arable crop farms has increased in absolute terms.

… with higher yields and greater cropping intensity largely accounting for greater production.

Notwithstanding the diversity between countries, arable crop production in OECD countries increased, on average, by 0.5% per annum over the 1985-2002 period. Overall, most of this growth was derived from an increasingly intensive use of land already under crops rather than expansion of the harvested area, although the latter was the main source in some countries.


The contribution of increases in harvested area to production growth can be broken down into the effects stemming from increases in arable land expansion and to effects arising from increases in cropping intensities, such as multiple cropping and shorter fallow periods. In most of the cases where harvested area increased, the contribution of increases in cropping intensity was more important than the contribution of arable land expansion in explaining expansion of harvested area. How extensive is the agricultural support affecting arable crops? Despite some progress in policy reform, support remains high, with associated production and trade distortions …

Support to arable crop producers in OECD countries amounted to USD 62 billion in 2001-03, accounting for 39% of farm receipts from crops. Reflecting overall trends, the average support levels decreased over time for all arable crops, except rice, for which support levels have changed little since 1986-88. The rice sector is the most-supported arable crop and oilseeds the least-supported. Although rice is produced in relatively few OECD countries, the price gap between domestic and world prices is the highest for any commodity in the OECD area. In 2001-03, prices received by rice producers and paid by consumers were, on average, more than four times higher than world rice prices.

… but support varies considerably across countries and arable crops.

Overall, the level of support for the arable crop sector, as measured by the share of support in gross farm receipts (%PSE) are highest – over 70% – in Japan, Korea, Norway and Switzerland. However, arable crop producers in Australia, the Czech Republic, New Zealand and the Slovak Republic are the least supported, with less than 10%. In Canada support ranges between 10-20%, in the EU between 30-40%, while for the United States arable crops support is around 30%. Over the 2001-03 period, the majority of support was concentrated in a few countries. It is not only the level of support, but also the form in which it is provided, that is important in terms of the impacts on resource allocation and on the environment. Many governments utilise a complex array of


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measures –including tariff rate quotas and preferential trade agreements – that directly or indirectly affect production, consumption, trade, prices and the environment. For arable crops as a whole in the OECD area, market price support and output-related support – which are the forms of support with the greatest potential to stimulate production, exacerbate environmental pressures and distort trade – accounted for about half of the support to the sector in the 2001-03 period. There has been a significant shift from market price support to area payments.

For the OECD area, on average, payments based on area planted constitute, to an increasing extent, the main form of support provided to grain producers, while for rice producers market price support (tariffs and export subsidies) dominates. Oilseed producers are mainly supported through payments based on output. Area payments are particularly important in the EU, where they represented almost three-quarters of producer support in 2001-03 and, following the 2003 CAP reform, are now less linked to production. Set-aside has been an important element in policies for supply control and, increasingly, for environmental reasons. Land retirement programmes are currently being pursued in the EU, Japan and the United States. In the EU, the two long-term land diversion schemes introduced as part of the 1992 CAP reform are specifically aimed at achieving environmental objectives. The payment rates of several of these land diversion schemes are intended to compensate farmers for the cost increases and/or revenue losses associated with abandoning conventional production on part of their land. In Japan, environmental provisions have gradually been incorporated into programmes aiming to divert land from rice production to other crops and activities. In the United States, the 2002 FSRI Act maintains and extends the programmes that retire environmentally sensitive land from crop production.


What are the effects on the environment of agricultural support policies for arable crops? Price support maintained over time is one of the most important factors causing the intensification of production and resulting environmental harm …

Price support and input subsidies both provide incentives for output expansion and intensification of input use, as they stimulate farmers to change their management practices and rates of input use. Commodity-linked support will also alter the mix of crops grown, which may not be neutral for the environment. If higher levels of support are given to high-performance crops that are more input-intensive, then the impacts on input use and crop mix will be even greater. Further, when high levels of support are maintained over time, this may impede structural change in the sector and may stimulate the development of new yield-enhancing and cost-reducing technologies, which could be biased in favour of those crops receiving the highest support, and which may result in variable environmental outcomes. At the same time, capitalisation of support into land prices may enhance the underlying pressures for farm consolidation and production intensification. However, the link between production changes and environmental outcomes is sitespecific.

… but environmental effects of shifting to payments will depend on the degree to which they are decoupled from production and targeted to specific goals.

The reduction in price support is likely to lead to a reduction in output and variable input use. Replacing market price support with more decoupled payments at fixed rates is expected to decrease input use and encourage a reduction of cropped area, thus producing potentially beneficial environmental effects. When payments are coupled to current area, producers are more likely to maintain or, if possible, increase their cropped area in order to qualify for payment entitlements, whilst still reducing input intensity. The evidence available on the environmental impact of the shift away from arable price support to budgetary payments that followed the 1992 CAP reform suggests that some land was released from cereal and oilseed production due to set-aside. Production intensity for these crops declined, although the extensification effect was less pronounced than expected. The total environmental impact of these changes varies depending on, among other things, on how the released land was used and on how arable crop producers adjusted their variable inputs.


– 19

How large are the impacts of further agricultural trade liberalisation on the environment? Environmental impacts of trade liberalisation at the country level are small …

This study analyses the potential environmental impacts of further agricultural trade liberalisation using a multi-country, global trade model and indicators of environmental quality, such as changes in the scale and intensity of input use, pesticide use, nitrogen uptake and off load, and emissions of greenhouse gases from crop production. The analysis provides an illustration of the potential implications for the environment of multilateral agricultural trade liberalisation. It does not consider the counterbalancing influence of existing environmental policies and regulations. Two hypothetical multilateral agricultural trade liberalisation scenarios are considered. The first scenario assumes an extension of the WTO Uruguay Round Agreement on Agriculture. The second scenario involves the elimination of all agricultural policy measures in all countries. The latter scenario can be viewed as an upper bound of potential outcomes of multilateral agricultural trade liberalisation. In most cases, the simulated liberalisation impacts for the aggregate arable crop sector do not suggest significant environmental implications: the percentage changes in land and chemical use, aggregate output, and the rate of chemical application are small. This conclusion applies to both the partial and full agricultural trade liberalisation scenarios. Under the partial liberalisation scenario, the impacts on production and chemical intensity are less than 10% in all countries and country groupings. Only under the full trade liberalisation scenario are the impacts in some cases higher. Under the full trade liberalisation scenario, environmental pressures associated with the degree of intensity of arable crop farming are likely to increase in New Zealand, and to a much lesser extent, in Australia and Canada. Intensity of chemical use would decline the most in Korea, Norway and Switzerland. In the EU15, Japan and the United States, the simulated impacts of full trade liberalisation suggest that arable crop output and use of chemicals would decline. For the new EU10 members, output of arable crops, land and chemical use would increase at about the same rate.


Overall, the estimated changes in arable crop production, even in the extreme scenario of full agricultural trade liberalisation, are within the bounds of average seasonal variations witnessed over the last twenty years in the OECD area. The simulations also suggest that trade liberalisation would cause global methane and nitrous oxide emissions to decline. … but there may be important regional differences.

The cross-country quantitative analysis is supplemented with some country-specific disaggregated analysis. The results from the global model are used as inputs into spatial, regional and environmental models to assess the environmental impacts of trade liberalisation at the regional level for Canada and the United States. The results suggest that the estimated changes in crop production and subsequent environmental impacts are not uniform across the regions in each country, with increases in crop production and environmental quality in some regions and decreases in others.

What are the main policies addressing environmental issues in the arable crop sector? Environmental policies mainly include non-commodityspecific payments and regulations.

The diversity of programmes across OECD countries and regions is vast. A plethora of measures affects arable crop farmers, encompassing economic instruments, direct regulation, technical assistance and conservation, research and extension. Notable trends in payment measures include the growing use of land retirement payments to promote environmental objectives; payments to support the adoption of less-intensive farming practices, such as organic farming; and transitional payments based on farm fixed assets, such as assistance for water, soil and land conservation.


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While European countries and the United States rely heavily on the use of payments to address environmental issues, other countries, such as Australia and New Zealand, place greater emphasis on community-based approaches. The scope of regulatory policy measures has generally expanded in OECD countries over the past two decades. These measures range from broad prohibitions to very prescriptive details for the adoption of environmentally benign farm management practices. Most regulations are implemented at the local level, and environmental legislative responsibilities usually rest with sub-national level governments. Regulations to protect groundwater quality and control soil erosion are often used, with the most severe restrictions applying to pesticide use. Taxes and charges, and tradeable quotas and rights are seldom used…

In the few OECD countries where a tax on pesticides or fertilisers is imposed, the tax is relatively small. Tradeable rights are used in only a few countries at regional/local level for water extraction for irrigation. The arable crop sector is also affected by various eco-labelling schemes, particularly those dealing with organic production and other non-crop-specific measures on research, technical assistance and extension.

… but crosscompliance is becoming important in several OECD countries.

While in the United States, cross-compliance has been used as a mechanism for seeking to control soil erosion, the ploughing of fragile rangeland and the drainage of wetlands, in European countries some of these objectives are being pursued primarily through regulations. All direct payments affecting arable crops in Switzerland, area payments in Norway and area payments for paddy field farmers in Korea are subject to cross-compliance. In the EU, following the 2003 CAP reform, cross-compliance became compulsory and the single farm payment to farmers will be linked, inter alia, to the respect of environmental, food safety, animal welfare and plant health standards, as well as the requirement to keep all farmland in good agricultural and environmental condition.


What are the production and trade effects of agri-environmental payments and regulations on arable crops? Evidence on the effects of agrienvironmental payments and regulations is limited …

The recent growth in agri-environmental regulatory and payment programmes raises concerns about the possible negative effects on trade, including arable crop imports and exports. Correcting for missing markets for environmental externalities, or reducing government policy distortions improves social welfare, despite having trade impacts. However, if agri-environmental programmes are not implemented in cost-effective ways, there is a risk that national and global welfare will be lower. Effects of regulations on factor costs and trade depend on the particular regulatory, country and crop conditions. The regulations may cover erosion, fertiliser and pesticide use, as well as land maintenance requirements under compliance schemes. Research generally has not shown that environmental regulations have significant impacts on trade competitiveness and firm location. However, the vast majority of the research did not cover agriculture and did not investigate specific product markets. Recent developments in modelling provide an empirical approach to estimate the potential impacts of environmental regulations on a country’s crop production and trade. Simulation analyses of arable crop and country combinations were conducted to gauge the sensitivity of production and trade to different forms and intensities of regulation. The analyses suggest that the trade effects can be significant, 10% or more, depending upon the particular regulatory, country and crop conditions. As an illustration, Australian wheat exports were estimated to decrease by approximately 18% if the price of a pollutive input is increased by 200% in order to discourage its use. The simulation analyses do not capture potential offsetting effects if other countries adopt similar regulatory programmes and standards in their arable crop sectors. Despite the rapid growth of agri-environmental payments, there have been few similar advances in modelling their production and trade impacts. Depending upon the programme objectives and the ways in which they are implemented, the payments may be designed to maintain particular types of land use that provide the desired environmental services, with differing effects on production. Two recent studies estimated the impacts of such payments on production and trade and arrived at different conclusions that may reflect the manner in which


– 23

other agricultural payments reinforce or offset the effects of payments. A simulation analysis suggests that agrienvironmental payments could have modest effects on production, and larger impacts on trade flows, in certain country-crop situations. … and crosscompliance measures are not sufficient to reconcile the inconsistencies between support and environmental policies.

Cross-compliance measures can improve environmental performance and lead to better harmonisation of agricultural and environmental policies. But when cross-compliance requirements are attached to direct income payments with the aim of achieving income support and environmental objectives, they are not necessarily the most cost-effective measures. If the income support payments are high enough and the cross-compliance conditions are sufficiently modest, all producers will find that the programme improves their income. Either compliance cost in income support payments will be very high or the environmental benefits will be small, or both. On the other hand, if the cross-compliance conditions are set to aim for a significant impact on environmental targets, then some producers will either suffer an income loss (if remaining in the scheme is compulsory), or these producers will leave the programme (if participation is voluntary). Gross environmental benefits will be lower, and net environmental benefit could also be lower.

Some policy conclusions Further agricultural policy reform and trade liberalisation should reduce environmental pressure in countries with high support and environmental pressure …

A comprehensive analysis of the linkages between trade and environment requires a thorough knowledge and understanding of both agricultural support policies, including trade policies, and environmental policies with a bearing on agricultural production. The levels of support, and the ways in which support is delivered, together with the dispersion of support and protection across commodities, are important causes of distortion in resource allocation between commodity sectors, input use and distortion in environmental outcomes. Production-linked agricultural support for crops has hindered the adoption of environmentally benign farming systems. Decoupling of agricultural support from production decisions, provision of information and investments in human capital would facilitate the adoption and diffusion of such systems.


… but reductions in price support alone are unlikely to redress the environmental harm caused by decades of such support, unless accompanied by targeted agrienvironmental policies…

With lower levels of support, producers are unlikely to retrace the pathway already taken when adjusting to high support. The shift from high price support is likely to be characterised by new technological choices. There are also asymmetric or irreversible processes involved and it may take years of reduced environmental stress to produce any discernible improvement in environmental conditions. In this case, complementary policies that provide explicit signals and appropriate incentives through targeted agri-environmental policies could promote sustainable production methods.

… and improving their costeffectiveness is necessary.

The theory of the economics of trade and environment shows that so long as “optimal” environmental policies are in place, open trade is nationally and globally superior to no trade. However, while allocation of resources that achieves production and trade efficiency may not be optimal if environmental effects are not considered, it is a challenge to achieve in practice. A crucial consideration in assessing the cost effectiveness of an agri-environmental programme, taking into account its production and trade impacts, is whether, or to what extent, crop production and the environmental services are joint outputs and, therefore, whether the agri-environmental policies can or cannot be decoupled from production. Even if the environmental services and production are joint, measures to improve the cost effectiveness of the programme will lessen potential trade impacts. There is a need for a coherent institutional framework in order to rationalise local and regional environmentally inspired initiatives. The level of government involvement that is appropriate, i.e. local, state/provincial, national or international, is the one that is the most cost-effective and which involves the lowest transaction costs for the particular environmental problem concerned.

Payments should be targeted to reflect different compliance costs and environmental benefits.

Cross compliance attached to direct payments can achieve some objectives at low incremental cost, but the income support and environmental objectives are sometimes in conflict. A crucial limitation of cross compliance is that those farmers who receive payments with cross-compliance conditions are not necessarily


– 25

those farming the most environmentally sensitive land or highly valued landscape. Improved environmental outcomes at lower cost could be achieved through targeted environmental measures such as taxes and regulations to deter the use of specific damaging inputs, and payments to foster certain environmental services. An impediment to discovering and implementing more cost-effective programmes is improved environmental research related to agriculture. Past research on environmental issues in agriculture has largely been reactive to a problem and sometimes in approach. Proactive research that integrates biophysical and socioeconomic sciences into a systems view is needed to develop programmes that achieve more environmental benefits and avoid emergent environmental damage from arable crop production.


Introduction Over the last two decades, trade and environment issues in agriculture have gained increasing prominence at international and national levels alike. At the global level, this interest is principally expressed in the on-going WTO negotiations and the UN World Summit on Sustainable Development, whilst at the micro level, local government and agencies are concerned about the impacts of policies on production and trade, as well as on the local environment. In the context of OECD’s work on Analysing Approaches towards a more Sustainable Agriculture, further analysis exploring the linkages between agriculture, trade and environment has been undertaken through in-depth sectoral studies. Studies on the pig sector and on the dairy sector have already been completed (OECD, 2004a; 2003f). The present study analyses the impacts of these linkages on the arable crop sector. There are a number of reasons for undertaking this study:

x

There is great variation in the levels and types of support, including trade measures, provided to arable crops among OECD countries; between arable crop sector; and over time. In addition, a number of OECD countries are reviewing their policies and implementing new ones and the arable crop sector features prominently in such reforms.

x

A wide disparity exists between policy approaches taken and measures introduced across OECD countries to address the environmental impacts of arable crop production.

x

As is the case in other agricultural sectors, the arable crop sector is witnessing significant structural and technological changes. Technological advances, such as the introduction of new seed varieties, pesticides and larger-scale machinery, have enabled the spread of arable agriculture onto environmentally fragile land in certain regions, but not without entailing some negative consequences for the environment, such as the destruction of semi-natural habitats and increased risks of contamination, resulting from the use of pesticides and fertilisers. At the same time, some arable areas have been abandoned. On the other hand, Global Positioning Systems and the development of precision farming methods are helping to improve the efficient use of inputs such as fertilisers, pesticides and seeds.


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x

A study by the FAO projects that by 2030 an additional one billion tonnes of cereals will be needed each year to satisfy expected growth in global demand (FAO, 2003). Although, according to the study, there is enough unused potential to meet this demand, in terms of land, water and yield improvements, the expansion of cereal supply, particularly in some developing countries, could entail environmental risks such as deforestation, desertification, resource degradation of cultivated lands and loss of biodiversity.1

x

Production systems for arable crops range from the relatively extensive to the highly intensive, with varying levels of input use, mechanisation, and monoculture and, consequently, have varying environmental effects. On the one hand, a more concentrated, modern and highly intensive farming system may result in the loss of non-crop habitats, such as grassland, and so have negative environmental implications in terms of the elimination of biodiversity within the immediate production area. On the other hand, lower-yield, extensive farming systems may require more land at the expense of natural areas. While drawing general conclusions is difficult and speculative, extensive and intensive methods of production are associated with different types of externalities.

Obviously, it is not possible for the analysis to be comprehensive in all domains because of the complexity of the issues involved and the inadequacy of some data, particularly on agri-environmental indicators (AEI). Moreover, arable crops include a wide range of annual crops (e.g. wheat, barley, maize, rye, rapeseed, sunflower, peas, etc.). The following guiding criteria and considerations were considered when selecting which specific arable crops would be most suitable for the analysis:

x

The importance of the sector in production, trade and in terms of domestic and trade-related policies;

x

The relevance of the sector in terms of environmental impacts;

x

The potential for further trade liberalisation in the sector; and

x

The availability of relevant data and quantitative models.

For the purpose of this report, analysis of the arable crop sectors in relation to the aforementioned criteria has been limited to the case of cereals and oilseeds. Sugar is not part of the study. In particular, the focus of the analysis is on grains, rice, soybeans, rapeseed and sunflower. Table 1 provides a summary of the varying significance of the economic, environmental and policy relevance of the sectors.


Table 1. Relative qualitative characteristics of different arable crops Economic and Trade p %PSE Tariffs and TRQs Export subsidies

Maize

Rice

Rapeseed

Soybeans

Sunflower

*** *** ***

** ** ***

*** *** *

** * *

** * *

** * *

US, Brazil, Argentina

Russia, Argentina, US, Hungary

US, Canada, US, China, Australia, EU, Brazil, Argentina France, Argentina, Mexico

Main exporters

Brazil, Egypt, EU, Japan, Japan, Korea, Indonesia, EU, Russia Korea

Main importers

Environmental Issue

Wheat

Thailand, Canada, Vietnam, Australia, EU China, US, India, Pakistan, Uruguay, EU Indonesia, EU, Brazil, Iran, Japan

China, Japan, EU, Mexico

EU, China, Japan, Mexico

EU, Turkey, Morocco

1

Soil (Erosion)

*2

**2

*

*2

***

*

** ***

*** ***

*** **

* *

** *

* *

** **

** ***

** ***

* **

* **

* *

**

**

***

**

**

**

*

*

***

*

*

*

Water 1) Irrigation 2) Nutrient loss 3) Nutrient demand 4) Pesticides Nature conservation, biodiversity and landscape Air Quality (nitrous oxide, methane)

Notes: *** = high; ** = moderate; * = low. 1. Assuming the crop is dominant in a given area. The comparisons are made among the arable crops considered in the study in terms of their relative importance of the respective issue. 2. Assuming conservation tillage practice. Source: OECD Secretariat.


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The report is organised as follows:

x

Chapter 1 provides an overview of the relative importance of the arable crop sector in production and trade, examines changes in farm structures and discusses the main driving forces that affect such changes, including changes in area, yields and chemical inputs.

x

Chapter 2 addresses the main environmental issues and impacts associated with arable crop farming, as well as management practice approaches aimed at reducing the adverse environmental impacts of arable crop production. A brief review of the main environmental issues associated with transgenic crops is also provided.

x

Chapter 3 examines the agricultural support measures provided to arable crop farmers in OECD countries and reviews their evolution over the last fifteen years. The analysis draws extensively on the OECD’s PSE/CSE database.

x

Chapter 4 discusses agri-environmental and environmental policy measures designed to address environmental issues associated with arable crop farming. The classification of the various types of policy instruments used in the OECD Inventory of Agri-environmental Measures is also adopted here.

x

Chapter 5 endeavours to analyse the environmental effects of agricultural support policies for the arable crop sector, including shifting support from market price support to direct payments. It also provides an assessment of the cost-effectiveness and efficiency of cross-compliance measures.

x

Chapter 6 explores some of the environmental impacts of further multilateral trade liberalisation and reduction in support on arable crops, using a multi-country, global trade model and indicators of environmental quality. The model is based on standard economic theory and it allows consideration of the general equilibrium impact of food and agricultural policies by accounting for inter-sectoral linkages and inter-sectoral competition for land and other resources. Environmental impacts include changes in the scale and intensity of input use for crop production, changes in pesticide use, nitrogen uptake and off-load, and impacts on emissions of greenhouse gases from crop production.


x

Chapter 7 provides a cross-country analysis of the trade effects of agri-environmental payments on the arable crop sector and examines the extent to which environmental regulations affect the factor costs for arable crop producers. It also offers some practical suggestions for enhancing the effectiveness of agri-environmental policies related to arable crops in achieving their environmental objectives without “distorting” trade flows.

Note

1.

The FAO projections suggest that, over the next 30 years, developing countries will need an additional 120 million ha for growing crops, an overall increase of 12.5%, and that land expansion will mainly take place in sub-Saharan Africa and Latin America. Overall, land expansion is expected to account for 20% of growth in crop production in developing countries, yield improvements for about 70%, and increased cropping density for the remainder.


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Chapter 1 ECONOMIC AND STRUCTURAL ASPECTS OF THE ARABLE CROP SECTOR 1.1.

The arable crop sector in OECD countries The arable crop sector occupies approximately one-third of the OECD’s Utilised Agricultural Area (UAA),1 and contributes to around a half of the OECD’s total agricultural output. China, the United States, the European Union (EU), Russia, Argentina, Australia and Canada are the world’s main cereal producers. The OECD countries are responsible for approximately 80% of world cereal trade. In Canada, the arable crop sector covers around 60% of UAA, while in the United States the share is approximately just over 40%. In the EU, arable crops cover 40% of UAA [around 140 million hectares (ha)] and are grown in all member states, although there is high regional concentration. Cereal production is concentrated in five member countries (France, Germany, Spain, Italy and the United Kingdom) and about half of all cereal production in the EU is concentrated in 20 out of its 127 regions. In the EU, cereal production represents the most important use of arable land. According to the 1999/2000 Farm Structures Survey, around 37 million ha – 52% of the total arable area of 72 million ha – were allocated to the production of cereals, and 5.4 million – 0.1% of the total arable area – to oilseeds. Wide variations appear between EU member states, with three countries (France, Spain and Germany) together accounting for some 61% of the total area under cereal production. France had the largest cereals area (9 million ha) in 1999/2000, followed by Spain (almost 7 million ha) and Germany (6.6 million ha). Italy (4 million ha) and the United Kingdom (3.3 million ha) also had relatively important areas allocated to the production of cereals in 1999/2000. In terms of harvested area, wheat is the world’s largest cereal crop. Global production is estimated at approximately just under 600 million tonnes, with international trade at just over 100 million tonnes annually (Annex Table 1.A1). Maize is grown in more countries than any other cereal and it is the third most important cereal crop in the world, after wheat and rice. In OECD countries, maize production ranks second, after wheat. Six countries (the United States, China, Brazil, Mexico, France and Argentina) AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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produce 75% of the world’s maize, with the United States alone producing around 40% of the total. The United States is the largest maize (corn) producer and exporter, accounting for approximately 40% of the grain produced in the world, followed by China, Brazil and Mexico. The majority of the world’s maize production is used for animal feed or industrial input, with only approximately 20% going to human consumption. Mexico is an exemption, with 68% of all maize grown being used for human consumption. Approximately 94% of maize exports from the United States are destined for Latin America, in general, and Mexico, in particular (11% of US exports). Since 1996, US maize exported to Mexico has increased at the same time that exports to Europe have decreased. The decline in European markets coincided with the nascent production of transgenic maize in the United States. Maize cultivation is believed to have originated in Mexico, has particular cultural, social and economic significance. It is the country’s most important crop in terms of land area and the second in terms of gross production volume. There is a great diversity of the varieties of maize and of its wild species (i.e. the teosintes), although their population sizes and distribution have been affected by general land-use practices, intensive agriculture and urbanization (Dyer-Leal and Yúnez-Naude, 2003). Much of the crop is grown by subsistence farmers on small plots under rain-fed conditions, where yields are typically low. Maize draws more heavily on soil nutrients than other grains and oilseeds, and substantial amounts of fertiliser and water are needed to maintain yields. Maize is often planted in rotation with other crops. Rice is the main source of food for about half of the world’s population. It is cultivated in more than 100 countries, but around 90% of the world’s rice is grown and consumed in Asia (China, India and Indonesia), and 96% in developing countries. In OECD countries, rice is produced in Australia, Japan, Korea, the United States and Italy and, to a smaller extent, in Spain, France, Greece and Portugal. Thus, rice, relative to grains and oilseeds which are produced over a more diverse area, is more dependent on narrower climatic conditions. Worldwide trade in rice expanded at an average rate of 7% a year during the 1990s, to reach about 25 million tonnes in 2003. Despite such growth, the world rice market remains a “thin or residual market”, as only a small proportion of production is traded. Data indicate that only around 5% of global rice production is traded, as compared with 18% for wheat, 12% for coarse grains and nearly 25% for soybeans. This thin world market, in tandem with low price supply and demand elasticities, implies that a small production shortfall in an important


rice-producing country could trigger a sharp rise in world rice prices. In order to protect producers and consumers from such price fluctuations, countries where rice is an important staple food have traditionally insulated their domestic rice markets from international rice markets and pursue a high degree of rice self-sufficiency. Another stylised feature is that the international rice market is segmented by type and quality, with little substitution in consumption and production. Market segmentation makes the international rice market even thinner, further contributing to price volatility. Of the 27 million tonnes of rice traded internationally in 2002, about 80% is indica and around 10% is japonica, with speciality varieties such as Indian “basmati” rice making up the rest. The bulk of the world’s rice trade occurs among developing countries. Thailand, Vietnam, the United States, China, India and Pakistan are the largest exporters, typically accounting for 75% of global exports. The EU and Mexico are large importers of high-quality indica rice, while Japan is the largest importer of japonica rice, followed by Turkey and Korea. Australia, although not a major rice producer, is an important rice exporter (about 80% of the harvest is exported). The various methods of cultivation used in different ecological conditions have, over time, led to the evolution of different types of rice. There are now four recognised ecosystems under which rice is grown: irrigated, rain-fed lowland, upland and flood-prone. Worldwide, irrigated rice accounts for almost three-quarters of total rice production. In Japan, all rice production is irrigated and sometimes, depending on location and climate, rice cultivation is rotated with wheat, barley and soybeans. In Korea, 79% of the harvested rice area is under irrigation, while 20% is on rain-fed lowlands. In the United States, all rice production is irrigated. In Australia, production is highly advanced and mechanised, and rice is generally planted in rotation with pasture. All rice production is irrigated. In Europe, rice is cultivated with permanent flooding. Oilseeds and oilseed products occupy a prominent place in world agriculture and play an important role in the agricultural sectors in all OECD countries, either through production or utilisation. Oilseeds rank third after livestock products and cereals, in terms of value of both world production and world trade. Virtually all oilseeds are crushed and processed to produce oil and meal. Most of the vegetable oil is used for human consumption, although relatively small but growing quantities are utilised for industrial purposes. Meal is used predominantly for animal feed, although in some countries it is also used as a fertiliser.


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Oilseeds span a range of agricultural crops, ranging from arable crops grown solely in temperate zones to tree crops grown solely in the tropics. Correspondingly, the nature and extent of any environmental effects associated with oilseed production vary considerably depending on the type of crop cultivated. Almost all types of oilseeds are joint product commodities, with the seed price determined jointly by the value of the oilseed meal and vegetable oil. In this study, the discussion and analysis will be primarily limited to the three major oilseeds (soybeans, rapeseed, sunflower seed) produced and used in the OECD region. OECD member countries currently account for close to 40% of the total world oilseed production (the United States, 29%; EU, 5%; Canada, 3%) and a similar level of world consumption. Total use of oilmeal within the OECD area accounts for about 55% of total world utilisation (the United States, 19%; EU, 27%; Japan, 5%), reflecting the higher meat production in OECD countries compared with non-OECD countries. About 70% of all trade in oilseeds and oilmeal occur within the OECD region. The two major importers of oilseeds are the EU and Japan. In contrast to the cereals markets, most OECD oilseed exports are destined for the OECD area, whilst the majority of OECD oilseed imports originate outside the OECD region. Soybeans are the world’s dominant oilseed crop and their price has a major influence on that of other oilseeds. Soybeans account for almost 55% of world oilseed production and about three-quarters of the oilseed trade. OECD member countries account for over 50% of the world’s soybean production, although almost all of this production occurs in the United States, which is the world’s largest soybean producer. Rapeseed accounts for about only 10% of world oilseed production, but is the second most important oilseed crop traded on world markets. OECD countries accounted for approximately 45% of rapeseed production and approximately 90% of rapeseed trade during the 2001-03 period. Production is concentrated in the EU (26%), China (24%) and Canada (20%). However, Canada is the principal exporter of rapeseed (canola), accounting for 60% of world exports, with almost half of this quantity going to Japan. World sunflower seed production is ranked a close third, after rapeseed, in terms of oilseed production and trade. Sunflower production takes place predominantly in Russia, Argentina and the EU. The OECD region accounts for 25% of world sunflower production and consumption, with most of the production occurring in the EU (14%). The United States accounts for 7% of world production.


1.2.

Developments in farm structures Farm structure and environmental concerns are closely related. Farm structures and their evolution over time are crucial for understanding the way the sector functions and for assessing the likely effects of agricultural policies on the environment. Farm households in different farm-size categories organise their production practices, financing and marketing strategies in different ways. Consequently, a predominance of small- to medium-sized farms would have different environmental implications from a predominance of large farms, both of which might not be homogeneous across regions (OECD, 1998a).

1.2.1.

Changes in number and size of farms

The evidence suggests that there are fewer arable farms at the beginning of the 21st century than in the latter part of the 20th century (Figure 1.1). The total number of arable crop farms (cereals and oilseeds) in the EU has declined consistently over the last fifteen years, with an annual average rate of decline of around 4% for the EU-12 as a whole during the 1987-2000 period. In 1999/2000, there were around 2.6 million farms producing cereals and 441 000 farms producing oilseeds. This decrease was driven by the large declines in the number of farms in Italy (3.5%), Spain (5.6%), France (4%), Portugal (4%) and Germany (4%). The decline in arable crop farms in OECD countries has been associated with either a reduction, or only small increases in the area used for arable crops (Annex Table 1.A2). Between the mid-1980s and 2000, the area planted for arable crops in OECD countries as a whole decreased by an average annual rate of around 0.2%. Because of the rates of decline in area devoted to arable crops were lower than the rates of declines in the number of farms, the arable crop area per farm has risen over time. In the EU, the average size of cereal farms increased by more than 4% per annum in Germany (6%), Spain (4.3%), Ireland (7%) and Finland (8%). In Australia, the number of grain-producing farms fell by one-third between the late 1970s and 2001-02, while the average area operated by grains farms increased by 34% (ABARE, 2003). This has enabled an increase of more than 25% in the average area planted to crops per farm. In Japan, the number of rice farms fell by 0.9 million over the 1985-2000 period, while the area harvested declined by 0.5 million ha. Figure 1.1 and Figure 1.2 also underscore the great diversity in the amount of area allocated to arable crop per holding across OECD countries, as well as the differences in rates of change over time. Average size in 2000 ranged from 0.8 ha per farm in Japan to 1654 ha per farm in Australia. The average size of arable crop farms varies considerably within the EU (51 ha in the United Kingdom compared to 3 ha in Portugal). AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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Figure 1.1. Number of cereal farms in selected countries

3500

Thousand farms

3000 Germany

2500

Spain 2000

France

1500

Italy Japan

1000

Australia

500 0 1985

1987

1990

1993

1995

1997

2000

Notes: Japan: farms cultivating rice. Australia: 1999-2000 to 2001-02 average. Sources: OECD Secretariat based on EUROSTAT; Statistical Yearbook, MAFF, Japan; ABARE (2003).

The magnitude of the structural change is reflected in the proportional share of the different size categories. In the EU, the majority of arable crop farms are relatively small in size, with 58% of all farms utilising less than 5 ha. In Greece Italy, Italy and Portugal, the proportion of small farms in the national cereals total is even more pronounced, with over three-quarters of farms using less than 5 ha. On the other hand, farms using more than 100 ha per farm account for some 3% of cereal area for the EU as a whole, with the largest proportion being in the United Kingdom (4%). Also in Denmark, France and Luxembourg the percentage of large cereal farms using more than 100 ha accounts for 10% or more. Large farms (i.e. over 100 ha per farm) and specialist cereal farms can also be found in the new German Länder. In Finland, between 1995-2002, the share of arable farms receiving agricultural support with less than 20 ha has fallen from 56% to 44%, while the share of farms with more than 50 ha has more than doubled from 7% to 17% (MTT, 2003).


Figure 1.2. Average size of cereal farms in selected countries

30

ha

25 20

Germany Spain

15

France Italy Japan

10 5 0 1985

1987

1990

1993

1995

1997

2000

Notes: Japan: farms cultivating rice. Australia, with an average area of 1 654 ha in 2000, cannot be shown on this graph. Sources: OECD Secretariat, based on EUROSTAT; Statistical Yearbook, MAFF, Japan.

In the United States, grain farms (including soybeans) in 1997 accounted for about 24% of total farms. Small farms, those with 100 ha or less of maize, comprised 75% of all US maize farms and produce 29% of US maize production. At the other extreme, fewer than 4% produced just under 20% of US maize (Foreman, 2001). Similar trends are found for other arable crops. For example, for soybeans in 1997, small farms comprised 75% of soybeans farms and accounted for 30% of total US soybean production. On the other hand, very large farms, those with 300 ha or more, comprised 9% of soybeans farms and produced 39% of soybeans using 22% of the soybean acreage. For rice in 2000, small farms accounted for 43% of rice farms, but just 16% of the rice production (Livezey and Foreman, 2004). In contrast, very large farms comprised 11% of all rice farms and 33% of rice production. Farms also tend to be specialised, rather than diversified. In the EU, the share of farms specialising in mixed crops and livestock declined from around 10% in 1987 to 6.5% by 2000, and the share of farms specialising in mixed cropping declined from more than 12% to around 7% over the same AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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period. Moreover, specialisation differs by farm size. In the United States, over half of farms produce just one commodity. Specialisation in grain production is more frequent for farms with sales between USD 100 000 and less than USD 499 999 (Hoppe, et al., 2001). These trends have encouraged in many regions monocultures and loss of mixed farming, with important impacts on land use, landscapes and biodiversity. An overview of the distribution of cereal farms by economic size2 suggests that, despite the diversity across member countries, the number of larger, more capital-intensive and specialised cereal farms has increased over time (Table 1.1). The increase in the number of large and very large cereal farms is more evident in Denmark, Germany and Spain. Table 1.1. Distribution of cereal farms by size for selected EU countries (%) 1990

1995

Small farms

Large farms

Very large farms

29

9 20 0 3 36 4 4 41 13

2 1 0 1 7 1 0 22 3

Denmark Germany Greece Spain France Italy Portugal UK EU

84 54 0 69 80 0 44

2001

Small farms

Large farms

Very large farms

79 41 0 63 68 0 36

11 19 1 7 39 4 6 35 14

3 9 0 1 10 1 1 27 4

Small farms

Large farms

Very large farms

77 50 0 57 56 0 33

13 27 1 9 42 5 9 35 9

4 23 0 2 19 1 2 35 2

Notes: Small farms = farms with less than 8 ESU. Large farms = farms with 40-< 100 ESU. Very large farms = farms with >= 100 ESU. Source: EC, RICA Database, 2003.

1.2.2.

Regional concentration

The trend towards fewer but larger cereal farms applies throughout the OECD area, although to varying degrees. However, aggregate national statistics conceal divergent trends within farms of different size and in different regions across countries. Arable crops production is also characterised by regional concentration, reflecting the resource endowment, climate, soil types and policy changes in diverse regions. Approximately half of the EU’s cereal production comes from 20 of the 127 regions of EU15. This concentration is particularly high in Denmark, Germany (Bayern, Niedersachsen and Nordrhein-Westfalen), France (Centre, Picardie, Champagne-Ardenne, PoitouCharentes and Midi-Pyrenées), Spain (Castilla-Leon and Castilla-la Mancha)


and the United Kingdom (the south-east). In Finland, most crop production is located in southern and south-western parts of the country, due to natural conditions more than half the crop farms are located in the main region of southern Finland (MTT, 2003). In the United States, over half of maize farmers and maize acreage are found in the Heartlands and about one-fifth is located in the Northern Crescent.3 There is also a great diversity in the average size, ranging from 27 ha per farm in the south-east to 133 ha per farm in the Prairie Gateway (Foreman, 2001). The Prairie Gateway has the fewest maize producers, but much larger farms (an average of 574 ha), producing nearly 15% of US maize production.

1.2.3.

Sources of growth in production

Notwithstanding the diversity between countries, arable crops production in OECD countries increased, on average, by 0.5% per annum since the mid-1980s. The fastest growth was observed for: wheat in Denmark (4.2% per annum), coarse grains in the Netherlands (3.6% per annum.), wheat in Ireland (3.3% per annum) rice in Australia (3.6% per annum); and soybeans in France (3.9%) (Table 1.2 and Annex Table 1.A3). There are two sources of growth in crop production: harvested land expansion and yield growth. As illustrated in Table 1.2, arable crops production in the OECD area has derived most of its growth from an increasingly intensive use of land that was already under crops, rather than expansion of the harvested area, although area expansion remains the main source of growth in several countries. Growth in wheat, coarse grains production and rice production in a number of OECD countries stems primarily from gains in yield (more than 80%), while expansion of harvested land was a major contributor to production growth of soybeans (Annex Table 1.A4). In several OECD countries, expansion in harvested area was an important source of growth in arable crop production over the 1985-2002 period. The contribution of increases in harvested area to production growth can be decomposed into the effects stemming from increases in arable land expansion and to effects due to increases in cropping intensities, such as multiple cropping and shorter fallow periods. As shown in Table 1.3, in most of the cases the contribution of increases in cropping intensity was more important than the contribution of arable land expansion in explaining expansion of harvested area. Arable crop yields for the OECD area have increased, on average, at 0.7% per annum. For the OECD area as a whole, the rate of yield growth is fairly similar between arable crops, ranging from 0.6% per annum for rice, to 0.9% per annum for coarse grains. Technological advances, including AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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better farming practices and improved varieties, as well as policies all contributed to increasing yields. Policy developments, for example, such as the 1992 CAP reform in the EU, are an important factor in influencing arable crop production, yield and area. The evidence so far shows that the arable crop yields in the EU for the post-CAP reform period (1995-2002) increased at a higher rate than in the pre-1992 period, suggesting that technological advances more than offset the effects of reduction in market price support for arable crops brought about by the 1992-CAP reform. Differences in average arable crop yields between countries are considerable. Figures 1.3 and 1.4 display the wheat and maize yields (threeyear averages 2000-02) in the major wheat- and maize- producing countries of the OECD. Yields vary from a high range of 6.0-7.8 tonnes per ha in four EU countries (the United Kingdom, Denmark, Germany and France); through an upper middle range of 3.0-4.0 tonnes per ha (Hungary, Poland and Italy) to a lower middle range of 2.4-2.7 tonnes per ha (the United States, Spain and Canada); and down to the low-yield range of 1.022.2 tonnes per ha of Australia and Portugal. Analogous wide differentials exist for maize and other arable crops. The reasons why country average yields differ from one another are many, including agro-ecological diversity and socio-economical factors. Irrigation, for example, is an important factor in the achievement of high yields in several countries. Moreover, agro-ecological and demand factors influence the mix of varieties of the same crop grown in each country; for example, low-yielding durum wheat versus higher-yielding common or soft wheat. In addition, agricultural support policies, including input subsidies, encouraged farmers to use more fertilisers and pesticides in order to maximise yields. However, further increases in yields might be restrained by increased environmental concerns which restrict fertiliser applications. A study by FAO (2003), has distinguished between contributions resulting specifically from agro-ecological factors and other factors. The agro-ecological attainable yields can be used to draw inferences about the potential environmental risks associated with increasing intensification. The higher the gap between actual and agro-ecological attainable yields, the larger the potential environmental risk. As shown in Table 1.4, France, Sweden, the United Kingdom and Germany have actual yields close to, or even higher, than those attainable for their agro-ecological endowments under rain-fed, high-input farming.


Table 1.2. Sources of growth in arable crop production, 1985-2002 (%) Contribution of:

Wheat Australia Denmark France Germany Ireland Norway Sweden Coarse grains Australia Italy Mexico Netherlands Turkey Rice Australia United States Soybeans France Spain United States Arable crops Australia Czech Republic France Germany Netherlands

Production growth

Harvested land expansion

Yields

1.4 4.2 1.5 2.4 3.3 2.1 2.2

36 75 16 49 38 96 57

64 25 84 51 62 4 43

2.0 2.2 1.6 3.6 0.1

42 18 15 79 29

58 82 85 21 71

3.6 2.5

-139 -132

239 232

3.9 1.0 1.9

80 60 62

20 40 38

1.9 0.7 1.2 1.5 1.8

51 81 2 17 64

49 19 98 83 36

Note: Calculations are based on three-year averages: 1985 = 1985, 1986 and 1987; 2002 = 2000, 2001 and 2002. Source: OECD Secretariat calculations based on FAOSTAT, January 2005.


– 43

Table 1.3. Sources of growth in harvested area for arable crops, 1985-2002 (%) Arable land expansion

Increases in cropping density

Australia

34

66

Czech Republic

-29

129

Hungary

-214

314

Netherlands

37

63

Poland

-95

195

Note: Calculations are based on three-year averages: 1985 = 1985, 1986 and 1987; 2002 = 2000, 2001 and 2002. Source: OECD Secretariat calculations based on FAOSTAT, January 2005.

Ita ly Sp ain US A Gr ee ce Tu rk ey Ca na d Au a str ali Po a rtu ga l

8 7 6 5 4 3 2 1 0 U Ge K rm a De ny nm ar k Fr an c Hu e ng ar y Po lan d OE CD

(tonnes/ha)

Figure 1.3. Wheat yields (average 2000-02)

Source: FAO, FAOSTAT, January 2005.


ex i

co

ey M

ry ga

Tu rk

l ga H

un

rtu

a

la nd

Po

Po

ad

D

an C

O

EC

SA U

ce an Fr

an y

ly G

er m

ai Sp

re ec G

Ita

n

10 9 8 7 6 5 4 3 2 1 0 e

(tonnes/ha)

Figure 1.4. Maize yields (average 2000-02)

Source: FAO, FAOSTAT, January 2005.

Table 1.4 Potential environmental risk from increasing intensification of rain-fed wheat production, selected countries, 1996/2000 Area suitable for rain-fed wheat Total

ha mill. Australia Canada France Germany Hungary Italy Japan Poland Sweden Turkey UK US

24.3 42.2 24.6 16.9 6.1 7.6 6.4 17.6 4.3 7.6 11.9 230.4

% of area by suitability class

VS 17.5 10.7 26.0 42.5 11.6 31.0 31.0 26.6 0.0 8.2 4.0 18.8

Yields attainable

Actual yields

Tonnes/ha

Area Yield (mill. ha) (tonnes/ha)

S

M

VS

S

M

38.0 35.0 45.6 39.2 51.5 46.9 39.7 51.0 54.8 31.3 70.6 54.1

44.5 54.3 28.4 18.3 36.9 22.2 29.3 22.5 45.2 60.4 25.4 27.1

6.2 6.3 8.4 9.0 8.5 8.6 8.9 8.7 0.0 5.7 8.4 6.5

4.5 5.6 6.7 7.1 6.8 6.2 7.0 7.2 5.7 5.9 7.2 6.1

3.2 3.1 4.7 5.2 5.2 4.0 5.1 5.1 4.2 4.0 4.8 4.6

Avg. all classes 4.2 4.3 6.6 7.6 6.4 6.5 7.1 7.1 5.0 4.8 6.7 5.8

Area Yield (mill. ha) (tonnes/ha) 11.1 10.9 5.2 2.7 1.1 2.4 0.2 2.5 0.4 9.1 2.0 23.7

2.0 2.4 7.1 7.3 3.9 3.2 3.4 3.4 6.0 2.1 7.8 2.7

Notes: Area suitable for rain-fed wheat indicates land that – given soil and climate characteristics and taking into account physical and chemical requirements for growing wheat – could potentially produce wheat. Countries with predominantly rain-fed wheat with over 5 million ha of land in the wheat suitability classes: VS (very suitable), S (suitable) and MS (moderately suitable) under high input. Source: FAO (2003), Table 11.1. AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

– 45

1.2.4.

Chemical inputs

Increased use of agro-chemicals such as fertilisers and pesticides has been one of the most prominent factors increasing arable crop yields. Historically, around one-third of the increase in cereal production worldwide has been attributed to increased fertiliser consumption (FAO, 2003). Fertiliser and pesticide use vary significantly by arable crop, by country and by region. Their rate of application depends on a variety of factors, including soil type, crop mix, crop rotation, irrigation, climate, technology and government policies. Table 1.5 and Annex Table 1.5 show use across the OECD area, as a whole and by country, of the major nutrient elements (nitrogen (N), phosphate (P2O5) and potash (K2O)), respectively. Table 1.6 shows fertiliser use by nutrient and pesticide application by class, for selected crops in the United States. Table 1.5. Average application rates of fertilisers by nutrient and by crop in the OECD area, 1992-2000 N

P2O5

K2O

Rate (Kg/ha) Wheat

83

37

27

Maize

135

56

66

Barley

80

32

23

Rice (Paddy)

121

74

72

Rapeseed

101

33

41

Soybeans

30

39

71

Sunflower

44

31

37

Notes: Four-year average. Australia is not included due to data limitations. Source: IFA/IFDC/FAO, various issues.

Overall, these data reveal that the most frequently applied nutrient in arable crop farming is nitrogen. In terms of fertiliser intensity (as measured by the average nutrient use per ha), maize and rice are the most intensively fertilised crops, while sunflower is the least fertiliser dependent arable crop. There are also significant variations between countries in consumption of nutrients per ha of harvested area. For example, consumption of nitrogen varies between 11 kg/ha in Canada for soybeans, to 178 kg/ha in Italy for maize (Annex Table 1.A5). The United States allocates almost half of its fertiliser use to wheat and maize, while France devotes three-quarters of its fertiliser use to rapeseed.


Table 1.6. Chemical use for selected crops in the United States, 1999 Percentage of area treated and total fertiliser applied Nitrogen

Fertiliser use, by nutrient: Phosphate Potash

Percentage of area receiving applications and total pesticides applied Herbicides

Pesticide use, by class: Insecticides Fungicides

(%) 1 000 t

(%) 1 000 t

(%) 1 000 t

(%)

1 000 t

97

21

91

14

90

18

39

13

Corn

98

4 064

82

1 381

67

1 696

98

Soybeans

18

116

26

369

28

672

Sunflower

90

79

43

15

8

Cotton

86

445

59

177

52

Wheat

1

(%)

1 000 t

70

30

5

96

32

2

9

1

95

1 283

33

55

252

97

11

84

18

(%) 1 000 t

7

329

Note: 1. Includes both spring and winter wheat; but winter wheat only for Indiana State. Source: USDA (2000).

Arable crop farming in the United States relies on intensive application of fertiliser, herbicides and insecticide. Of the 15 states included in the USDA’s survey in 1999, 98% of the planted maize acreage received nitrogen, 82% phosphates and 67% potash (USDA, 2000). Herbicides were applied to 98% of the maize acreage. Soybeans producers applied nitrogen fertiliser to 18% of the area planted, phosphate to 26% and potash to 28%. Soybeans growers applied insecticide to only 2% of the soybeans area planted. They also reported few fungicide or other chemical applications. For sunflower, nitrogen was applied to 90% of the total sunflower area. In the states surveyed, 43% of the planted sunflower acreage received phosphates, and potash was applied to 8% of the acreage. Herbicides were applied to 95% of the sunflower acreage and 33% of the area was treated with insecticides. For wheat, nitrogen fertiliser was applied to 97% of the area planted for 1999 in Indiana. Phosphate fertilisers were to 91% of the wheat acreage. Fertiliser use and pesticide application have slowed in recent years compared to the mid-1980s, with rates of decline varying across OECD countries (IFA/IFDC/FAO, 2002). Many factors have contributed to the overall reduction in fertiliser and pesticide volumes applied, including weather and seasonal conditions, fertiliser and pesticide prices, government policies, including set-aside and taxes in some countries, as well as environmental pressures.


– 47

Other factors, such as the impact on soil fertility of more intensive cultivation practices and the shortening of fallow periods, are important determinants of increased yields. There is some empirical evidence suggesting that increases in production and yields can be achieved with a less than proportional increase in fertiliser nutrient use. A study on maize in the North America, for example, found increased nutrient-use efficiency was achieved through the adoption of improved and more precise management practices (Frink, Waggoner and Ausubel, 1998). Socolow (1998) suggests that management techniques, such as precision agriculture offer abundant opportunities to provide information on fertiliser management. The current trend of increasing nutrient use efficiency through better nutrient management and by improving the efficacy of nutrient balances and the timing and application of fertilisers, will continue to increase and accelerate in the future (FAO, 2003).


Annex 1.A. Selected Data Table 1.A1. Area, yield, production and exports, 2000-02 C om m odity W hea t OECD A ustra lia C a na da EU Fra nce G e rm a ny U n ited S tate s A rg en tin a W o rld M a ize OECD C a na da EU Fra nce Ita ly S pa in M e xico U n ited S tate s A rg en tin a B ra zil W o rld R ic e OECD EU Ita ly Ja pa n K orea U n ited S tate s C hin a Ind ia Th aila nd W o rld S oybe ans OECD C a na da EU Fra nce Ita ly U n ited S tate s A rg en tin a B ra zil W o rld

A rea H arvested (’0 00 ha) 74 11 10 17 5 2 19 6

17 3 59 4 09 0 55 2 08 2 96 0 92 2 39 8

2 14 59 9

Yie ld

P ro du ction

E xp orts

kg/h a

(’00 0 ton ne s)

(’0 00 ton ne s)

3 1 2 5 7 7 2 2

17 7 62 5 07 4 73 0 06 0 35 7 63 4 28 1

2 16 10 16 1 04 38 20 44 12

444 059 198 376 939 818 063 300

89 15 16 27 15 5 25 10

E xpo rt sh ares (% )

03 1 98 8 21 1 73 8 77 8 38 4 95 3 28 7

76 14 14 24 13 5 22 9

1 17 10 8

10 0

2 71 8

5 73 967

56 4 21 3 41 3 83 7 10 6 46 9 35 4 40 4 78 0 89 9 67 3

7 6 9 8 9 9 2 8 5 3 4

32 8 67 4 11 5 87 3 50 0 52 8 58 3 47 3 68 5 06 8 34 9

3 09 8 40 16 10 4 19 2 28 15 35 6 01

597 999 821 440 824 463 299 805 000 933 994

58 91 7 22 6 9 10 1 7 79 1 19 6 11 8 59 47 86 7 10 42 1 28 8 81 92 0

72 0 11 10 0 0 0 58 13 0 10 0

4 75 7 39 9 21 9 1 72 1 1 07 0 10 00 2 1 29 0 29 31 8 43 24 8 1 51 11 7

6 6 5 6 6 2 7 6 2 3

79 8 36 6 90 0 64 0 63 3 61 4 22 9 20 1 89 3 90 0

31 2 1 11 6 26 9 1 76 1 08 5 71

763 607 371 111 687 057 569 342 900 076

5 01 7 1 39 7 60 8 20 9 0 7 05 5 2 87 5 2 38 3 2 92 7 26 00 5

19 5 2 1 0 27 11 9 11 10 0

31 13 5 1 05 1 32 4 91 21 3 29 38 3 10 15 1 14 66 0 76 69 6

2 2 3 2 3 2 2 2 2

57 4 12 0 30 9 64 5 70 4 59 3 52 2 56 2 25 5

78 655 2 336 816 209 566 74 825 30 180 42 125 1 80 910

30 07 1 63 7 1 56 3 16 13 27 85 3 5 88 4 14 38 8 52 99 0

57 1 3 0 0 53 11 27 10 0

43 1 4 1 1 7 28 2 11 1 38

Source: FAO, FAOSTAT, January, 2005.


– 49

Table 1.A2. Growth of area, by arable crop, 1985-2002 (%)

Country Australia Austria Belgium Canada Czech Republic Denmark Finland France Germany Greece Hungary Ireland Italy Japan Korea Mexico Netherlands New Zealand Norway Poland Portugal Spain Sweden Switzerland Turkey United Kingdom United States OECD

Arable crops 0.9 -0.9 -1.2 -0.7 0.5 -0.6 -0.1 0.0 0.3 -1.0 0.2 -1.4 -0.7 -1.4 -1.5 -0.3 1.1 -3.1 -0.1 0.2 -3.0 -0.8 -1.5 -0.2 0.0 -1.0 -0.3 -0.2

Wheat 0.5 -0.6 -0.2 -1.7 0.9 3.0 0.1 0.2 1.2 -0.2 -1.0 1.3 -1.5 -1.4 -2.6 -2.8 0.6 -2.9 2.0 1.3 -2.0 0.5 1.2 -0.3 0.0 -0.2 -1.1 -0.5

Coarse grains 0.8 -1.7 -2.8 -0.8 -1.0 -1.5 -0.1 -0.8 -1.1 -1.9 1.0 -2.2 0.4 -1.6 -4.8 0.3 2.7 -3.1 -0.6 -0.2 -4.0 -1.5 -2.0 -0.3 0.1 -2.5 -0.9 -0.6

Rice

Soybeans

2.0

-2.4 5.5 5.3 8.4

2.8 0.8 -8.2

3.2 -5.7 2.0 -1.1

0.8 -1.5 -0.8 -5.6

-1.3 -0.2 -3.2 -10.0

-1.4 2.3

0.6

0.3

1.1 -7.3

1.6 -0.4

1.2 1.1

Note: Calculations are based on 3-year averages: 1985 = 3-year average of 1985, 1986 and 1987; 2002 = 3-year average of 2000, 2001 and 2002.

Source: OECD Secretariat calculations based on FAOSTAT, January, 2005.


Table 1.A3. Growth of production, by arable crop, 1985-2002 (%)

Country Australia Austria Belgium Canada Czech Republic Denmark Finland France Germany Greece Hungary Ireland Italy Japan Korea Mexico Netherlands New Zealand Norway Poland Portugal Spain Sweden Switzerland Turkey United Kingdom United States OECD

Arable crops

Wheat

Coarse grains

1.9 -0.5 0.7 -0.6 0.7 0.7 1.2 1.2 1.5 -0.4 -0.9 0.1 0.6 -1.2 -0.8 0.8 1.8 -1.2 0.1 0.1 -0.4 0.5 -0.2 0.8 0.4 -0.2 0.4 0.5

1.4 -0.2 1.3 -1.4 1.3 4.2 1.2 1.5 2.4 -0.1 -1.9 3.3 -1.2 -0.9 -2.9 -2.0 1.2 -0.2 2.1 1.2 -2.4 1.2 2.2 0.4 0.4 0.9 -0.7 0.3

2.0 -0.9 -0.3 -0.6 -0.9 -0.9 1.3 0.8 0.4 -0.5 -0.2 -1.1 2.2 -2.5 -4.4 1.6 3.6 -1.7 -0.4 -0.4 0.3 0.2 -1.2 1.2 0.5 -1.9 0.3 0.3

Rice Soybeans 3.6

-1.9

3.3

3.9

1.4 -1.4 0.9 -1.2 -0.5 -4.8

-0.7 0.3 -3.3 -10.9

3.1

1.0

1.5

-6.6

2.5 0.1

1.9 1.8

Note: Calculations are based on 3-year averages: 1985 = 3-year average of 1985, 1986 and 1987; 2002 = 3-year average of 2000, 2001 and 2002. Source: OECD Secretariat calculations based on FAOSTAT, January, 2005.


– 51

Table 1.A4. Growth of yields, by arable crop, 1985-2002 (%)

Country Australia

Arable crops

Wheat

Coarse grains

Rice

Soybeans

0.9

0.9

1.1

1.6

0.5

Austria

0.4

0.4

0.9

2.0

Belgium

1.9

1.4

2.6

0.0

Canada

0.0

0.3

0.1

-1.1

Czech Republic

0.1

0.4

0.1

2.2

Denmark

1.3

1.2

0.6

Finland

1.4

1.2

1.4

France

1.2

1.2

1.6

Germany

1.2

1.2

1.5

0.4

1.0 -2.4

Greece

0.6

0.1

1.4

0.7

-1.8

Hungary

-1.1

-1.0

-1.2

0.5

-0.4

1.5

2.0

1.1

Ireland Italy

1.3

0.3

1.8

0.0

0.7

Japan

0.3

0.4

-0.9

0.3

0.5

Korea

0.7

-0.3

0.4

0.3

-0.1

Mexico

1.1

0.8

1.4

0.9

-1.0

Netherlands

0.7

0.6

0.8

New Zealand

1.9

2.9

1.5

Norway

0.2

0.1

0.1

Poland

-0.1

-0.1

-0.3

Portugal

2.6

-0.5

4.5

1.4

Spain

1.3

0.7

1.7

0.8

Sweden

1.3

1.0

0.8

Switzerland

1.0

0.7

1.5

Turkey

0.4

0.4

0.4

United Kingdom

0.8

1.0

0.5

United States

0.7

0.4

OECD

0.7

0.8

0.4 1.9

1.2

1.2

1.2

0.8

0.7

0.9

0.6

0.7

Note: Calculations are based on 3-year averages: 1985 = 3-year average of 1985, 1986 and 1987; 2002 = 3-year average of 2000, 2001 and 2002. Source: OECD Secretariat calculations based on FAOSTAT, January, 2005.


Table 1.A5. Average area and application rates of fertilisers by nutrient and crop, 1992-20001

Wheat Canada France Germany Italy Poland Spain United Kingdom United States (spring) United States (winter) Maize Canada France France (silage) Germany (silage) Italy Mexico United States Barley Canada France Germany Spain Turkey United Kingdom United States Rice (Paddy) Japan Korea United States Rapeseed Canada France Germany United Kingdom United States Soybeans Canada Mexico United States Sunflow er 2 France Hungary 2 Italy Spain Turkey United States

Area (1 000 ha)

N

P 2O 5 Rate (Kg/ha)

K 2O

12260 3735 2682 2345 2510 2166 1993 19573 13138

46 157 144 99 76 86 186 71 75

25 54 31 67 34 43 47 37 41

5 49 83 36 44 26 49 36 54

1023 1752 1442 1182 990 7859 30286

152 166 48 79 178 82 145

51 66 31 31 90 24 63

95 53 56 31 42 3 84

4450 2250 2164 3556 3439 1206 3144

63 118 133 73 43 120 45

25 45 27 38 25 49 19

10 32 35 23 0 57 7

2030 1090 1249

82 149 150

95 71 40

82 82 44

4271 729 844 383 437

68 151 143 189 150

20 54 48 49 120

15 92 98 51 84

807 301 25727

11 30 32

34 34 40

99

810 520 516 1043 591 1179

56 50 55 19 96 23

53 13 63 12 46 8

102 15 46 11 24 6

72

Notes: 1. Average for four years. 2. Includes sunflower, soya and linseed. Source: IFA/IFDC/FAO, various issues.


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Table 1.A6. Arable crop production data for selected countries, by type of land, 1997/1999 Rainfed Land Crop

Irrigated Land

Area

Yield

Production

1000 ha

kg/ha

174 37 6 230 61 1 250 2 0 3 7 773 16 170 210 48 15 7 208 526

Total

Area

Yield

Production

1000 MT

1000 ha

kg/ha

1000 MT

1000 ha

kg/ha

1000 MT

2 733 3 455 2 142 1 307 2 480 1 235 0 875 2 206

474 129 13 342 80 3 099 2 0 3 17 148

553 62 1 249 181 665 0 99 0 2 760

5 148 5 038 3 843 2 046 4 477 0 1 570 0 4 126

2 847 312 4 800 370 2 977 0 156 0 11 388

727 99 7 479 242 1 915 2 99 3 10 534

4 571 4 442 2 426 1 860 3 174 1 235 1 570 875 2 709

3 321 441 18 142 449 6 077 2 156 3 28 537

1 455 1 735 1 817 1 778 909 1 000 903 1 680

24 295 381 85 13 7 188 883

53 420 366 10 0 0 94 849

2 409 4 200 2 615 2 723 0 0 1 696 3 388

127 1 764 957 27 0 0 159 2 875

69 590 576 58 15 7 302 1 374

2 182 3 490 2 324 1 942 909 1 000 1 149 2 735

151 2 059 1 338 112 13 7 347 3 758

23 691 29 103 1 350 2 266 28 597

2 806 8 261 6 511 3 179 25 656

66 477 240 433 8 670 7 202 73 333

Area

Yield Production

Mexico Wheat Rice Maize Barley Sorghum Rapeseed Soyabeans Sunflowers Cereals Korea Wheat Rice Maize Barley Millet Sorghum Soybeans Cereals United States Wheat Maize Rice Barley Soybeans

22 192 24 891 0 1 861 26 788

1 499 4 212 1 350 405 1 809

Source: FAO (2003), ESDG database; USDA (2003d).


Notes 1.

The UAA is the total area taken up by arable land; permanent pasture and meadow; and land used for permanent crops and kitchen gardens.

2.

Economic size is based on the European Standard Unit (ESU). A farm has an economic size of 1 ESU if its total “standard gross margin”, that is, production minus certain variable costs, has a certain value in euros.

3.

These are regions depicting geographic specialisation in production of US farm commodities as defined by the Economic Research Service (ERS) of the United States Department of Agriculture (USDA).


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Chapter 2 ENVIRONMENTAL IMPACTS ASSOCIATED WITH PRODUCTION With the widespread intensification of arable farming, environmental consequences have become apparent throughout the OECD area. Such environmental impacts include damage to, and removal of, soil thereby threatening agricultural sustainability, and water pollution. Modern arable systems also impact upon biodiversity within the system itself, and on associated non-cropped habitats such as grassland, field boundaries and watercourses, as well as on the aesthetic quality of the arable landscape. There is a high degree of integration between the various environmental impacts of arable farming because crop production affects multiple environmental services through complex ecosystem linkages. For example, the conversion of grassland to an intensive form of arable crop production will reduce certain wildlife habitat and landscape values formerly provided by the grassland, increase erosion and release carbon emissions from tillage, increase the potential for nutrient and pesticide residue run-off and infiltration into surface and ground waters, and could increase surface or ground water withdrawals if supplemental irrigation is used. In this chapter, as far as possible, environmental impacts will be treated separately. Arable systems are also often highly integrated with livestock and forestry, and therefore references are made as appropriate. Generally, such multiple land use tends to be associated with higher biodiversity and landscape value compared with purely arable systems. The following environmental impacts of arable farming systems are discussed in this chapter:

2.1.

x

soil-related impacts;

x

water-related impacts;

x

air quality; and

x

biodiversity.

Soil-related impacts Soils under arable crop cultivation may be susceptible to erosion; declining organic matter resulting mainly from frequent cultivation; AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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pollution by pesticides and, to a lesser extent, heavy metals (Stoate, et al., 2001).1 These processes are highly interrelated. Farming practices are important driving forces influencing soil properties.

2.1.1.

Soil erosion

Soil erosion is widespread throughout OECD countries. Soil erosion can adversely affect crop productivity and damage the environment in a variety of ways. Impacts of soil erosion are felt both on-farm and off-site.2 Moreover, there is a direct link between the magnitude of soil erosion and loss of soil biodiversity (OECD, 2003c). There are two distinct, but related, facets of the on-site decline in productivity caused by soil erosion: short-term reduction in agronomic yield and long-term decline in soil productivity, resulting from a lessening in soil quality due to reduced rooting depth water-retaining capacity, soil organic matter and soil biodiversity. The two most important off-site impacts of erosion on the environment are, respectively, degradation of surface water by sediment and sediment deposition, and emission of greenhouse gases into the atmosphere (Heimlich, 1991). The risk of soil erosion from wheat cultivation is normally low, with soybean, sunflower and maize cultivation systems generally being associated with higher levels of soil erosion.3 For rice, soil erosion is constrained by the ground coverage offered by irrigation water during the early stages of growth and through the widespread use of terracing in upland rice cultivation. The system of terracing can prevent soil erosion and landslides. On the other hand, irrigated rice production systems may cause problems of soil salinisation and waterlogging, particularly in regions where irrigation water is often of poor quality and paddy fields are provided with inadequate drainage (van Tran, 1998). Expansion of upland rice farming systems may increase soil erosion and deforestation. The draining of coastal wetlands for rice cultivation can lead to the dehydration of soil, often causing sulphur to rise to the surface, with consequent acidification (Barbier and Mouret, 1998). Soil erosion is caused by wind and water. The rate of erosion is influenced by a combination of physical factors such as climate, topography, soil texture, crop type and management factors such as cultivation practices, dates of seeding and harvest and post-harvest residue levels. Higher rates of erosion can result from devoting larger areas to autumn cultivation, increasing field size, with the associated loss of hedges, and continuous arable cropping, all of which increase the exposure of soil to wind and water in space or time (Evans, 1996). Soil erosion is partly related to crop rotation. Available studies, mainly in the European context, seem to


suggest that, generally, lack of crop cover tends to increase erosion rates on arable land (Boatman, et al., 1999). Late-harvested spring-sown crops such as maize also increase the exposure of soils to erosion. Moreover, rainfall, slope and soil type can all have a major influence on erosion risk (Brouwer and Ervin, 2002). The capacity of farmland to produce, and the link between agricultural production practices and soil erosion, has been studied extensively. Recent research shows that on-site productivity losses from erosion are relatively small. Erosion-induced productivity decline is estimated to generate a potential annual loss of 0.3% in the value of the global production of selected crops, ranging from 0.04% per year in Europe, to 0.61% per year in Australia (den Biggelaar, et al., 2003). A USDA study found that average annual water-induced soil erosion rates vary widely by crop production area, soil, and region, but, in most cases, range between 12 and 17 t/ha/year (Eswaran and Reich, 2001). Estimates of annual production losses to erosion in the United States range from USD 40 million, to over USD 100 million (Crosson, 2004). Den Biggelaar, Wiebe and Breneman (2001), taking into account differences due to regional variations in soil and climate, but assuming unchanged farmer management practices, estimated the erosion-induced losses for wheat, maize, soybeans and cotton at only USD 56 million. The same study found that, although the erosion-induced yield loss varies widely by crop and region, there is, on average, a 0.3% per year loss in the value of global crop production, ranging from 0.04% in Europe, to 0.6% in Australia.4 This average yield loss ranges from 0.03% for wheat on Alfisols (fertile soils that occur primarily in the Corn Belt) in the United States, to 0.3% for wheat on Alfisols in Canada, and for soybeans on Ultisols (fertile but acidic soils that occur primarily in the Southeast) in the United States (Figure 2.1).5 The total loss in production for the United States was estimated at 229 000 tonnes for maize; 54 000 tonnes for wheat; 61 000 tonnes for soybeans; and 2 000 tonnes for cotton.6 While the estimated costs of erosion in terms of lost output are insignificant at the national level, there may be important regional and local impacts in terms of resource depreciation and off-site costs of crop production. For example, in the United States, Faeth (1993) found negative net economic value per hectare, after accounting for soil degradation and off-site costs, for Pennsylvania’s best maize-soybean rotation over 5 years.


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Figure 2.1. Annual yield losses due to erosion for selected crops in Canada and the United States, 1939-99

Percent per year

0.3 0.25 0.2

Alfisols

0.15

Mollisols Ultisols

0.1 0.05

he at .S .S oy be an s U .S .C ot to Ca n na da M ai ze Ca na da W he at U

U .S .W

U .S .M

ai ze

0

Source: USDA/ERS.

In Australia, rates of soil erosion associated with arable cropping are similar to those of native pastures. Of the land uses, sugarcane has the highest erosion rate (20.3 t/ha/year, as compared to 4.3 t/ha/year for oilseeds and 3.3 t/ha/year for cereals excluding rice) (Lu, et al., 2003). The same study found that although acceleration of current erosion rates above natural rates is relatively evenly distributed across Australia, there is a great diversity across various land uses: cereals (excluding rice) 18 times the natural rate; oilseeds 33 times; sugarcane 33 times – while grazing lands have rates typically 2-5 times the natural rate. Soil erosion from cropland is an issue of concern regionally in Canada, particularly in the arable plains of the Canadian wheat belt. Soil erosion is widespread in the EU, although levels of severity vary across countries, and between regions within countries (EEA, 2003a). Major causes are unsustainable agricultural practices, over-grazing, large-scale farming, construction activities, and poor water and irrigation management. Estimates of soil loss by erosion range from 3.6/t/ha to 40 t/ha/year (Boatman, et al., 1999). The European Soil Bureau and the Pan-European Soil Erosion Risk Assessment programme show that the south European region is the most prone to soil erosion – with most erosion linked to the occurrence of high rainfall in short periods during storms. There is also evidence of significant erosion occurring in other parts of Europe (e.g. Austria, Belgium, the Czech Republic, France and the United


Kingdom). A study found that half of the arable fields surveyed in England and Wales showed signs of soil erosion at least every other year (Evans, 1996). Erosion by water is exacerbated by intense rainfall, steep slopes and sandy soil, late-harvested, spring-sown crops, such as maize and sugarbeet. It is lower where crops are drilled in early autumn and where minimum cultivation or direct seeding practices are used. Annual economic losses are estimated at around EUR 53 per hectare, while the costs of off-site effects on the surrounding civil public infrastructures reach EUR 32 per hectare (Torress, et al., 2001). In the United Kingdom, in grassland and arable regions, the timing of agricultural activities is as significant as considerations of cultivation practice, crop cover and soil type, in determining the scale and extent of soil erosion (McHugh, 2004). Approximately 70% of crops on arable soils are winter-grown, and therefore planted between August and December, when rainfall duration and intensity greatly increase the risk of erosion. For arable crop farming in Korea, soil erosion by water is mainly due to the concentrated rainfall in the summer season. Annual soil loss is only 0.02 t/ha in paddy fields, as compared to 32 t/ha in uplands (on slopes greater than 15%) and 0.9 t/ha for forest. Annual total soil loss in paddy fields is 22 768 tonnes, while in upland and forest areas it is 26 and 488 million tonnes, respectively (Hur, et al., 2004). Water-induced soil erosion is an important by-product of cereal production in Norway (Oygarden and Gronlund, 2004). Erosion occurs mainly in autumn or winter as the result of rainfall, snow melt and partly frozen soil conditions. Since 1993, threshold values for soil loss were 2 t/ha/year. In Switzerland, average soil losses during the 1998-2001 period decreased by 6% compared to the 1987-89 period (Prasuhn and Weisskopf, 2004). Between 1998-2001 around 20% of the arable land was affected by soil erosion every year, with an average soil loss of 0.7 t/ha/year. Significant damage associated with erosion was estimated for winter wheat. Threshold values were 4 t/ha/year. The 2001 National Resources Inventory (NRI) showed that soil erosion on cropland in the United States declined from between 2.8 billion tonnes per year in 1982, to 1.6 billion tonnes per year in 2001 (NRCS, 2003). Sheet and rill erosion dropped from 8.9 t/ha/year, to 6.1 t/ha/year, and wind erosion dropped from 7.4 t/ha/year, to 4.7 t/ha/year. Water-caused erosion dropped by almost 41% during this period, while wind erosion dropped by 43%. Between 1982 and 2001, cropland acreage eroding at excessive rates dropped by 39%.7 In 2001, 42 million ha of cropland were experiencing excessive erosion, down from 69 million ha in 1982. In 2001, about 72% of total cropland was eroding at, or below, the soil loss tolerance rate, up from AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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60% in 1982. Highly Erodible Land (HEL) cropland acreage declined from 50 million ha in 1982, to 41 million ha in 2001. The decline occurred in HEL acreage eroding at excessive rates, while HEL acreage eroding at acceptable soil loss tolerance rates increased slightly. Heavy concentration of both HEL cropland and high average erosion rates was located in cereal and oilseed producing areas such as the western plains, the western Corn Belt and in the Mississippi delta (Claassen, et al., 2004a).

2.1.2.

Nutrients

Loss of nutrients and organic matter from the soil can represent a loss of fertility which ultimately can affect crop yields and also pollute water bodies. Losses of phosphates from the soil are largely due to soil erosion. Nitrates originating from organic and inorganic fertilisers are particularly prone to leaching and the degree of losses resulting from arable crop production depends on the type farming system operated as well as on specific site characteristics. The quantity of nitrate loss from a particular farming system is determined largely by the balance between nitrogen inputs in the form of fertilisers, and nitrogen outputs from the farm in terms of harvested crops. It also depends on whether the farming system protects the soil from leaching during winter, by avoiding spreading of nitrogen fertilisers (organic or inorganic) on the land in this period and ensuring vegetation cover. Leaching of nitrogen can result from applications of mineral fertilisers at very early stages of crop growth, so that little is taken up by plants, or from the excessive application of fertilisers. However, in some regions much of the nitrogen lost from soil is associated with mineralisation of soil organic matter, normally during the period following the harvest or the ploughing of pasture for planting arable crops (Bloem, et al., 1994). Hoffmann, et al. (2000) estimated long-term changes in nitrogen leaching from cereals, grass and bare fallow for three different soil types in nine Swedish agricultural regions, covering a range of climatic conditions. They found that leaching of nitrogen was approximately the same in the 1860s as it was in mid-1980s. For cereals, in particular, both N input and N-uptake efficiency have exhibited upward trends. To gauge whether nutrients from arable crops pose an environmental risk, nitrogen balances for arable crops were calculated. A negative balance indicates that the amount of nitrogen removed from the soil through the harvested crop exceeds the amount of nutrient applied. Continued negative balances deplete nutrients in the soil, disrupt the soil ecosystem and can damage productivity (USDA, 2003b). Positive balances occur when farmers over-apply nitrogen.


Table 2.1 displays application rates of nitrogen (N) on arable crops, the share of N consumed by arable crops and the potential environmental risk from nitrogen loss in arable crop farming, as measured by the nitrogen balance (e.g. greater than 50KgN/ha). According to these results, countries where both the risk and the application rates of N are estimated to be highest include Korea, Belgium and Denmark. The Netherlands has the largest potential risk, but is ranked fourteenth in terms of application rates. Poland, Canada, Australia and Turkey are estimated to have both the lowest risk and application rates.

2.1.3.

Waterlogging and salinisation

Waterlogging and soil salinisation have become important environmental concerns in some OECD regions. Waterlogging occurs as a result of a rise in the level of the water table, commonly caused by inefficient irrigation practices, such as inadequate drainage. The rise of the water table may also increase salinisation by drawing salt upwards from the lower soil horizons. Most arable crops do not tolerate salt and are seriously affected when salts concentrate within the root zone. The main impact of increasing soil salinity is loss of production, yields and income. Other on-farm effects include the decline in the capital value of land, salinisation of water storage, loss of farm flora and fauna, and loss of shelter and shade. These effects are propagated at the regional level, where they could have a significant impact on biodiversity, water supplies and infrastructure. It is estimated that moderate-to-severe salinity on agricultural land can reduce the annual yields of most cereal and oilseed crops by about 50% (McRae, Smith and Gregorich, 2000). In Australia, the incidence of soil salinisation is high on dry and irrigated land, predominantly in the Murray-Darling Basin and the south-western part of the country. In these areas, production of wheat is particularly affected. Around 30% of the grain farms in the west and 10% in the south of Australia are affected by significant dryland salinisation (AUDIT, 2001). It is estimated that in 2000 4.6 million ha of agricultural land in Australia were under a high risk of salinity hazard, and is projected that, unless effective solutions are implemented, the area could increase to 14 million ha by 2050. In the United States, some 5% of the cropland and pasture is affected by soil salinisation. Salinisation is also a problem in Turkey where it is associated with poor irrigation practices in some regions (OECD, 2001a).


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Table 2.1. Potential environmental risk from nitrogen in arable crops1

Country

United Kingdom Germ any Switzerland Ireland France Korea Belgium Norway Denm ark Italy Austria Czech Republic Portugal Netherlands Greece Sweden Spain New Zealand Hungary United States Japan Finland Slovak Republic Mexico Poland Canada Australia Turkey

Application rates of N on arable crops 2,3 (kg/ha)

Share of N consum ed by arable crops as % of the total am ount of N consumed by total 2,3 agriculture

Nitrogen balance (kgN/ha) 1995-97

156 140 135 124 114 112 111 104 104 103 103 101 94 94 91 90 89 86 82 80 78 74 71 64 59 56 37 32

48 63 57 8 32 46 37 33 72 62 80 87 60 12 41 61 59 6 87 88 35 53 86 58 55 86 72 31

87 61 61 79 54 253 181 73 115 30 27 54 63 262 33 34 44 6 4 32 135 64 45 n.a. 29 14 7 12

n.a. = not available. Notes: 1. Environmental risk is indicated where nitrogen surplus is greater than 50 kgN/ha. 2. As time series data for N by crop are not available, the most recent data from IFA/IFDC/FAO (2002) were used. Nitrogen balance data are from OECD (2003b) 3. Caution should be exercised in interpreting these results due to a number of data and methodological problems. Data on fertiliser use by crop types should be taken to reflect the general magnitude rather than the exact measurement. Mixed-cropping, for example, makes it difficult to estimate the amount used for each crop. On the other hand, with double-cropping, although the fertiliser is applied to one crop, both crops benefit. Moreover, some countries (e.g. Australia) make estimates for a group of crops (e.g. cereals, oilseeds) rather than individual crops. Sources: OECD Secretariat calculations, based on IFA/IFDC/FAO (2002), OECD (2003b); FAOSTAT.


2.2.

Water-related impacts Arable crop production can have environmental impacts on water through extraction for irrigation and pollution of watercourses with nutrients and pesticides.

2.2.1.

Water use

Agriculture is a significant user of water resources in many OECD countries. Large volumes of water are used annually in some regions for the irrigation of arable crops. Non-irrigated crop systems generally use significantly fewer inputs of fertilisers and other agro-chemical inputs. Different crops are subject to irrigation at varying levels of intensity. Wheat requires little irrigation except in arid and semi-arid regions. Maize requires relatively high levels of water during the early stages of growth, and in some regions cultivation relies heavily on irrigation. Water also plays a prominent role in the cultivation of rice. Paddy rice consumes more water than any other crop, but much of it is recycled and put to other uses. Certain rice cultivation practices develop water storage capacity and help to control flooding during heavy rains. In Australia, the agricultural sector is the most intensive user of water per unit of value created. Approximately 75% of Australia’s water is used in irrigated agriculture (AUDIT, 2001). The intensity of water use varies within and across states, due to climate, soil crop type and method of application. Generally, rice is the most water-intensive crop sector, with application rates varying between 11.9 and 13.9 ml/ha, followed by grapes. The intensity of water use for cereals and oilseeds is, on average, 3 ml/ha, as compared to 7 ml/ha for all irrigated land uses. In Europe, agriculture accounts for around 30% of total water use. The scale and importance of irrigation is significantly greater in southern areas of the EU, accounting for over 60% of water use in most countries. Within the EU, the main irrigated arable crops consist of maize and rice, particularly in France, Greece, Italy and Spain (IEEP, et al., 2000). In Portugal, the application rate for maize varies between regions from 3.9 m3/ha, to 6.6 m3/ha (Plano Nacional da Água, 2002). On the other hand, in the United Kingdom, in the mid-1990s cereals accounted for only 12% of total area of irrigated crops and around 5% of the volume of water used for crops (potatoes, sugarbeet, cereals, other crops grown in the open) (DEFRA, 1997). In Mexico, the total area planted for soybeans is irrigated, and for wheat and barley more than two-thirds of the area planted is irrigated. For maize, available evidence seems to suggest that the decline in maize production and AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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yield observed since the mid-1990s was in the higher-yield irrigated sector. Between 1995 and 2000, production on irrigated land declined by 31% from its 1994 peak, whilst average rain-fed maize was 18% higher than the average rain-fed production of the previous six years. Likewise, the area cultivated by the irrigated sector, which applies more pesticides, has significantly declined, while the rain-fed maize sector, which uses significantly less pesticides, has expanded (Dyer-Leal and Yúnez-Naude, 2003). In Korea, paddy fields take up about 77% of total water use in agriculture, 58% of which is used in irrigated paddy fields. Even though large areas of irrigated paddy fields have been converted for non-agricultural uses, the share of irrigated paddy field in total paddy field has increased steadily since 1970s (Hong-Sang, 2004). Irrigated agriculture accounts for an important part of the United States cropland sector, contributing almost half the total value of crop sales on just 16% of total cropland harvested. Over time, the mix of irrigated crops has changed. From 1969 to 1982, irrigated area increased for almost all crops, with the biggest gains in the major export grains (maize, soybean and wheat). Since 1982, there has been a general trend towards crops with higher value per hectare irrigated. Acreage of irrigated soybean, maize, horticulture and mint has doubled, while declines occurred in irrigated areas of sorghum, wheat, oats, barley, dry beans, pasture and un-harvested cropland. In 2000, around 280 000 farms irrigated 22.4 million ha of crop and pastureland (USDA, 2003b). Irrigated acreages in 2000 were substantial for several crops, including maize for grain (4.1 million ha, or 18% of all irrigated crops), wheat (1.3 million ha, or 6% of all irrigated crops), barley (0.4 million ha, or 2% of all irrigated crops), rice (7.7 million ha or 6% of all irrigated crops) and soybeans (2.1 million ha, or 9% of all irrigated crops). All of the rice-growing area is irrigated.

2.2.2.

Water pollution

For most OECD countries, nutrients, pesticide and soil sediments are the principal sources of water pollution associated with arable crop production. Inputs such as pesticides and nutrients can enter ground and surface waters, seriously affecting the quality of drinking water, and the cost of its treatment. Their presence in surface water can also have serious consequences for aquatic life. Greater impacts are associated with simplified, high-input arable systems. Nutrients, especially phosphates, cause eutrophication of water, which changes the ecological balance and can result in undesirable effects such as fish death and algal blooms. Problems are greatest where farming is intensive (Stoate, et al., 2001).


Nutrient pollutants from arable crop production are comprised primarily of nitrogen and phosphates which reach water courses from the soil by leaching, surface run-off, sub-surface flow and soil erosion. Both nutrients can cause severe eutrophication of water. Arable farm systems are smaller sources of phosphate pollution than livestock systems. In the United Kingdom, for example, the UK Environmental Agency has estimated that agriculture is responsible for 43% of phosphates in surface water - 29% from livestock and 14% from fertiliser. In the United States, nutrient pollution is the most important cause of water quality impairment in lakes and the third-largest cause of river pollution. Phosphate pollution from arable crops production may be important in regions with low absorption-capacity soils, such as sandy soils, and in areas where phosphorus-demanding crops (e.g. maize) are grown. For example, in the United States, some evidence shows that the Corn Belt has a high potential for nitrate contamination of both groundwater and surface water from commercially applied fertiliser, and for phosphorus contamination of surface water the same source (USDA, 2003b). Whether nitrogen actually contaminates surface or groundwater depends on the amounts of nitrogen applied to agricultural land, the leaching characteristics of the soil, precipitation, crop type, timing of cultivation and on farming practices. Early ploughing of rape residues can lead to nitrogen leaching. Nitrates are particularly prone to leaching during the autumn, when nitrate passes through the root zone faster than the crop is able to exploit it, and also following the ploughing of grassland, when organic nitrogen is mineralised (Young, 1986). Leaching is greater under cereals than under permanent grass (Croll and Hayes, 1988), but can also be high under rotational set-aside (Meissner, et al., 1998). The likelihood of nitrate leaching is higher for spring-sown of cereals in northern Europe, unless cover crops, under-sowing or stubble regeneration are adopted. In contrast, nitrate leaching for autumn sowing is similar to winter cover crops (Boatman, et al., 1999). Pesticides reach water via surface run-off, through soil cracks and drains. Spray drift and acute pesticide pollution incidents can adversely affect aquatic organisms, as can the silt burden from eroded soil particles, which may also have phosphates and pesticides bonded onto their surfaces. Inappropriate cropping and cultivation techniques can exacerbate these problems. Pesticides may enter water from point-source contamination or from diffuse sources, following application to crops. The risk of pesticide pollution depends on its solubility, mobility in soil and rate of degradation. As with nutrients, rates of pesticide use over much of southern Europe are lower and pesticide pollution of water is less of a problem than in northern AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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Europe, but it does occur where intensively managed, irrigated crops, such as maize are grown. Some evidence suggests that in the Po Valley in Northern Italy in early 1990s, use of the herbicides atrazine and molinate on irrigated maize and rice caused contamination of local drinking water and led to a ban on their use in vulnerable areas (Boatman, et al., 1999). Ground- and surface-water vulnerability to pesticides varies geographically, depending on soil characteristics, pesticide application rates, and the persistence and toxicity of the pesticides used. Areas with sandy, highly leachable soils and high application rates of toxic or persistent pesticides generally have high vulnerability ratings for pesticide leaching. Areas with heavy soils and high application rates of toxic or persistent pesticides generally have higher vulnerability ratings for pesticide run-off. The relatively high levels of inorganic fertiliser used in the cultivation of rice may lead to the contamination and eutrophication of water. However, nitrogen leaching into surface water and groundwater from paddy fields is low compared to dryland crops and orchards, due to denitrification. Both lowland and upland systems make heavy use of pesticides. The draining of coastal wetlands for rice cultivation leads to the dehydration of soil, often causing sulphur to rise to the surface, with consequent acidification.

2.3.

Air quality Although arable crop production is not in itself a major source of air pollution, it can contribute to air pollution and climate change in a multitude of ways. Air quality concerns arising from arable crop farming include emissions into the air of greenhouse gases (GHGs), ammonia, wind-borne soil and other particulates (e.g. from burning crops). The focus of this report is on GHGs. The main arable crop activities which lead to airborne emissions include emissions of GHGs arising from the use of fertilisers, fossil fuel combustion (primarily through long-distance transport of arable inputs and products), wetland rice cultivation and the burning of crop residues. Burning crop residues in fields produces methane and nitrous oxide, while, of all arable crops, wetland rice cultivation is the principal source of methane (UNFCCC, 2003). On the other hand, production of biofuels from crops such as wheat and maize (for ethanol) and soybeans and rapeseed (for biodiesel) provide significant benefits for GHG reductions and air quality improvements (OECD, 2004d). Notwithstanding considerable uncertainty and lack of data, it is generally accepted that agriculture is an important contributor to emissions of three GHGs: carbon dioxide (CO2), nitrous oxide (N2O) and methane (CH4). Carbon dioxide emissions from agriculture occur primarily in areas


where land-use changes have taken place, or fuel use occurs; nitrous oxide, where there is crop cultivation using organic and inorganic fertilisers; while methane emissions are generally related to livestock and rice production. Most of the greenhouse gases result from intensive livestock rather than arable farming. As shown in Table 2.2, the contribution of arable crop production in agricultural GHGs is, on average, just over 10%, with considerable variation among countries (ranging from 1% in Switzerland to 49% in Japan). Table 2.2. Contributions of agriculture and arable crop farming to GHG emissions, 2001 Share of Share of Share of agriculture arable crops Share of wetland rice in total in agricultural agriculture cultivation in in total CH4 agricultural GHG GHG emissions emissions emissions CH4 emissions Australia Greece France Italy Japan Poland Portugal Spain Switzerland UK US

Share of N2O emissions from Share of arable crops agriculture in soil in total N2O agricultural N2O emissions emissions

%

%

%

%

%

%

20 8 20 8 3 8 14 12 10 7 8

2 26 2 10 49 4 9 5 1 2 11

62 33 68 50 67 24 55 58 66 42 27

1 4 0 8 43 0 3 1 0 0 5

81 59 68 55 57 68 73 66 72 64 74

26 17 20 24 7 43 10 24 24 19 16

Source: OECD Secretariat calculations, based on UNFCCC (2003).

Farming practices associated with arable crops such as tillage methods, soil protection, crop timing and rotation, crop selection and land use can all play a role in the emissions of CO2, N2O, and CH4 (OECD, 1998b). Agricultural soil is a major source of nitrous oxide emissions mainly originating from inorganic and organic fertilisers, while incorporation of crop residues, biological nitrogen fixation and cultivation of some soil also generate nitrous oxide emissions. Crop practices often affect the carbon content in the soils. Extreme differences can be found between wetlands and sandy soils. Wetlands can contain far more carbon than other types of soils. Changes in land use can affect the exchange of carbon between the soil carbon and atmospheric carbon dioxide. Arable crop production is the most important source of nitrous oxide emissions from agricultural soil in Switzerland, the United Kingdom, Poland and France, while emissions of methane from rice cultivation are AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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the most important source in Japan (Table 2.3 and Figure 2.2). Over 90% of methane produced by the cultivation of arable crops is caused by rice cultivation in all the countries listed, with the exception that of Poland. Emissions from burning arable crop residues in the field are important in Australia, Greece, Japan, Portugal, Spain and the United States (Annex Table 2.A1). Figure 2.2. Gross emissions of GHGs from arable crop farming, 2001 CH4 wetland rice cultivation

CH4 cereals residue burning

N2O emissions from arable crops soil

N2O cereals residue burning

NOx cereals residue burning

CO cereals residue burning

NMVOC cereals residue burning

100% 80% 60% 40% 20%

Sp ain Sw itz erl Un an ite d dK ing do Un m ite dS tat es

Po rtu ga l

Po lan d

Ja pa n

Ita ly

Fr an ce

Au str ali a Gr ee ce

0%


Overall, recent estimates show that rice cultivation accounts for a much smaller share of methane emissions than was previously believed. Although in most of the countries listed, methane emissions from rice cultivation increased during 1990-2001, they represent only a small share of CH4 emissions from agriculture, if Japan is excluded. In 2001, methane emissions from rice cultivation represented 43% of the methane emitted from all agricultural sources in Japan, although on average in OECD rice-producing countries, methane from rice represented less than 5% of agricultural methane emissions (Table 2.3).


Table 2.3. Methane emissions from agriculture, 1990-2001 (1000 tonnes) 1990 Australia Agriculture Rice Share (%) France Agriculture Rice Share (%) Italy Agriculture Rice Share (%) Japan Agriculture Rice Share (%) Portugal Agriculture Rice Share (%) Spain Agriculture Rice Share (%) United States Agriculture Rice Share (%)

1995

2001

Annual Growth Rate (%)

3579.0 23.4 0.7

3413.0 30.9 0.9

3707.9 35.1 0.9

0.3 3.5

2185.0 8.6 0.4

2102.0 10.9 0.5

2087.5 8.5 0.4

-0.4 -0.1

913.8 73.3 8.0

901.2 81.4 9.0

871.1 74.0 8.5

-0.4 0.1

741.4 336.9 45.4

737.1 342.9 46.5

651.3 281.3 43.2

-1.1 -1.5

302.1 12.2 4.0

278.4 7.8 2.8

279.8 8.6 3.1

-0.6 -2.8

912.4 10.8 1.2

957.6 6.5 0.7

1120.6 14.0 1.3

1.7 2.2

7473.4 339.1 4.5

7972.4 362.8 4.6

7717.7 363.7 4.7

0.3 0.6


The amount of methane released from the cultivation of paddy rice depends on a number of factors, including water management during the growing season, soil characteristics – such as soil temperature and type – application of inorganic and organic fertilisers, and also other cultivation practices (Yagi, 1997). Long periods of submersion promote the aerobic decomposition of organic material and reduce the amount of oxygen in the AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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soil. As the oxygen is depleted, anaerobic decomposition by methanogenic bacteria begins. The resulting methane is partially released into the air through evaporation of water and transpiration of the rice plants. Other agricultural practices conducive to GHG reduction from rice cultivation include lowering the levels of organic fertiliser used, reducing the amount of crop residue left in the paddy fields and increasing the use of varieties of rice that emit low levels of methane.

2.4.

Biodiversity Arable crop farming can affect biodiversity and landscape in several ways. In particular, factors such as cropping systems, field size, use of agro-chemicals, drainage and irrigation can influence habitat and farmland species. Increased intensification and specialisation of arable cropping is characterised by significant economies of scale, which could trigger declines in diversity of habitats and in farmland species. In some regions, particularly in Europe, with farm amalgamation, many rotations have been simplified so that crops such as wheat or maize may be grown continuously without any breaks, which often requires higher applications of fertilisers and pesticides and increases the erosion risk. Moreover, increased monocultures and reduction in the number of mixed arable and livestock farms have led to loss of biodiversity and created a less diverse landscape (Baldock, Dwyer and Vinas, 2002; Boatman, et al., 1999). Increased drainage and irrigation have also caused habitat degradation in many areas where irrigation of crops (e.g. maize) is usually associated with increased fertiliser and pesticide applications. In contrast, the cultivation of rice can increase the local diversity of birds and the aquatic invertebrates on which they feed. Paddy fields can play a particularly valuable role in the conservation of wetland wildlife, including breeding, wintering and migratory birds, where rice is grown close to estuary habitats. The seasonal wetland habitat provided by flooded paddy fields also supports a number of ecosystems, including many species of birds and small mammals. Rice fields also host many natural enemies or predators, which provide a mechanism to control harmful insects and pests, and thereby reduce the need for pesticides. In some OECD countries such as in Japan, rice production is considered the single most important factor of “multifunctional” agriculture (Nakashima, 2001). On the other hand, the introduction of upland rice production can result in deforestation on marginal, steep hillsides, whilst lowland systems are often extended at the expense of coastal wetlands and mangrove swamps, with the consequent loss of habitats and destruction of ecosystems. Further, chemicals,


agricultural run-off, sedimentation and other forms of pollution could accumulate in rice fields and cause environmental damage and loss of plant and animal species. A number of biodiversity indicators has been established by OECD within the general framework of genetic, species and ecosystem diversity (OECD, 2001a). According to OECD work on Agri-environmental Indicators, the number of new crop varieties has increased between the mid-1980s and the mid-1990s. This work also suggests that the trend in the share of one of the top five dominant varieties in the total marketed production for certain arable crops (i.e. wheat, barley, maize and soybeans) increased for many OECD countries. Wetterich (2003) reports increasing diversity in Germany in terms of the number of registered varieties of maize and wheat over the 1992-2000 period. McRae and Weins (2003) found positive trends in Canada for wildlife habitat in cropland (land used for grains, oilseeds, fruits, nuts, vegetables, tames hay). Scott (2003) calculated changes in stock and condition of habitats for the United Kingdom over the 1990-98 period. It was found that for arable crops and horticultural farming there has been little change in the stock, but unfavourable trends have appeared in the condition of wildlife habitat. Some other studies have calculated changes in biodiversity using farmland bird indicators as a proxy. These studies, which are mainly for Europe, found declining trends, especially in the United Kingdom. Heath and Rayment (2003), for example, report that although the number of common birds has remained stable in the United Kingdom since 1970, the variety of farmland species has declined.

2.5.

Management practice approaches to reduce environmental impacts of arable crop production The improvement of arable crop yields described earlier stems to a great extent, from changes in agricultural practices and techniques. Few practices have remained unaltered by the increased intensification and modernisation of arable crop production. Tilling, sowing and harvesting have become increasingly mechanised, and application of chemicals has become more sophisticated. Contemporary agricultural practices – such as monoculture or the continuous production of row crops, fewer rotations with forages, shorter rotations, intensive tillage, inappropriate fallowing and crop residue management, and the cultivation of marginal lands – are often held responsible for many of the adverse environmental effects of arable crop farming discussed in the preceding section. This section will endeavour to


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discuss those farming practices which are deemed to be benign to the environment. Various approaches have been developed over the past 15 years to minimise the environmental effects of agricultural production. Among the foremost of those concerning arable crop farming are Soil Management and Conservation Systems, Integrated Plant Nutrient Systems and Integrated Pest Management. These practices are interrelated and may be substitutes or complements, but they are treated separately here, as far as possible.

2.5.1.

Soil management and conservation systems

Awareness of the need for protection of the soil resource is increasingly on the research agenda and also the wider political agenda. Different combinations of crops, rotations and tillage practices may have different impacts on soil and water quality. Decisions on crop selection, rotation and tillage can affect the risk of erosion, compaction, salinisation and nutrient loss (OECD, 1994). These choices are also likely to affect water quality. Concentrations of wildlife may also be affected, as different crops and tillage methods provide different levels of habitat. Large shifts in crops and tillage practices can also affect emissions. Research on a wide range of agricultural husbandry systems and techniques has revealed direct beneficial implications in mitigating impacts on water quality. For example, the use of contour cultivation, or minimum tillage, silt traps, cover crops, the technical application of fertiliser, and riparian buffer zones can significantly reduce sediment and fertiliser run-off losses from arable cropping activities. A United Kingdom survey shows that nitrogen surpluses for winter wheat have dropped from 70 kgN/ha/year in the early 1980s, to around 25 kgN/ha/year in the late 1990s due to improvements in crop protection, plant breeding and agronomy (DEFRA, 2002).

2.5.1.1. Rotational cropping systems Different land uses have different effects on natural resources. Generally speaking, annual cropping is the most disruptive type of land use and, depending on local soil conditions, it may reduce surface and groundwater quality. It also tends to provide less wildlife value. On the other hand, perennial forages, improved pasture, and native grassland or woodland are less disruptive. Cropping systems which involve crop rotation could reduce the environmental risk posed by arable crops because they affect soil conservation, soil fertility and pest control. For example, row crops on erodible soils can be rotated with soil-conserving crops to reduce soil loss.8


Closely sown row grain crops such as wheat, barley and oats provide additional vegetative cover to reduce soil erosion and add organic matter. As such, these crops tend to be less erosive than rapeseed, which is in turn less erosive than wide-row crops, such as maize and sunflowers (AAFC, 1996). Wide-row crops are associated more with soil degradation, silt and nutrient infiltration to surface water, and the leaching of nutrients and pesticides to groundwater (USDA, 2003b). Rotations that include forages, green manure and winter cover crops tend to erode less and improve soil quality. Rotations that include tilled summer fallow may raise the risk of salinisation and erosion. In the United States, rotational cropping of arable crops is predominant with soybeans and maize. Most rotational cropping of maize and soybeans alternates, while winter wheat rotates with a row crop and small grains, and fallow. About 60% of the acreage in maize and soybeans and 40% of winter wheat were rotated in 1999 (USDA, 2003b). Because maize production leaves more residue after harvesting than soybeans, a maize-soybeans rotation reduces soil erosion to a greater extent than continuous soybeans (although to a lesser extent than continuous maize). Over time, rotating maize with other crops, particularly soybeans, has increased. Empirical studies in the United States found that crop rotations were associated with higher yields than those achieved with continuous cropping under similar conditions. For example, in 1996 returns to maize averaged 5% to 51% higher, depending on the region, when in rotation with soybeans rather than in continuous maize production (USDA, 2003b). However, agricultural support policies could be an important impediment to the adoption of crop rotational cropping systems. For example, while farmers may be able to increase nitrogen to crops and decrease susceptibility to pests and diseases through crop rotations with leguminous crops, they may be able to earn greater profits through monocultures of crops. For example, in the United States maize grown in rotation with soybeans received deficiency payments was generally less profitable for farmers than continuous maize production in Iowa and Nebraska (Hrubovcak, et al., 1999). The amount of cover and residue left on the soil also affects soil quality and productivity and alters the effects of the soil on environmental quality. Cover crops are a management option to reduce nitrate leaching under cereal grain production. Soil organic matter in agricultural topsoils, derived from crop residues, organic manures, microbial biomass and soil microflora and fauna, plays a key role in maintaining soil quality, structural stability, and water-holding and buffering capacity. Crops that provide a high level of ground cover tend to have lower erosion rates compared to other crops. A AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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cover crop of small grains, meadow, or hay planted in the autumn after harvest of a row crop provides vegetative cover to reduce soil loss, hold nutrients and add organic matter to the soil. Except for winter wheat, the cover crop is usually not harvested, but is sometimes grazed by livestock. A study undertaken in Sweden on the effects of rye-grass cover crops on nitrate leaching in spring barley found that rye-grass cover reduced leaching by two-thirds in the first year and by more than 50% over a two-year period (Bergström and Jokela, 2001). Soil residue cover provided by arable crops depends on tillage practices. For example, in Canada, the highest soil cover is provided under no-till and the lowest is produced under conventional tillage. Conservation tillage is associated with medium soil cover for maize, rapeseed and soybeans, and high for wheat, barley and oats (AAFC, 1996).

2.5.1.2. Tillage practices Tillage systems are defined by the amount of crop residue remaining on the soil after the previous crop has been harvested. In the United States, conventional tillage leaves a maximum of 15% of the previous crop residue covering the soil, whereas conservation tillage maintains a maximum 30% of the previous crop residue covering the soil. The adverse effects of conventional tillage practices (such as ploughing) on farm productivity and on the environment are being increasingly recognised (EEA, 2003b). The recurring disturbance of topsoil buries any soil cover and may destabilise the soil structure so that rainfall can cause soil dispersion, sealing and crusting of the surface. It often results in compacted soil which, in turn, negatively affects productivity. In response to these problems, conservation tillage practices have been developed in a number of OECD countries. Conservation tillage reduces soil erosion and the risk of soil salinisation, and has the potential to improve surface-water quality (Derpsch, 2000; Pieri, et al., 2002). It maintains and improves crop yields and resilience against drought and other hazards, while at the same time protecting and stimulating the biological functioning of the soil. Studies in the United States found that pesticide use on maize, soybeans and wheat differs among tillage systems and it is difficult to distinguish the effects related to tillage systems from differences in pest populations between areas and from one year to the next, and from use of other pest control practices (USDA, 2003b). The study by Caswell, et al., 2001, which is based on a detailed field-level survey across the US, found that tillage choice had no effect on yields for soybeans and maize.


Almost half of the area worldwide where conservation tillage practices have been applied is in the United States, although a considerable share of this is under monoculture. Adoption of conservation tillage has also increased over time. In the United States, for example, farmers employ conservation tillage practices on over 36% of planted area to maize and 56% of planted area to soybeans in 2000, compared with 30% in 1990 (Table 2.4). Table 2.4. Adoption of alternative tillage practices in the United States, 1990-2000 1990

1995 (%)

1997

2000

Conservation tillage No-till Ridge-till Mulch till Non-conservation tillage Reduced-till Intensive-till

32.3 8.7 2.6 21.0 67.7 24.4 43.3

41.3 18.1 3.1 20.1 58.8 22.6 36.2

41.5 17.5 3.1 20.9 58.5 24.2 34.3

36.5 17.9 2.1 16.5 63.5 23.2 40.3


30.4 9.6 1.4 19.4 69.6 24.2 45.4

50.4 30 1 19.4 49.6 20.8 28.8

53.6 30.5 1 22.1 46.4 20.2 26.2

56.1 32.8 0.9 22.4 43.9 18.8 25.1


24.4 3.0 0.0 21.4 75.5 30.4 45.1

31.2 6.6 0.0 24.6 68.7 33.7 35

32.2 8.3 0.1 23.8 67.9 35 32.9

30.4 9.8 0.1 20.5 69.6 27.1 42.5

Corn

Soybeans

Small grains

Source: USDA (2003b).

The trend towards adoption of conservation tillage, and the corresponding decline in intensive tillage, is attributable to many factors including the prospect of higher economic returns with conservation tillage and by government policies and programmes promoting tillage for its conservation benefits. Higher economic returns resulting from conservation tillage stem primarily from increased or stable crop yields and an overall reduction in input costs, with both heavily dependent on the characteristics of the resource base and appropriate management. AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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Farm size and cropping practices affect the likelihood of farmers’ adopting soil conservation and tillage practices. According to the ERS/USDA study (Caswell, et al., 2001) farm size and cropping practices, especially crop type and use of crop rotations proved to be important determinants in the adoption of till conservation practices. However, the most important determinant was the influence of policies concerning areas such as conservation compliance and technical assistance.

2.5.2.

Nutrient Management

Any method of crop production – extensive or intensive, conventional or organic – removes plant nutrients from the soil. Nutrient uptake varies according to the type of soil and the intensity of production. An increase in biomass production results in a higher plant nutrient uptake. As mentioned in earlier sections, the major nutrients required by arable crops are nitrogen, phosphate and potash. Enhanced nutrient management aims to optimise the uptake of plant nutrients by the crop and thereby increase productivity. It involves efficient use of nutrients from commercial fertilisers and animal wastes. Enhanced nutrient management practices include improving existing practices in regard to assessing nutrient needs and the timing of applications, placing fertiliser closer to the seed, using alternative products, changing crop and irrigation management, and using manure and organic wastes. Nutrient management practices may have a significant effect on nitrogen fertiliser use and crop yields. OECD countries use a wide range of nutrient management practices to enhance fertiliser use efficiency and reduce nutrient losses into environment. These practices, inter alia, include: assessing nutrient need through regular soil and crop tissue testing before applying nutrients; timing nutrient application to tailor feeding to crop-growth needs; applying nutrients close to the root zone; selecting the nutrient product according to the soil’s chemical stability; rotating nitrogen-using with nitrogen-fixing crops; using nitrogen inhibitors and other products to retard the release of nitrates from ammonium fertilisers until later in the growing season; and applying manure and organic waste based on nutrient management plans. Soil nutrient tests are carried out in almost all OECD countries. In Australia, the focus has shifted from broad regional fertiliser guidelines to site-specific nutrient management.9 In the United States, results from the 1996 USDA Agricultural Resources Management Study survey of maize farmers indicate that soil tests were the most extensively used (44% of maize acreage), whilst nutrient-testing techniques were used only modestly. Numerous studies have examined the factors determining the adoption of


nutrient management systems. A survey of the literature suggests that these are both regional and practice-specific (Christensen, 2002). Adoption depends on the method of farming in the region (e.g. irrigated or not), the type of soil, and the presence of regulation. Moreover, some tests, such as manure testing, may more commonly adopted by livestock farmers.10

2.5.3.

Integrated Pest Management

Arable crop production systems suffer losses caused by diseases, weeds, insects and other pests. The goal of integrated pest management is to avoid or reduce yield losses by pests, while minimising the negative impacts of pest control through the application of the most appropriate pest control methods. Under the system of integrated pest management, the presence and density of pests and their predators and the degree of pest damage are systemically monitored.11 Pest management practices include biological controls, cultural controls (including crop rotation and strategic controls such as planting dates and location) and the use of pest-resistant plans. Integrated pest management can reduce the need for pesticides, which can also have a beneficial effect on the quality of groundwater. Unfortunately, quantitative evaluations of the uptake of integrated pest management in terms of hectares covered and reduction in pesticide use is only available for a few projects, making generalisation difficult. Integrated pest management has been introduced in many countries and for many different arable crops. According to FAO, worldwide integrated pest management applied to rice has shown significant improvements in production, in some cases simultaneously reducing costs (FAO, 2003). In the United States, farmers have used integrated pest management for more than 20 years (Hrubovcak, et al., 1999), but many of the techniques under the umbrella of integrated pest management have been used for some considerable time, the large-scale adoption of integrated pest management elements is a relatively new phenomenon. Farm structure, including human capital, is an important factor in the adoption of integrated pest management. Studies in the United States have found that human capital and farm size had a positive effect on the uptake of modern integrated pest management technologies (Caswell, et al., 2001). On the other hand, human capital had a negative impact on the use of the more traditional pest management strategy of destroying crop residues and farm size had no influence on the use of traditional pest management strategies of crop rotation and crop residue destruction. Cropping practices, especially crop choice and use of irrigation significantly affected the use of all of the pest management practices that were analysed. Moreover, natural endowment was found to be important in explaining farmers’ use of AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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traditional pest management technologies, but not the use of integrated pest management. Large farms are more likely to adopt integrated pest management than smaller farms. The availability of operator and unpaid family labour was found to be associated positively with integrated pest management adoption.

2.5.4.

Organic farming practices

Organic farming is a method of production comprising a range of land, crop and animal management systems. It is based on minimising the use of synthetic chemical inputs such as fertilisers, pesticides, additives and medicinal products and represents a deliberate attempt to make the best use of natural resources. Organic agriculture is circumscribed by a set of rules enforced by inspection and certification mechanisms. Organic farming generates less stress for the environment than conventional agriculture, in terms of lower pesticide residues and soil erosion, increased biodiversity and resilience to drought (OECD, 2003a; FAO/WHO, 1999). Organic farming systems also have the potential to lower nutrient run-off and reduce greenhouse gases. There is evidence to suggest that organic farming and no-till are more effective in reducing soil erosion than conventional farming practices and, therefore, in maintaining soil productivity (Loucks, 2003). However, the overall long-term effects of organic methods of food production on the sustainability of agriculture require more investigation. Although the environmental costs of organic systems are generally lower than those of conventional farming, their unit production costs are higher. Compared with conventional farms, organic yields on a given area of land are often lower and more variable (OECD, 2003a; FAO, 2003). In such cases, a significant expansion of organic farming could mean more land under cultivation, which may have an alternative value in terms of its potential use, depending on its current and historical use. From the perspective of potential environmental impacts on the arable crop sector, an expansion in crop production will have immediate impacts on land use and land-use change. The extent of the change in land use depends on the type of crop and the method of crop production introduced. However, yields might be improved if agricultural research were to place greater emphasis on organic farming. Any comprehensive assessment of the value of different farming systems needs to take account of the relative economic, social and environmental costs and benefits of these systems in terms of varying yields, soil and water depletion, pollution, landscape, wildlife habitats, and animal and human health. Organic farming systems for arable crops include practices such as organic fertilisation, manipulation of crop rotations and strip cropping,


biological pest management and composting. Soil fertility and crop nutrients are managed through tillage and cultivation practices, crop rotation, and cover crops, supplemented with manure and waste material from crops and permitted synthetic substances. Crop pests, weeds and diseases are controlled through physical, mechanical and biological control management methods. Crops produced by organic grain and oilseed farmers include traditional grains and oilseeds such as maize, soybeans, wheat, barley, oats and rice, as well as non-traditional grains, including millet, buckwheat, rye and spelt. Organic agriculture is practised in almost every country in the world, and its share of agricultural land, farms and production has accelerated in recent years. This shift has been encouraged by changes in consumer demand. Moreover, in some OECD countries, particularly in Europe, government support has been instrumental in the development of organic farming. The share of farm area accounted for by organic agriculture varies considerably in OECD countries, from under 0.2% in Japan, Korea and Mexico, to over 10% in Austria (Table 2.5). For arable crops, as depicted in Table 2.5, there is considerable variation between countries, ranging from less than 1% of area harvested under arable crops in the majority of countries, to 6% in Austria. Austria has the highest share of land under organic arable production, followed by Finland and Italy (4%). In absolute terms, the United States has both the largest organic area devoted to arable crops as well the largest number of organic farms, followed by France. In the EU, major growth of the organic farming sector has taken place in the last decade, following the implementation in 1993 of EC Regulation 2092/91, defining organic crop production. The widespread application of policies to support conversion to, and maintenance of, organic farming has been ensured by Regulation 2078/92 in the framework of the agri-environmental measures (see Chapter 4). Land area under organic arable crops production has more than tripled in the EU since the early 1990s (Foster and Lampkin, 2000). In Australia, rice is one of the most important organic crops. In Canada, organic grain production is the fastest-growing organic sector. In Korea, the market for organic products is still very small. In 2001, locally grown organic produce, comprising rice, fruits and vegetables, accounted for only 0.2% of total agricultural production. In Mexico, soybeans are amongst the most important organic crops. In the United States, organic farming has been one of the fastest-growing segments of US agriculture for nearly a decade (Dimitri and Greene, 2002). Certified organic cropland for maize, soybeans and other AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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major crops more than doubled from 1992-97, and doubled again between 1997-2001. Even so, less than 1% of maize, soybeans and wheat were grown under certified organic farming systems in 2001. Table 2.5. Arable crop area under organic farming, 2001 Arable Crops Sector (Cereals and oilseeds)1

Country

Number of % of total organic arable farms crop farms Australia Austria3 Belgium Canada Czech Republic Denmark Finland France Germany Greece Hungary Japan2 Korea2 Iceland Ireland Italy Luxembourg Mexico Netherlands2 New Zealand Norway Poland Portugal Slovak Republic Spain Sweden Switzerland Turkey United Kingdom United States

7804

7.0

4600 879

0.3

Organic hectares2 (1000)

6.0

19

1.0

51 78

4.1 0.7

4

0.3

3.5

12

19 16

1414

Number of % of organic arable farms crops area

77

250

576

Total Agriculture

4.3

0.2 3.0

5

2.2

57 299

1.7 0.3

1380 18292 694 3236 654 3525 4983 10364 14703 6680 1040 1237 27 997 56440 48 34862 1507 983 2099 1787 917 82 15607 3589 5441 18385 3981 6949

% of ALL farms 1.4 9.3 1.0 0.6 2.4 5.6 6.4 1.6 3.3 0.8

0.8 0.7 2.4 1.6 0.1 1.6 3.1 0.1 0.2 1.3 4.0 7.9 0.1 1.7 0.2

Organic hectares (1000)

% of total area

10500 276 22 431 218 175 148 420 632 31 105 5 1 5 30 1230 2 143 38 63 27 45 71 59 485 194 94 57 680 950

2.3 11.3 1.6 0.6 5.1 6.5 6.6 1.4 3.7 0.6 1.8 0.1 0.0 0.6 0.7 7.9 1.7 0.1 1.9 0.4 2.6 0.3 1.8 2.4 1.7 6.3 8.7 0.1 4.0 0.3

Notes: 1. For the Czech Republic: arable land; Finland: includes dried pulses; France: includes protein plants; United Kingdom: includes other crops. 2. The data for Japan refer to 1999, for Korea to 1998 and for the Netherlands to 2002. 3. Data from IACS. Sources: Foster and Lampkin (2000); Yussefi and Willer (2003); USDA/ERS; Delegations.


2.5.5.

Factors influencing adoption of environmentally benign farming practices

The environmentally friendly practices and technologies described above are interrelated and complementary, seeking to meet the dual goals of increased productivity and reduced environmental impact. Yet, experience today suggests that, despite their higher rate of returns, wide-scale adoption has not yet occurred across OECD countries. There are several reasons for the continuing dominance of conventional farming practices. Each of the environmentally benign practices is “information- and management-intensive”, because a farmer is required to have a thorough understanding of how the physical characteristics associated with farming, such as soil type, rainfall and temperature, interact with inputs such as pesticides, nutrients and soil, to affect crop production. Each practice uses inputs efficiently and may dramatically affect farm profits, the quality of the environment, and the pattern of natural resources (Hrubovcak, et al., 1999). While decisions on the amount of conventional inputs to apply are made on a seasonal or annual basis, the adoption of new technologies entails extra costs for tools and equipment, and requires complex management skills. For example, production systems that include crop rotation are more complex, they require coherent management over the longer term. The adoption of information-intensive technologies requires a certain level of educational attainment on the part of the farmer. Evidence from the United States reveals that small grain farms are generally operated by older and less educated farmers than their counterparts on larger farms. Moreover, larger grain farms are more likely to use risk management strategies, conservation or no-till systems than operators of small farms. However, larger maize farms are likely to irrigate maize and to make heavier use of chemical inputs (Foreman, 2001). The overall policy framework is also an important determinant of the type of environmentally benign practices adopted and their rate of uptake (OECD, 2001b). For example, commodity programmes that restrict base acreage to one or two crops could be an important impediment, as they encourage monoculture or the continuous planting of the same crop. In the EU, cuts in the compulsory set-aside rate brought about by the 1992 CAP reforms have encouraged some increase in the areas under cereal cultivation. In the United States, policy changes brought about by the 1996 FAIR Act, including elimination of set-aside requirements, changes in prices and loan deficiency payments (LDP) led to some farmers transferring land previously used for maize production to the production of other crops, mainly soybeans or rotations with other crops (Lin, et al., 2000). Farmers also adopted conservation tillage partly in response to incentives associated with conservation compliance provisions of the 1985 Food Security Act (FSA) (see Chapter 5). AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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The fact that the nexus of environmental benefits-profitability exhibits spatial variation could be another factor hindering the adoption of environmentally benign technologies and farm practices. A given technology may be appropriate in one region, but inappropriate for another. Further, there could be environmental trade-off associated with the adoption of new technologies, as controlling one type of problem might exacerbate another (for example, it is possible that conservation tillage may reduce soil erosion, but increase herbicide use). The costs and benefits of conservation tillage vary according to farm and location. Studies in the United States comparing profitability of conservation and conventional tillage systems produced mixed results. Studies at the regional level for wheat found that higher yields resulted with conservation tillage than with conventional tillage in semi-arid areas (see Hrubovcak, et al., 1999, for more discussion).

2.6.

Transgenic crops12 and the environment The main purpose of this section is to summarise the current commercial status of transgenic crops and to identify some of the main environmental issues associated with them. It is not intended to provide an exhaustive overview of the “GMO debates”.13

2.6.1.

How widespread are transgenic crops?

The first transgenic crops became commercially available in the mid-1990s. Since then, their uptake has been rising. During the period from 1996 to 2003 there was a large increase in the area grown with transgenic crops worldwide, from 1.7 million ha in 1996 to 67.7 million ha in 2003 (Figure 2.3). So far, adoption has been uneven across countries and commercialisation has involved only a few crops and traits. In 2003, two-thirds of the transgenic crop area worldwide was found in developed countries. Six countries, four crops (soybeans, cotton, maize and rapeseed) and two traits (insect resistance and herbicide tolerance) account for almost the totality of global transgenic crop area. The United States grew 63% of the global total, followed by Argentina (21%), Canada (6%), Brazil (4%), China (4%) and South Africa (1%). In addition to the producing countries, many others have approved importation of transgenic crops for domestic consumption. In the EU, for example, 18 GMOs are approved for marketing, including amongst others GM maize, GM soy and rapeseed oil.


Figure 2.3. Global area of transgenic crops, 1996-2003 B y co u n try U n ite d S ta te s

A rg e n tin a

C anada

C h in a

T o ta l

(mill. ha)

80 70 60 50 40 30 20 10 0 1996

1997

1998

1999

2000

2001

2002

2003

B y cro p S o yb e a n s

M a ize

C o tto n

R apeseeds

45 40

(mill. ha)

35 30 25 20 15 10 5 0 1996

1997

1998

1999

2000

2001

2002

2003

B y trait H e rb ic id e T o le ra n ce (H T )

In s e c t R e s is ta n c e (B t)

B t/H T

V iru s R e s is ta n c e

60

(mill. ha)

50 40 30 20 10 0 1996

1997

1998

1999

2000

2001

2002

2003

Source: James (2003).


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Globally, most of this area is divided among four crops: soybeans (61%), maize (23%), cotton (11%) and rapeseed (5%). Of these crops, 55% of soybean acreage, 21% of cotton, 16% of rapeseeds and 16% of maize was transgenic in 2003. The uptake has been more rapid in the United States, growing from zero in 1996 to approximately 80% of soybean, 70% of cotton, and 38% of maize acreage being planted with transgenic varieties in 2003 (USDA, 2003d). Transgenic rapeseed is planted in two countries (Canada and the United States). Currently, there are three main types of traits used in commercial cultivation: herbicide tolerance; insect resistance; and virus resistance. Insect-resistant transgenic crops are used as a way of controlling specific pests. Insect-resistant crops have been developed by integrating genes derived from various strains of a bacterium Bacillus thuringiensis (Bt), which produces toxins that kill certain insect pests, for example, the European maize borer and the Southwestern maize borer. Insect-resistance genes have been introduced in maize and cotton. For herbicide-tolerant traits, the insertion of a herbicide-tolerant gene into a plant enables farmers to spay wide-spectrum herbicides on their fields to control weeds without harming the crop. Herbicide tolerant crops include soybean, maize, rapeseed and cotton. Virus resistance genes have been introduced in tobacco, potatoes, papaya and squash. Transgenic crops have also been developed which involve two or more traits (e.g. stacked events). The most common stacked events at present are combinations of herbicide tolerance (HT) and insect resistance (e.g. Bt). During the 1996-2003 period, herbicide tolerance has consistently been the dominant trait introduced, followed by insect resistance. Seventy-four percent of all transgenic crops in 2003 were herbicide tolerant, 18% insect resistant and a further 8% contained both these traits. HT soybean was the most dominant transgenic crop grown commercially (occupying 41.4 million ha or 61% of the global total), followed by Bt maize (13%) (James, 2003). OECD’s Product Database (http://www1.oecd.org/scripts/biotech/) has information on most transgenic crops which have been approved for commercial use in OECD member countries. Despite the focus of this discussion on the relatively small number of transgenic crops which have been commercialised so far, it is important to note that there is an impressive range of crops and traits in research and development, many of which have already been in field trials. Many of these are likely to be commercialised in the near future. It takes around a decade for a new transgenic crop variety to be developed from the field-trial stage to commercialisation. Arable crops in the pipeline include soybeans with improved animal nutritional qualities through increase protein and amino acid content; crops with modified oils, fats and starches to improve


processing and digestibility, such as high stearate canola, low phytate or low phytic acid maize.

2.6.2.

What are the environmental implications?

The environmental impact of transgenic crops may be either positive or negative. They may accelerate the damaging environmental effects of agriculture or contribute to more sustainable agricultural practices and the conservation of natural resources, including biodiversity depending on how and where they are used. Releasing transgenic crops into the environment may entail risks such as gene transfer to wild relatives or conventional crops, weediness, trait effects on non-target species and other unintended effects. These risks are similar for transgenic and conventionally produced crops. Although scientists differ in their views on these risks, there appears to be an agreement on the need that environmental impacts should be assessed on a case-by-case basis and regularly monitored. Transgenic crops may also entail positive or negative indirect environmental effects through changes in agricultural practices such as pesticide and herbicide use and cropping patterns.

Main environmental benefits The increasing cultivation of transgenic crops could contribute to more sustainable agriculture. Transgenic crops have been developed in order to increase the value or reducing the costs of producing crops. In addition to market effects, there could also be positive environmental impacts, depending on the crop and trait under consideration. These benefits include use of environmentally benign methods for managing weeds and insect pests due to smaller use of chemical inputs, thereby conserving biodiversity. Table 2.6 provides a snapshot of potential environmental benefits of transgenic crops, while Box 2.1 discusses the findings of selected empirical studies. Productivity gains encompass higher returns on all factors of production or lower input requirements per unit of production. This could lead to higher crop yields (due to the presence of fewer insects or pests), lower pesticide and fertiliser applications, less demanding production techniques, higher product quality, better storage and easier processing. These gains should be assessed in comparison with conventionally produced crops, produced under the same production system. Ultimately, higher productivity may result in lower producer and consumer prices. Moreover, the reduction in production cost has the potential to raise rural incomes in developing countries in a similar way to the Green Revolution in large parts of Asia during the 1960s to 1980s (FAO, 2003).


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Table 2.6. Potential environmental benefits of transgenic crops

Characteristics

Rationale

Examples

Productivity enhancements

Higher output per unit of land

High-yielding rice and maize

Herbicide tolerance

More efficient herbicide use and/or safer herbicide use

Glyphosate-tolerant soybeans, canola, maize

Disease/insect tolerance

Reduction in pesticide use and/or more efficient pest control

Bt cotton, maize, potatoes; virus resistant papaya, tobacco, melon

Tolerance to biological stresses

Improved resistance to droughts, easier production in marginal areas, easier nitrogen fixation

Research on droughttolerant maize

Source: Nelson and de Pinto (1999; 2001).

Changes in pesticide use associated with the production of transgenic crops have been considered as an important possible impact (Royal Society, 1998; Ervin, et al., 2000; Fernandez-Cornejo and McBride, 2002; Wolfenbarger and Phifer, 2000). Transgenic crops could lead to a reduction in the use of environmentally harmful chemicals to control weeds and pests because certain pesticides are no longer used, the frequency of treatments is reduced, or the area treated is reduced. Due to higher yields, transgenic crops might lower pressures on land resources and diminishing the need for clearing the land or for land conversion, thereby leaving more area available for habitat protection and preservation. In the future, transgenic crops might become available that are resistant to drought (thereby saving water). Salinity-resistance of the soil could contribute towards the continuation of agriculture in regions affected by this phenomenon, which is primarily linked to irrigation.


Box 2.1. What does the empirical evidence show? Several studies have attempted to assess non market benefits and impacts associated with transgenic crops (e.g. an annotated bibliography can be found at: www.isb.vt.edu). However, they are non conclusive, partly because of the novelty of such crops, because some of these crops have been grown for a short period and there are different approaches as to what should be the benchmark of comparison. Overall, available empirical evidence tends to suggest that yields are somewhat higher with transgenic crops than with their conventional counterparts, although there is significant variation by crop, location and year. The National Center for Food and Agricultural Policy, which estimated the impacts of nine transgenic crops in the EU, found that collectively the nine transgenic crops have the potential to increase yields by 8.5 million tonnes per year, increase grower net income by USD 1.6 billion per year and reduce pesticide use by 0.014 million tonnes per year. Transgenic tomato would offer the greatest yield and grower income increase, while herbicide tolerant maize would have the largest reduction in pesticide use. The largest increase in yields is estimated for transgenic sugarbeet, whereas for glyphosate tolerant maize, wheat and rice yields would be unchanged (Gianessi, Sankula and Reigner, 2003). Traxler (2003) found that yields of glyphosate tolerant soybeans are not significantly different from yields of conventional soybeans in either the United States or Argentina. A study by USDA (1999a) reports that while glyphosate tolerant soybeans appear to have low yields, in some US Midwest regions, farmers planting Bt maize had yields 26% higher than conventional, non modified crops. Brookes (2003) found that Bt insect resistant maize in Spain on yields varies depending, inter alia, on location, climatic factors, timing of planting and on whether insecticides are used or not, with a country average yield benefit 6.3%. In Australia, the yield advantage GM rapeseed offers over non GM varieties is estimated to be 12.7% (Foster, 2003), while in Canada it is estimated at 10% (Serecon, et al., 2001). The evidence also suggests that changes in pesticide use rates have been variable (van den Bergh and Holley, 2001). For example, USDA studies found that, in the aggregate, as more farmers adopted transgenic crops, insecticidal treatments have been reduced on maize, whereas, the use of glyphosate, such as Roundup ®, on maize and soybeans has increased (USDA, 1999a and 1999b). However, the use of other, more toxic, chemical decreased. The situation varies by production method and by region. Studies published so far on the effects of transgenic plants on agricultural biodiversity indicate that there is lack of consensus of the consequences of gene flow and conclude that more data and new models are needed to analyse the possible long-term unexpected effects of transgenes (Ervin and Welsh, 2005). The Farm-Scale Evaluation study initiated by the United Kingdom government compared biodiversity in fields of glyphosate-tolerant sugarbeet, maize and rapeseed with that in comparable plots of equivalent non-transgenic varieties in adjoining fields (DEFRA, 2003). The findings showed that there were differences in the abundance of wildlife between genetically modified herbicide tolerant crop fields and conventional crop fields. However, the study stressed that the differences found arose not because the crops have been genetically modified, but because the GM herbicide tolerant crops gave farmers new options for weed control. The differences depended on which and how herbicides were used.


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There may also be other types of beneficial environmental impacts. Transgenic crops could contribute to savings in energy and air emissions or reductions in soil erosion due to less frequent operations in the field. Herbicide-resistant crops may lead to environmental benefits by letting farmers use herbicides that do need not to be incorporated with the soil, thereby encouraging a shift to no-till and conservation tillage practices.14 In contrast to crops requiring conventional chemical applications, herbicideresistant crops may thus reduce wind and water sediment damages by allowing for reductions in plowing. These techniques also facilitate the use of winter cover crops, thereby limiting nutrients leaching (e.g. nitrates). Certain transgenic crops in the pipeline could also increase removal of toxic heavy metals from the soil, either by incorporating them in the cells or transforming them to less toxic substances (Engel, et al., 2002; Wolfenbarger and Phifer, 2000).

Main environmental concerns In certain areas, where transgenic crops are released widely into the environment, the main potential environmental risks include impacts stemming from gene flow to wild relatives. The development of resistance to pests and viruses is equally possible, as in the case of conventional crops showing similar resistance, especially in the case of monogenic resistance. An important environmental concern is the possibility that genes may be transferred by pollen or seed to populations of the same crop species or wild relatives in the surrounding area, if the gene(s) is considered to present a hazard. This is an especially important issue when considering the impact of a transgenic crop in its centre of origin and diversity, which can be considered as the geographic region where the crop has its largest diversity and where a close relationship exists with its wild relatives. Many of these issues were explored at an OECD Conference, LMOs and the Environment, which was held in the United States in 2001. A special session at the Conference considered the preliminary evidence of gene flow from transgenic maize to local varieties in Mexico, as well as issues related to the conservation of maize diversity given the possibility of gene flow from transgenic maize. Another potential environmental concern is whether the use of transgenic crops will have adverse impacts on non-target organisms or cause ecosystem damage. The Bt toxin, for example, may have adverse effects on non-target organisms like butterflies or beneficial insect populations that help control pests. There are also issues associated with the potential impacts of transgenic crops on organic agriculture due to the inadvertent presence of transgenic


crops or material in organic land. Organic farmers are not allowed to have transgenic content in seed or plants. For example, the EU Regulation for organic farming (EC No. 2092/91) forbids the use of LMOs. In July 2003, the European Commission published guidelines for the development of strategies and best practices to ensure the co-existence of LM crops with conventional and organic farming. They are intended to help EU member states to develop workable measures for co-existence in conformity with EU legislation. The guidelines set out the general principles and the technical and procedural aspects to be taken into account. Approaches to co-existence should be developed in a transparent way, based on scientific evidence and in co-operation with all concerned. Measures should be specific to different types of crop and regional and local aspects should be fully taken into account. In June 2004, a law on co-existence was adopted by the Danish Parliament, which lays down rules on the cultivation of LMOs. The key elements of the law, inter alia, is capacity building with LM farmers, information sharing between LMO- and non-LMO farmers, crop specific measures such as distances and cropping intervals, to minimise the adventitious presence of LMOs in other crops and setting up a compensation scheme. The law will be evaluated regularly, with the first evaluation planned two years after its implementation.

2.6.3.

Environmental impact assessments

All OECD countries (and many others besides) have a system of regulatory oversight in place for assessing the environmental safety of transgenic crops. In the majority of countries, these systems have been in place for a number of years; in fact, for well over a decade in many cases. As indicated above, a number of countries have approved the production and commercial use of such crops for human consumption or feed and have accumulated experience in risk/safety assessment of the large-scale use of transgenic crops in the environment. A far greater number of countries (the majority of OECD countries) have approved field trials of transgenic crop plants, which also involve a risk/safety assessment. Most countries continue to make changes and improvements to their regulatory systems in light of this experience. In parallel with this, many OECD countries have continued to sponsor large research programmes designed to address risk and safety assessment questions related to the release of transgenic organisms to the environment. The results of this research have been used to inform and improve the practice of risk/safety assessment. Similarly, a large number of countries have undertaken national studies on the implications of agro-biotechnology. In general, OECD countries have shown a practical commitment to a AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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proactive and scientifically-based approach to the risk/safety assessment of environmental applications of genetically engineered organisms. National approaches to biosafety have been enhanced by successful multilateral activities aimed at developing a common approach to both the principles and practice of risk/safety assessment. Much of this common understanding was developed through work at the OECD where biosafety projects, addressing, inter alia, transgenic crops, have been in place since around 1985. An authoritative description of the internationally accepted principles and practice of risk/safety assessment, as it relates to transgenic organisms, is given in a report by OECD’s Working Group for Harmonisation in Biotechnology, which was prepared for the G8 Okinawa Summit in 2000 at the request of the G8 Heads of State and Government. This report shows how environmental risk/safety assessment takes into account the biological properties of the host organism, the gene(s) introduced and their source, how the gene(s) is (are) expressed in the transgenic crop and the nature of the gene product. The characteristics of the organism are taken into account, as well as its likely performance and impact in the environment where it is to be released. For example, exposure and toxicity data are used to examine potential ecological effects to resident wildlife and biodiversity (for example, plants with pesticidal genes may impact non-target species of insects). In addition, information on the eventual use of the product is necessary to ensure a complete assessment. The kinds of information risk/safety assessors use have been developed, in part, from experience with traditional organisms. The general issues assessed for transgenic plants were developed by OECD and include the following: gene transfer, weediness, trait or non-target effects, genetic or phenotypic variability, and the use of vectors and genes from pathogens. The report of OECD’s Working Group to the G8 describes the issues addressed by risk/safety assessors in greater detail. It is important to note another significant multilateral effort, the Cartagena Protocol on Biosafety, which is a key international instrument dealing with “living modified organisms” (LMOs) in transboundary movements. The objective of this Protocol is to contribute to ensuring an adequate level of protection in the field of the safe transfer, handling and use of LMOs resulting from modern biotechnology that may have adverse effects on the conservation and sustainable use of biological diversity. It has established an advance informed agreement (AIA) procedure to ensure that countries are provided with the information necessary to make informed decisions before agreeing to the import of such organisms into their territory. The Protocol has also established a Biosafety Clearing-House


(BCH) to facilitate the exchange of information on, inter alia, LMOs used for Foods Feeds or Processing. The BCH also assists countries in the implementation of the Protocol.

2.6.4.

Current and future trends

Despite the large degree of similarity among OECD countries in terms of risk/safety assessment, there remain major differences among countries on the topic of the safety of genetically engineered crops/foods. Most of these differences appear to be focused around “risk management” issues. In other words, the measures which are taken once an application has been the subject of a risk/safety assessment and has been approved for release to the environment. These measures include, amongst other things, the monitoring and detection of transgenic material following release, labeling of products, and measures designed to avoid the development of pest resistance to insecttolerant crops.


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Annex 2.A. Selected Data Table 2.A1. Gross emissions of GHGs from field burning of agricultural residues, 1990 and 2001 (1 000 tonnes) 1990 CH4

N2O

NOx

2001 CO

NMVOC

CH4

N2O

NOx

CO

NMVOC

Australia Agriculture

8.8

0.3

12.6

0.4

20.8

492.1

28.7

Cereals

7.1

0.2

11.4

0.3

16.3

444.5

25.9

Wheat

4.0

0.1

6.5

0.1

Barley

0.9

0.0

1.5

0.0

Maize

0.1

0.0

0.3

0.0

Oats

0.4

0.0

0.3

0.0

Rice

1.2

0.0

2.2

0.1

2.7

0.1

2.3

56.7

0.0

0.0

0.0

2.5

0.1

2.1

52.6

0.0

Greece Agriculture Cereals

0.0

0.0

0.0

Wheat

1.6

0.0

Barley

0.2

0.0

Maize

0.6

0.0

Oats

0.1

0.0

0.5

0.0

0.5

0.0

Rice Italy Agriculture

0.6

0.0

Cereals Wheat

0.3

0.0

Barley

0.0

0.0

Maize

0.0

0.0

Oats

0.0

0.0

Rice

0.0

0.0

Japan Agriculture

8.0

0.4

0.0

149.1

0.0

6.4

0.5

0.0

123.4

0.0

Cereals

6.8

0.4

0.0

149.1

0.0

5.6

0.4

0.0

123.4

0.0

1.6

0.0

1.2

0.0

5.0

0.3

4.1

0.3

1.3

0.1

0.0

0.0

0.0

0.4

0.0

Wheat Barley Maize Oats Rice Poland Agriculture Cereals

1.5

Wheat

0.2

0.0

Barley

0.1

0.0

Maize

0.0

0.0

Oats Rice

0.0

0.0


Table 2.A1. (continued). Gross emissions of GHGs from field burning of agricultural residues, 1990 and 2001 (1 000 tonnes) 1990

2001

CH4

N2O

NOx

CO

Agriculture

0.9

0.1

2.1

177.8

Cereals

0.1

0.0

0.2

1.5

0.1

0.0

Agriculture

2.9

1.0

Cereals

1.1

0.1

Wheat

0.3

Barley Maize

NMVOC

CH4

N2O

NOx

CO

NMVOC

0.0

0.8

0.1

1.9

16.1

0.0

0.0

0.1

0.0

0.1

1.1

0.0

0.1

0.0

2.9

1.0

36.1

60.8

8.5

1.5

0.1

3.7

31.4

4.4

0.0

0.7

0.0

0.6

0.0

0.2

0.0

0.1

0.0

0.1

0.0

Oats

0.0

0.0

0.0

0.0

Rice

0.0

0.0

0.1

0.0

Agriculture

12.7

0.3

0.0

0.0

0.0

0.0

0.0

Cereals

12.7

0.3

0.0

0.0

0.0

0.0

0.0

Portugal

Wheat Barley Maize Oats Rice Spain 35.5

61.1

8.6

United Kingdom 9.1

266.0

35.0

Wheat

11.6

0.2

0.0

0.0

0.0

0.0

0.0

Barley

0.9

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.1

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Maize Oats Rice United States Agriculture

32.6

1.2

28.1

684.8

0.0

36.3

1.5

34.9

762.0

0.0

Cereals

24.6

0.6

13.7

516.0

0.0

24.5

0.6

13.4

514.4

0.0

Wheat

6.5

0.2

4.7

0.1

Barley

0.8

0.0

0.5

0.0

Maize

13.4

0.3

16.1

0.3

3.9

0.1

3.3

0.1

Oats Rice

Source: Greenhouse Gas Inventory Database, 2003.


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Notes 1.

Heavy metal contamination of soil can arise from the use of sewage sludge, fertilisers and copper-based fungicides. However, copper is not used in most arable farming systems (Boatman, et al., 1999).

2.

It has been argued that the on-farm economic costs of soil erosion, including the costs of lost soil biodiversity, are less than the off-farm costs of damage caused by sediment (Crosson, 2004). Furthermore, when markets do not function well and property rights are not well established, soil erosion and associated productivity losses are larger than would otherwise be the case (Claasen, et al., 2004a).

3.

Tobey (1991) looked at soil erosion and agrochemical use of the ten primary crops grown in the United States. In terms of soil erosion, soybean production was found to be associated with some of the highest levels of soil loss, at 17.5 metric tons per hectare, being exceeded only by tobacco.

4.

The estimates of potential production losses should be treated with care as the true value of production losses depends on how farmers change management practices to address erosion.

5.

The loss in agronomic productivity due to water-induced soil erosion in North America is estimated at 235 x 103 Mg/y for maize, 60 x 103 Mg/y for soybean, 75 x 103 Mg/y or wheat and 2 x 103 Mg/y for cotton. Globally, the value of annual production losses is estimated at USD 15 million in Africa, USD 98 million in Asia, USD 15 million in Australia, USD 15 million in Europe, USD 206 million in North America and USD 90 million in Central and South America. These losses represent an annual loss of 0.3% of the value of the global production of selected crops.

6.

In a more recent study, den Biggelaar, et al. (2003) found that absolute yield loss caused by erosion ranged between 0.5 and 1.4 kg/ha/Mg of soil erosion for grain and leguminous crops, and between 0.7 and 127.0 kg/ha/Mg for root crops. In North America, crop yields declined at the rate of 0.4%/Mg of soil erosion.

7.

Cropland includes areas used for the production of adapted crops for harvest. Two subcategories of cropland are recognised: cultivated and non-cultivated. Cultivated cropland comprises land in row crops or close-grown crops and also other cultivated cropland, for example, hayland or pastureland that is in a rotation with row or close-grown crops. Non-cultivated cropland includes permanent hayland and horticultural cropland (NRCS, 2003).


8.

See Orlick, Bauer and Jeffrey (1995) for a literature review of crop rotation and tillage literature.

9.

In Australia, the Ricecheck Programme was developed in 1986 to improve the system of rice management (AUDIT, 2001). It covers seven areas of crop management or component factors: environment (land suitability and safe pesticide use); productivity (field layout, sowing time, crop establishment, crop protection, crop nutrition, panicle initiation date and water management); and grain quality (harvest grain quality). Key checks are provided for each target, allowing for easy self-assessment.

10.

Precision farming, defined as a systems approach to optimise crop yields through systematic gathering and handling of information about the crop and the field, has the potential to contribute to nutrient management by tailoring input use and application more closely to ideal plant growth and management needs. Results from the 1996 USDA Agricultural Resource Management Study found precision agriculture adopters more likely to operate larger farms, have more maize acreage and higher yields, and have higher educational attainment than non-adopter farmers.

11.

For a detailed explanation see: www.nri.org/ipmeurope/homepage.htm.

12.

Different countries have different preferences for terms which describe products of modern biotechnology. This document uses the term “transgenic crops” or “transgenic organisms”. For the purposes of this text, the term transgenic organisms is equivalent to the terms “genetically modified organisms” (GMOs), “genetically engineered organisms ” or “living modified organisms (LMOs)”.

13.

There is a large and still increasing body of literature concerning the potential economic, social and environmental effects of transgenic crops (e.g. Ervin and Welsh, 2005; Ervin, et al., 2000; Nelson and de Pinto, 1999 and 2001, Wolfenbarger and Phifer, 2000; NRC, 2003; Alvarez-Buylla, 2004; van den Bergh and Holley, 2001).

14.

The two most common herbicides are Roundup Ready, with the effective chemical glyphosate and BASTA, with the effective chemical glufosinate (Wolfenbarger and Phifer, 2000).


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Chapter 3 AGRICULTURAL POLICIES AFFECTING THE ARABLE CROP SECTOR

3.1.

Introduction Agricultural support and environmental policies have evolved over time. Shifting government priorities, domestic budgetary pressures and the implementation of multilateral, regional and bilateral trade agreements have impacted on the agricultural policy of OECD member countries. These changes range from limited re-instrumentation, to comprehensive reform which has had particular consequences for the arable crop sector.1 In a number of OECD countries both the number and complexity of policy measures are increasing, as the centre of gravity of policy measures shifts gradually from traditional market price support and output-related measures towards sector-wide and non-commodity-specific policies, particularly those encompassing environmental and rural development concerns.

3.2.

Main policy instruments Government policy regarding arable crops in Australia is limited in scope. Support to producers is mainly provided through budget-financed general measures. Tax concessions, such as rebates on excise taxes on fuel used in off-road vehicles and machinery are available to all agricultural producers. Landholders can claim a tax reduction for expenditures relating to landcare operations and water storage. Statutory marketing arrangements are in place for wheat, barley and rice in some states.2 In Canada, there is no market price support policy. With the termination in 1997 of the various transitional programmes intended to cushion the impact of the phasing out of the Western Grain Transportation Act in 1995, support to arable crop producers was drastically reduced. Canada has not maintained support prices for arable crops since the mid1990s. Instead, risk management policies are prevalent, although these are mostly non-crop-specific in nature. These programmes take the form of Crop Insurance and the Canadian Agricultural Income Stabilization programme (disaster assistance, as well as additional programmes, being administered by provinces). A variety of other policies such as transportation regulations and advance payments in the form of interest-free AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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loans, are also provided. Most programmes are funded by Federal and/or Provincial governments. In the EU, market price support, provided through administered prices and trade barriers, and area payments are the main policy instruments affecting arable crop producers. The Agenda 2000 Common Agricultural Policy (CAP) reform package, which deepens and extends the 1992 CAP reforms, provides the basic legislative framework governing agricultural policy for the period 2000-06. This reform package entails, inter alia, a gradual reduction of administered prices for cereals, partially compensated by payments based on area planted. Market price support for cereals is provided through institutional prices, export subsidies tariffs and tariff rate quotas (TRQs), and is combined with set-aside land. There are no intervention prices for oilseeds and protein crops (peas, beans and sweet lupins). Area payments for cereals and oilseeds are based on historic, regional yields and are paid on condition that producers set aside a defined percentage of their arable land; small-scale producers are exempted from the sets-aside requirement. Payments are also made in respect to the land that is set aside. Following the phased implementation of the Agenda 2000 CAP reforms, the EU area payments have been harmonised across major land uses as from 2002. The CAP reforms agreed at the end of June 2003, entail, inter alia, replacement of the arable crops payment, which is based on the area planted to an arable crop, with a single farm payment (SFP) (also comprising past livestock premia), which will be independent of current production levels and prices; and a reduction of the intervention price for rice (Box 3.1). Furthermore, farmers are required to meet specified standards in production methods in order to qualify for the full amount of the payment (EC, 2003a). The crop regime in the OECD member countries joined the EU in May 2004 (the Czech Republic, Hungary, the Slovak Republic and Poland) consists primarily of market price support and supply controls. In the late 1990s, these countries began to implement CAP-type policies to align their agricultural policies with those of the EU, with a view to easing future accession. In this context, the Czech Republic amended the scheme providing area payments to producers in 2001. In Hungary, area payments have been granted to grain producers since 1999/2000, with payments inversely related to farm size. In the Slovak Republic, direct area payments for specific arable crops, including grains and oilseeds, as well as permanent pasture, were introduced in 2000: oilseed payments were reduced and converted to a production basis in 2001.


Box 3.1. Key elements of the CAP reforms affecting the arable crop sector Direct payments

x The “arable crops” payments for cereals, oilseeds and protein crops, as well as payments for flax and hemp, linseed, grain legumes and setaside land, will be replaced by a SFP.

x Support for rice will be raised from EUR 52 per tonne to EUR 177 per tonne. Of this amount, EUR 102 per tonne will be paid as part of the SFP. The remaining EUR 75 per tonne will be paid as a crop-specific payment.

x Durum wheat supplements in “traditional areas” will be reduced from EUR 344.50 per hectare to EUR 285 per hectare and incorporated into the single-farm payment. Supplements elsewhere will be abolished. A special premium of EUR 40 per tonne will be introduced from 2004-05.

x Area set-aside payments for arable crops will be maintained and existing set-aside obligations will be carried over to apply to arable production under the SFP payment scheme.

x Entitlements for the single-farm payment will be based on aids claimed in the 2000-02 reference period, with adjustments taking into account the increases in premiums or the introduction of new premiums as a result of the current reforms.

x The single-farm payment is to apply from 1 January 2005. However, under certain conditions, member states have the option of delaying implementation until 2007. Options for retaining coupled support

x Where member states believe that the application of the single-farm payment will lead to the abandonment of production, they have the discretion to retain part of the pool of money available for the singlefarm payments to use at the national or regional level in order to retain the current support system.

x The share of the single-farm payment fund that can be retained for this purpose varies by type of payment: up to 25% of arable payments (for cereals, oilseeds and protein crops), or up to 40% of the supplementary aid (for durum wheat). Conditions for single-farm payment

x Farmers in receipt of the full single-farm payment will be required to meet “cross compliance” criteria on environmental practices, food safety, animal and plant health and animal welfare standards. Farmers must also maintain their land in “good agricultural and environmental condition”. AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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x It will be compulsory for member states to apply the cross compliance provisions, with cuts in direct payments noncompliance with the relevant standards.

to

be

imposed

for

Specific voluntary environmental payments

x Member states or regions can also use an “envelope” of up to 10% of the SFP for environmental purposes, or for marketing and product quality improvement. However, these amounts have to remain within the above limits for coupled payments for each sector. Modulation of direct payments and rural development

x In order to finance extra funding for rural development, direct payments greater than EUR 5 000 per farm will be reduced by 3% in 2005, 4% in 2006 and 5% in 2007 and onwards. Intervention prices

x The cereals intervention price remains unchanged. However, the monthly increment in the intervention price, which is applied as the marketing season progresses, will be halved.

x The intervention price for rice will be cut by 50%, to EUR 150 per tonne. x Rye intervention will be abolished. In Japan, market price support, which is provided through administered prices, import barriers and supply management, is the dominant form of support. For rice, government purchase and selling prices apply to less than 5% of consumption and production. The government purchases this quantity as a national reserve from producers who follow the government’s guidelines for rice supply control. TRQs apply to rice, wheat and barley. A state trading body, the Ministry of Agriculture, Forestry and Fisheries, is responsible for importing rice under Japan’s WTO Uruguay Round Agreement on Agriculture (URAA) minimum-access commitment. Supply controls include the diversion of land from rice to other crops under the Production Adjustment Promotion Programme. Direct payments based on rice production are used to stabilise incomes under the Rice Farming Income Stabilisation Programme (RFISP). Budgetary support is also provided for irrigation and drainage, and the re-adjustment of agricultural land. Agri-environmental programmes include measures to encourage farmers to adopt sustainable agricultural practices that reduce fertiliser and pesticide use, and to improve the quality of soil with composting. Budgetary payments for farmers in hilly and mountainous areas aim to prevent the abandonment of agricultural land and to maintain environmental benefits.


Over the last five years, new policies have been introduced with particular significance for rice farming, and some controls over rice marketing were abolished in the 1990s. In 2001, the government announced a Priority Plan for a Stable Food Supply and Aesthetic Land Development, which calls for programme and resources to be directed towards productive sectors, while at the same time providing safety measures to address risks associated with structural reform. Key elements of this policy include a reorientation of support to align producer incentives with market signals while providing greater stability in, and a higher level of, farm income through direct payments. Detailed policies to implement these broad guidelines are to be announced in 2005, although there already appear to be some changes to the existing agricultural policies in the direction of market orientation and direct payments. Korea’s agricultural policy relating to arable crops is dominated by market price support and barriers to imports. The Agricultural and Rural Basic Law, which came into effect in January 2000, reinforces public investment in the infrastructure and technologies of the agricultural sector. In addition, direct payments to producers based on area have been increasing, but remain small relative to total expenditures on support. Arable crop policies in Mexico are based on market price support, mainly due to import barriers, and on direct payments. The latter are now provided as deficiency payments. Other programmes provide support for the transformation of wheat and maize areas to other crops, and for very small farms. Policies relating to oilseeds tend not to lead to interventions in markets to the same extent as occurs with cereal policies, reflecting the relatively small area devoted to oilseeds. However, the deficiency payment system was extended to include safflower in 2001. In Norway, market price support policy dominates. Following the revision of the crop policy regime in 2001, guaranteed producer prices for cereals and oilseeds were replaced by target prices at the wholesale, rather than producer, level. Area payments remain in place and in the case of cereals, the payment rate increased somewhat in 2002. In Switzerland, market price support, mainly through border protection, is the principal form of support to producers. The Federal Agricultural Law (AP 2002) agricultural policy reform programme provides the basic legislative framework governing agricultural policy for the period 19982002. This programme involves the elimination of all guaranteed prices (e.g. for bread wheat and rye) and consolidation of the previous direct payment programme into a uniform area payment. Area payments are based on historical entitlements, on condition that farmers comply with a set of environmental farm-management practice requirements. Arable crop AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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farmers also benefit from ecological direct payments, which are granted mainly in the form of payments based on input constraints and on condition that farmers comply with a specified set of environmental standards and farm management requirements. To compensate for the price reduction following the abolition of oilseed price and marketing guarantees in 2000/01, the government introduced payments per hectare of oilseeds. In Turkey, arable crops are mainly supported by market price support (purchasing prices are fixed by co-operatives in the case of oilseeds), import barriers and state enterprises. Since 2001, administered output prices and input subsidies are in the process of being eliminated and replaced by a budgetary payment granted per hectare to all farmers. In the United States, the 2002 Farm Security and Rural Investment (FSRI) Act provides the basic legislation governing farm policy for the period 2002-07.3 The main policy instruments for the arable crop sector include support-price provisions, operating through non-recourse marketing loans, Direct Payments (DP) for crops and Counter-cyclical Payments (CCP). The DP replaced the Production Flexibility Contract Payments (PFCP) provided under the 1996 FAIR Act to programme crops (wheat, feed grains, rice and cotton – to which soybeans, other oilseeds and peanuts have since been added). The CCP replaces the ad hoc Market Loss Assistance Payments (MLAP) provided to farmers during the 1998-2001 period, with support that varies counter-cyclically with market prices for farm programme crops. While PFCP and DP are based on pre-determined rates and past production, the CCP is based on a formula that includes current market prices and past production. Input subsidies are also provided, through interest rate or fuel tax reductions and subsidies to encourage greater insurance coverage on the part of producers. Trade promotion programmes, food aid and export credit guarantees also provide some assistance to arable crop producers.

3.3.

Levels of support The Producer Support Estimate (PSE) and related indicators are the principal tools used by the OECD for measuring and evaluating policies. These indicators provide estimates of the annual level and composition of support to agriculture.4 The level of support to farmers in the OECD area as a whole has declined over the long term, although it remains unchanged in recent years (Figure 3.1). There is wide variation in the levels of support and protection across commodities for which the PSE is calculated. Support for grains and


oilseeds has exhibited relatively large annual fluctuations, while support for rice has generally remained stable since 1986.

Figure 3.1. Evolution of Producer Support Estimate, by crop, 1986-2003

% 90 80 70 60 50 40 30 20 10

19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03

0

Rice

Wheat

Maize

Other grains

All commodities

Oilseeds

Source: OECD PSE/CSE database, 2004.

For the three-year period 2001-03, USD 62 million, or about a quarter of the USD 238 billion transfers from consumers and taxpayers to agricultural producers, was allocated to producers of arable crops, including wheat, coarse grains, rice and oilseeds (Table 3.1). The size of the PSE relative to gross farm receipts (%PSE) for arable crops (39%) was above the average of the whole agricultural sector (31%).


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Table 3.1. Support to arable crop producers in the OECD area (million USD) 1986-88

1992-94

1995-97

2001-2003

120 663

137 642

157 377

119 398

Producer Support Estimate (PSE) Market Price Support Payments based on output Payments based on area planted(1) Payments based on historical entitlements Payments based on input use Payments based on input constraints Payments based on overall farming income Miscellaneous payments

74 874 48 547 7 781 11 789 57 5 035 1 221 392 52

75 824 48 677 1 726 16 782 554 5 185 2 528 369 3

69 328 35 370 1 311 18 926 4 766 5 427 3 150 476 -98

62 015 22 843 4 180 19 978 7 022 4 291 2 838 845 18

Percentage PSE Producer Nominal Protection Coefficient (NPC) (Arable crops PSE/ All commodities PSE)%

51 2 31

46 2 27

36 2 27

39 2 27

Total value of production

Note: Arable crops include wheat, maize, other grains, rice and oilseeds. 1. This category provisionally includes the US counter cyclical payments. Source: OECD PSE/CSE database, 2004.

Reflecting overall trends, the average support (%PSE) levels in 2001-03 was lower than in 1986-88 for all arable crops, except rice (Figure 3.2, Annex Figures 3.1A, 3.2A, 3.3A and 3.4A). For individual arable crops, support to producers of rice, other grains (e.g. barley, oats) and wheat was higher than that observed for all commodities combined (i.e. total agriculture). With 78%, rice remained the commodity with the highest share of farm receipts derived (directly or indirectly) from government support and of all arable crops it also received the largest absolute PSE, with USD 23 billion. Oilseed producers received the lowest support, on average, with about USD 7 billion, or 24%. Although rice is produced in relatively few OECD countries, it remains the most supported and protected agricultural commodity in the OECD area, with more than four-fifths of farm receipts attributable to agricultural policy. In 200103, prices received by producers and paid by consumers were, on average, more than four times higher than the world price for rice (Figure 3.3). The OECD aggregate rice PSE is largely dominated by Japan and Korea, two of the three main rice producers in the OECD area. While these two countries have %PSEs for rice of 84% and 78%, respectively, support to Australian rice producers totals 6% of gross farm receipts. The support levels for rice in the United States (46%), the EU (37%) and Mexico (35%) are closer to the average rate of total support to all agricultural producers in the OECD (31%).


The oilseeds sector has traditionally been less directly affected by government intervention than other agricultural sectors, partly because of agreements negotiated earlier under the GATT. However, policies designed primarily to support the cereals sector have often had a significant indirect influence on the oilseeds sector. In general, the share of support in total farm oilseed receipts declined from over 25% in the late-1980s, to under 20% the mid-1990s, and then increased to over 30% as governments responded to low prices by raising levels of support. The increase in support throughout the late1990s until 2001, may have been triggered automatically by existing policies, such as deficiency payments in Japan, or gains associated with the loan programme in the United States, as well as being supplemented through discretionary policies introduced by policy makers. Figure 3.2. Producer Support Estimates by commodity, 1986-88 and 2001-03 (OECD average as % of value of gross farm receipts) Rice

Other grains

Wheat

All commodities 2001-03 1986-88

Maize

Oilseeds

0%

10%

20%

30%

40%

50%

60%

70%

80%

Notes: Products are ranked according to 2001-03 levels; All commodities = whole agricultural sector. Source: OECD, PSE/CSE database, 2004.

The OECD aggregate conceals considerable differences across member countries. There are large differences in the levels of support and protection among OECD countries, reflecting different historical uses of policy instruments and the varying pace and degree of progress in agricultural AGRICULTURE, TRADE AND THE ENVIRONMENT – THE ARABLE CROP SECTOR – ISBN-92-64-00996-5 © OECD 2005

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policy reform. For grains, the %PSE ranges from more than 85% of gross farm receipts in Japan, to negative values (implicit taxation) in Hungary. For the 2001-03 period, Australia, the Czech Republic, Hungary, New Zealand and the Slovak Republic have relatively low %PSEs, with Japan, Korea, Norway and Switzerland exhibiting the highest average %PSEs (Table 3.2). Over the 2001-03 period, two countries/regions account for more than three-quarters of total OECD support for the corresponding crop: for wheat producers, the EU contributes approximately 60% and the United States 26%; for maize producers, the EU contributes just over 20% and the United States almost 60%; for rice producers, 66% of the OECD total is due to support in Japan and one-third to support in Korea; for oilseeds, the United States contributes 60% and the EU almost one-third. Figure 3.3. Producer Nominal Protection Coefficient (NPC) by commodity

Rice

All commodities

Oilseeds

Other grains

2001-03 1986-88

Wheat

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Notes: NPC = is a measure of market protection defined as the ratio between the average prices received by producers and border prices. Products are ranked according to 2001-03 levels; All commodities = whole agricultural sector. Source: OECD, PSE/CSE database, 2004.


Table 3.2. Ranges of %PSE in OECD countries by crop, 2001-03

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