oversight

Alternative Agriculture: Federal Incentives and Farmers' Opinions

Published by the Government Accountability Office on 1990-03-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United   States General       Accounting       Office

                  Testimony
GAO

For Release         Alternative          Agriculture:
on Delivery         Federal       Incentives            and   Farmers'    Opinions
Expected at
10:00 a.m.
Thursday,
March 15, 1990




                    Statement    of
                    Carl Wisler,     Director    for Planning
                       and Reporting
                    Program Evaluation        and Methodology                 Division
                    Before the
                    Subcommittee  on Department Operations,
                      Research, and Foreign Agriculture
                    Subcommittee  on Conservation,   Credit,
                      and Rural Development
                    Committee on Agriculture
                    House of Representatives




GAO/T-PEMD-90-9                                                                  GAOForm160(12/87)
                                     /
Mr.   Chairmen          and Members of the                 Subcommittees:

          It    is a pleasure         to be here            today     to discuss          our recently
completed         study     of federal          farm       programs        and how they           contribute
to,   or inhibit           the     use of,      alternative           farm production              methods.1
Interest         in alternative             agriculture           has grown substantially                      in
recent         years    in response          to increasing            evidence         of health,
environmental,             and economic           problems          related      to conventional
agriculture.              A basic      strategy         of alternative              agriculture           is the
reduction         in the      use of nonrenewable                   resources,         particularly
agrichemical            inputs,      through         the       use of diverse          crop     rotations,
integrated         pest     management,           mechanical          weed control,             and other
practices.             Many researchers,              farmers,        and consumers             believe         that
alternative            agriculture          practices           can help      lower     health        risks,
protect         farm    resources,          reduce      environmental            damage,        and improve
long-term         farm profitability                 and competitiveness.


          Although        a large      number of farms               in the United             States      use
one or more alternative                     practices           in conjunction          with      their        more
dominant         use of conventional                 practices,         few farms         have fully
adopted         the goals         and practices            of alternative             agriculture.
Several         hypotheses         have been advanced                as to why this             is so.
Farmers         may perceive         that      alternative           agricultural           practices


1The full         details    of this work are presented  in our report
entitled         Alternative    Agriculture: Federal Incentives  and Farmers'
Opinions,         GAO/PEMD-go-12 Washington,     D.C.: February 1990).
                                                           1
would       lower        crop        yields          and profits.             Lack of information                      about
workable          alternatives                  or simple         reluctance            to change might                  also
hinder        their       adoption.                  Farmers      may also         lack       markets         for      some
alternative              crops,          the     financial            resources         to change labor                  and
machinery,              or the         skills         needed      for     more complex            management.
Finally,          since         government             farm     policies         significantly                influence
farm       profits,            credit,          and insurance             availability            and the
development              and transfer                 of research            information          to farmers,
these       policies            may--intentionally                      or unintentionally--
institutionalize                     the      use     of conventional             practices             and contribute
to the        reluctance               of farmers             to adopt        alternatives.


           Let    me     begin         by briefly             highlighting          the key         results            of our
study.           We found            that       federal        farm programs                do provide         strong
incentives              for     farmers             to grow program             crops        and to specialize                  in
them year             after         year.           These incentives              reinforce         farmers'             use of
conventional                  farming          practices         and make it            economically                difficult
for     them to adopt                  alternative             practices.              If    the Congress               wants
to encourage                  the    adoption          of alternative              agriculture,               then       the
federal          farm programs,                     and particularly              the crop        acreage             base
system,          will         have to be modified                     so that      farmers        have greater
flexibility              to make production                      changes        without         suffering             undue
financial             consequences.                   Yet,     because        many other          factors             such as
market        prices           and agronomic                 conditions         also        influence         farmers'
crop       selection             and production                practices,          changing         the       farm
programs           alone         may       not be sufficient                 to bring         about      any

                                                                  2
significant          increase         in the        adoption        of alternative          agriculture.


         Before      turning        to any further             discussion         about     farm program
influences,          let       me first      address       some of the key concerns                   about
conventional            agriculture          that      have been raised            and provide           an
overview       of the characteristics                     of alternative           agriculture.


CONVENTIONAL AGRICULTURE


         Agriculture            in the United           States       is highly         productive.             Food
supplies       are abundant,               of high      quality,        and relatively
inexpensive.               Farmers        today     produce        roughly     twice      as much per
acre     as they        did     in the      1940's.        These productivity               gains     were
spurred       by increased            farm specialization,                   mechanization,          use of
synthetic         fertilizer          and pesticides,               and other      technological
innovations.               While     farm labor         decreased        by 56 percent            between
1960 and 1987,                agrichemical          use on major         crops     rose 244 percent.
Despite       the     impressive           productivity            of our nation's          farms,
several       health,          environmental,           and economic           challenges         face
conventional            agriculture           today.


Health


         Concern        is growing           among consumers            that     harmful      residues
from agrichemicals                 are appearing              in the    food they         eat and the
water      they     drink.         Although         the National         Research         Council        has

                                                          3
suggested          that      the pesticide              residues             consumed in the average
diet      do not make a "major                   contribution                 to the overall                 risk     of
cancer      for     humans,"          many agrichemicals                      have been shown to cause
tumors      and other          health         problems              in laboratory             animals.              Because

knowing      precisely             how dangerous               such agrichemicals                      are to human
health      is quite          difficult,            these           fears     are likely              to persist.


          Health      concerns         can create              economic          risks         for     farmers.                 If
consumers          perceive         that      an agrichemical                   is harmful,              purchases                   of
treated       crops        can fall         sharply,           as they          did     with         Alar-treated                    and
other      apples         in early         1989.        And,         if     perceptions           are borne           out             by

facts--     for     example,          when an agrichemical                       is shown to                cause

unreasonable              health      risks        --   it     can be banned for                      use    by     the
Environmental              Protection          Agency.               Thus,      whether         food        safety
concerns          are justified             or not,           farmers         who rely          on agrichemicals
are at economic               risk.         They may face                   a loss      of productivity                    if
agrichemicals              become unavailable                       for     use or a loss              of income                if
they      cannot      sell      products           treated           with      them.


Environment


          Conventional             agriculture               has contributed                  to environmental
problems          involving         soil      erosion          and water             pollution.              Intensive
farm      production          methods         and the          cultivation              of highly            erodible
lands      have contributed                 to the           loss         of some 3 billion                 tons     of soil
each year.            Estimates            of the       farm-related                  costs     of soil            erosion

                                                               4
range     as high         as $18 billion             per year.


         Agriculture         is also        a primary             nonpoint         source          of water
pollution,        contributing             up to 50 percent                  of all          the     suspended
sediments       and 50 to 70 percent                    of the nutrients                     found      in surface
water      supplies.         Sediment         and nutrient                pollution           obstruct
waterways,        limit      recreational              use,       increase         water       purification
costs,       and harm plant            and animal              life,      including           fisheries.
Estimates       of the total             economic         costs          associated           with
agricultural           surface        water        pollution            range between               $2 billion         and
$16 billion           per year.          Groundwater              contamination               from
agricultural           pesticides          has appeared                 in 26 states,               and the U.S.
Department        of Agriculture                (USDA) estimates                  that       46 percent          of all
counties        in the United            States        contain           groundwater               susceptible         to
contamination             from agrichemicals.


Economics


         The long-term             profitability               and competitiveness                     of farming
in the       United       States      are uncertain.                    Average       real     net farm
income       was 25 percent             lower       in the         1980's     than       it        was in the
1960's,        even though          government           spending           on farm income
stabilization             has been twice              as high.            According           to USDA
estimates,        about      one third             of a 11 farm operators                     were st ill         in
questionable           economic         health        at the end of 1988,                     because       they       had
marginal        income,      marginal           solvency,              or both,       even though           the

                                                          5
"farm      crisis"           of the mid-1980's                  was over.             One key reason               why net
income declined                    is that       farmers        found       it     necessary           to spend more
of their          farm revenue               on variable              production            costs.           Farm exports
also     fell      sharply           in the       1980's        and,      although           they      increased           in
1987 and 1988,                it     is uncertain              whether           additional           lost     market
shares          can be recaptured.


ALTERNATIVE AGRICULTURE


         Concerns            about      conventional                 agriculture            have focused
attention          on alternatives                    that     attempt           to promote           consumers'           and
farmers'          health,           maintain          environmental               stability,           enhance
farmers'          profitability,                 and produce             the      agricultural               goods that
meet society's                needs.           Proponents             of such an "alternative
agriculture"               contend        that        by using         less       synthetic           fertilizer           and
pesticide,            farmers          can reduce             production            costs      and thereby
increase          profits.             Reducing          agrichemical               use can also              decrease
pollution,            thus         improving          water      quality,           while      easing         consumers'
and farmers'               health       concerns             and problems.              Furthermore,
advocates            of alternative               agriculture               believe         that      farm
productivity               can be maintained                   even with            reduced          agrichemical
use.        Alternative               agriculture             can best           be illustrated               by
contrasting            its         practices          with     those      of conventional                    agriculture
regarding            the     four      key farm management                       decisions:           crop      choice,
pest     and weed control,                     soil      fertility,              and soil          cultivation.
(See table            1.).

                                                                 6
Table       1:   Farm Practices

Agricultural           Conventional    practice           Alternative   practice
component
Crop choice            Specialize;  plant most            Increase   diversity,   use
                       profitable  crop on same           multiyear    rotations,
                       ground year after  year            and develop integrated
                                                          crop and livestock
                                                          operations

Pest and weed          Apply synthetic                    Use integrated      pest
control                insecticides,   herbicides,        management, natural
                       and fungicides                     predators,    resistant
                                                          crops, crop varieties
                                                          well-suited     to agronomic
                                                          conditions,    crop
                                                          rotations,    mechanical
                                                          cultivation,      and
                                                          intercropping

Soil                   Apply synthetic                    Use crop rotations,
fertility              fertilizer,     especially         legumes to fix nitrogen,
                       nitrogen    products     such as   and livestock   manures
                       anhydrous ammonia and urea


Soil                   Cultivate highly      prepared     Maintain   protective
cultivation            seed beds                          cover on soil and plow
                                                          to minimize    soil erosion
                                                          and loss of soil
                                                          moisture




                                             7
         These practices                 are distinctly                 different,             although         farms
often      blend       conventional             and alternative                   practices.             Farms,
consequently,              are more or less                     conventional             or alternative,
rather       than      simply        being      one or the              other.           They are usually
labeled        "conventional"                or "alternative"                    for     their      main
tendencies,            not because            they       fall        completely           within       either
category.


          Because        conventional             and alternative                      farm practices            overlap,
moving       from one to the other                       may not         necessarily               require
dramatic           changes         in techniques.                 For example,              carefully           targeted
applications             of pesticides               can help           control          insects        and diseases
while       reducing        the      use of agrichemical                      inputs.            Growing        legumes,
using       manure efficiently,                   and following                  the guidelines              of regular
soil       tests     can enhance             fertility               and reduce          the     need for
synthetic           fertilizers.              Broadening               crop      rotations          to include          a
variety        of cash crops,                legumes,            and hay can also                  improve       soil
quality,           cut down on erosion,                     and break            insect        and disease
cycles.            Using     different          cultivation               techniques             and cover        crops
to control           weeds can limit                 the        need to use herbicides.                         These are
all      alternative          techniques             that        lead     to significant                reductions          in
agrichemical             inputs.


FARM PROGRAMINFLUENCES



                                                                 8
        Federal          policy          has traditionally                    had an important             influence
on the        agricultural               sector       by supporting              farm     income      and
regulating          production.                   Several      proponents           of alternative
agriculture             believe          that      federal       policy         has been a key factor
encouraging             the use of conventional                          farm practices             and
discouraging             the      use     of alternative                 farm practices.              Of
particular          concern             to critics           of federal          policy          are a number of
different         incentives              embodied           in two types           of programs:            commodity
price         and income          support          programs          and farm credit               and crop
insurance         programs.


Commodity         Price        and Income Support                       Program      Incentives


         Proponents            of alternative                 agriculture           argue that            the     farm
programs         give      farmers          incentives             to


         --     grow only          a     small      group      of selected              program      crops,
         --     grow the          same program               crops       year     after     year     instead         of
                  planting              diverse       crop     rotations,
         --     overproduce              program        crops,          and
         --     plant      program          crops      on land           best    left      unfarmed.


         Incentives            to Grow Only Program                       Crops


         The farm          programs              support,      to varying           degrees,         the
production          of 16 commodities.                        By supporting               only     these        crops,

                                                               9
the     farm programs           offer        incentives            to farmers          to devote          more
resources          (land,      capital,        and so on) to the production                              of
supported          crops      and less        to nonsupported                crops.           Program         crops,
especially          those      given      higher        levels       of support,            have tended               to
displace          nonprogram         crops,         or program            crops     receiving         less
support,          in areas      where the            crops        could     be substituted.                   The
acreage       planted         with     3 of the most important                       program        crops
(corn,       soybeans,         and wheat),             for    example,            increased        from about              45
percent       of total         crop       acreage          in 1960 to almost                60 percent           in
1987.        However,         the     farm programs               alone     have not been
responsible            for    the changes            in crop        acreage         uses.        Improvements
in crop       yields         and better        market         prices        have also          been important
influences.


         Incentives           to Grow the Same Crops Year After                                Year


         Program        support        payments         depend        on a farmer's              "crop        acreage
base,"       and this         base is determined                   by the 5-year              moving          average
of acres          planted.           Farmers        thus     have incentives                to plant           program
crops      even when alternative                     crops        have higher          current        returns,             if
expected          future      returns        for     program        crops         are higher.            Expected
future       returns         from crop         programs           are also         capitalized           into       the
value      of the       farmland.            Thus,      the       farm     programs         can make expected
returns       to program             crops     higher         and more stable               than    alternative
crops      with      regard     to both            current        and future          returns.



                                                             10
          Incentives              to overproduce                program        crops


          The farm programs                     can also         encourage         increased             production
per     acre       of these            crops.          The incentives            to boost           per-acre
production           correspond              to three           program        features:          deficiency
payments,           nonrecourse              loans,       and required                acreage       reductions.


           Before         1986,        farmers         received        deficiency             payments          based on
their       crop      "program"            yields.          Farmers           could      increase          their
deficiency           payments            by increasing                these     program          yields.           The
ability           to increase             program        yields        by maximizing              actual          yields
provided           clear         incentives            to use more agrichemical                         inputs.           The
Food Security                  Act of 1985 placed                  a cap on program                 yields,           thus
significantly                  reducing         this     incentive.             But because              the      Congress
may reverse               this     policy,         as farmers            are aware,             there      are some
continued           inducements              to farmers            to boost           their      actual         yields.


           Since         nonrecourse            loan     payments         are made on current                      actual
yields,           they        may induce         farmers          to increase            production             to obtain
a larger           loan.          If    market         prices      for    a crop         are below          the       loan
rate,       a farmer             can forfeit            the crop         to the government                  and keep
the       loan.          It    has generally             been assumed that                     whenever         the      loan
rate       is above the market                     price,         marginal        returns         are raised               and
farmers           have incentives                 to apply         more inputs                to boost         yields.


           Acreage            reduction         provisions            may also          contribute          to the

                                                                 11
intensity        with      which         land     is farmed.            Since     farmers         are required
to hold       some of their               crop      acreage       base out of production                        to
receive       farm program               benefits,        they     may farm their               remaining
acreage       more intensively                   to make up for             the production               lost        from
idle     acreage.          Furthermore,               since      farmers      may have less               land
under       production,           they     may be able            to concentrate            greater
available        resources          toward           increasing         production.


         Incentives         to plant             program       crops     on land         best     left      unfarmed


         Program        support          may also        have encouraqed                farmers      to produce
program-supported                 crops         on marginal        lands,        such as wetlands                    or
land     susceptible             to high         rates    of erosion.             The sodbuster                 and
swampbuster         conservation                 provisions        created        by the Food Security
Act of 1985 restrict                     farmers'        opportunities            to cultivate              fragile
lands.        Placing        land        in the Conservation                 Reserve       Program          also
reduces       the total           acreage         under       production.              However,      highly
erodible        land      that     was previously                entered        into     the programs                can
be kept       under       production,             although        the    Food Security             Act of 1985
requires        farmers          to develop           conservation           compliance           plans         on such
acreage.


Farm Credit         and Crop Insurance                     Program       Influences


         Proponents         of alternative                 agriculture           claim     that      farm credit
and insurance             opportunities               may be limited             for     farmers         who use

                                                           12
alternative            farming         practices.             The    basis        for       this    assertion            is
that     farm      lenders       and insurers                are more likely                 to place        greater
emphasis        on the         use of conventional                    farm practices                and are less
likely       to invest          in or provide                protection           for       alternative
practices.             Lenders         concerned          about      an applicant's                 expected           cash
flow     and ability            to repay         a loan        often          require        detailed
information            on past         crop    production             yields         and farm management
input       practices.           An applicant                who does not have a well-
established            production            history         or does not             use     generally           accepted
conventional             farm practices                may    be considered                 a higher         lending
risk,       thus     requiring           more stringent               loans.


         Similarly,            farm      practices           play     a role         in the        way crop
insurance          premium           rates    are structured                  and insurance             claims         are
settled.           The crop           insurance         program         will       not pay damages on any
crop       acreage       if    the     farming         practices             being      used are not             in
accordance           with      the     farming         practices--usually                    conventional
ones--used           to establish             the premium             rates.


         Proponents            of alternative                agriculture             also      claim      that
credit-lending                policies        work against                  the   adoption         of alternative
practices          because        many lenders               can require             that      applicants
participate            in the         farm commodity                programs         as a condition               for
loan       approval.           Therefore,           farmers          wanting         to switch            from program
crops       to alternative               crops      may      find      it      harder       to qualify           for     a
loan.         For producers              of alternative               crops,         the      availability              of

                                                              13
crop      insurance          can also         be a limiting               factor.         Although          insurance
from the          Federal        Crop Insurance               Corporation            is available               on more
than      40 different             crops,       insurance            on these        crops         is not
available           in every        county       and,       for      many other          crops,       federal        crop
insurance           is not available                 at all.


FARMERS' OPINIONS


          Rather         than    conclude        that        farm program             incentives           are the
unique       factors         involved         in the        adoption        of alternative                 farming
practices,              we decided       to query            farmers       directly          on their
opinions          about     the     farm      programs            and alternative             agriculture.                We
asked      a sample          of 74 farmers                a set of structured                  questions          about
factors          that     influence          their        planting        decisions,          the     strategies
they      believe         are important              to    reduce        farm    risk,       the
sustainability               of their         farms,        the      influence         of the        farm
programs,           and the possible                 barriers         to the adoption                of
alternative              production          practices.            (See appendix             I.)      Our survey
results          are presented           to help           answer        three      questions:            (1)    What
are these           farmers'        opinions          about        the    issues?        (2) How strongly                 do
they      feel      about       particular           issues?         (3) Are there             differences           of
opinion          among different              types        of farmers?


          Although          we visited          a variety            of different            farms,        our
analysis          of the        farm operations               showed that            they     could        be
usefully          divided         into   two groups:               "specialized"             and "diversified"

                                                             14
farms.        We defined             specialized              farms      as those         that         have a high
percentage          of their          farmland          concentrated              in a      small        number of
commodity          crops,       while        diversified              farms      grow greater              numbers of
crops      in relatively              smaller          portions.            By distinguishing                     between
relatively           specialized             and diversified                   farms,      we were able                to
examine       more closely              key claims             put      forth     by proponents               of
alternative           agriculture            --that          the     federal       farm programs              provide
incentives           for     farmers         to become and remain                       highly         specialized             in
program       crops         and that         such specialization                       leads      farmers         to
choose       conventional             farm      practices.


Factors       Influencing             Planting           Decisions


          Decisions          about      what crops             to grow heavily                  influence          the
kinds      and quantities               of inputs             that      are used to control                   weeds,
insects,       diseases,             and soil          fertility.               We asked farmers                  to rate
10 possible            factors        that      might         influence          their         decisions          about
what crops           to plant.           As shown in table                      2, farmers             responded            that
the      federal       farm programs,                 particularly              "the     desire         to keep         my

crop      acreage          base,"     have a large                  influence          on their         planting
decisions.            The farmers             also       believed,             however,         that      other
factors       such as experience                      with     the      crop,      availability             of
markets,           and crop         prices      are quite              important.              The specialized
group      of farmers           gave greater                 importance          to the crop             acreage            base
factor       and less          importance             to prices           or markets;             the     diversified
group      of farmers           gave greater                 weight      to experience,                 markets,            and

                                                               15
crop   prices   in determining   what to plant.




                                      16
Table    2:    Factors     Influencing         Planting      Decisionsa




Factor                                                       Farmers      interviewed
                                                      All      Specialized        Diversified


Desire     to keep crop         acreage   base        4.09             4.26             3.91
Experience      with     the    crop                  4.00             3.60             4.48
Availability      of markets                          3.78             3.46             4.12
Farm program      benefits                            3.76             3.77             3.74
Need to rotate         crops                          3.76             3.80             3.72
Crop prices                                           3.74             3.37             4.08
Availability       of equipment                       3.26             3.03             3.49
Availability      of labor                            2.87             2.62             3.11
Need to produce          feed                         2.83             2.63             3.03
Conservation       compliance                         2.55             2.29             2.85


al   = no influence:            3 = moderate      influence;       5 = large      influence.




                                                 17
Ways To Reduce Farm Risks


         We asked the            farmers         about     the    strategies         they     choose to
reduce      the economic            risks        they     face.      As shown in table                 3, the
farmers      strongly           believed         that     participating           in the      federal          farm
programs      to get        at least            a fixed     minimum price            for     their      crops         is
an important            way to reduce             the     economic        risks    of farming.             To a
lesser      degree,       the      farmers        also     thought        that    diversifying           their
operation        with     crops         and livestock             is a good way to reduce                  risks.
The specialized                farmers,         however,        viewed     diversification              as a
less-important            strategy,             whereas      the more diversified                    farmers      we
interviewed        considered              it    to be very        important.              Fewer than          half
the   farmers      favored          buying        crop     insurance         to reduce         risk.
Furthermore,            only     a small         percentage        of these        farmers           considered
applying       extra       fertilizer            or pesticides            to their         crops       as a good
way to reduce            risk.




                                                           18
Table   3:     Ways to Reduce Farm Riska


                                        All        Specialized        Diversified
Response                           Yes
                                   --         No       Yes
                                                       --    No            Yes
                                                                           --       No
Enter   farm    programs           65          6       33         2        32        4
Diversify      with   crops        57         14       24        11        33        3
Diversify      with   livestock    43         28       19        16        24       12
Buy crop      insurance            31         40       20        15        11       25
Use "extra"      fertilizer        11         60        2        33          9      27
Use "extra"      pesticide          5         66        2        33          3      33




aNumbers are numbers of respondents.




                                     19
Influence          of the Farm Programs                      on Farmers'              Behavior


           We also         asked the            farmers       about        the     influence        of federal
farm programs              on their         actions.              As shown in tables                4 and 5, the
farmers         responded         that      participating                 in the       farm programs
encourages          them to grow only                   program           crops       and makes it             difficult
to switch          crop     rotations,            somewhat          problematic           to grow nonprogram
crops,         and easier         to get         credit.           The farmers           did      not believe
that     the     farm programs              had much influence                     on other        farm
practices,             such as their             use of agrichemicals                     or crop        yield
goals.          The specialized                 farmers         believed         more strongly             than          the
diversified             farmers      that        the    farm programs                 make it      difficult               to
switch         rotations         and grow nonprogram                      crops.


              In subsequent           questions,             we asked the              farmers      about             their
interest         in planting             other      crops.              Fifty-seven           percent      indicated
that     they      had considered                planting          some other           crop.       Most of these
farmers         considered          planting           either       more of their               existing          crop
mix or more of some other                         program-supported                    crop.       The farmers
provided         a variety          of reasons             for     not being           able     to plant          other
crops,         such as the weather,                    the       lack     of markets,           and the          lack         of
flexibility             in the      farm programs.                      Seventy-five           percent      of the
farmers         said      they    would         consider          growing         some other        crop         if      their
existing         program         crop     acreage          bases         were protected.                Several            of
these         farmers      stated        that     the      farm programs               should      provide             more

                                                             20
flexibility   to enable     them to switch   crops   without   loss   of
established   acreage     bases.




                                       21
Table      4: "Does Participating         in the Farm Program            Encourage     You
to -----7~*a.


Behavior                                      All         Specialized       Diversified


Grow only          program    crops            2.18            2.14             2.22

Specialize          in one crop                3.22            3.00             3.42

Get crop        insurance                      3.31            3.00             3.63

Use more fertilizer                            3.33            3.23             3.43

Use more herbicide                             3.43            3.31             3.54

Grow best          crop   rotation             3.44            3.74             3.16

Expand farm size                               3.51            3.63             3.40

Produce      higher       yields               3.60            3.60             3.59

Use more pesticides                            3.63            3.51             3.73

Raise      crops     and livestock             3.69            3.63             3.75

Borrow      more                               3.94            3.86             4.03



aFarmers        were asked whether       participation         in the    farm program
encouraged          them to engage in the          behaviors   listed.      Responses
ranged       from 1 = strongly        agree   through     3 = no effect      to 5 =
strongly        disagree.




                                              22
Table       5: "Does Participating            in the Farm Program           Make It   -----?"a


Behavior                                                All        Specialized    Diversified


Difficult       to switch     rotations                  1.94             1.63            2.25
Easier       to get credit                               2.17             2.31            2.03
Tough to grow non-program                 crops          2.41             2.00            2.81
Tough to raise         crops/livestock                   3.13             3.09            3.17
Easier       to grow one crop                            3.30             3.06            3.53
Important       to expand                                 3.43            3.40            3.46
More important         to get    insurance                3.51            3.51              3.50
Less important         to use fertilizer                 3.77             3.86              3.69
Less important         to use pesticide                   3.90            3.88              3.91
Less important         to use herbicide                   3.97            4.03              3.92


aFarmers       were asked whether           participation          in the    farm program
made these        behaviors     likely.           Responses      ranged   from 1 = strongly
agree       through   3 = no effect         to 5 = strongly          disagree.




                                                   23
Farmers'       Opinions         About Sustainability


        We asked the            farmers         what they          thought     about       their      farms'
prospects        into        the foreseeable            future.         Ninety-seven               percent     of
the    farmers        said     they     intended        to continue           planting        their      current
crop    mix and expected                their     use      of agrichemical             inputs,
environmental            conditions,            and farm economics                 to be    similar          to the
present.         As illustrated             in table         6, the        farmers       were somewhat
optimistic           about     their     crop     yields      and farm profits                in the future
but    saw    only      minimal        changes     to      input     use     and    environmental

conditions.




                                                        24
Table     6:       Effects      of Continuing   Current    Crop Rotationa


Effect                                          All        Specialized       Diversified
Input
         Herbicide                              3.11             3.11                  3.11

         Pesticide                              3.11             3.20                  3.03

         Fertilizer                             2.96             3.00                  2.92
Environment
         Erosion                                3.23              3.40                 3.06

         Weed problems                          3.13              3.11                 3.14

         Water quality                          3.06              3.00                 3.12

         Pest problems                          3.01              3.00                 3.03

         Soil      fertility                    2.63              2.66                 2.60

Economics
         Profits                                 2.61             2.65                 2.57

         Crop yields                             2.31             2.29                 2.34



aEffects        ranged         from 1 = large   increase   through       3 = no change to
5   = large        decrease.




                                                25
Barriers             to the Adoption             of Alternative              Practices


         We asked the              farmers        to   identify         factors        that      are barriers
to the        adoption         of alternative              agriculture.               As seen in table              7,
the    farmers           identified        a great         many barriers              that      make it
difficult             to adopt        alternative          agriculture.               The farmers
responded             that   the      federal       farm      programs        provide          barriers        to
alternative              agriculture,            yet    the     farmers       also      strongly          agreed
that        there      are many other             barriers         not directly              related       to the
federal         farm programs.                  The farmers         believed          that      adopting
alternative              agriculture            may require         greater         management            skills    and
cause        greater         weed problems,             lower      yields,          and lower          profits.
The lack             of farm labor,             and the       opinion        that     their       work load         may
increase,             also    appeared          to discourage           farmers         from embracing
alternative              practices.             The farmers         stressed          that      many
alternative              practices        might        be technically               feasible       on their
farms,         but     for    a variety          of reasons         they      believed          they      were
impractical              or too costly.




                                                              26
Table      7:     Barriers              to the Adoption         of Alternative        Agriculturea
Potential         barrier                                       All     Specialized        Diversified
Greater         management              is required             1.61          1.63              1.59
Yields       may decline                                        1.66          1.56              1.76
Weeds may increase                                              1.76          1.86              1.66
Profits         may decline                                     1.89          1.80              1.97
Farm labor             is unavailable                           1.89          2.06              1.71
Need to maintain                     crop
          acreage            base                               1.90          1.80              2.00
Work load         may increase                                  1.96          2.09              1.82
Current         system          works well                      1.99          2.09              1.88
Lack of information                                             2.11          2.14              2.09
Loans are more difficult                          to get        2.13          2.23              2.03
Loss of federal                     benefits                    2.39          2.54              2.24
Markets         are not             available                   2.43          2.40              2.46
Rotations         are not allowed
          in program                                            2.49          2.23              2.74
Livestock             will      be needed                       2.53          2.26              2.80
Alternative              techniques             are not
          allowed            on rental          land             2.89         2.47              3.26
Crop insurance                  may be more
          difficult             to get                           2.77         2.94              2.60
No vacations                 will      be possible               2.91         3.34              2.45
Neighbors             "won't         understand"                 3.27         3.29              3.26
aBarriers             ranged         from l= strongly           agree   through      3 = feel   neutral
to 5 = strongly                     disagree.

                                                           27
Obtaining         Credit        and Crop Insurance


         In our interviews                with     farmers,           we asked them if                 lenders         and
insurers         inquired        about     their         farm practices               and participation                 in
the     farm commodity            programs.              Forty-seven            percent          of the       farmers
said     that      lenders       had asked them about                       participation             in the      farm
programs         but only        10 percent          said        lenders        inquired           about      farm
production          practices.            Eighteen          percent          of the        farmers,        though,
said     that      lenders       recommended they                  participate             in the      programs         in
order      to qualify           for     a loan,      but        virtually         no farmers           said     that
lenders         suggested        that     they     change their               farm practices.                  The
farmers         overwhelmingly            agreed         that      farm practices                 and commodity
program         participation            are not a consideration                        when applying             for
crop      insurance         or in settling               insurance           claims.


SUMMARY


         Our farmer           interviews           support         the      claims      made by proponents
of alternative              agriculture           that      there        are strong              incentives       to
grow only          program       crops      and to keep growing                      the    same program
crops      year     after       year.      The farmers               also      agreed       that
participating               in the      farm programs              makes it          difficult          to grow
nonprogram          crops       and difficult             to switch            crop     rotations.             The
desire      to both maintain                program         crop       acreage         bases and receive
program         benefits        influenced          farmers'          decisions            about      crop

                                                           28
choices.


         By maintaining                 program          crop     acreage         bases,        farmers         are able
to obtain          the full           benefits           of the         commodity           programs.           Yet,
maintaining              crop     acreage          bases generally               means planting                 the same
program       crop        year      after        year.          Growing        program         crops     is less
risky      for     farmers,           because           the programs            provide         available            markets
and guaranteed              minimum prices.                      The crop        acreage         base     system
makes it          economically              difficult            for     farmers        to move toward                 more-
diverse       crop        rotations.              The loss           of program             benefits      that         would
result      from giving               up program            crop        acreage        and using         it     to grow
alternative              crops      is a key economic                    disincentive            farmers          must
consider.               The farmers             we interviewed                showed a strong                 interest         in
greater       program            flexibility             that     would        allow        them to grow other
program          crops      without            losing     established                crop    acreage          bases.


          We found          no evidence             in our interviews                   to support             the     claim

that      current          program        provisions             have led            farmers      to increase
production           or cultivate                marginal         lands.          The farmers            in general
responded          that      the programs                did     not     influence           their      use     of
agrichemicals               or other            farm     production            methods.           The farmers             also
reported          that      their       use of farm practices                         was not an issue                 when
applying          for     a loan        or taking           out        crop    insurance.              However,          about
one fifth           said     that       lenders          suggested            they     participate             in the
farm programs.



                                                                29
CONCLUSION


        We believe              that     the      results       of our study              have two important
implications:


         -- To the extent                  that      the     federal        farm programs               make it
        difficult              for     farmers       to grow other             crops        and implement               more
        diverse           crop       rotations,        they        act     as a barrier               to the
        adoption              of alternative           agriculture.                   The farmers             who are
        the       most specialized                  in the      production             of program             crops     are
        the ones facing                  the      strongest         disincentives.


        -- The farm programs                        have a great             influence          on crop         choice.
        Crop selection                  in turn       strongly            influences           the     types      and
        amounts           of production              inputs        that     are required.                 Thus,       even
        though          the     farm programs               may not have a strong                      and direct
         effect         on production               methods,        they      do have a major                  indirect
        effect          on input         use.


         If      the     federal        government           wants        to encourage               farmers'to
adopt         alternative            agricultural            practices,          it     will     need to change
its     farm programs.                  To give       farmers          greater         flexibility             to grow
diverse          crop     rotations,           the    crop      acreage        base system               in
particular             will     need to be modified.                       However,         a different               farm
program         may     not be sufficient                   by itself         to bring          greater         adoption
of alternative                 agriculture.

                                                              30
          Although          the farm programs                    appear        to have a strong                        influence
on farmers'           planting              decisions,           which       in turn            affects         their
choice      of production                   methods,       other           factors        appear            to play         an
important           role        as well.         As indicated                in our farmer-survey
responses,           farmers           have serious              concerns             about         the effectiveness
of alternative                  agriculture,             particularly                 factors         that       relate           to
its      economic          viability           and technical                utility.                Also,      farmers            may

themselves           be reluctant               to change their                  practices              without
increasing           their         technical        knowledge               and managerial                   skills.
Furthermore,               market       forces      may      still          provide            incentives           to apply
large      amounts          of agrichemicals                 on highly                 specialized             farms.


          Understanding                the     factors       that          may influence                the      adoption               of
alternative               agriculture           is much          more       complex            than      most people
think.         It    is     not      just      a matter          of changing                  farm    policy
incentives           or disincentives.                      Other          factors            as well--such                 as
economic        market            conditions,            farmers'           attitudes,               and evidence                 of
the      effectiveness               of alternative               production                  practices--are                 also
likely       to have an important                        impact         on the          use     of alternative
agriculture.                    Even if       changing        the crop            acreage             base system                will
not by itself               transform           these       circumstances,                     it    is still           a
prerequisite               if     a major       move to alternative                           agriculture              is
desired.            In sum, we believe                    that        providing               greater         flexibility
in the       programs             to allow        farmers            the    opportunity                 to make
production           changes           will     be a critical                 first           step      toward

                                                              31
increasing          the    use   of alternative            agriculture   methods      in the
United         States.


         Mr.     Chairman,       this     concludes        my prepared   statement.       I will
be happy at this             time       to respond     to any questions       the
Subcommittee             may have.




                                                      32          '
APPENDIX I                                                                                             APPENDIX I


                                       STUDY SCOPE AND DESIGN


          We designed         our study          to evaluate            the       extent      to which
federal         farm programs           create          incentives         that      influence         farmers'
crop      selection        and production                practices.           We selected             for     review
those      components         of the          federal       farm programs             that     have major
importance         for     the economics            of farming.               We also         looked         at the
federal         components       that         have been identified                   in the literature                   as
having      potentially          important              implications          for     the     adoption         of
alternative            agriculture.             From these            criteria,        we chose to
examine         the commodity           price      and income            support,          federal          farm
credit,         and federal           crop     insurance        programs.             We narrowed             the
scope of our study               to the major               commodity         cash crops             covered        by
the     price     and income           support          programs--namely              feed grains,             wheat,
cotton,         and soybeans.            We also          included         the main farm operating
and ownership             loan   programs          of the Farmers                 Home Administration
(FmHA) and the             Federal           Crop Insurance            Corporation            (FCIC)
programs,         which      subsidize           insurance           coverage        on many different
farm commodities.


          Our study         includes          a number of evaluation                       components.              To
learn      more about         the characteristics                     of alternative             agriculture
and its         use,     we conducted            an information               synthesis.             Our
synthesis         involved       reviewing              available        research           studies         and other

                                                           33
APPENDIX I                                                                                             APPENDIX I
relevant        literature,          as well          as interviewing                researchers,            public
interest        group      representatives,                  and various           experts       in the        field.
We also        examined        federal       agriculture            legislation,             program
regulations,            and administrative                   provisions        that        pertained         to the
price        and income        support,        credit,         and insurance               programs         in order
to identify            program      objectives,              interactions,            and intended
effects.         We supplemented               this      work by interviewing                    officials
from USDA's Agricultural                     Stabilization               and Conservation               Service,
FmHA, FCIC,            Extension         Service,        and Economic              Research         Service       and
others        knowledgeable          about         federal       agriculture           policies         and
programs.             Our final      evaluation              component        was a set of interviews
with     farmers        to learn         how programs            are implemented               at the        local
level        and to obtain          farmers'          views      about       the     influence         of farm
programs        on their          farm practices.


         We visited           seven farm counties                  in different             parts      of the
country        and interviewed             74 farmers,            various          state     and local          farm
officials,         and agricultural                 researchers           at nearby          land-grant
universities.2                We chose local             farm areas           that     were concentrated
in the major            commodity         production           areas      and selected              counties
within        these     areas      where agriculture                was a key part               of the
economy and where the                    federal       programs          were a key part               of


2The seven study sites included   Colquitt  County, Georgia;
McLean County, Illinois;  Boone County, Iowa; Cowley County,
Kansas; Robeson County, North Carolina:    Brookings County,                                                 South
Dakota; and Dane County, Wisconsin.
                                                         34
APPENDIX I                                                                                             APPENDIX I
agriculture,               as indicated            by farmers'            participation             and federal
farm       program         spending.            In addition,             we considered           information           on
farm and farmer-related                         characteristics              in the counties             and tried
to select            counties          that     contained         at least           some farms devoted               to
alternative               farming       practices.           Local        extension        service       officials
assisted         us in selecting                  a sample        of farmers           to interview.            We
chose farmers               who generally              owned their           own farms,         had farmed
for    many years,                 relied      on farming         for     their       livelihood,        grew
program-supported                    crops,       participated            in the       farm programs,           and
typically            used conventional                 farming          practices.          We also
identified            a    small       number of farmers                 who used or were in the
process        of developing                  alternative         practices.


           Because         information            about     farm     program          influences        is fairly
limited,        and since              we examined          data        from only        a small,
judgmentally               selected           sample      of farmers         in a few locations,                our

findings         cannot            be generalized           to other         farmers        or farm      areas.
However,        when the              farmers      in our sample             are      compared       to their
peers,       they         do not appear,             collectively,             to be unusual            regarding
farm size,            crop         types,      and management             practices.




                                                             35