In agricultural production a number of so-called "free" goods are used as inputs, primary examples being air and water. In the process, both negative and positive effects may become evident. Misuse or abuse of these goods may arise from the fact they are "free". In terms of environmental impact all goods entail a cost. Indeed, the local landscape provides public goods including amenities such as a satisfying setting, wildlife, air and water. At the same time, private goods such as crops and livestock are also produced. The impact of agriculture on the use of public goods gives rise to tension between agricultural producers and other sectors of society. Producers follow their private economic interests in management of their farms and may in the process reduce, eliminate or impair the public goods desired by others. Unless values are attached to both the public and private goods along with those arising from their impairment or enhancement, the true cost of production will not be taken into account:

"There has, in other words, to be a trade-off between what are normally understood as 'economic goods', such as food and chargeable rural leisure services, and the sustenance of less measurable environmental goods. The less measurable or definable services have to be properly valued. -- Society must choose on the basis of a full understanding of the choice in question. That means that the economic value of the environmental cost, if one is to be incurred, must be understood." ¹

During the process of production, land may be degraded as a result of a producer's actions which may be encouraged by the instruments of government policy. Habitat may be destroyed in the process. This illustrates the need for soil conservation as degradation affects both the producer and those using the services produced. Often, the producer is unable to capture all the benefits of conservation. Determination of how the benefits may be achieved therefore presents a problem even though the results of conservation are very apparent in purer air, less sedimentation in streams, greater wildlife habitat and other benefits.

The above situation has led to a search for effective means by which the desired end may be achieved. Such means include government regulation, purchase of property rights, financial incentives or fines, cross compliance in government policies, and moral suasion. However, much attention has also been given to valuation of the benefits and the costs to the environment as well as to the returns from production. In this connection Adamowicz makes the following statement:

"In the analyses of sustainable agriculture we are interested in the provision of environmental services, including the production of food, over the long run. Trade-offs between aspects of these environmental services will undoubtedly have to be made. Non-market evaluation provides one form for evaluating the magnitude of these trade-offs. Also, some insight into the relevant policy approach has also been derived from evidence supported by non-market evaluation. The concern over off-site impacts of agriculture implies an externality control policy may be more relevant than on-site productivity policies."²

When the market fails to establish value in terms of price, i.e. market failure, there is the potential to have an unsustainable system. Those who pay the full costs of production sometimes do not receive the benefits and conversely sometimes the amount paid does not cover the full costs of production. In agriculture, producers may not be compensated for soil conservation and therefore may not engage in the practice. As a result, for example, sloughs may be drained which remove habitat for wildlife. Thus many air, soil and water quality problems can be traced to market failure.

Where producers harm the environment by contamination of air or water, regulation appears appropriate since the perpetrators of the problem may not easily be identified, rendering enforcement of the "polluter pays principle" infeasible. Tension between agricultural producers and society in the use of the environment will increase unless the common property issue is resolved.

Common property implies that goods are essentially available for the taking. No property rights are involved. A frequent prescription for overcoming the tendency to abuse public goods is privatization. This principle has application to agriculture with respect to land tenure. A substantial proportion of the land on the prairies is operated by tenants who hold either cash or share leases. Unless the person operating the land is credited with the value of any improvements made, there is little incentive to invest in long term measures such as soil conservation. When land prices rise the tenant may be unable to resist a change in the ownership of the land, some purchasers merely buying the land for speculative purposes or as a hedge against inflation. These individuals have little interest in conservation. The land also may not be sold on the open market and therefore not purchased for its highest production value. This may or may not be synonymous with environmentally benign land use. Furthermore, the tenant has less collateral to use as the base for borrowing funds, the purpose of which would be improving the productivity of the land. However, private property does not resolve the issue of external effects imposed by one owner on another unless both parties can negotiate the externality. In order to achieve a situation conducive to soil conservation it becomes essential that the responsibilities of the tenant and the landlord be carefully spelled out with the agreement covering an extended period of time.

The present pattern of land tenure on the prairies may therefore have implications for maintenance of the soil resource and ultimately on the sustainability of agriculture. As inferred by Pearce and Warford, absence of operator ownership has egradation. Table 3.6 indicates that during the 1971 to 1986 period the proportion of the land operated by owners on the prairies declined from 69 percent to 61 percent. The proportion of the land operated by those renting or holding leases rose from 31 to 39 percent. Over the five year period 1986 to 1991, the respective proportions remained relatively stable. Nonetheless, tenancy remains an issue holding forth the prospect of affecting the sustainability of agriculture on the prairies.

Table 3.6 Farm Tenure, Prairie Provinces by Census Years, 1971-1991

	Manitoba	Saskatchewan	Alberta	Prairie Provinces
Owned	percent of total area in farms
1971	74.0	70.9	64.4	68.8
1976	71.4	69.0	64.3	67.6
1981	66.9	67.6	64.9	66.5
1986	62.9	62.1	58.4	60.8
1991	62.9	61.1	59.2	60.7
Rented or Leased
1971	26.0	29.1	35.9	31.2
1976	28.6	31.0	35.7	32.4
1981	33.1	32.4	35.1	33.5
1986	37.1	37.9	41.6	39.2
1991	37.1	38.9	40.8	39.3

Source: Calculated from Statistics Canada, Agricultural Profiles, Census of Canada, 1991.

Footnotes:

1. Agri Europe, Agriculture and the Environment: How Will the E.C. Resolve the Conflict?, Special Report No. 60, 1991. p. 25.
   
2. W.L. Adamowicz, "Valuation of Environmental Amenities," Canadian Journal of Agricultural Economics, Vol. 39, No. 4, Part 1, 1991. p. 615.

INDEX:

Great Plains Home Page

Measurement of Sustainability

Land Use

Degradation of Soil Resources

Preservation of Biodiversity

Water Use and Quality

Rural Communities

Economic Situation

Use of Common Property

Impacts of Trade on Sustainability

Federal & Provincial Policies

Global Changes