Farm Science Review panel talks economics of water quality, fertilizer tax


LONDON, Ohio — As Ohio farmers confront new regulations and best management practices related to improving water quality and reducing nutrient runoff, they’ll undoubtedly incur some costs along the way.

In a panel discussion on opening day of the Farm Science Review, a group of economics experts from Ohio State University discussed the broad costs producers can expect. The goal is to reduce nutrient runoff into Lake Erie, which causes harmful algal blooms.

For the most part, new regulations are not yet a law. But some of the proposals include a requirement for certification to apply fertilizer (similar to a pesticide applicator license), required soil testing, and requiring farmers to develop and use a nutrient management plan.

The costs

Barry Ward, an ag economist with OSU, said an applicator license could cost about $50 a year per applicator — a fairly reasonable cost.
Requiring soil testing, he said, would likely cost $3-4 per acre.

The most expensive factor so far looks to be the nutrient management plan, which Ward said could cost several thousand dollars, depending on the kinds of facility infrastructure that may be required.

Ward said some of the costs may not seem like much, but in a year of shrinking profit margins, like 2013, those costs could become more burdensome.

“Some of these costs per acre per year could be impacted,” he said.

He researches the costs of new conservation measures and “how they might impact farmer bottomline.”

Tax fertilizer

Brent Sohngen, an OSU environmental economics professor, took a different approach by suggesting farmers pay a tax on the phosphorus and nitrogen fertilizer they apply.

He scrutinized farm conservation efforts of the past few decades, saying they have not produced the results people want. He said as much as $100 million is spent in Ohio each year on water pollution, but the result isn’t effective.

“When we look at the data and when we look at the evidence and we try things out in the field, they inevitably don’t work,” he said. “(We’re) not putting enough pressure on our government officials who actually designed these programs to make them work.”

Managing phosphorus

Elena Irwin, environmental and economics professor, said the concern is phosphorus management. She agreed with Sohngen that some practices “clearly aren’t” working, but at the same time, “there are going to be some that are, so we need to do a better job of demonstrating which ones are effective.”

She said farmers are rightfully concerned about money and economics, but their attitude also plays a part in what what new practices they use. They have to believe in a practice and see that it’s beneficial.

“There’s lots of potential here we think to improve this,” she said.

The panelists also talked about the goals for Lake Erie water quality. Irwin said the broad goal is for a 41 percent decrease in dissolved phosphorus, and a 37 percent reduction in dissolved phosphorus.

Irwin outlined several best management practices to help get this done, saying they do make a difference, but Sohngen said it will take a tax if the goal is to be fully reached.

“You would never be able to get that kind of a reduction,” he said, without a significant tax on fertilizer.

He said if farmers were taxed for the fertilizer they apply, they would apply less and the government could do away with certain federal farm conservation programs.

But taxing farmers for applying fertilizer is just one possible answer to improving water quality, and possibly not the most popular.

Other answers include planting cover crops, installing tile drainage controls, and following the Tri-State Fertilizer Recommendations, which tells farmers to apply the right amount of fertilizer at the right time, at the right rate and in the right place.

Irwin disputed Sohngen’s suggestion that farmers are applying too much phosphorus and not managing it. She said “the jury is still out” on the new conservation measures, and expressed her confidence that farmers’ actions are making a difference.

Tadd Nicholson, executive director of the Ohio Corn and Wheat Growers Association, was among a half-dozen commodity leaders who listened in on the discussion.

Decreased yields

He said a tax on phosphorus would decrease crop production at a time when the nation needs more food, to feed a growing number of people.

“What a tax would do is cause us to produce less crops, and that completely ignores the fact that we’ve got a lot of people to feed and we’re going to have more people in the future to feed,” he said.

Instead, Nicholson said there needs to be a “balance” between economic concerns and a clean environment. He and other Ohio farmers recently contributed $1 million to help state leaders research the issue.

Aside from the environmental concerns, he said farmers have a direct economic incentive to doing things right: They keep expensive nutrients in the fields.

“You don’t have to force a farmer to keep fertilizer on his field,” Nicholson said. “He will happily do that because he bought it.”


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