Farmer Willingness to Pay for Herbicide Safety Characteristics

Abstract

AbstractMicroeconomic studies often make two assumptions: 1) producers focus on profit maximization,disregarding “external” environmental and health costs; and 2) producers have full information about theirproduction processes and markets. This study examines whether these assumptions are valid for theherbicide use decisions of Michigan corn growers. It further examines corn growers’ willingness to pay forreductions in risk associated with the use of herbicide safety characteristics.The approach used involves a mail survey designed to simulate the market for herbicideformulations described as identical to atrazine except that the “new” herbicide formulations are describedas a) not carcinogenic to humans, b) not leachable into groundwater, or c) nontoxic to fish. Respondentswere asked a variety of questions about their farms, herbicide use, information sources, and theirknowledge and opinions of health and environmental effects of atrazine.A double-hurdle model is used to estimate demand for the “new” formulations. From this,willingness to pay is estimated. As predicted by theory and indicated by previous studies, willingness topay for risk reductions associated with each of the three safety attributes was positive. Results indicatethat mean willingness to pay for source reduction in leaching risk from atrazine is $4.40 per acre for 40acres and is $4.92 per acre for the carcinogenicity risks. While the average respondent would not demand40 acres of source reduction in fish toxicity risk from atrazine, mean willingness to pay for 30 acres is$3.92 per acre. For the non-leaching formulation, this result indicates the average respondent would pay apremium of $4.40 cents per acre to purchase 40 acres of an atrazine alternative proven to be non-leaching. As atrazine is typically applied at a cost of $3.00 per acre, these premiums are significant.The range of willingness to pay estimates for the three aspects of health and environmental qualityexamined by this research suggest that farmers are more concerned about on-farm health and environmentaleffects than about off-farm effects. For each of the quantities examined here, per acre willingness to payfor reductions in fish toxicity risks was less than that associated with reductions in leaching andcarcinogenicity risks. Cancer and leaching are generally on-farm effects, while harmful effects to fish tendto occur “downstream.” The mean levels of adoption for the three attributes also confirm this. Over 40percent of respondents indicated they would use some of the non-leaching and non-carcinogenic attributes,while only 25 percent indicated similar intentions for the fish-safe attribute.The results for the non-leaching attribute allowed testing of the hypothesis that willingness to payincreases with knowledge of the potential of atrazine to leach. The empirical results suggest that averagewillingness to pay for reductions in the leaching risk from atrazine would increase by approximately 9percent if all farmers were fully informed of the leaching potential of atrazine.