Potential effects on rural economies of conversion to sustainable farming systems

Abstract

AbstractConversions from conventional to sustainable farming systems could affect local rural economies either positively or negatively, by several means: changes in income of agricultural households; backward linkages to input supply firms; forward linkages to transportation, processing, and marketing firms; and changes in consumer expenditures by agricultural and other households. We estimated these effects for five local rural economies in South Dakota, representing different agroclimatic and population settlement patterns. Whole-farm economic models of case study conventional and sustainable farms in each area were used to estimate differences in input purchase and marketing patterns. We found declines in on-farm personal income (returns to farm labor and management) in four of the five case comparisons under a conversion to sustainable farming systems if organic price premiums are ignored; we found increases in three of five cases if applicable organic premiums are included. In all five study areas, total off-farm personal income drops in the portions of local economies connected to farming through backward linkages. It also drops in four of the five study areas in the portions of local economies connected through forward linkages if organic premiums are ignored (all five if organic premiums are included). However, net forward linkage effects are usually much smaller than net backward linkage effects, and on-farm personal income effects are substantially greater than either backward or forward off-farm linkage effects in most cases. The total (on-and off-farm) personal income effect of converting to sustainable systems is positive in only one area without organic premiums, and in one additional area with premiums. The ratio of total to on-farm personal income effects within local economies, considering only first round effects on backward- and forward-linked firms, averages 1.2 without organic premiums, or 0.6 with them. Taking account of more complete multiplier effects, which also consider changes in consumer expenditures and changes in expenditures for supplies by backward- and forward-linked firms, the average is 1.8 without organic premiums, or 0.8 with them. With more time for changes in sustainable production techniques and in the structure of farms and the rural economy, the overall economic effects of conversions to sustainable farming are likely to be more positive than our estimates.