Download Econ Assessment of IPM Programs

Economic Assessment of
IPM Programs
Scott M. Swinton
Dept. of Agricultural Economics
Michigan State University
4th National IPM Symposium, Indianapolis, Apr. 8-10, 2003
Purpose
• Economic assessments aim to evaluate
the net benefits of investments in IPM
• Focus on valued outcomes
– Outcomes may be monetary or not
– Adoption per se is not an outcome; it is an
intermediate step that affects outcomes
• Scale:
– Individual
– Society
User-level profitability
assessment
• Partial budget or partial enterprise budgets
– Does average change in benefits from IPM
exceed average change in costs?
• Capital budget (investment analysis)
– Does investment in IPM over time generate
benefits that cover costs?
• Risk analysis
– Does adoption of IPM cause change in probability
distribution of net returns?
Illustrative partial budget:
Intermediate IPM replaces Conventional
PM in 10-ac tart cherry orchard, 1998
Reductions to Income ($)
Added Cost
Insect pest prediction model
2
Added scouting
111
Reduced Revenues
(None)
Total Reductions (A)
113
Net Change (B-A)
438
Source: M. Williams M.S., 2000
Gains To Income ($)
Added Revenues
(None)
Decreased Cost
Reduced sprays
551
Total Gains (B)
551
Potential discounted cumulative
returns to investment in IPM
Cumulative
Net gain
$
Discounted
Cumulative
Net gain @ 10%
Discounted
Annual
Net gain @ 10%
1 2
3
4
5
6
7
8
9
Break-even
In Year 7
Year
Discounted
Break-even
In Year 9-10
Adding risk and environmental
benefits to a profit analysis
• Assign cash values &
factor into money
measure
• Use non-money measures
& evaluate trade-offs
(multi-criteria analysis)
– Mean profit vs. Variance
– Profit vs. pesticide exposure
Mean-risk profitability tradeoff in tart cherry
groundcover management (NW Mich, 1995-2000)
Standard Devation of Yearly Means
7000
6000
x
Compost
(Trt. 9)
x
Cover mix 2
+ Fertigated N
(Trt. 11)
Std. Spring
Nitrogen (Trt. 2)
Metered,
Fertigated N
(Trt. 10)
5000
Cover mix 2
(Trt. 6)
4000
14000
15000
16000
17000
18000
Mean Gross Margin ($ / 10ac)
19000
20000
Profitability-nitrate leaching tradeoff in tart cherry
groundcover systems (NW Mich, 1995-2000)
Mean Nitrate leaching (kg/ha)
70
60
x
Std. Spring
Nitrogen (Trt. 2)
50
40
30
20
Cover mix 2
(Trt. 6)
10
0
11000
Metered fertigated
Nitrogen (Trt. 10)
Compost
(Trt. 9)
13000
15000
Cover mix 2 +
Fertigated N
17000 (Trt. 11)
19000
Mean Gross Margin ($/10ac)
21000
230
Percent reduction in useadjusted EIQ
Reduction in Cost and Environ. Impact by
IPM Level: Michigan Tart Cherry, 1999
35%
30%
25%
20%
“Advanced”
IPM
15%
Basic
IPM
Intermediate
IPM
10%
5%
Conventional
0%
0%
5%
10%
15%
Percent cost reduction from Conventional PM
20%
Challenges to incorporate environment
& health in economic analysis
• Cost-effective non-market valuation
– Environmental economists have developed a variety
of methods, but most require costly, targeted studies
– Emergent lit on “benefit transfer” from prior studies
• How to aggregate different E&H benefits?
– Scoring measures
• Subjectivity problem
• Scores not necessarily designed for assessment
– Multiple E&H measures
• Unwieldy to analyze
• Diminishing willingness to pay for more E&H benefits
Scaling up from one IPM user
to society: Adoption
• Need clear, simple
IPM definition to
measure adoption
100%
Max adoption
• Projecting adoption
trends into the
future
0
Present
Time
Scaling up from one IPM user
to society: Market effects
• When many users adopt IPM, indirect market
effects may result
– Price effect (supply curve shifts)
• Higher yields will depress price
• Higher costs will cause some producers to exit, increasing
prices for those who remain
– Income effect (input demand shifts)
• Higher producer incomes may raise demand for
environmentally friendly inputs
• Economic surplus analysis can estimate effects
If IPM raises yields, shifting
Supply from S to S’S
Price
S’
CS
p*
PS
D
Q*
Quantity
Current state of the art
• Benefit-cost analysis over time based on
–
–
–
–
Adoption trends
IPM public program costs
Market-adjusted net benefits per adopter
Environmental & health benefits
• Valuation
• Trade-offs
• Staff paper on “Economics of IPM”:
• http://agecon.lib.umn.edu/cgi-bin/pdf_view.pl?paperid=1854
Challenges ahead:
Cost-effective assessments
• Excellent impact assessments are costly
– Expert opinion is cheap; can lead to error & bias
– Surveys are costly, but cooperation with NASS can
cut costs & strengthen data quality
– Benefit transfer research is developing new tools for
adapting prior E&H valuation results to new settings
• Scaling up economic assessment to multiple
programs at national or international level not
easy
– Spillovers
– Diminishing marginal benefits
Challenges ahead:
Assessing biological IPM
• Innovations in ecological pest mgt calls
for bioeconomic modeling of production
systems with pests present
– Dynamic systems
• Time to achieve new equilibrium?
• Resilience & vulnerability to shocks?
– Beyond pesticide thresholds to habitat
management for beneficials
– What value of such long-term investments?
Biological control of the pesky
Michigan wolverinebug
Expert opinion vs Survey data:
IPM adoption, tart cherry, 1999
30000
25000
Acres
20000
Advanced IPM
Intermed. IPM
15000
Basic IPM
Conventional
10000
5000
0
Experts: NW
Michigan
Survey: NW
Michigan
Survey: All
Michigan
Expert opinion vs Survey data:
Gross revenue by IPM level, t.cherry, 1999
2100
2000
1900
$/acre
1800
Experts assumed no
revenue difference
from Conventional PM.
1700
1600
1500
1400
1300
1200
Conventional
Basic IPM
NB: Error bars = 2 x Standard deviation
Intermed. IPM
Advanced IPM