Profitability and sustainability can go hand-in-hand

Key Result: BMPs can improve canola production while simultaneously advancing environmental stewardship. This study identifies factors that contribute to improved canola production efficiency on the Canadian Prairies. It also examines the relationship between production efficiency and adoption of select environmental stewardship practices. These results may be of use for policy makers in identifying areas of focus for extension and/or support aimed at increasing canola production and competitiveness.

Project title, Principal investigator: “Economic profitability and sustainability of canola production systems in Western Canada,”
Scott Jeffrey, University of Alberta, Edmonton, Alta.

Funding: Alberta Canola, saskcanola, MCGA, CCC, AAFC, GF2

Adoption of best management practices (BMPs) has been encouraged as a means of mitigating the impact of agricultural production on environmental quality. However, the resulting effects of BMP adoption on farm performance are uncertain. Limited evidence suggests that some BMPs might contribute to lower returns. One way in which BMP adoption may affect financial performance is through changes (positive or negative) in the efficiency of production.

BMPs may include development of environmental farm plans, soil testing, reduced- or zero-tillage systems, application of precision farming techniques and various nutrient management practices. Understanding the relationship between BMP adoption and production efficiency levels can provide insights into the likelihood of BMPs being economically viable for producers.
Data for this study was obtained from a 2011 survey of canola producers in the four Western Canadian provinces. Survey data included information on canola area and yield, nutrient use, production practices, as well as farm- and farmer-specific characteristics.

Higher than normal growing season precipitation in 2011 resulted in significant production problems, and contributed to unexpected negative correlation between rainfall and yield. Model results indicate that BMP variables for soil tests, nutrient management planning, use of cropping plans, and precision farming are positively related to production efficiency while other BMP indicators are not significant. There was no significant evidence indicating whether fertilizer inputs were risk increasing or risk decreasing, which may have been due to the high rainfall in 2011.
In terms of environmental stewardship and BMP adoption, the impact on canola production efficiency appeared to be either positive or neutral.

However,only a limited number of practices were addressed in the current study. In particular, the survey did not ask producers about their use of environmental stewardship practices that are not directly related to canola production decisions; for example, land use change BMPs such as restoration of wetlands or implementation of buffer strips. If these types of BMPs were considered, the effects might have been different. If wetlands in canola fields were restored for example, there may be an impact on efficiency of field operations due to nuisance costs that would negatively affect overall efficiency of production.

Published results

Results from the efficiency study were presented in a
selected paper session at the joint conference of the Agricultural & Applied Economics Association and the Canadian Agricultural Economics Society. An accompanying paper, discussing the potential of improving technical efficiency in Western Canadian canola production while simultaneously advancing environmental stewardship, was subsequently published in the Canadian Journal of Agricultural Economics*.

To build upon this study, it would be useful to assess environmental efficiency. This would require estimates of not only canola yield but also environmental outputs such as nitrogen that may have been lost due to leaching or run off. This type of assessment would permit a more complete picture of the impact of environmental stewardship, including potential tradeoffs between production and environmental efficiency. Further analysis of this type would help farmers and industry develop profitable and sustainable canola production policies.

*Cagdas, Ali D., Jeffrey, Scott R., Smith, Elwin G., Boxall, Peter C. 2016. Environmental stewardship and technical efficiency in Canadian Prairie canola production. Canadian Journal of Agricultural Economics 64(3): 455-477.