Economics of crop and land management practices and water

quality impacts for four watersheds located in Manitoba Canada

Economics of crop and land management practices and water

quality impacts for four watersheds located in Manitoba Canada

M. Khakbazan*, J. Vanrobaeys, L. Braul, J. Huang, H. Wilson, J. ElliottAgriculture and Agri-Food Canada, Brandon Research Centre, Brandon, Manitoba, Canada

SWCS July 27-30, 2014 Lombard, Illinois, USA

CGH1

Slide 1

CGH1 Are we to include names on this slide?Cliff Hamilton, 5/10/2011

Study Issue• The water quality in the Lake Winnipeg has been

deteriorating due to, in part, excessive non-point source nutrient contributions from agricultural activities within the Red and Assiniboine rivers drainage basin (953,000 Km2) (Salvano et al., 2009, Jones et al., 2001).

• Land management practices and the type of cropping system present within a catchment are found to significantly affect the water quality of aquatic ecosystems (Ye et al., 2009).

Objective of Watershed ProjectsObjective of Watershed Projects• Evaluate both the environmental and

economic performance of BMPs for four watersheds in Manitoba, Canada

• Water quality as a primary indicator• Examine management practices aimed at

increasing economic benefits and reducing environmental impacts in the agricultural Production.

Study Area

South Tobacco Creek WatershedManitoba, CanadaSouth Tobacco Creek WatershedManitoba, Canada

150 km2 SW of Winnipeg

Study Area

• The four catchments in this study, the Boyne River, the La Salle River, the Little Saskatchewan River, the South Tobacco Creek watersheds are located in Manitoba, Canada within the Lake Winnipeg Basin

• These watersheds contain varying topography and land use and are located within the Assiniboine and Red River Basins.

Watershed La Salle Boyne L. Saskatchewan

South Tobacco Creek

Drainage Area (Km2)

2,400 1,135 4,000 75

Land Use Cropland (80%)

Cropland (66%)

Cropland (37%)

Cropland (71%)

Forest (2%) Forest (12%) Forest (28%)

Pasture (9%) Pasture (15%) Pasture (14%)

Wetland (0.1%) Wetland (0.6%) Wetland (10%)

BMPs StudiedBMPs StudiedConversion of Crop Land to permanent ForageConversion of Crop Land to permanent Forage

Stream

Restoration of wetlands

Nutrient management

100% conversion of cropland

Conversion of marginal cropland

100% conversion of cropland

Conversion of marginal cropland

Restoration of all wetlands in cropland

Restoration of wetlands only in marginal cropland

Conversion or Restoration Over:

10 years or

20 years

BMPs StudiedBMPs Studied

Small Reservoirs/Dams

Small Reservoirs/Dams

Holding Pond Downstream of Cattle Over-Winter-Feeding Area

Holding Pond Downstream of Cattle Over-Winter-Feeding Area

Methods• Enterprise budgeting• Costs benefit analysis• Compared discounted cash flows with and

without BMP.• Used Net Present Value.• 8% discount rate.• Baseline and Scenario

• Costs estimation and Simulation Modeling

Total costs of restoration

Opportunity costs Nuisance Costs Restoration Costs

Construction Costs

Administration CostsPrivate Costs to producers

Public Costs (if a program)

Boxall et al.

Wetland or Small Dam Costs

Holding Pond Or Small Reservoirs/DamsHolding Pond Or Small Reservoirs/Dams

• Model description– Input parameters

• Available land• Previous land use• Catchment area• Number of livestock housed• Days in livestock yard• Liner and fencing options• Required pond dimensions• Holding pond capacity

– Cost parameters• Capital costs; annual costs

Zering and Wohlgenant (2005)

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# of Livestock Or Area of Catchment

Construction CostConstruction Cost

Total Excavation Cost

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# of Livestock Or Area of Catchment

Construction CostConstruction Cost

Watershed 100% cropland conversion cost per year ($/ha/yr)*

Marginal cropland conversion cost per year ($/ha/yr)*

Boyne ‐153.02 ‐39.39Little Sask. ‐106.91 ‐19.69La Salle ‐152.21 ‐11.67South Tobacco Creek (STC)

‐160

Results – Crop Land Conversion

For STC, land conversion was a Seven-year rotation [Wheat-Canola-Wheat-Canola(Alfalfa)-Alfalfa-Alfalfa-Alfalfa] s

Conversion of Annual Cropland to ForageConversion of Annual Cropland to Forage

• Tillage costs decreased by about 42%, fuel costs by 17% chemical costs by almost 50%, and total average annual fertilizer costs by around 30% by using N-fixing crops.

• However, the cost saving of including forage in annual crop rotation was not enough to offset the loss of net income from annual crops.

• Other benefits not included: Nitrogen fixation; reduced chemical use and GHG benefits; reduced soil erosion;…

Watershed Total Opportunity cost/ha of wetland converted ($/ha)

Total Opportunity cost/ha of marginal wetland converted ($/ha)

Boyne ‐3,022 ‐1,106Little Sask. ‐2,012 ‐633La Salle ‐2,305 ‐1,708South Tobacco Creek

‐2, 704

Results – Wetland Restoration

Wetland: Natural

(restored) or

constructed water

systems used to filter

run-off from cropland

or feedlots.

Results – Small Reservoirs/DamsResults – Small Reservoirs/Dams• On- and off-farm costs and benefits• Small dam: Constructed barrier in a stream that impounds

water.

• Dams cost ranges from $11,000-$64,000 depending on dam size, with an average of $23,000.

• Reduces downstream erosion and flooding (0% to 100% reduction in runoff peaks)

• Value of the dams’ flood reduction alone resulted in a financial payback period of approximately 35 years or shorter

• Potential gross income of irrigation could be $280 and $624/ha for wheat and canola

EconomicsEconomics• On- and off-farm costs and benefits• Reduce movement of sediment and nutrients.

• Sediment: 73% reduction• Nitrogen: 17% reduction• Phosphorous: 11% reduction

• Nutrient reduction benefits ($3/ha); sediment reduction benefits ($1.85/ha) - 1,100 hectares of drainage area

• Significant other benefits such as wildlife, recreational, esthetic, spiritual and quality of life values may exist. Wildlife value ($30/ha)

• Manitobans are willing to pay $294 per household per year over a five-year period for wetlands and if 100% of wetlands are restored in the province, the public is willing to pay $358 per household per year over five years (Boxall)

• Improves land value.

Results – Holding PondsResults – Holding Ponds• Smaller operations: average fixed costs of

$19/animal/year with annual average maintenance costs of about $5/animal,

• Medium operations: average fixed costs of $5/animal/year with annual maintenance costs of $2.5/animal,

• Large operations: fixed costs of $2.8/animal/year with annual maintenance costs of $0.75/animal, assuming the holding pond has a 25-year lifespan.

• Benefits: Reduction in N – 39%, P – 30%, TSS – 12%• Benefits: Irrigation benefits not realized yet up to 10%

higher forage/alfalfa yields

Watershed Total nutrient management reduced fert. benefit on manuredland ($/ha)*

Boyne 378.21Little Sask. 222.76La Salle 267.55

Results- Nutrient Management

Development of Nutrient Export RelationshipsDevelopment of Nutrient Export Relationships

– Regression results (STC)– Nutrient export was found to be related to nutrient

application rates, tillage and flow.

Pexport = -2.95 + 0.000013*Papplied + 4.27*Conservation Tillage + 0.013*Flow(-4.40) (2.00) (5.00) (15.01)

• The replacement value of the nutrients that left the South Tobacco Creek Watershed over ten years averaged to about $7/ha/year, or average of $37,000 of nutrients leaving the entire watershed every year.

• The replacement value does not include costs to society in terms of environmental damage.

• Complete economic feasibility mapping for selected BMPs showing where agricultural land use and watershed characteristics suggest certain BMPs will be cost effective, facilitating the development of realistic scenarios in the four watersheds.

• Use Decision Support System (DSS) to identify “hot spots”

BMP TargetingBMP Targeting

“Best” vs. “Worst” Case Scenarios - BMP required for a 30% TP reduction target

• The economic benefits of perennial forage rotation failed to compensate for the opportunity costs from the profit of continuing to plant annual crops.

• Similarly, the on-farm benefits of retention ponds and wetland restoration were insufficient to justify their capital costs although they provided significant off-farm benefits through reductions in nutrients, sediment and pathogen exports.

• Reduced fertilizer management on manured land increased farm benefits.

“Conclusions

Acknowledgements• AAFC - Red and Assiniboine and South Tobacco Creek

Watershed Projects - for providing financial support• We also greatly acknowledge technical contributions

from Red and Assiniboine and South Tobacco Creekwatersheds management team.

• Deerwood Soil and Water Management Association for collecting data

Thank You for listeningThank You for listening