After decades of effort, the voluntary, collaborative approach to restoring the health and vitality of the Chesapeake Bay— the largest estuary in the United States—has not worked and, in fact, is failing. A diverse group of 57 senior scientists and policymakers have joined forces to save the Bay. This is our plan.

Regulating Agriculture: Taking the Profit Out of Pollution

(Posted by Howard Ernst.)

Agricultural practices in the Bay region today remain grossly under-regulated, giving a tremendous economic advantage to those who pollute our waterways with environmentally irresponsible farming practices. Industrial agricultural production is the single biggest source of pollution to the Bay because the current rules (or lack of them) make this form of food production the most profitable. Sensible agricultural regulations level the playing field, take the profit out of pollution, and are absolutely essential to restore the Chesapeake Bay.

To illustrate, imagine a bay-friendly farmer (we will call him Farmer Green for the sake of this thought experiment). Farmer Green understands agricultural science and environmental science, has a strong environmental ethic and desires to make his living in an environmentally responsible manner. He is willing to “do what is necessary” to farm his 50 acres in a manner that does not harm the environment, even if that means making less money than his competitors. Nonetheless, Farmer Green has three children (and each of the little Greens want to go to college), he has to pay a mortgage, buy farm equipment, make car payments, buy health insurance, and save for retirement.

Farmer Green voluntarily engages in Bay-friendly farming practices:

a) Engages in labor intense “no till farming.”
b) Chooses not to farm land near rivers, creeks, or on steep slopes.
c) Takes fields out of production periodically, to minimize the need for fertilizer.
d) Keeps his livestock to a minimum.
e) Makes use of as little fertilizer and pesticides as possible (perhaps none).

Farmer Green’s Bay-friendly farm manages to yield a decent profit.

Cost of production per acre: $100
Total cost of production: $100 * 45 acres (5 acres out of production) = $4,500
Average farm yield per acre: 1,000 pounds
Total farm yield: 1,000 pounds * 45 acres (5 acres out of production)= 45,000 pnds
Price per pound of yield: $1 (determined by market)

Total Farm Profit: (45,000 pnds * $1) – $4,500 production cost = $40,500 profit.

Now imagine a second farmer (Farmer Green’s neighbor and let’s call him Farmer Big Bucks). Farmer Big Bucks understands agricultural science and environmental regulations, has a strong desire to make a profit and to grow his business. He is willing to “do what is necessary” to farm his fifty acres in a manner that maximizes his profits, even if that means bending environmental regulations and undercutting his neighbors (yes, such people do exist).

Farmer Big Bucks engages in profit maximizing farming practices:

a) Traditional till farming.
b) Farms all available land (right to the water’s edge).
c) Keeps land in production by making use of cheap fertilizers, animal manure and even human sludge (which is provided to him at no cost from the local sewage treatment plant).
d) Makes use of large livestock containment barns.
e) Stores animal waste as cheaply as possible.
f) Spreads animal waste even when crops are dormant.

Farmer Big Bucks is able to maximize his profits:

Cost of production per acre: $200
Total Cost of Production: $200 * 50 acres = $10,000
Average yield per acre: 2,000 pounds (
Total yield: 2,000 pounds * 50 acres = 100,000 pounds
Price per pound of yield: $1 (determined my market)

Total Profit: (100,000 pnds * $1) – $10,000 cost = $90,000 profit.

In the side by side comparison (below), we see that Farmer Big Bucks’ practices are more expensive (and certainly more environmentally damaging) than Framer Green’s, but ultimately they produce far more product and as a result produce far more profits (which is after all why most farmers prefer these methods). But Farmer Green is willing to make a little less money for the Bay (bless his heart), so all is good in our hypothetical world—or is it?

Year One Summary

  Farmer Green Farmer Big Bucks
Cost of production per acre $100 $200
Total cost of production $4,500 $10,000
1,000 pnds 2,000 pnds
Total farm yield 45,000 pnds 100,000
Price per pound $1 $1
Total Farm Profit $40,500 $90,000

Now let’s move our thought experiment into its second year. Twenty-five additional acres become available in the community ($3,000 per acre * 25 = $75,000) and who is in a position to buy the additional land, Farmer Green or Famer Bucks? Farmer Bucks of course (he has a more profitable business model). And by expanding his highly productive, but environmentally harmful practices to additional acreage what does this do to farm yields in the area? It increases them of course. And as farm production increases what does this do to farm product prices? It decreases them (simple supply and demand). So now instead of selling their products at $1 per pound, Farmer Big Bucks and Farmer Green sell for 80 cents per pound. Let’s see what this means for our two farmers.

Farmer Green:

Cost of production per acre: $100 * 45 acres = $4,500
Av. yield per acre: 1,000 pounds * 45 acres = 45,000 pounds
Price per pound of yield: $.80 (determined my market)
Profit: (45,000 pnds * $.80) – $4,500 cost = $31,500 profit

Farmer Bucks:

Cost of production per acre: $200 * 75 acres = $15,000
Av. yield per acre: 2,000 pounds * 75 acres = 150,000 pounds
Price per pound of yield: $.80 (determined my market)
Profit: (150,000 pnds * $.80) – $15,000 cost = $105,000 profit.

Year Two Summary

  Farmer Green Farmer Big Bucks
Cost of production per acre $100 $200
Total cost of production $4,500 $15,000
1,000 pnds 2,000 pnds
Total farm yield 45,000 pnds 150,000
Price per pound $.80 $.80
Total Farm Profit $31,500 $105,000

What happens in the long run should now be obvious. Over time, more and more farmers adopt the business practices of Farmer Big Bucks, or they become less and less competitive in the market. Small family farmers become fewer and fewer, environmentally friendly family farmers become rarer yet, and we end up with an industrial food production system that provides us cheap food, but pollutes our water way (the Chesapeake Bay included) in the process. Sound familiar.

Of course, it does not have to be this way. We could adopt sensible farming regulations that require ALL farmers to make use of the environmentally friendly farming practices that Farmer Green uses. Such regulations take the profit out of pollution, by taking away the market advantage that Farmer Big Bucks enjoys by farming in an environmentally harmful manner.

Here is the bottom line. Agricultural practices in the Bay region today remain grossly under-regulated, giving a tremendous economic advantage to those who pollute our waterways with environmentally irresponsible farming practices. Industrial agricultural production is the single biggest source of pollution to the Bay because the current rules (or lack of them) make this form of food production the most profitable. Sensible agricultural regulations level the playing field, take the profit out of pollution, and are absolutely essential to restore the Chesapeake Bay.

One Response to Regulating Agriculture: Taking the Profit Out of Pollution

  1. Howard Ernst’s analysis is interesting, but it lacks an estimate of the environmental costs incurred–but not paid for directly–under the different scenarios. Identifying–even if in fairly rough estimates–the costs borne by society at large for pollution makes the case much stronger for imposing additional regulation.