The new modeling suggests that incentives or zoning may be introduced to induce industries to modify their behavior. Furthermore, in some cases optimal resource allocation, which takes into account both pollution and transportation costs, may lead to establishment of green zones separating animal production from urban areas. The disposal of animal manure in the Chino area has historically caused severe groundwater contamination problems. Dairies in this region designated certain lands as disposal areas where all liquid and solid animal wastes are disposed. In many cases, one acre of land is needed for disposing of the wastes from more than 30 or 40 cows, and most of the salt content in this waste percolates into the groundwater. The Clean Water Act was introduced in the early 1970s. One of its most important purposes was to reduce groundwater contamination and especially salinization by animal waste. The standard regulation proposed by the State Water Quality Control Board restricted the ratio of cows’ disposal acres—the tons of manure disposal compared to the animal waste produced by one cow—to be no greater than 1.5. Studies performed at the time to assess the economic impacts of this standard suggested that it would reduce the dairy cow population drastically and reduce the economic surplus that this industry generates by about 80 percent . Not surprisingly, the proposal encountered strong objections by dairy farmers and resulted in heavy litigation. An alternative proposal was to treat solid and liquid wastes separately; the solid waste was to be hauled to safe disposal areas outside the Valley,macetas plastico and restrictions were to be imposed on the disposal of liquid waste so that the original target of salt reduction could be met. On analysis this policy proposal was found to meet regional water quality targets at less than 50 percent of the cost of the original proposal.
This policy was adopted, and enabled the industry to survive for another two decades. The use of disposal areas for animal waste is not optimal and is not sustainable in the long run, however. A major challenge for the California dairy industry is to find better solutions for disposal of animal wastes. Accommodating the animal waste regulation requires investment in waste disposal facilities. Some farmers may have significant credit constraints and not be able to obtain the resources from private lenders to invest in the waste disposal facilities. Government credit provision may alleviate this problem and reduce the difficulty of adjusting to the waste disposal regulation. Macdougall et al. show that credit support policies can significantly reduce the cost of adjustment to water quality regulation in the Chino area. They also show that the ability of the dairy industry to withstand animal waste regulation is much higher in periods of low interest rate and economic prosperity and thus that regulation should be introduced in such periods. The concern with the environmental side effects has resulted in a wide variety of constraints and regulation that resulted in outcomes that are consistent with the theory presented above. Many dairies have moved from the Chino area to the San Joaquin Valley, where growers could find both larger disposal areas and better opportunities to market their manure as fertilizer. Four of the five leading dairy counties in California are now in the San Joaquin Valley: Tulare, Merced, Stanislaus, and Kings . Part of this move is certainly a shift away from the high land values brought by residential development, but much of it is also due to decreasing the environmental costs. California has not yet found the balance between transportation costs and environmental concern in locating its animal facility and managing its land resources. The design of optimal policies to control the side effects of animal agriculture will be one of the major challenges to policymakers and agricultural economists in the coming years.The Mediterranean fruit fly, Ceratitis capitata , or the Medfly, is an imported pest, infestations of which have serious consequences for California agriculture.
The 1980-81 infestation was ultimately eliminated at a great expense—reported at over$100 million—to the State of California and the federal government. A significant amount of public funds has been spent on eradication efforts for subsequent infestations. In 1989-90 there was another Medfly infestation , and findings of the Medfly have continued since. Because of aggressive eradication efforts, the impact on the California agricultural industry has been minimal compared to potential damage. However, the eradication efforts have not been without controversy. In addition, infestations to date have been in urban areas. The protocol for eradication involves a system of traps, aerial application of Malathion-treated bait, and the use of sterile male Medflies. The most controversial part of the protocol has been the aerial application of bait. This technique has raised fears and concerns among urban residents, and, coupled with diminished availability of public funds, has caused local officials, public interest groups, environmental groups, and health and safety groups to raise questions about the necessity of eradicating the Medfly. The outbreak of the Medfly in 1993-94 raised the specter of a possible embargo of California products by Japan, and probably Korea, Taiwan, and Hong Kong . This concern increased with the discovery that the Medfly had spread eastward into Riverside County near commercial citrus orchards. Japan has indicated that if a fertile female Medfly is found in a commercial orchard, it will consider placing an embargo on shipments of fresh fruit and vegetables from California. The list of crops that serve as hosts to the Medfly is quite extensive. In a 1991 production-cost study, 22 different commodities were included: apples, apricots, avocados, bell peppers, cherries, dates, figs, grapes, grapefruit, kiwis, limes, mandarin oranges, nectarines, olives, peaches, pears, persimmons, plums, prunes, and tomatoes . In 1992, these commodities represented nearly 1.6 million acres of irrigated cropland and over $4.2 billion in value of farm production. The farm value of exports amounted to $559 million, with a substantial amount shipped to Japan and other Asian countries. The assumption made in the production-cost study was that through periodic and regular applications of Malathion-treated bait, a marketable product would be produced.Increased costs would come from the application of bait and, for those crops shipped from California in a fresh state, there would be a post-harvest treatment using methyl bromide or a cold treatment to meet U.S. Department of Agriculture quarantine restrictions.
The annual increased costs were estimated to range from a low of $349.6 million to a high of $731.9 million. The reason for this range is that the effective application of pesticides is dependent on weather factors and the length of the season. The estimated cost for post-harvest quarantine treatments was $135.3 million, which includes the cost of the treatment and the loss of fruit due to treatment damage. An additional $8.1 million in transportation costs for movement to and from treatment facilities was also estimated. Hence, total annual costs of controlling the Medfly were estimated to range from a low of $493 million to a high of $875.3 million. Compared to the 1992 value of the total value of production for the crops affected, these costs are substantial. The economic impacts from a trade embargo would include effects on fresh shipments of apples, apricots, avocados, bell peppers, sweet cherries, dates, figs, table grapes, grapefruit, kiwis, lemons, limes, tangerines, oranges, nectarines, peaches, pears, persimmons, plums, and tomatoes. These commodities do not necessarily match those of the production study, because an embargo would likely include all exported commodities to the countries in question. For example, in the production-cost study, lemons were excluded; however, in the embargo study, they are considered. Also,cultivar arandanos the embargo would likely take place even though the commodities could be treated for shipment. The 1992 farm value of these products was $2.1 billion, and the farm value of total exports was $354.8 million. These crops were grown on 655,000 acres . The 1992 total f.o.b. value of shipments of these products, including both domestic and export , was $2.9 billion. The total f.o.b. export value was $605.5 million, and the f.o.b. value of shipments to Japan, Korea, Taiwan, and Hong Kong was $376.3 million, amounting to 62.1 percent of total exports for this product. Estimates of the changes in revenue from 1992 due to an export embargo vary by crop as to their significance.In most cases, the estimated change in price was small and not very significant as reflected in the lost revenue figure. However, for the citrus crops—grapefruit, lemons, navel oranges, and Valencia oranges—which were the most impacted, the estimated revenue loss was highly significant. For grapefruit, the loss in revenue is estimated to be 51 percent of the 1992 levels; for lemons, 38 percent; for navel oranges, 15 percent; and for Valencia oranges, 55 percent. The loss in revenue for all of the commodities considered was $564.2 million or 20 percent of the 1992 value of shipments. This loss represents a decrease in income to growers, packers, and shippers of the commodities involved. At the levels indicated, it is highly unlikely that any profits would result to those commodities most heavily impacted. The costs of growing, packing, and shipping the commodities would still occur.
The question that remains is how long the industries involved would continue to produce at the levels that existed before an embargo. The total impact of a Medfly infestation on the industries involved should also take into account the costs of controlling the pest. When these costs are added to the embargo estimates, they indicate even higher losses to the industry. The total impact on the commodities would range from a low of $1.057 billion to a high of $1.44 billion. These figures represent losses to all segments of the industries involved—from pesticide applications to control the Medfly, to losses in revenues due to losses in export markets and price decreases in domestic markets. In the short run, the domestic consumer would benefit from an embargo, particularly from citrus.Estimated price decreases range from no change in the case of apricots, to over 60 percent for grapefruit. How long the consumer would benefit from these price decreases would depend on how long it took for the industry to readjust its production or to find new markets. Price decreases of the magnitude estimated for the citrus industry would be expected to last no longer than two years before production adjustments would be made. In the long run, the consumer might be worse off. Producers would eventually decrease production in order to raise prices enough to regain lost revenues and adequately cover capital investments. In addition to a loss in income to the commodities affected, the California state economy would also be impacted. It is estimated that there would be a $1.2 billion decrease in gross state product and a loss of 14,200 jobs. Hence policies to eliminate pest invasions have a significant impact on both the industries affected and the general economy.The sharpshooter transfers the bacteria from an infected host plant to other plants. Once infected, yield decreases, and often the vine will die. The leaf hoppers breed over winter in riparian vegetation, ornamentals, and/or pastures, picking up the Xylella bacteria from host plants. The insects then migrate in the spring to feed on succulent vegetation, such as grape vines, infecting the vines as they spread. An infectious blue green sharpshooter has more than a 90 percent chance of transmitting the bacteria. Recent PD outbreaks in California’s Napa Valley wine grapes, one of the premier wine-producing regions of the United States, are estimated to have cost vineyard owners $46 million in 1999 . Insecticides have limited effectiveness on PD in vineyards where the sharpshooters enter each spring from riverbank vegetation. Applying insecticide to the riparian area where the insects are concentrated might control the spread of PD, but applications are constrained due to wildlife and water quality concerns. Removal of the bacterial and sharpshooter host plants at their riparian sources might reduce incidences of the disease, but the riparian vegetation may be protected by legislation. Brown et al. considered the economic impact of planting crops between the source area and the grape vines. These crops act as a barrier to transmission in order to slow or prevent the sharpshooter migration, but this strategy requires taking land out of grape production. The optimal barrier crop strategy depends on the profitability of the barrier crop relative to wine grapes and the effectiveness of the barrier crop, measured by percentage reduction in pest penetration per unit of barrier length.