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Brief Description of Agricultural Conservation Innovation Center

In response to inquiries following my posting of an internship
announcement on this BB, I am posting a brief description of the
Agricultural Conservation Innovation Center.  

Alison L. Hess
Agricultural Conservation Innovation Center
1400 Wilson Boulevard, Suite 1100
Arlington, VA  22209-2308
Email:  Alison.Hess@USDA.GOV

In short, three basic premises underlie the projects being promulgated by
the Agricultural Conservation Innovation Center.  

First * Economic factors are a dominant, if not the dominating factor, in
determining what conservation activities farmers adopt.
Second * The agricultural landscape that holds high environmental
values is so large (more than 900 million acres) that traditional
conservation tools (information, inspiration and cost-sharing) must be
augmented with economic incentives that can reach far more acres far
more quickly.
Third * No government or single private organization can afford to
provide an adequate level of financial incentives to induce 4.7 million
individuals responsible for the stewardship of 900 million acres of
agricultural landscape to adopt all the conservation practices necessary
to preserve and provide all the public benefits that land is capable of

The Agricultural Conservation Innovation Center proposes to explore the
feasibility of new systems of economic signals that can induce or
enhance conservation activity.

There are 4 major ways that private economic activity is affected:
1. Through taxation
2. Through lending standards and rates
3. Through risk management standards and rates
4. Through direct governmental incentives and sanctions

ACIC projects are based on the postulate that too much time has been
spent analyzing the fourth issue.  Instead, far more attention needs to be
given to using the tax, lending, and risk management tools to promote
conservation objectives.

Agricultural Conservation 
Innovation Center (ACIC) 
ACIC is a private, nonprofit organization that operates as a project of the
Natural Resources Council of America. It is a new conservation project
working at the cutting edge of agricultural resource conservation.  It is
developing new programs and incentives to help solve the most pressing
agricultural-environmental problems that the Nation faces.  ACIC has
been designated *NRCS* Innovation Partner.*  Through this close
relationship with NRCS,  it has unparalleled access to the best
conservation expertise in the Nation and the structure through which to
deliver innovative solutions rapidly to the field.  ACIC also is working with
other Federal agencies to develop watershed assistance materials for
private watershed management groups, and with various companies and
corporations on some of the following initiatives.

Risk Management Initiative

In spite of great strides made by the agricultural sector in applying new
conservation tillage practices, the level of agricultural inputs (fertilizers
and pesticides) leaving farmland still is perceived as too high by the
public.  At the same time, these inputs are necessary for modern
agriculture to operate economically.  New nutrient management systems
(e.g., split nitrogen application, legume crediting) and integrated pest
management systems can significantly reduce a farmer*s costs and input

These new input management systems appear to offer a win-win
situation.  The farmer cuts production costs and the public benefits
through less agriculturally related pollution. Still, the level of use of these
new systems is very low in many areas.  Why is this?  Recent studies
have concluded that *risk* is a major stumbling block. As the National
Academy of Sciences recently stated:
The interaction of economic feasibility and risk largely determines the
likelihood that an ecologically based management system will be
adopted or implemented by growers.  Ecologically Based Pest
Management--New Solutions for A New Century, Committee on Pest and
Pathogen Control Through Management of Biological Control Agents and
Enhanced Natural Cycles and Processes, Board on Agriculture, National
Research Council, National Academy Press, Washington DC, 1996.

The ACIC is working with a private insurance company to develop risk
management instruments that should provide a powerful incentive for
farmers to adopt these *win-win* technologies.

Fields of Tomorrow Initiative

"USDA is committed to helping landowners install 2 million miles of
conservation buffers by the year 2002.* 
-- Agriculture Secretary, Dan Glickman

The Department of Agriculture is beginning a major national initiative to
introduce the use of conservation buffer areas on a major scale in the
farm landscape. These *green stripes* include in-field and field edge
filter strips, riparian buffer areas, grassed waterways, and similar
practices. This unprecedented Department-wide effort will commit $1
billion to such conservation buffers and similar practices with major
public benefits.  As the National Academy of Sciences concluded:
The creation, protection and management of field and landscape buffer zones should be an important
objective of programs to protect soil and water quality.... Nutrient load reductions of more than 70 percent
have been achieved with several types of buffer strip-surface cover combinations.  Soil and Water
Quality--An Agenda for Agriculture, Committee on Long-Range Soil and Water
Conservation, Board On Agriculture, National Research Council, National
Academy Press, Washington DC, 1993.

In support of the Department wide effort, ACIC is engaged in two major

National Private Sector Initiative

ACIC is organizing a private industry coordinating committee--the National
Buffer Partnership Committee--in support of this effort. Six major
corporations have committed $900,000 for the initiative.

Regional Initiative

ACIC is also developing regional initiatives involving private sector and
non-profit organizations in support of the National Conservation Buffer

Wetlands Mitigation Initiative

Agricultural Wetlands--Small number, large controversy

Only about 10 percent (10%) of remaining wetlands are on agricultural
lands.  Some of these wetlands have significant values and functions
well beyond their often small size.  Others, however, are degraded
wetlands that provide fewer functions and lower values.  The frequently
farmed degraded wetlands are probably less than 3% of remaining
wetlands.  However, nearly three-quarters (75%) of former wetlands
also are located on farmland.  Many have potential to be restored to
functioning wetlands.

We also know that a wetland managed by an unwilling landowner will
degrade, not improve, over time.  Wetland protection regulations that
prevent a farmer from repairing or replacing an out-of-date drainage
system can significantly decrease crop yields and farm revenue.  Thus a
workable mitigation system--effectively exchanging improved drainage
on actively farmed wetlands for restoring previously drained wetland
elsewhere--would appear to be a win-win solution.

A mitigation program focused on frequently cropped degraded wetlands
should have a high likelihood of success because:
1.  there are a large number of potential mitigation sites, and
2.  it trades a degrading wetland, managed by an unwilling owner, for an
improving wetland managed by a willing landowner.

Farm Mitigation: Different Economics

Farm sector wetland mitigation is fundamentally different from mitigation
in the commercial sector.  Successful mitigation requires a large enough
increase in the economic returns from developing the drained wetlands
to support the costs of restoring other wetlands.  When a shopping
center developer destroys wetlands as part of a larger project, the
increase in land value and cost savings from expediting the project can
justify relatively expensive mitigation.  Unfortunately, most farm sector
wetlands are owned by farmers whose annual rates of return are very
low (averaging less than 4 percent).

ACIC*s Response: Mitigation That Works For Both The Farmer And The

ACIC is attempting to develop successful mitigation models for degraded
agricultural wetlands.  Models currently being developed are aimed at
making mitigation successful (both environmentally and economically) in
three key situations:
.  where watersheds are managed, in part, by drainage districts;
.  where land values are enhanced though irrigation or similar practices;
.  when an individual farmer chooses to mitigate.
We are also working toward the development of an *Agricultural
Wetlands Mitigation Trust Fund* that operates on a multi-state level
pending the development of local mitigation banks.  In addition, ACIC is
working closely with and providing technical assistance for two
developing wetland mitigation pilot projects in the corn belt.

Other Projects Under Development

Agricultural Conservation Innovation Fund

Innovation in an industry in which net returns are only 3-4% is very
difficult. Yet, if farmers do not change, the cost-price squeeze can drive
them out of business.  Fortunately agricultural research, extension
services, and other entities are continuing to develop new systems that
help farmers lower costs, maintain acceptable yields, and improve
conservation practices.  

The problem is that new systems, even when they reduce costs, can be
risky for farmers to adopt.  It is hard *to bet the farm* on a researcher*s
results, no matter how successful the test plots have performed.  The
farmer needs assurance that when he is one of the first in an area to try
a new technique, he won*t be hurt financially.  Using various funding
sources, conservation districts and USDA agencies have provided
insurance to farmers trying new techniques.  Adoption of no-till cotton
cultivation and apple IPM practices have been encouraged through such
insurance.  The problem is that providing the insurance for the farmer
can tie up a large amount of  local conservation funds, or cost a local
entity dearly if a particular experiment fails.

An *Innovation Fund* could be established to address innovation risk
aversion.  This will permit the local conservation, extension, or research
entity to limit its risk in its particular innovative conservation activity.  The
fund will be developed on as sound an insurance basis as possible. 
Because the individual projects would be carefully monitored, there
would be little of the *moral hazard* risk that accompanies many
insurance policies.  And, since the fund can spread the risk nationwide, 
the overall risk should be minimized and conservation activities

Data on new conservation practices indicates that the risk of crop loss
will be low.   Using even a very conservative assumption that the loss
ratio will be 50%, a $1 million budget would permit the Fund to offer $2
million worth of insurance to enhance adoption of innovative
conservation practices.  If, as we expect, the loss ratio is much lower,
additional risk management insurance would be available.  There is a real
chance that this type of entrepreneurial activity over time can be

Developing Institutions for Ecologically Based Pest Management

A recent study by the National Academy of Science on Ecologically
Based Pest Management (EBPM) found that EBPM is far more likely to be
adopted where it is operated on a community based system.  As the
report stated:
Economically feasible solutions to solve pest problems often require the coordination and cooperation of
growers of the same crop located within the same region.  For example, the Fillmore Citrus District of
Ventura County. California manages their supply of biological-control organisms and keeps pest
management costs below those of other districts.  Growers are willing to pay for ecologically based
management if they are assured that other members of the cooperative are paying their fair share too. 

This is also a time of unique opportunity because the legal authorities to
permit wide scale acceptance of EBPM are in place or under review. 
Even the best ideas can founder in the face of legislative inertia. 
Fortunately, this proposal does not face that obstacle.

Two already-established community systems that may assist the
development of  EBPM are *promotion orders* and *marketing orders.* 
Promotion and marketing orders are essentially already ecosystem
management systems that may form the community support necessary to
replicate the Fillmore experience on a broader basis.

Promotion Orders--A number of agricultural sectors, such as cotton,
beef, dairy, and potatoes, have promotion orders.  Under these orders,
farmers are assessed a small fee based on their production levels for
generic promotion of the product they produce.  In section 512(b)(4) of
the 1996 Farm Bill, *conservation* was included as a purpose for which
the promotion orders could operate.  Promotion orders may support EBPM
by raising the funds necessary to operate a community EBPM system in
a manner that is fair to all producers.  The promotion assessment system
ensures that all of the members of the group that benefit from the pest
management system, support it financially. Avoiding *free riders* in turn
increases support for community based pest management.

Marketing Orders--Marketing orders, established at both State and
Federal levels, require growers of certain products, largely fruits and
vegetables, to meet certain standards in order to market the crop.  In the
past they have also been used to control supplies and thus manage
prices.  These controls are now under legal attack.  Because of legal
challenges (now before the Supreme Court), marketing order proponents
are now engaged in rewriting the 1937 Act to reflect existing conditions. 

The courts may conclude that quality standards are not a sufficiently
important public purpose to uphold marketing orders* power to interfere
with individual producers* agricultural marketing decisions.  In contrast,
the courts have consistently found that achieving conservation or
environmental objectives is a sound purpose for community institutions
that limit private action.  Thus, it is likely that the courts will tend to uphold
systems that achieve public benefits such as those resulting from
expansion of EBPM.

The success of the Fillmore Pest Management district shows the
potential for marketing orders to operate in a manner that makes sense
for both their members and the public.  Like the promotion orders, the
marketing orders can insure that all of the growers cooperate financially
and otherwise with an ecologically based pest management system for
the crop covered by the order.

Other ACIC projects related to grazing land management and manure
management for methane energy generation, among others, are in
various stages of evaluation and development.
(Updated 7/30/97)