A comparative breakeven net return threshold to guide development of conservation technologies with application to perennial wheat

Carson Reeling, A.E. Weir, Scott Swinton and R.C. Hayes

No 124723, 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington from Agricultural and Applied Economics Association

Abstract: In recent decades, public research into agricultural technology development has shifted is primary focus from farm profitability to environmental stewardship. While the orientation of technologies coming from the public sector has changed, the factors motivating adoption by farm businesses remain focused on profitability. This paper develops a comparative breakeven net return threshold for new conservation technologies that requires net returns to the farm enterprise after adoption of the new technology to at least equal their net returns before adoption. The framework is applied to the case study of perennial wheat, a wheat-grass hybrid that can survive and yield grain for multiple seasons. Its perenniality generates environmental benefits over annual wheat via improved soil conservation, water quality, and greenhouse gas sequestration. The framework is illustrated using data from the evaluation of a small set of perennial wheat breeding lines in Australia during 2009-11. We calculate a net return threshold and a potential environmental subsidy and evaluate the potential for changes in yield, price, and perenniality to enhance the commercial viability of PW. Increasing absolute grain yields seems to be the most promising option for further research and development. In all cases, increasing the price of PW through increasing grain quality without making additional improvements to other PW traits would require grain prices that exceed the range of currently feasible market levels. This paper generates a simple but versatile framework for the ex ante economic evaluation of new conservation technologies. The framework can be used to estimate a benchmark level of economic performance that must be achieved in order for a practice to be deemed economically attractive and ultimately adopted by producers. This framework can be used to inform technology developers of the most economically productive avenues for further refinement of their nascent technologies, thereby increasing the potential for their adoption by farmers.

Keywords: Demand and Price Analysis; Environmental Economics and Policy; Research and Development/Tech Change/Emerging Technologies (search for similar items in EconPapers)
Pages: 26
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea12:124723

DOI: 10.22004/ag.econ.124723

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