Volume VI: Watershed level economic analysis of tillage practices in Southwestern Ontario

This report contains the findings of the watershed modelling component of the Soil and Water Environmental Enhancement Program (SWEEP) for the Kettle Creek, Essex, and Pittock watersheds. The watershed level analysis was undertaken to fulfil two main objectives. The first objective was to evaluate the farm level impact of conservation technologies on farmers' net income, choice of tillage method and resource use. Using a simulation model and a multi-period linear program it was found for the Kettle Creek, Essex and Pittock watersheds that maximum profits could be obtained by using conservation tillage for each of the 3 periods modelled. This result was due to the fact that no-till was not only environmentally sound but also more profitable than conventional mouldboard plough tillage. To contrast these 'unconstrained' solutions with the more common practice of using conventional tillage in the watershed, additional model runs were done which restricted the use of no-till technology to zero. The results showed a substantial reduction in overall profitability implying that failure to adopt conservation technology may be costly to some farmers. The second objective was to evaluate the opportunity costs of conservation in terms of reducing soil and phosphorous run-off into surface water and reducing soil degradation through soil loss. The effect of imposing these environmental quality constraints was to reduce the total hectarage planted to more erosive crops such as continuous corn or soy-corn-soy in favour of a less erosive soy- heat-corn rotation. However, there were many situations where land was left idle in order to satisfy the environmental quality constraints imposed. It was this idle land which established the opportunity costs of reduced revenue caused by the environmental quality constraints. Results showed that marginal costs of environmental quality constraints were never less than the average costs, implying an overall loss in allocative and economic efficiency could accrue to watershed farmers. However, opportunity cost of effluent restrictions was lower with conservation tillage practices relative to conventional tillage practices.