Multifunctionality in Agriculture

Multifunctionality in Agriculture

Evaluating the degree of jointness, policy implications You do not have access to this content

English
Click to Access: 
    http://oecd.metastore.ingenta.com/content/5108071e.pdf
  • PDF
  • http://www.keepeek.com/Digital-Asset-Management/oecd/agriculture-and-food/multifunctionality-in-agriculture_9789264033627-en
  • READ
Author(s):
OECD
20 May 2008
Pages:
252
ISBN:
9789264033627 (PDF) ;9789264033610(print)
http://dx.doi.org/10.1787/9789264033627-en

Hide / Show Abstract

These proceedings examine the nature and strength of jointness between agricultural commodity production and non-commodity outputs from the perspective of three areas important to the agricultural sector: rural development, environmental externalities and food security. This workshop also examined whether the relationships among these non-commodity outputs were complementary or competing. Finally, the policy implications that could be derived from the findings of this workshop were also a key element in the discussions and are summarised in the Rapporteur’s summary.
loader image

Expand / Collapse Hide / Show all Abstracts Table of Contents

  • Mark Click to Access
  • Multifunctionality in Agriculture
    The primary function of agriculture is to supply commodity outputs such as food, fibre and other raw materials. However, agriculture can also be a source of several noncommodity outputs (NCOs) that are jointly produced with commodity outputs and that exhibit the characteristics of public goods or externalities. The term multifunctionality refers to this nexus between commodity and non-commodity output production in agriculture.
  • To what extent is rural development a joint product of agriculture?
    In 1998, at the Ministerial meeting of the Committee for Agriculture, OECD Agricultural Ministers acknowledged that the role of agriculture is going beyond the provision of food and fibre [...] by contributing to rural development and generating environmental and amenity services for which there are often no or very imperfect markets (OECD, 1998). The Ministers used the term "multifunctionality" to describe this role.
  • Maintaining Farmland
    Agricultural policy reforms, including CAP reform in Europe, periodic changes in U.S. Farm Bills, and adjustments in Canadian agricultural policies, have a number of common threads. These can be grouped under the concept of multifunctionality, although in North America and some other countries the term is not popular (Garzon, 2005; Dobbs and Pretty, 2004). Even so, there is a general recognition by the majority of OECD countries that farm policy has to move beyond its historic focus on increasing commodity production and supporting farm incomes (Cochrane, Normile and Wojan, 2006). Largely, this involves recognizing the various non-commodity outputs of agriculture and finding ways to adjust farming practices to alter the balance between commodity and noncommodity outputs (OECD, 2003).
  • Agricultural Multifunctionality and Village Viability
    The discussion on multifunctionality has evolved since the publication of Multifunctionality: Its Policy Implications (OECD, 2003), which developed a framework for developing appropriate agricultural policies without distorting trade liberalisation. Nevertheless, problems with multifunctionality in agriculture persist; one of the more significant problems revolves around the extent that there exists jointness between farming activities and multifunctionality.
  • Evaluation of Jointness Between Agriculture and Rural Development
    The discussion on multifunctionality has evolved since the publication of Multifunctionality: Its Policy Implications (OECD, 2003), which developed a framework for developing appropriate agricultural policies without distorting trade liberalisation. Nevertheless, problems with multifunctionality in agriculture persist; one of the more significant problems revolves around the extent that there exists jointness between farming activities and multifSince 1990, the term multifunctionality has served to define those public services provided by agriculture which arise as by-products of the production of marketable goods. According to Mann and Mack (2004), the term multifunctionality stands for the various tasks of agriculture which, in turn, can be derived from the targets set down in the Swiss Federal Constitution. The most important services of Swiss agriculture are (Federal Constitution, Article 104):unctionality.
  • To What Extent are Environmental Externalities a Joint Product of Agriculture?
    Jointness is a key attribute of multifunctionality. The first discussion of jointness in this context has been attributed by Nowicki (2004) to Harvey and Whitby (1988) who raise "the possibility of symbiosis between agriculture and the environment and the possibility of joint production of both environmental goods and services". However, as Nowicki comments "the relationship between the economic benefit and environmental good in the structure of joint production is not simple". It is defined more formally by the OECD (2001) in terms of situations where a firm produces two or more outputs that are interlinked so that an increase or decrease in the supply of one output affects the levels of the others. To be of policy relevance, one or more of the outputs must be a noncommodity output with some element of publicness. This report concentrates on situations where commodity outputs are potentially produced jointly with positive environmental or countryside goods.
  • Different Types of Jointness in Production of Environmental Goods and Agricultural Policy Change
    This paper analyses the effects on environmental good production by farmers of the transition from coupled direct payments to fully decoupled payments as proposed in the June 2003 CAP reform. Two types of environmental goods differing in their production relationships to agricultural commodities are considered: complementary goods and competing goods. Uncertainty, together with the farmers’ risk aversion, is likely to change the production neutral character of fully decoupled payments therefore we account explicitly for it. First, some general results are derived analytically. Then several case studies are carried out by means of mathematical programming farm-level models applied to the case of joint beef and biodiversity production in France and in the Czech Republic. Both the analytical and numerical results confirm that decoupling of direct payments is likely to have a positive effect on competing grassland biodiversity production but its effect will be negative if biodiversity production is complementary to beef production. The observed effects of uncertainty and risk aversion are negligible. The simulation results draw our attention to the fact that on the one hand, the type of jointness between agricultural commodities and environmental goods determines the effects of applied policy instruments on environmental good production, and that on the other hand, the type of jointness itself is to a certain extent determined by these policy instruments and their parameters, like the output price level or the degree of decoupling of direct payments.
  • De-linked Cost of Rural Landscape Maintenance
    Land-use in Switzerland continues to be dominated by agriculture. Approximately 40% of the total area (11 000 km2) is managed by farmers. The rest of the surface is either forest (30%), unproductive mountain area, lakes and rivers (26%) or built up areas (BLW, 2004). A change in agricultural structures or the amount of land in production would therefore also change landscape and open space amenities. This leads to the fundamental source of jointness between agriculture and landscapes. Since both have the same input factor, land, no separate production functions exist for agricultural products and landscape maintenance. For that reason, the latter can also be seen as an externality of agricultural production (Hediger and Lehmann, 2003). However, the intrinsic relationship is shifted under current agricultural support schemes. In Switzerland, market price support and direct payments result in a producer support estimate (PSE) of 68% (OECD, 2004). The extent of agriculture’s contribution to landscape amenities in an unsupported situation is unknown. From an economic perspective, however, the assessment of jointness needs a reference to this basic situation in order to evaluate efficient provision schemes. Moreover, agricultural support not only entails positive effects on landscapes, such as open space amenities or the provision of certain landscape elements, but also negative effects, e.g. the deterioration of wild life habitats or nutrient runoff. These relationships are based on complex ecological interactions which are often poorly understood (Heal and Small, 2002).
  • The Cost Relationships Among Various Environmental Benefits
    The agricultural sector jointly provides a series of marketed and non-marketed goods, among which environmental benefits play an increasingly important role. This positive characteristic of farming is acknowledged by the European Union's current policy with agri-environmental measures providing public financing of programs under several headings such as extensification, grassland maintenance, landscape, and nature protection. These policies are expected to be continued and even reinforced. They rely on voluntary agreements with farmers: entrants are compensated for complying with a package of prescribed farming practices designed to secure conservation goals. To be effective from an environmental perspective, uptake is a key factor.
  • Degrees of Jointness for Food Security and Agriculture
    It was in the early 1990’s that the term multifunctionality as such entered the political discussion (for a literature review see Bohman et al., 1999). Due to the increased awareness of the concept of multifunctionality, the OECD has contributed, through a broad process of consulting and coordination, to providing a theoretical framework for this perspective which has the potential to challenge the foundations of welfare economics. In the course of this process, it became clear that the theoretical origin of the perception of multifunctionality lay in the phenomenon of jointness: the production of agricultural goods was connected with the production of non-commodity outputs. "The key elements of multifunctionality are: (i) the existence of multiple commodity and noncommodity outputs that are jointly produced by agriculture; and (ii) the fact that some of the non-commodity outputs exhibit the characteristic of externalities or public goods, with the result that markets for these goods do not exist or function poorly."(OECD, 2001) Generalising this notion of jointness, all production processes allowing for all weight and energy flows are characterised by some sort of joint production (Baumgärtner and Schiller, 2001).
  • Optimal Provision of Public Goods
    Agriculture is a heavily supported industry in most developed countries and is widely perceived as a hindrance to economic growth and development and a major source of distortion of international trade. It has become one of the main focuses of OECD and has been a continuing concern in WTO negotiations.
  • The Relationship Between Domestic Agricultural Production and Food Security
    The modern concept of food security is not an old one, being first used in a series of FAO conferences held in the 1970s. In Japan, it first appeared in a policy document of 1980 when policymakers began to worry about the future of world food supply and Japanese agriculture. Since then, the idea has occupied a major position in Japanese agricultural and related trade policies. It has often been used as a rationalization to protect Japanese domestic agricultural production, which has been challenged by cheaper imports resulting from trade liberalization policies.
  • An Evaluation of Agriculture's Contribution to Food Security
    The Federal constitution of Switzerland guarantees the national security of food supplies. Under the terms of Article 102, the Federal Government must ensure that, in the event of a crisis or a shortage, essential goods and services that the economy is unable to provide by itself will be guaranteed by the government. The objective is to overcome any supply crises by means of precautionary measures in six sectors: food, energy, medical supplies, transport, industry as well as information and telecommunications infrastructure. Supplementary to Article 102 of the Federal Constitution, Article 104 states that agriculture shall contribute "to securing food supply for the population." The term "supply security" can be understood to cover both food safety and food security. In Switzerland, food safety is subject to food laws and is based primarily on Article 118 of the Federal Constitution on the protection of public health. Agricultural policy measures deal mainly with the food security aspect.
  • Rural Viability, Multifunctionality and Policy Design
    The Federal constitution of Switzerland guarantees the national security of food supplies. Under the terms of Article 102, the Federal Government must ensure that, in the event of a crisis or a shortage, essential goods and services that the economy is unable to provide by itself will be guaranteed by the government. The objective is to overcome any supply crises by means of precautionary measures in six sectors: food, energy, medical supplies, transport, industry as well as information and telecommunications infrastructure. Supplementary to Article 102 of the Federal Constitution, Article 104 states that agriculture shall contribute "to securing food supply for the population." The term "supply security" can be understood to cover both food safety and food security. In Switzerland, food safety is subject to food laws and is based primarily on Article 118 of the Federal Constitution on the protection of public health. Agricultural policy measures deal mainly with the food securityAccording to OECD (2001), the fundamentals of multifunctionality are defined by i) the existence of joint production of commodity and non-commodity outputs and ii) the fact that some of the non-commodity outputs exhibit the characteristics of externalities or public goods (OECD, 2001). Non-commodity outputs include the impacts of agriculture on the environment, such as rural landscape, biodiversity and water quality but also socioeconomic viability of rural areas, food safety, national food security and the welfare of production animals together with cultural and historical heritage. aspect.
  • Domestic and International Implications of Jointness for an Effective Multifunctional Agriculture
    When agriculture is effectively multifunctional, the optimal policy is to provide society with an adequate level of non commodity output (NCO) at the lowest cost. Whether or not this policy affects the welfare of trading countries does not alter this definition of optimality from a national standpoint. For large trading countries, the terms of trade effects of domestic environmental policies on national welfare may alter the optimal levels of instruments (Krutilla, 1991; Peterson et al., 2002). In this case, the international dimension of environmental policies cannot be overlooked.
  • Jointness, Transaction Costs and Policy Implications
    The goal of policy measures is to ensure that the outcome of the policy is close to the desired goal, i.e. that the policy is targeted. If no costs were involved in designing, implementing and managing the policy, this would be no problem. In such a case all policy goals would be met by using one (or more) instrument for each policy goal. However, due to natural uncertainties, actions and states that are not observable, as well as the costs of implementing the policy, we need to balance the precision — how targeted the policy is — and the transaction costs of the policy. This paper will discuss these issues in situations where there is jointness.
  • Evaluation of Jointness in Swiss Agriculture
    Since the 1990's, the term multifunctionality has served to define those public services provided by agriculture which are linked to production. The concept of multifunctionality is internationally recognised in that multifunctional services serve as the basis upon which instruments for agricultural support are justified and accepted. Indeed, some countries base their agricultural policies on the concept of multifunctionality. In Switzerland, direct payments compensate multifunctional services provided by agriculture under the terms of the Swiss Federal Constitution.
  • Add to Marked List
 
Visit the OECD web site