This post is part of a blogging series by economics students at the Presidio Graduate School's MBA program. You can follow along here.
By Cyndie Hoffman
Agricultural industries are especially sensitive to scale and growth of operations as ecological variables work in systems to supply the throughput necessary for abundant yields. The supply of water, health of soil, nutrients from vegetation, and activity of microorganisms and pollinators interact at certain capacity levels to produce fruits, vegetables, and grains to feed the nation’s people and livestock. Large-scale agriculture has flourished over the last century with the foundation of the industry model being neoclassical economics. This theory explains agricultural production in terms of efficient allocation of resources but often does not consider essential ecological factors in the equation. These hidden values are becoming more apparent as large operations test the capacities of ecosystems and find their limits.
California's flourishing almond industry, the fourth largest valued agricultural commodity in the state with over $2 billion in annual revenue, provides a great example of agricultural growth that has felt the cost of a previously unvalued ecosystem service. With acreage dedicated to almond orchards growing about 600% to 700,000 acres over the last half-century California currently produces 80% of the world's global supply of this delicious, nutrient-rich crop. Healthy honeybee populations are relied upon to sufficiently stimulate output but at this scale they no longer have the capacity to do so.
Additionally, honeybees thrive best in lands offering rich biodiversity with a nourishing mix of amino acids and protein-rich pollen but the predominantly monoculture nature of almond operations causes an inadequate diet and leads to reduced productivity and weakened immune systems. To achieve optimal yields from pollination growers have two options, both of which require time and money: food supplements for local bees or the procurement of commercial beehive services. California growers focus on the latter and truck approximately 1.4 million commercial beehives from the east coast each year with costs up to $150 per hive.
The typically no-cost benefit of honeybee pollinators is now capitalized and consumes approximately 15% of the largest grower’s almond production costs. Ecological services suddenly have an economic cost. How should California’s agricultural economy consider and prepare for these issues in the future? One perspective, ecological economics, provides a broader view of the world showcasing that the ecosystem is not external to business operations but that business operations are actually a subsystem of the environment.
Ecological economics reveals the concepts of limits to growth and sustainable scale. When applied to almond firms the long-term sustainability of the almond production activity would be assessed as-is and with components that are not completely factored in at the present or in the future with traditional economics. For example, the high-value nature of almond crops protects the industry from high water costs but the impacts of current water shortages and future water availability would weigh the costs and benefits at various scales.
To ensure a viable food economy in the long-term the interrelationships between financial, ecological and human variables must be anticipated, assessed, and balanced. As agricultural constraints continue to emerge how will farm practices and production scales evolve? How large can the almond industry grow with expensive commercial bee pollination costs? Could biodiversity and sustainable farming practices play a larger role in helping mitigate these costs?
Cyndie Hoffman is an MBA candidate in Sustainable Management at Presidio Graduate School where she focuses on sustainable agriculture, local food systems, water, waste management, transportation, and renewable energy. You can follow her on Twitter.