Mike Duffy, Iowa State University Extension economist, provides the following "food for thought" on the topic of soil erosion and considerations for farmers and landowners to think about when placing a value on reducing soil loss.
Soil erosion levels have decreased in the United States and in Iowa, but soil erosion remains a serious problem. In 1982 there was an estimated average of 7.4 tons of soil erosion on Iowa cropland. By 2007, erosion in Iowa had decreased to an average of 5.2 tons per acre.
Erosion represents costs to the farmers including lost fertilizer and soil carbon. Erosion also produces costs to society. These costs include clogged roadway ditches, increased turbidity in the water damaging fish and increasing the need for filtration of municipal water supplies. Also, the displaced soil in the water increases siltation of water control structures. These societal costs are borne by taxpayers or society in general. They are "external" to the decisions made by the farmer.
There is a cost of erosion to the farmer and to society
Estimating the cost of soil erosion is extremely difficult and subject to a variety of assumptions. It is especially difficult to estimate the non-market benefits, both locally and nationwide. There are a number of variables that confound soil loss cost estimates. Regardless of the difficulties, the majority of the studies recognize there is a cost of erosion to the farmer and to society.
There is another category of costs not usually considered in a discussion of soil erosion. These are the costs to landowners caused by a decrease in their asset value. Landowners may be the farmers who are actually farming the land, but increasingly they are not. In 2007, over half the farmland in Iowa was rented.
Methods used to evaluate the cost of degrading the soil
In a new Iowa State University study, three methods were used to evaluate the cost of degrading a soil from one erosion phase to another:
•Change in land value based on a lower Corn Suitability Rating,
•Change in land value due to loss of yield potential (including continuous corn and a corn/soybean rotation),
•Change in land rent value, as of July 2011, due to the change in soil erosion phase.
As the accompanying chart shows, the three methods produced similar results. The biggest difference is between the continuous corn estimate and the average of the rental methods with the difference of $68 per acre or 30%. The lower impact for continuous corn was expected because the greater input costs associated with it reduces net returns. The corn/soybean rotation produced a $33 or 13% difference between it and the loss due to erosion using the rental method (see footnote below).
Will soil erosion show up in sale price of the land?
These analyses suggest it is possible to estimate the potential impact of erosion on land values. However, will erosion loss show up in the sale price of the land, or will erosion loss simply be a part of the overall price per acre because it is too difficult to separate the eroded and non-eroded land in a sale? In some cases, especially in highly erodible areas, if a person farmed in such a manner as to prevent erosion, the soil would have an increased value.
If we are to truly consider the impact of erosion we need to consider what it does to the value of our investment. Too often we apply more fertilizer or other crop inputs masking the impact of erosion. We fail to account for decreased value of the land asset due to soil erosion. Higher expenses for the same yield mean lower profits, which lowers the value of the asset.
Eventually, soil erosion will cost the landowner money
Soil for the landowner is a bit like removing bricks from a wall. Bricks can be removed one at a time without much trouble until one too many are removed and the wall collapses. A landowner can tolerate soil erosion a little at a time, but at some point it is going to cost and they won't know what they've got until it is gone.
*Footnote: Read the full report, including information on how the analysis was performed on the ILF website www.extension.iastate.edu/ilf/conservationsoil.