Farmer Land Stewardship : A Pillar to Reinforce Natural Resource Management?

Jim Crosthwaite

Department of Natural Resources and Environment, Victoria.
jim.crosthwaite@nre.vic.gov.au

The opinions expressed in this work are those of the author only
and are based on research completed for a PhD at the University of Melbourne.

In the 1940s, Samuel Wadham, Professor of Agriculture at the University of Melbourne, toyed with the idea of giving farmer committees the power to remove farmers from their land for poor stewardship of the land ( Humphreys 2001 ) .

Recently a rural newspaper ran a 'war on weeds' campaign in which frustrated landholders were invited to write in about the weed problem on neighbouring properties. Aside from attacking irresponsible neighbours, contributors generally directed criticism at poor enforcement of regulations by government. Meanwhile, calls are being made for a major public investment in environmental management on private land of up to $6.5 billion annually for 10 years. How different might these debates have been if farmer groups had received a mandate to enforce stewardship in the 1950s?

Recent proposals for a duty of care (Industry Commission 1998, Australia 2001) have placed the question of regulating farming activities according to the concept of stewardship back on the public agenda. The duty of care and other policy initiatives are under consideration because key indicators of the state of land management and biological diversity are worsening (State of the Environment Advisory Council 1996 , Walker et. al. 1999 , Williams 1999 ) . While environmental considerations are leading many farmers to make some management changes, they are not generally the 'deep' changes now seen as necessary (AFFA 1999) and are generally at the periphery of the existing production system ( Beilin 2000 ) .

The duty of care would impose obligations on all those who are connected directly or indirectly with land management. The duty is based on what is 'reasonable and practical' given community expectations, and on what is 'foreseeable'. The regulators are not to approve standards as the aim is to shift responsibility to the duty holders. Duty holders comply by adopting voluntary standards such as codes of practice or a recognised environmental management system.

As the duty of care changes in line with community expectations, it creates a dynamic incentive to change. The Productivity Commission (formerly the Industry Commission) regards the duty of care as one of three pillars of a desirable government approach to sustainable land management; the other pillars are market-based measures and voluntary measures (particularly management agreements). Mandatory standards may be required if the consequences of land use are uncertain, or if there is a high risk of irreversible damage to significant environmental values.

The duty of care marks the point below which landholders have to meet land management obligations and above which they begin to provide public services. Binning and Young (1997) explore the use of management agreements with farmers to obtain conservation services over and above the duty of care. Auctions have been proposed as a way to overcome the information asymmetry problems when reaching agreements with farmers ( Stoneham et. al. 2000 ) , and are currently being trialed in Victoria and New South Wales. A potential problem is what economists call moral hazard - payment to farmers for environmental outcomes that they may have provided without contractual agreement ( Colman 1994 ) . Any scheme should be designed to minimise such payments and to avoid building expectations that further payments are required to maintain the status quo.

How could a duty of care be enforced and updated? The Productivity Commission (1998) proposes a package of measures, with the regulator having a role in ensuring that the duty of care is updated as circumstances change. However, governments have consistently shown a lack of will to enforce laws governing natural resource management by farmers ( Bradsen 1988 ) . Regulation can take many forms, including self-regulation and moral suasion. While Landcare groups may exert some influence, they do not have formal powers to compel action by individual landholders.

Many commentators have recognised the potential contribution to the public interest of a consistent and expanded right to standing before the courts, both in Australia ( Gunningham and Grabosky 1998 ) and in other countries ( Naysnerski and Tietenberg 1992 , Australia. Law Reform Commission 1985, 1996 ) . For more than twenty years environmental legislation in New South Wales has expressly provided rights of standing to any citizen or group without requiring a demonstration of interest ( Cripps 1992 , Farrier et. al. 1999 ) . The relatively few third party appeals in New South Wales have generally not been frivolous ( Gunningham and Grabosky 1998, fn 35 p.105 , Farrier et. al. 1999 ) , and overseas experience is similar ( Australia. Law Reform Commission 1985, 1996 ) .

What if Landcare groups had legal standing to bring an action against individual landholders before the courts? After due process, actions could be initiated against landholders not following the duty of care that has been defined locally as 'reasonable and fair'. Such an action, or even just the threat of it, could have a powerful demonstrative effect. Frequent resort to such action is unlikely, given the nature of the social bonds linking landholders in small communities. Support by government is likely to increase the willingness of Landcare groups to act. Resourcing of such actions by government is likely to be required, as is the case with the Clean Water Act in the United States, which makes provision for recovery of legal costs ( Gunningham, Phillipson and Grabosky 1999 ) . Giving third party rights to environmental groups is a complementary means of ensuring that the regulator takes enforcement action and exerts pressure on those defining the duty of care to keep it up-to-date with changes in farm management practices.

Third party rights could be abused by a Landcare group. The risks are illustrated by a recent incident, conveyed to me by a colleague, in which a Landcare group signed a contract with a State Government for a grant to rip rabbit warrens on stony rises. One farmer refused to act because to do so would destroy vegetation recognised as having conservation significance. Legal action was threatened. In the end, the rabbits were controlled using hand measures! A system of checks and balances, as proposed by the Productivity Commission ( Industry Commission 1998 ) , is clearly needed to ensure that any duty of care covers all relevant environmental issues, and not just those regarded as important by local farmers.

By introducing new obligations, the duty of care changes the property rights of landholders. If the duty of care is expected to disadvantage many land managers, resistance is likely with farmers both ignoring the duty of care, and mobilising politically to ensure that it is watered down. Regulation without majority support is difficult ( Gunningham and Grabosky 1998 ) . The need for financial support to help shift farmers to a new duty of care has been previously recognised. Binning and Young (1997) argue for one-off payments which 'secure permanent changes in property rights (p.20)'.

One approach to financial support may be to fund a re-organisation of the farming system that will enable the farm to comply with the duty of care while remaining capable of meeting farmer objectives into the future. Financial payments could be in the form of adjustment assistance based on an analysis of whole farm options and future prospects, rather than as compensation. From this perspective, financial assistance to meet the duty of care may only be required in some cases. In others, strategic business advice to farms that pinpoint solutions at the level of the farm business may be enough. Emphasising farm re-organisation is consistent with the dynamic nature of the duty of care in that it will evolve over time, following changes in farming practices and community expectations.

If payments to shift to a duty of care were standardised across a given class of farmers, payments must equal the marginal costs for the farm that is least willing (on financial grounds) to comply. Standard payment schemes have been previously criticised for incurring 'the moral hazard of paying farmers for things they need no payment to perform' ( Colman 1994 p.310 ) and for being inefficient ( Weaver 1998 ) . A competitive auction system could be used to lower costs by revealing landholder's willingness to accept ( Latacz-Lohmann 1998, Stoneham et. al. 2000 ) . However, competition cannot be introduced if every farm is required to comply. Direct costs may be lowered by individually negotiating agreements with landholders. The disadvantage is the high transaction costs.

One problem with standard payments, individually negotiated agreements and auction systems is that they do not necessarily act as an incentive for a shift in strategic behaviour whereby farm business and land management goals might both be more easily met. Investigations into modifying such payment vehicles in this direction may be fruitful.

Our understanding of opportunity costs and farmer motivation are important to the question of assistance to comply with a duty of care. Concern is not with the alternative uses to which a particular parcel of land might be put, and the net income that might be foregone. The critical consideration is opportunity to invest across the farm, and alternative futures that might be available for the farm business. Beyond the question of opportunity cost, objectives of satisfying rather than profit maximisation motivate farm family behaviour, as they motivate many firms ( Leibenstein 1979 ) . Once farmers can expect satisfactory income levels, investment to comply with standards of land management is likely to be forthcoming. Surveys show that stewardship is an important goal of farmers ( Curtis 1997 ) , and environmental attitudes are positive to the extent that this is consistent with good farming practice and business survival ( Cary and Wilkinson 1997 ) .

New farm business opportunities depend in part on the capacity of farm businesses to adjust. Recent research shows that there is considerable scope to increase intensification of pasture production on land with high capability. This gives scope to manage other areas of the farm more benignly ( Crosthwaite and Malcolm 2000 ) Opportunities will also arise as markets change. There is a growing emphasis on 'clean and green' production in 'boutique' markets, more so than in bulk commodity, markets. The industry research and development corporations, and corporations such as Unilever, are trialing environmental management systems to position industries so that farmers can take advantage of market premiums should they arise.

Taking the dynamics of farm businesses and changing opportunities into account, the sum required to 'repair the land' in Australia needs to be recalculated. There are fundamental weaknesses in the method by which the proposed $6.5 billion per year has been calculated, estimating the area affected by each form of land degradation and multiplying it by the estimated cost of repair per hectare. The sum should be based on more careful specification of the problem ( Pannell 2001 ) and then on determining the sum required by farmers to do the work - in the context of future farm business opportunities.

In conclusion, farm businesses are dynamic entities. A set of mechanisms, rather than one alone, will be required to achieve policy goals. The duty of care can be one of the pillars, but needs to be supported by adjustment assistance, management agreements and third party rights, as well as demand-led measures and mandatory standards in some cases. However, these mechanisms cannot work in isolation from institutional changes. As concerns about the sustainability of Australian agriculture have emerged over the last two decades, conflicts in goals, policy and administration have been evident. The reasons are not simple, and a concerted program is needed ( Dovers 1999 ) .

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