In order to establish the environmentally friendly agricultural system (EFAS), policy programs should be tailored for each region based on the accurate diagnosis of the environmental loading of regional-based agri-ecological system and the economic analysis for managing environmentally friendly agricultural resources. The objective of this study is to take a look at sample regions and to propose measures to develop the environmentally friendly agriculture (EFA) based on the analysis of the economic effects of the EFA.
Various analytical methodologies were applied to achieve the purpose of the study. In order to analyze the management performance of the farm households, which conduct environmentally friendly agriculture, Data Envelopment Analysis was applied to measure the technological efficiency. Tobit Model was utilized to evaluate the factors, which influence technical efficiency. The farm households' level of acceptance of the direct payment program for the EFA was evaluated by using the Contingent Valuation Method (CVM), while bootstrap was applied to assume the significance level. The economic values of the shift toward the environmentally friendly agriculture in terms of environment quality improvement were measured with Utility Difference Model.
In the survey farm households conducting the EFA, 27 percent of the respondents said that the biggest difficulty they are facing is the lack of sales channels, and 20.6 percent responded that technical problems related to the prevention of diseases and harmful insects and the weeding are the biggest hardship. Therefore, it was found that the lack of distribution channels and the production technology are the most troubling factors to EFA farmers. In the study, the appropriate amount of direct payment to an organic rice cultivating farm household was estimated to be 1,060,000 won to 1,100,000 won (95% of the significance level), which is higher than the current direct payment amount of 806,000 won. The average direct payment amount was some estimated to be 1,080,000 won.
When asked about the proper measures to promote the sales of environmentally friendly agricultural products and to facilitate the market, 29.2 percent said that the active consumer promotion and expanded training are necessary, followed by the increase in the number of merchants and the diversification of sales channels with 25.3 percent and the expansion of exchanges between consumers and producers with 19.9 percent. The joint supply via agricultural cooperatives was the most favored method of supplying environmentally friendly agricultural products by farmers.
In order to achieve material balance, the reduction of the number of livestock raised is required. In the Hongseong region, for example, it was found that the average direct payment per pig (for raised pigs) to a fattening pig farm, which reduces the number of pigs raised to or below a certain level, is estimated to be 46,250 won. If pig farming is completely phased out, the appropriate direct payment per head was estimated to be some 289,062 won (2.5 times the annual income per head).
In relation to the farm management performance, in Hongseong County, it was found that the average technical efficiency of environmentally friendly rice farm households was 0.73, indicating that an average of 27 percent of management efficiency should be improved compared with the most efficient farm households. The appropriate input level was calculated for environmentally friendly rice farm households in Hongseong County, and it was found that the expense for organic fertilizer was 32,000 won and needs to be cut 31.9 percent on average. The expense for preventing diseases and harmful inspects was 3,000 won and needs to be cut 41 percent on average. The expense for environmentally friendly agricultural equipment and supplies was 35,000 won and needs to be cut 40.6 percent on average, while the labor expense was 118,000 won and needs to be cut 40.3 percent on average.
When taking a look at the factors, which influence the technical efficiency of EFA farm households, it was found that younger, more educated, more experienced landlord farmers using a variety of species are more likely to show high efficiency. Also, the technical efficiency improves when the level of the soil management technology is high.
Hongseong County needs 30 percent reduction in the number of pigs raised to achieve the nutrient balance if the appropriate number of pigs raised is set at 300,000 to 320,000 heads. In addition, the nutrient generated by 100,000 to 150,000 pigs should be transferred to other regions, and the chemical fertilizer use (nitrogen and phosphorous, by ingredient) should be reduced 30 to 60 percent. Only then the environmental load could be minimized through a material balance.
It was estimated that Hongseong Country will need to spend some 5.9 billion won in 2005, 15.4 billion won in 2007, 19.9 billion won in 2010, and 23.7 billion won in 2014 respectively to achieve the transformation into the EFAS. In case of Okcheon County, it was estimated that it needs to spend some 5.3 billion won in 2005, 8.3 billion won in 2007, 11.3 billion won in 2010, and 14.2 billion won in 2014 respectively. Meanwhile, in Hongseong Country, the estimated economic value of improved environment quality stemming from the transformation into the EFAS was some 32.9 billion won per year. The value refers to the approximate economic value of the sound Hongseong's EFAS, which is recognized by consumers
Based on the economic analysis of the sample regions, the study suggests the management consulting aimed to reduce production costs for farm households, the investment expansion for EFA nurturing projects, the year-based differentiation and inflation of direct payment amount and the proper measures to expand sales channels and promote sales of environmentally friendly agricultural products as measures for EFA development.
To help EFA take a firm root, it was found that relevant training should be expanded to induce the voluntary participation of farmers in EFA; tailored technical development should be executed in line with regional farming conditions; and in particular, the technologies for weeding and disease and insect prevention should be developed and widely distributed. Beside, measures should be drafted to encourage private companies to participate in the activities of turning livestock manure into fertilizers by effectively linking cultivating farm households and livestock farm households. Lastly, all relevant entities, such as farmers, consumers, researchers, policy makers and NGOs, should take their share of responsibility to achieve the sound EFA development.
It will take considerable amount of time to build a sound EFAS in consideration of region-specific environmental loads. Therefore, phased approach should be taken, and the proper policy mix composed of economic analysis-based programs and infrastructure setting programs should be pursued.
Researchers: Chang-Gil Kim, Tae-Young Kim, Yong-Kwang Shin, and Jang Heo
E-mail address: changgil@krei.re.kr