This week we're going to talk about some of the key resource challenges that face agriculture currently and into the future. And we'll cover issues like water pollution, pesticide bans, salinity, phosphorus availability, water shortages, herbicide resistance, and climate change-- starting today with water pollution So water pollution can arise from agriculture in a variety of ways, a variety of causes. It can be caused by sediment by nutrients, by pathogens, by pesticides. And these can all occur in groundwater or in surface water. So there are a variety of different types of water pollution problems arising from agriculture. Let's start with nutrients. Some nutrients from fertilizer run off into waterways and/or leach into groundwater. And this can affect the ecosystem, and it can affect human health. And around the world, there are many different water bodies that have been or are being affected in this way. So some very prominent examples include Chesapeake Bay in the USA, the Gulf of Mexico, which famously has what's called a hypoxic zone or a dead zone, a zone with no oxygen in the water-- also in the US. The Great Barrier Reef in Australia-- a much less serious case than the Gulf of Mexico currently is, but still a concern. The Gippsland Lakes in southeastern Australia, and many, many other rivers and lakes, and inshore marine waters around the world. Another cause of water pollution is sedimentation. So when areas are cultivated or plowed for crops or grazing of livestock loosens the soil, this can lead to soil erosion. And the eroded soil washes or blows, usually washes, into waterways with a variety of different impacts. Impacts can include pollutant accumulation, sometimes pollutants are attached to the soil. Phosphorus is as a common example there. Shallower waterways, which means that there's reduced capacity for water to flow through those water bodies. Or in some cases, shallower dams. There's been cases of quite a lot of sediment washing into dams that have been created and slowly but surely filling up those dams and reducing their usefulness as dams. Reduced light penetration and ecosystem damage. So economic perspectives on this include the idea that water pollution from agriculture is what's called an externality, or an external cost. What this means is that the people with the potential to fix the problem or avoid creating the problem don't bear the cost of the problem. The costs of water pollution aren't reflected in the costs of agricultural production. So that means that farmers don't fully recognize the costs that some of their actions are causing. And economists recognize that that potentially means that there's a justification for a response by government to step in and try and reduce water pollution. Here's a supply and demand diagram that illustrates this point. This is showing the supply curve purely from the perspective of farmers, and you can see the point where the supply and the demand curve intersect, indicating the level of production and the price that would occur in free market. But then if we were to allow for the fact that there is an additional cost that's not captured or not felt by farmers due to water pollution, then that means that the marginal cost of production is higher. So this new supply curve, which I've labeled there, the social marginal cost, is higher than the private marginal cost, because it also factors in this cost of pollution. And if we could make this marginal cost be the one that determined what level of production there was and what the price would be, you can see that the production would be a bit lower, and the price would be a bit higher. If we were to do that, we would have achieved what economists call, "internalizing." We have an externality, and we can achieve and we can manage that externality appropriately by internalizing it. And it effectively means that in this case, we'd have a different supply curve. So the effect of the externality is that to produce an extra unit of grain, it not only costs the farmer inputs such as fertilizer, herbicides, labor, fuel, and so on, it also costs society a reduction in environmental quality. And so the total cost, the social cost is higher than the private cost. And once this is factored in, the optimal quantity of grain is a bit lower. So it reflects that we've struck a different balance, or we've struck a balance between production and the environment. An example of an externality that I've mentioned already is water pollution affecting the Great Barrier Reef in the northeastern part of Australia. And there's various types of pollution affecting the Great Barrier Reef. An important one is nutrient pollution coming from sugar cane production, which you can see in this photo. Here's a quote from the Great Barrier Reef Marine Park Authority to illustrate the problem. "The reef continues to be exposed to increased levels of sediments, nutrients and pesticides. In particular, there are significant effects in inshore areas close to developed coasts, such as mangrove dieback and increased algae on coral reefs." So in summary, the main pollutants from agriculture are nutrients and sedimentation, and water pollution is an example of an external cost, which is an additional cost to the community on top of the farmer's cost of production.
