It All Adds Up: The True Costs of Farming

For most farmers, the decision to use chemical fertilizers is an easy one. For every ton of ammonium nitrate a farmer uses, he pays $387 and sees a return of between $666 and $2,066—as much as 500 percent. The math simply makes sense.

Or at least it appears to. A 2013 European study calculated the total costs of using nitrogen fertilizer, including things like the cost of cleaning up chemical runoff into local waterways. What they found was that adding nitrogen fertilizer did not deliver a windfall, but resulted in damages to the environment, society and public health that ranged from $990 to a whopping $5,172 per ton. “If the damage done was charged to the farmer or fertilizer supplier, it would cancel out the benefit and it would transform agriculture all over the world,” says Patrick Holden, a farmer and the director of the U.K.-based Sustainable Food Trust.

Transforming agriculture is exactly what Holden has set out to do. His strategy is to put precise dollar figures on the costs of industrial agriculture. These are the so-called externalities that we hear about so often from food-reformers who argue that cheap food isn’t really cheap.

The problem is that without hard numbers, the issue remains stubbornly abstract. This is why a financial reckoning—what Holden calls true cost accounting—is so important. Only with real figures in hand can we at last have serious conversations about how to hold producers accountable and begin to level the playing field for sustainable producers.

Holden is not the only champion of true cost accounting. But for him, it’s personal: He raises 150 head of cattle on 300 organic acres in Wales. In 41 years, Holden has never used nitrogen fertilizer or any pesticides on his farm. And yet, he is paid just 62 cents per liter of milk—barely enough to cover his costs. And so after years of advocacy at the U.K.’s Soil Association and as a key advisor to the Prince of Wales, who himself is an outspoken advocate for organic methods, Holden turned his focus to true cost accounting. In 2013, his nonprofit, the Sustainable Food Trust, held two gatherings, one in Louisville, Ky., and another in London that drew scientists, policy makers and economists from around the globe. Prince Charles even recorded a message from St. James’s Palace for the London attendees, urging them to “commission a major study to explore once and for all whether it is more affordable and profitable in the long term to farm by putting nature at the heart of the process.”

Pavan Sukhdev took up the Prince’s challenge.  An environmental economist, Sukhdev is renown for his TEEB (The Economics of Ecosystems and Biodiversity) reports that put a price on “natural capital.” (“You cannot manage what you do not measure,” he explained in a 2007 TED Talk.) Inspired by Holden’s London conference, Sukhdev initiated a study in 2014 to examine the benefits of agro-ecological methods to productivity; the impacts of industrial production; and the role of small farmers in a sustainable landscape. An interim report, which will analyze efficiencies and benefits of production systems—such as rice farms at different scales across regions—will be released this spring. The full report, including policy recommendations, is slated for 2016.

True cost accounting, also referred to as triple bottom linefull cost accountinglife cycle analysis and cradle to cradle, is catching other groups’ attention, too. The Food Tank has launched a year-long project to promote awareness and new research on true cost accounting. (Holden gave a keynote on the subject at Food Tank’s first summit in Washington, D.C., in January 2015.) A growing number of consultancies, such as TruCost and TruePrice, work with companies to measure and understand the economic consequences of their use of natural resources. In a recent study, TruCost concluded that the food and beverage sector creates $40 million of external costs per billion in revenue compared to a $3.8 million average across sectors.

Of course, figuring out how to account for all those nasty externalities is mind-bendingly complicated stuff. As the Food Tank’s Danielle Nierenberg points out, the environmental and social costs for something like nitrogen fertilizer vary from place to place. And this will make it difficult to persuade conventional farmers and politicians—many of whom are in thrall to the corporations that manufacture the chemicals—that now is the time for change.

Holden’s enthusiasm for true cost accounting remains undimmed by the obstacles ahead. “Think of it as the beginning of a new journey,” he told me in an interview from Brussels, where he was giving a talk on the subject. “We need a new language, a new conceptual framework to make it possible for people to understand. It’s exciting to watch it dawn on people that it is possible to have a more honest economic relationship with our food system.”

Originally published on February 25, 2015

Jane Black

Jane Black is an award-winning New York food writer who covers food politics, trends and sustainability issues. Her work appears in The Washington Post (where she was a staff writer), The New York Times, The Atlantic, Slate, New York magazine and other publications. She is currently at work on a book about one West Virginia community's struggle to change the way it eats.

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