Managing soil natural capital: An effective strategy for mitigating future agricultural risks?

Abstract

Uncontrollable events such as adverse weather and volatile prices present considerable risks for arable farmers. Soil natural capital, which views the capacity of soil biodiversity to generate ecosystem services as a component of farm capital, could be important for the stability and resilience of arable production systems. We investigate therefore whether managing soil natural capital could be an effective strategy for mitigating future agricultural risks. We do this by constructing a dynamic stochastic portfolio model to optimize the stock of soil organic carbon (SOC)-our indicator of soil natural capital-when considering both the risks and returns from farming. SOC is controlled via the spatial and temporal allocation of cash crops and an illustrative replenishing land use. We find that higher soil natural capital buffers yield variance against adverse weather and reduces reliance on external inputs. Managing soil natural capital has therefore the potential to mitigate two serious agricultural risks: energy price shocks and adverse weather events, both of which are likely to be exacerbated in the future due to, e.g., globalization and climate change. (C) 2014 Elsevier Ltd. All rights reserved.

Keywords

Soil ecosystem services; Copula model; Dynamic portfolio theory; Soil organic carbon; Sustainable agriculture; Resilience

Published in

Agricultural Systems
2014, volume: 129, pages: 30-39
Publisher: ELSEVIER SCI LTD

SLU Authors

• Andersson, Hans

  • Department of Economics, Swedish University of Agricultural Sciences
    

• Brady, Mark

  • Department of Economics, Swedish University of Agricultural Sciences
    
  • Lund University

Global goals (SDG)

SDG2 Zero hunger
SDG13 Climate action

UKÄ Subject classification

Economics

Publication identifier

• DOI: https://doi.org/10.1016/j.agsy.2014.05.003

Permanent link to this page (URI)

https://res.slu.se/id/publ/60386