A blind spot in agroecology: economies of scale and ecological complexity

The criticism of industrial agriculture and its consequences for our climate, animal welfare and biodiversity is widely known. Countless scientific analyses explain them through high inputs of nutrients, pesticides and large-scale monocultures. Although this model of causal relationships is factually correct, it is based on a linear understanding in which industrial agriculture is the cause of a number of problems in our agricultural ecosystems. However, such simple cause-and-effect models ignore the much more complex socio-ecological interactions in agriculture.

Above all, such a linear model is in no way helpful in explaining agroecological transformation processes or the resilience of industrial agriculture to transformation. The comparison between “industrial” and “agroecological agriculture” is also understandable from an activist perspective and perhaps also necessary in terms of strategic communication. However, this harbors the danger of simple dichotomies that do not do justice to the complexity of our world in any way and therefore make it difficult to find technically sound and practically relevant solutions.

On the one hand, a more precise socio-ecological model of our agriculture is of a purely academic and knowledge-oriented interest. A central question is how biological diversity and economic efficiency in agriculture are linked. However, this question is also central to the concern of critics of industrial agriculture to reform this system or, as is often postulated, to radically transform it.

For this reason, I would like to try to take a more differentiated approach to the relationship between biodiversity in a production system such as agriculture and aspects of economic efficiency. Since I am not an economist I do stretch beyond my usual expertise, however the attempt to address interdisciplinary problems makes this unavoidable. This article is an translation from an older German version.

The resilience of industrial agriculture to an agroecological transformation

A good starting point for analysis is to look at efforts to change industrial agricultural production towards a more diverse agriculture based on the use of agroecological interactions. The so called agroecological transition is proposed by nature conservation organizations, representatives of peasant agriculture and also in agroecological research. The ecological benefits of agroecological approaches in agriculture can be very well substantiated by empirical and theoretical research results, which have been presented many times (Gliessman, 2016).

However, research that delves into the depths of agricultural practice reveals many problems with agroecological transformation, and these are mostly of an economic nature (Rosa-Schleich et al., 2019; Aare et al., 2021; Rodriguez et al., 2021). For this reason, it is essential to combine agroecological research with an essentially economic approach. This is not only necessary for empirical research, but also for the fundamental concepts and assumptions of agroecology that structure empirical research, especially the development of new agroecological production systems, e.g. crop production systems such as intercropping.

The example of intercropping in arable farming for food production

Intercropping is a prime example of an agroecological crop production system. Intercropping is well established in grassland and arable farming for fodder production. In arable farming for the production of food, e.g. cereals and pulses, on the other hand, they are present only in tiny niches of practical farming in Europe (here some data for intercropping in the German federal state NRW). In our own empirical research, we have qualitatively reconstructed the practical work process for the use of intercropping from a social science perspective (Timaeus et al., 2022). Here, too, economic aspects emerged as a central problem.

Ecological complexity and economies of scale

The study showed that intercropping for food production is generally more complex than simple monocultures. This may seem trivial; after all, ecological interactions are to be expected in intercrops making them more complex from an ecological perspective compared to monocrops. However, the question is whether and how this actually influences practical management on the farm. In the practical use of intercropping, the entire work process from planning, sowing, crop management to post-harvest processing must be adapted.

When planning intercrops, you have to find the right combination of species and varieties as well as the right mixing ratios. In addition, there are many possibilities for spatial (mixed in the row, separate rows, strips of several rows, etc.) and temporal (simultaneous or staggered sowing) arrangement. This is an attempt to control competition and positive interactions between the crops. However, these interactions are difficult to control and are always dependent on the variable environment, so that mixed crops can fluctuate greatly in their composition. In addition, the needs of several crop species must be taken into account in fertilization, irrigation and weed control. In the post-harvest treatment of arable crops, such as cereal-legume mixtures, the crop partners usually have to be separated again in order to achieve food quality. The separation effort is quite economical for crops with a relatively high value such as lentils, whereas this quickly becomes uneconomical for wheat and peas, for example.  Alternatively, arable farming systems are needed in which separate harvesting is possible, e.g. strip cropping and staggered intercrops (relay intercrops). However, these approaches require additional passes of the machinery during sowing and harvesting. In any case, both alternatives increase the workload relative to monocultures. They also require special knowledge and technology within a farm. Another option is to lower the requirements for grain purity, which greatly reduces the separation effort (Saathoff et al., 2022). However, this requires cooperation with the food processing industry, e.g. bakeries. For this to become relevant beyond a niche market, contamination with peas in cereal bread would have to be tolerated by the majority of consumers.

In contrast, the costs per unit produced can be greatly reduced in planning, management in the field and post-harvest treatment in specialized crop production systems (which consist of only one crop species), thereby also reducing the costs per unit produced. This is made possible by massively reducing the complexity of the crop production system from an ecological point of view. However, the complexity does not simply disappear but is outsourced from primary production. Upstream economic sectors that produce the inputs, i.e. breeding, agricultural machinery and the chemical industry, are linked to primary production. Part of the necessary work (and value creation) is thus externalized from agriculture and agriculture is reduced to the necessary minimum level of ecological complexity and functionality (photosynthetic assimilation).

The reduction of costs per unit produced is referred to in economics as the scale effect or eoconomies of scale (EoS) (Benston, 1972; Wikipedia). In summary, this means that specialized crop monocultures show positive scale effects compared to agroecological approaches and are therefore economically more efficient. An interesting example is a recent study that shows that in mobile chicken farming, the working time per hen decreases exponentially with the number of hens per barn, even if only up to a plateau of 1000 hens. This is a very good example of an economies of scale effect, although it appears to be limited.

Once an economy’s agriculture has reached the level of high-tech and industrialized agriculture, which is based on strong scaling effects, farmers cannot easily switch to an agroecological system because they would otherwise reduce their productivity and thus their competitiveness and also fail to meet the qualitative requirements of industrial food production. Organic farming may be used as a counter-example here. However, organic farming itself shows tendencies towards industrialization in which real agroecological practices (diversification, ecological cycles) are increasingly being replaced by “natural”, “organic” or “biological” input factors in order to reduce the complexity of the crop production system, yet keep it stable and thus achieve economies of scale. These include natural fungicides such as copper, or biological insecticides such as extracts from Bacillus thuringiensis and organic fertilizers from animal faeces.

The consequences of the economic scale effect can be observed in agroecological practice and applied agroecological research when the context is high-tech agriculture and an industrialized food system. Ecological diversification of the agroecosystem is associated with a negative economic scale effect. This effect endows the industrial agricultural system with a strong resilience to agroecological transformation. To ignore this mechanism is to ignore, from an academic perspective, a central mechanism that links the structure of the agroecosystem to the economic system at the farm and national level. For the agroecology movement, ignoring such connections would mean that efforts for an agroecological transformation would need to fail. . In the next section, I would like to provide a more in-depth theoretical foundation for these relationships.

The coupling of production and ecology in agriculture through agroecological complexity

Agricultural systems have a particularity that sets them apart from many other production systems (e.g., the chemical industry or the automotive industry), just as agricultural ecosystems differ from many other (natural) ecosystems. The agricultural production system is, to a significant extent, an ecosystem, even in its highly industrialized form. Conversely, the agricultural ecosystem is, to a significant extent, a production system for economic goods. This is also quite well expressed in the German term “Landwirtschaft,” which encompasses the management of a terrestrial ecosystem (“Land”) for economic production.

Therefore, agriculture is determined by both economic and ecological and technological structures and processes. A central characteristic of the agricultural system affects both functional areas of this system, namely the economic and the ecological functional areas: biological diversity as the central physical basis of the system. Biological units – especially biological species and varieties – are the constituent components of the agricultural ecosystem and the production system. Without biological units, there is no agricultural production system and no agricultural ecosystem. Thus, biological diversity is also the central element of this hybrid system and determines its complexity. I would like to emphasize that I am referring here to the part of biodiversity that directly serves agricultural production, i.e., the cultivated plants and domesticated animals. In agricultural ecosystems, there are, of course, many other aspects of biological diversity that I do not primarily address here because it would exceed the scope of my endeavor. In addition to biological diversity in the production system, the agroecological interactions between the components of the system are inevitably added. These interactions always occur, even in agricultural systems consisting of a single crop species, but the interactions are limited to ecological interactions within a species, e.g., the competition among individual wheat plants. When multiple crop species are present, there are more complex interactions within the crop species and between the crop species.

As mentioned earlier, the scale effect depends, among other things, on the number of agricultural goods produced and thus on biological diversity. But it is also a well-documented principle of agroecology that biodiversity is a basis of the agricultural system for its resilience to pathogens as well as for the efficient use of resources such as water and nutrients (Gliessman, 2015). This resilience is conditioned primarily by internal agroecological interactions. In contrast, agroecological systems with low diversity rely on external inputs for their resilience, which enable the necessary functions in production (pest control, nutrient supply) through externalized complexity in upstream areas (chemical industry, breeding, agricultural machinery). At the same time, the scale effect is reduced in diverse systems, while it increases in systems with reduced diversity. In this conceptual approach, agroecological and economic relationships are closely linked. An aspect not explicitly discussed yet is the actual costs or prices for the efforts for inputs and the management of agroecological complexity as well as for the produced goods. Because only through these does the scale effect naturally arise (change in costs with the complexity of the system). In our study as well as in other studies, it quickly becomes clear that the price of the produced crop naturally has a significant influence on economic efficiency. But of course, the cost relations between the external inputs and the management of agroecological complexity also play a significant role. If the costs for external inputs are relatively low, this means a stronger scale effect for monocultures, while this effect weakens in favor of more diverse systems as costs rise (e.g., energy prices for fertilizer production). Supply shortages for external inputs, as have occurred recently for synthetic nitrogen fertilizer, can also play a role here through price formation.

This simple but, I believe, very robust and conceptual ecological-economic model of agriculture illustrates the enormous challenge of an agroecological transformation. And above all, it is able to describe the empirical findings of agroecological research in a considerable manner.

Approaches to an agroecological transformation: Economies of Scope (Synergies)

Naturally, there is also a flip side to the scale effect, the so-called economies of scope. In German language, these are referred to as “Verbundeffekte.” In English Wikipedia, it is formulated as follows:

“Economies of scope is an economic theory stating that average total cost of production decrease as a result of increasing the number of different goods produced.”

This means that under certain conditions, the costs of jointly producing two goods are lower than their separate production. This effect is also well-known. If research and development results can be used for the production of several products, there is a reduction in unit costs, i.e., a synergy effect. In ecology, there is an equivalent, namely the (transgressive) overyielding, where the yield of two crop species in mixed culture exceeds the yields of the best monoculture. Roest et al. (2018) emphasize the potential of economies of scope in agroecology. The exciting question now is whether and how the ratio of synergy to scale effect can be shifted in favor of the synergy effect so that diverse agroecosystems gain in economic efficiency. One possible condition for strengthening the synergy effect is the increase in the costs of input factors such as fertilizers, fuel, gas, and electricity. This is not an entirely unrealistic scenario for the future, in which fossil fuels are taxed and renewable energies will certainly become more expensive than fossil fuels during their peak availability. Another aspect that also affects inputs is an increase in the risk of their provision due to the instability of international markets. This is also not an entirely unlikely scenario in times of increasing conflicts between major economies. Another aspect concerns the production function of agricultural systems against the backdrop of climate change. This is expected to lead to stronger fluctuations in precipitation and temperature (extreme weather events), and in fluctuating environmental conditions, diverse agricultural systems play to their strengths, e.g. by reducing the risk of yield losses. Another aspect is that more diverse agricultural production systems are also able to produce a wider range of goods that do not need to be imported and can thus support the autonomy of economies. These aspects may promote economies of scope without intended political measures, while others require them.

Whether an economies of scale effect is to be expected also depends on the level of biological diversity used in agriculture. When using diversity at the species level in mixed cultures, much stronger economies of scale effects are to be expected than when using biological diversity within a biological species, e.g., with various populations or mixtures of varieties. In the Bakwert project (University of Kassel), which explores the potential of wheat populations in practice, it seems to emerge that practically no adaptation processes are necessary in the practice of agriculture and food processing when comparing wheat populations with genetically homogeneous wheat varieties. In breeding practice, however – i.e., a domain preceding agriculture – different breeding methods and adaptation processes are indeed necessary.

It may sound paradoxical, but if mixed cultures become more prevalent in agriculture, they can also benefit from scale effects. For example, an investment in creating knowledge and technology for managing mixed cultures is only necessary once. Afterwards, it only needs to be “distributed” and provided. This reduces the cost per unit produced and creates a scale effect for diversification measures. So, a certain decoupling of increasing diversification and decreasing scale effects could be possible. While it is conceivable that these factors will shift in favor of synergy effects in agriculture in the future, partly due to climate change and a rollback of international trade or due to advances in research, it is questionable whether this will happen at the desired speed if one relies on market participants alone.

Literature

Aare, A. K., Egmose, J., Lund, S., and Hauggaard-Nielsen, H. (2021). Opportunities and barriers in diversified farming and the use of agroecological principles in the Global North–The experiences of Danish biodynamic farmers. Agroecology and Sustainable Food Systems 45, 390–416.

Benston, G. J. (1972). Economies of scale of financial institutions. Journal of Money, Credit and Banking 4, 312–341.

Gliessman, S. (2016). Transforming food systems with agroecology. Agroecology and Sustainable Food Systems 40, 187–189.

Gliessman, S. R. (2015). Agroecology: The Ecology of Sustainable Food Systems. 3rd ed. Boca Raton, FL: CRC Press.

Rodriguez, C., Dimitrova Mårtensson, L.-M., Zachrison, M., and Carlsson, G. (2021). Sustainability of Diversified Organic Cropping Systems—Challenges Identified by Farmer Interviews and Multi-Criteria Assessments. Frontiers in Agronomy 3, 1–20.

Roest, K., Ferrari, P., and Knickel, K. (2018). Specialisation and economies of scale or diversification and economies of scope? Assessing different agricultural development pathways. Journal of Rural Studies 59, 222–231. doi: 10.1016/j.jrurstud.2017.04.013.

Rosa-Schleich, J., Loos, J., Mußhoff, O., and Tscharntke, T. (2019). Ecological-economic trade-offs of diversified farming systems–a review. Ecological Economics 160, 251–263.

Saathoff, Georg, Torsten Siegmeier, Johannes Timaeus, und Maria Finckh. „Mischkultur-Weizen in der Lebensmittelverarbeitung“. Food Innovation, 15. November 2022. https://www.food-innovation.ch/forschung/mischkultur-weizen-in-der-lebensmittelverarbeitung.

Timaeus, Johannes, Ties Ruigrok, Torsten Siegmeier, und Maria Renate Finckh. „Adoption of Food Species Mixtures from Farmers’ Perspectives in Germany: Managing Complexity and Harnessing Advantages“. Agriculture 12, Nr. 5 (Mai 2022): 697. https://doi.org/10.3390/agriculture12050697.



Cite this blog post
Johannes Timaeus (2024, March 23). A blind spot in agroecology: economies of scale and ecological complexity. Bioculture. Retrieved June 13, 2024, from https://doi.org/10.58079/w858

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