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

• Published in: Agricultural systems Vol. 129; pp. 30 - 39
• Main Authors: Cong, Rong-Gang, Hedlund, Katarina, Andersson, Hans, Brady, Mark
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01.07.2014
• Subjects: Biologi; Biological Sciences; Copula model; Dynamic portfolio theory; Earth and Related Environmental Sciences; Economics; Geovetenskap och miljövetenskap; Nationalekonomi; Natural Sciences; Naturvetenskap; Resilience; Soil ecosystem services; Soil organic carbon; Sustainable agriculture; Sustainable agriculture; Copula model; Soil organic carbon; Soil ecosystem services; Dynamic portfolio theory; Resilience
• ISSN: 0308-521X; 1873-2267; 1873-2267
• DOI: 10.1016/j.agsy.2014.05.003

•We examine the role of soil natural capital in mitigating agricultural risks.•We model weather and price risks using the Copula method.•We construct a dynamic portfolio model to optimize soil organic carbon (SOC).•Higher SOC (soil natural capital) buffers yield variance against adverse weather.•Higher SOC reduces reliance on external inputs and hence price risk. 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.