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.