Social Benefits of Niche Agricultural Products: The Case of Pasture-Based Beef in Appalachia Part 1: The Conceptual Framework

Niche agricultural products are growing in economic importance. This growth is driven mainly by the increased demand for more healthy, nutritious, fresh and locally grown food products. There is obviously a potential increase in private benefits to producers/landowners as a result of increased production of the underlying crops to satisfy this demand. What is less obvious is the potential to also generate increased social benefits, particularly as they relate to energy conservation, alternative energy or biogas development and carbon sequestration. In other words, calories and kilo-calories are becoming more linked. The objective of this analysis is to develop a conceptual framework to illustrate the linkages among production at the local level, farm-level profitability and regional economic and environmental benefits. Using an optimal control approach, we apply this framework to the case of pasture-basedd beef (PBB) in Appalachia. PBB is an alternative to conventional, grain-based beef production. The idea is to determine to what extent a transition to PBB would enhance farm-level profitability while enabling surrounding communities to benefit from higher quality food products, environmental improvement, economic development and, ultimately, quality of life. We expect the results to illustrate under what combination of market and policy outcomes it is optimal – from both private and social perspectives – for a given PBB farmer to switch between cattle farming, energy farming and carbon farming. This paper is the first in a three-part series, with subsequent papers devoted to: (a) integrating spatial effects into the model, and (b) model estimation and use in policy formulation. The overall effort is part of a larger, interdisciplinary multi-institutional research project funded by USDA, ARA, focusing on the development of sustainable PBB operations for Appalachia.