Can someone please help me understand this sentence?
" (Measures to reduce yield losses to zero are not optimal because they cost farmers more than they save.)When markets function poorly, farmers' incentives to adopt conservation practices are diminished."
if you need help understanding it more, it was in this paragraph:
Farmers' incentives depend on their access to information to evaluate alternative measures; savings or credit to finance profitable investments; and secure property rights to ensure long-run benefits will be realized. When these conditions are met (i.e. markets function well), optimal choices result in yield losses that are smaller than potential losses. Optimal losses under maize production in the United States are estimated at less than 0.1 percent per year. (Measures to reduce yield losses to zero are not optimal because they cost farmers more than they save.)When markets function poorly, farmers' incentives to adopt conservation practices are diminished.
2009-01-10T00:32:03Z
what do you mean 'try to reduce losses to zero' ?
Anonymous2009-01-10T01:31:27Z
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Getting to the point where there would be no wasted agricultural products would be difficult and would cost farmers more to get to that point than to just let a small percent of the crop be wasted.
as in, when you make a cake, you mix the ingredients in the bowl, and pour the cake mix into the baking pan. There is still mix left in the bowl. You could try really hard in order to get the rest of the mix out of the bowl and into the pan, and that is great to an extent. But past a certain point it really becomes pointless. A teaspoon of mix would take you ten minutes to salvage. So, you stop, normally. Because the cake costs about 3.50 to make, and 8.00 to buy, and assume your time is worth at least 5.00 an hour... and you're already spending at least 15 minutes to prepare it... that teaspoon isn't worth it. Your profit margin reduces with the time you spend trying to salvage the cake mix. Just like the farmers.
When markets function poorly, farmers' incentives to adopt conservation practices are diminished. When the economy is in the dumps, like it is now, farmers cannot afford financially to adhere to the conditions of the conservation incentives. So they conduct business in the most financially intelligent way, which is not so environmentally friendly, but more economically friendly. I hope that makes sense.
It's saying, when farmers try to reduce their losses to zero, that's not always the best thing to do because is sometimes costs them more than they save.
When financial markets are acting normal, farmers are less likely to use conservation practices because it becomes less profitable.
Basically, if farmers' optimal crop loss of maize is less than 0.1 percent, then that's acceptable, but when the farmer tries to use "conservation" (green, eco-minded) methods to reduce the loss even more, then it usually ends up costing them more, and therefore, they don't want to do it.
Let's make one assumption; the crop we will discuss will be corn.
(Ways to keep corn harvest losses to 'none' (zero) are not desirable (or satisfactory) because the cost is more than the savings the farmers generate). If the market (where the farmer sells his corn) isn't doing well (prices are down and/or volumes being sold are down) the rewards to the farmer for using [land] conservation methods are lowered.
When a crop costs more to produce than for which it can be sold, farmers are reluctant to keep planting. Even if they "try to keep losses to zero," the bottom line is goods must be sold for more than cost of production.
The difference between cost of production and sale price is the profit, One can't stay in business if they are losing on every sale and there is no profit.