Whole farm considerations in the design of management agreements

Management agreements for the delivery of environmental services by farmers typically relate to that part ofthe farm that is of immediate public interest. However, the decision-making unit with which the farmer isprimarily concerned is the farm business as a whole. This provides the context within which any particulararea of the farm is managed. In this paper, the importance that a focus on the wider farm context might holdfor achievement of conservation outcomes is shown by drawing on economic theory as well as recent casestudies of farm businesses.Factors likely to influence conservation outcomes are: motives and other behavioural influences, characterof production processes and farmer routines, potential to define alternative farm futures, uncertainty,capabilities of the farm manager and resources available to them. These factors have implications for howeconomists approach key issues in design of management agreements - information asymmetry, cost(including transaction cost) and encouraging proactive rather than reactive behaviour by the economic agent.Whole farm considerations will be taken into account by farmers in their decisions about whether toparticipate in management agreements, and in the terms of that participation. In this paper, explicit attentionis given to opportunities that the principal has to address whole farm considerations. These opportunities canbe addressed in the assessment process, in preconditions, as part of the management agreement, or ascomplementary mechanisms. The purpose of the paper is to highlight these opportunities, and to discusstheir pros and cons. Tentative conclusions are drawn, and further research into this previously unexploredtopic is proposed.