2007 Annual Report 1a.Objectives (from AD-416) The objective of this cooperative research project is to integrate a farm economic decision-making model with the nonpoint source model, SWAT, to predict the choice and cost-benefit outcomes of Best Management Practice (BMP) strategies in the Town Brook (TBW) and Cannonsville Watersheds. Specific objectives will be to: (1) explain farm-level BMP choices and determine the farm economic impacts of BMP selection and implementation as well as water quality benefits given the unique natural capital, environmental characteristics and cultural norms in the Town Brook Watershed; (2) determine which acres, BMPs, cost-share programs and costs involved to induce land management changes, will support achieving water quality standards of an oligo- or mesotrophic Cannonsville Reservoir; and (3) estimate and place a value on some of the benefits resulting from reduced P inputs to the Cannonsville Reservoir. Develop a prototype data collection instrument for use in gathering input data from the Cannonsville watershed and testing the farm firm production decision model (funded in 2005, $30,000). 1b.Approach (from AD-416) Highly effective collaboration with WAC, NRCS, and Extension and County planning entities allows the research and demonstration results related to effectiveness of BMPs to be implemented and evaluated at field, farm, and watershed scales under real-world conditions. Because of this collaboration, we have the ability to track the effectiveness of the BMP implementations with time at all scales in both immediate and distant future, as well as to provide inputs needed for this economic modeling analysis. To meet project objectives the following procedures will be followed: (1) develop farm firm production decision models including input, output, and practice choices that characterize farm decisions consistent with unique physical and cultural environment in the Cannonsville watershed; (2) develop models for selection of BMP and other approaches to achieve particular pollution reduction goals. These models will consider overall program cost, as well as farm-level response based on farm firm production and financial models, and incorporate hydrologic transport models for the watershed; and (3) using state-of-the-art economic methods (e.g. experimental economics, contingent valuation and hedonic modeling), estimate the value of a portion of the benefits resulting from the pollution reduction and the concomitant increase in environmental quality. 3.Progress Report This report serves to document research conducted under a Specific Cooperative Agreement between ARS and The Pennsylvania State University. Additional details of research can be found in the report for the parent CRIS 1902-13000-011-00D, "Integrated Management of Land and water Resources for Environmental and economic Sustainability in the Northeast U.S." This work contributes to Subobjective 5.1 of the in-house project: “Develop tools and strategies through which field, watershed, and landscape scale environmental impact assessments are considered in the context of farm level N and P management decisions.” The overall objectives of this project are to integrate a farm economic decision-making model with Integrated Farming Systems Model (IFSM) to predict the choice and cost-benefit outcomes of BMP strategies in the Cannonsville watershed, one of the major reservoirs within the New York City water supply system. Highly effective collaboration with the Watershed Ag Council (WAC), NRCS, Cornell Cooperative Extension and the Delaware County Soil and Water Conservation District, NY farm planning entities allows the research and demonstration results related to effectiveness of BMPs to be implemented and evaluated at field, farm, and watershed scales under real-world conditions. A farm firm production decision model for the Town Brook/Cannonsville watershed, including input, output, and practice choices that characterize farm decisions consistent with unique physical and cultural environment in the Cannonsville watershed has been developed. The farm firm production decision model has been successfully linked to the Integrated Farming Systems Model (IFSM), which assesses nutrient losses at the field and farm scale. A prototype data collection instrument for use in gathering input data from the Cannonsville watershed and testing the farm firm production decision model was developed. The data collection instrument was reviewed by NRCS and Cornell Cooperative Extension farm planners, and modifications in response to reviewers’ comments were made. Input data for two farms in the Cannonsville watershed were collected. These data were used to conduct an economic assessment of the costs and benefits associated with adoption of vegetative filter strips, cover crops, soil nutrient management, precision feeding, conservation tillage, and rotational grazing. Results show that economic conditions (e.g. commodity prices) are parametric inputs to the farm firm production decision model. Components of a farm management plan that are sensitive to economic conditions include land use and crop production, buying and selling of inputs and outputs, animal feeding strategy, and manure management. Simulated dairy production plans share a number of important characteristics of real production plans, including soybean and corn being produced, crop diversification, and animal feeding using homegrown forages. Progress was monitored by participation in meetings among members of the scientific research team on an as-needed basis, including several joint trips to the Cannonsville watershed, and by email exchange of data and information.