On-farm erosion costs are impaired crop yields, land removed<sup>from crop production</sup> or used in less productive enterprises, and additional production<sup>costs, notably fertilizers to replace</sup> lost nutrients. Non-farm losses to erosion are siltation of wzterways,<sup>dams, and other collection sites.</sup> No good evidence exists on these effects in Mexico.<sup>Estimates of r'n-farm costs from research done</sup> in other countries are subject to uncertainty because of<sup>the local specific interactions between erosion</sup> and land use. There is disagreement on the magnitudes of<sup>these costs relative to on-faim costs. IhI</sup> estimates here of the total costs of erosion are based<sup>exclusively on reduced yields. thus are clear</sup> u,ndergtimahn In order to estimate the change in yield in the U.S.<sup>due to erosion, a regression of</sup> yield trend values on annual erosion rates was made<sup>(Crosson & Stout 1983, using county level data).</sup> For the U.S. yield losses to erosion estimated this way range<sup>from 1% to 18% of maize yield, with</sup> an average loss of 4 **%;** from 2 % to 22 % of soybean yields, with an<sup>average of 4%; and 1% of wheat2.</sup> These crops represent roughly 65 percent of the area<sup>of annual agricultural crops in Mexico.</sup> Application to the Mexican case was made by estimating<sup>the 1965-85 Mexican yield</sup> trends and then applyiiig the average U.S. erosion<sup>effects above; the resulting estimated</sup><sup>**yi.**ds (with</sup> and without erosion) were then compared.<sup>3</sup> The results were the following: losses in wheat on the order of 1 % of the value of 1990 output, or US$4.6 million at international<sup>prices; average losses to</sup> maize 2.9%,or US$38 million, and 0.4 % to soybean, or US$0.5<sup>million in 1990. Sorghum, beans, and</sup> cotton would be the other annual crops where erosion is<sup>intense (the area occupied by these crops</sup> is roughly 25% of the total agricultural area), but no<sup>studies are available relating erosion rates to</sup> yield losses. Only sorghum has shown a decrease in<sup>productivity in the last five years; for this crop</sup> we assumed that the effects of erosion on yields are the<sup>same as for wheat -only 1% -which lead</sup> to an estimated loss of US$6 million in 1990.

Total annual estimated losses to erosion were US$50<sup>million. "However, erosion-</sup> induced productivity losses are no. confined to a terminal year,<sup>but accumulate over much or all of</sup> the intervening period. Consequently, knowledge of the effect<sup>of erosion on costs in a terminal year</sup> is incomplete. ... The way to compensate (for these deficiencies)<sup>is to calculate the present value of</sup> the annuai productivity loss" (Crosson and Stout, op.cit.).<sup>To illustrate this aspect, suppose we have</sup> _2. fli gression coefficient for maize was -0. 0091, with the rate of_<sup>_erosion of 8.48 ton/acre;_</sup> _this lead to an average yield loss of 0.077bushels/ acre, which_<sup>_represented 4% of the average yield of_</sup> _1.97bushels/acre/year. The same procedure was applied to the other_<sup>_crops._</sup> _3. The trend yield growth (with erosion), which is observable,_<sup>_was 3.45% for maize, .0.52% for_</sup> _soybeans, and 10.95% for wheat. The trend yield growth_<sup>_without erosion is equal to (f + loss from_</sup> _trend yield growth) x (trend !eld growth with erosion), where_<sup>_the losses from trend yield growth are_</sup> _the percenta.ges observed in .ne U.S. As acknowledged,_<sup>_the figures of the Mexican case were provided_</sup> _by John McIntire, personal communication, and Mclntire_<sup>_and Shaw 1991)._</sup> 8