The ability to store commodities also means that they can be sold and stored strategically according to current and expected market conditions. Among crops that are produced as mono-cultures, breeding of crops for a few key traits has also contributed to reduced genetic diversity and increased specialization . Increased opportunity costs of time for farmers and laborers have led to increases in farm size to reduce labor costs . The consumer’s desire to have an array of cheap produce available, no matter the season, and decreased long-distance transportation costs due to improved infrastructure have also had important implications for regional specialization. Even in markets where some consumers are demanding food that is produced more locally, sustainably, organically, and diversely, the high costs of certification and marketing and risks associated with pests commonly controlled by synthetic pesticides, in the case of organics or pesticide-free varieties, can make these varieties more expensive than conventional varieties, and make consumer demand unpredictable . Farmers marketing locally-grown food also face the challenges of transporting small volumes of goods to local markets . Finally, variation in regional agricultural suitability and length of growing seasons mean that diverse, local production systems may not provide the same consistent product variety that consumers have become accustomed to. When large volumes of conventional produce varieties can be shipped cheaply and provide a consistent product year-round, so long as consumers choose low prices over quality, specialization will thrive. In addition to these economic factors that have driven specialized rather than diversified production, agricultural commodity programs have sustained the specialization of production of a few global agricultural commodities such as corn, rice and wheat, in some regions . In the United States, such programs arose during the Great Depression as increasing yields of these globally-traded commodities contributed to falling prices and, in turn, reduced farm incomes. Although these programs are not directly responsible for increased specialization in the countries where they were implemented, they required production of program crops to receive program payments, and thereby disincentivized diversification.

Furthermore, overproduction of commodity crops in countries where they were subsidized led to depressed global food prices,vertical farming in shipping containers and adversely affected terms-of-trade for developing countries and—in-turn—likely affected their investment in domestic agricultural production as they began to import more food . In the last decade, commodity prices have increased and the initial logic behind commodity programs has become less relevant; farms are larger and incomes are higher than ever before in the developed countries . Even as commodity programs are slowly being eliminated, however, the emergence of crop insurance programs for commodity crops serves as an effective subsidy-in-disguise with questionable social welfare implications and little-to-no benefit for DFS; O’Donoghue et al. showed that U.S. farmers responded to the 1994 Federal Crop Insurance Reform Act with increased specialization. How, then, do these factors continue to affect the proliferation of diversified farming systems? Because DFS often employ inter cropping or multi-cropping systems in order to take advantage of complementarities between crops, prevent soil erosion, and foster biodiversity, they are also less easily mechanized and therefore are more labor-intensive than planting mono-cultures. In the same way, the use of chemical pesticides and fertilizers and GMOs is often cheaper than manual weeding or biological pest control or IPM technologies . In more developed countries where the costs of labor are high, in developing countries where labor markets are incomplete , and wherever local and regional labor shortages are a key limiting factor for agricultural production , farmers will require developments in precision agricultural technologies that allow for more efficient inter cropping and planting on smaller scales if they are to adopt DFS systems. Although labor surpluses exist in developing countries and DFS may provide new opportunities for rural employment, there is a trade off between keeping labor costs low to make labor-intensive agricultural production economically viable, and retaining agricultural workers through higher incomes in order to compete with urban migration .

Because precision farming uses information technology to vary application of inputs by location, input use efficiency improves and is highly adaptable to bio-ecological conditions. The technology is expensive and faces many challenges in the development of new harvesting technologies and production management, but the application of precision farming to harvesting technologies will be necessary if multi-cropping or inter cropping is to become widespread in regions where mechanized mono-cultures prevail. In general, pest and input management techniques, harvesting technologies, and flexible physical capital that can be employed in diverse agricultural systems may help balance the increased labor requirements relative to other systems where labor costs are the most important factor limiting the profitability of DFS. Thus, though the productivity and sustainability of DFS may be high, the high labor costs and requirements associated with such systems are a major barrier to adoption. The potential for DFS to cash in on public or private payments for ecosystem service schemes represents both a potentially significant economic benefit to such systems, as well as a great challenge. In spite of growth in emerging markets for PES in developed and developing countries, the degree to which PES will provide financial support for DFS is unclear. Valuation of the economic benefits associated with the ecosystem services provided via DFS production methods is still in its early stages, and even if ecosystem services are identified, questions remain: to whom are the services valuable…and how much are they willing to pay for them? Critically, even if demand for these ecosystem services exists on the part of consumers, governments, or private firms, the mechanisms and markets to make these exchanges work are still missing in many cases. Below, we discuss several key sticking points associated with linking PES to DFS, including: lack of research on and valuation of environmental services provided in DFS, transaction costs, heterogeneity in benefit provision and the costs of provision of benefits, landowner coordination problems associated with engaging in PES markets, and lukewarm political and financial support for publicly-funded PES programs. Because DFS by definition focus on providing crucial ES for agricultural production , identifying and quantifying WTP for ES beyond those critical to agricultural production at the single farm/single landowner level may be a key component in making these systems economically sustainable. Identifying the exact direct, indirect, or existence benefit provided by DFS methods is a first step, and combining rigorous evaluation of ES with evaluations of willingness to pay for these services is crucial for a discussion on the environmental benefits of agriculture in the European context. For example, in the case of pollination services, neighboring farmers may receive a direct benefit from increased production due to improved pollination from a landowner who maintains a healthy native bee community as part of a DFS .

Understanding the production functions associated with environmental services is absolutely critical to understanding how PES schemes will support DFS. Knowing who benefits from what services is a starting point for rigorous economic research on the value of or WTP for environmental services from DFS, but even if we knew who benefited from DFS and how much, creating and adapting existing markets to correctly link provision of environmental services in DFS to existing WTP for such services is a challenge . Tepid political and financial support for expansion of publicly-funded PES programs has limited the supply of such services, and privately-funded PES programs have been limited in large part to payments for watershed protection , payments for improvements in water quality , and payments for carbon sequestration . Finally, the transactions costs for farmers to enter into existing PES schemes as well as for private or public entities to develop new PES schemes are often quite high . Finally, in many cases, the level and costs of provision of environmental services at the local or regional scale are heterogeneous ,vertical grow racks as well as in some cases dependent upon the coordinated actions of a large group of landowners . In most cases, heterogeneity in the marginal cost of provision of benefits makes PES a more economically efficient and lower-cost mechanism for providing environmental services than less flexible policy alternatives, such as command-and-control regulation . Heterogeneity in the marginal benefit of provision of ES, in contrast, makes designing efficient and effective PES schemes more complicated.In this case, benefits only exist above and beyond the conservation of a critical area of habitat, and the marginal benefit of conserving a unit of habitat will depend upon the location of the property, as well as upon the total amount of existing suitable habitat. In cases such as this, targeting PES schemes for optimal ES provision is complex and costly , and there is a trade off between making programs more context-specific and efficient, and costs of implementation . Designing and expanding such programs will require public and private funding for research, program implementation, enforcement and monitoring, as well as funding for outreach and extension that minimize the costs to farmers of engaging with PES mechanisms. Providing ES via landowner coordination is a special case where the marginal benefit of providing an environmental service is not constant. Almost all existing PES programs pay landowners to engage in behaviors or management practices on their property, and pay landowners independent of what other landowners in the region are doing. The provision of many environmental services, however, occurs at scales larger than that of the property boundary. Goldman et al. discuss three examples of types of benefits for which landowner coordination and landscape-level coordination for provision of benefits are critical: pollination services, hydrologic services, and carbon sequestration.

Despite a number of papers that make the theoretical case for programs such as “cooperation bonus” programs that take this into account , they are largely absent in practice. This is, in part, due to high transactions costs which increase with the number of landowners . The loss of biodiversity due to anthropogenic activity can markedly modify the functional properties of ecosystems and the services they provide. Biodiversity impacts ecosystem properties and processes because species differ in their productivity and contributions to ecosystem functions. These differences increase ecosystem functioning by increasing the odds of including more productive species when diversity increases , increasing the complementarity in how species use resources , and/or in how they modify their surrounding environment in ways that impact other species . The functional characteristics of species influence ecosystem functioning directly by mediating changes in biotic controls and indirectly through responses to changes in local environment. Traits govern not only the impacts of species on the environment, but also the response of species to the environment and, thus, their fitness. Therefore, functional trait diversity, rather than the diversity of species per se, is the dimension of biodiversity most directly related to ecosystem functioning.Variation in functional trait diversity and composition due to land management can be a strong driver of ecosystem functioning and ecosystem services . Functional traits can be assessed at different levels of biological resolution, from functional groups to species-level means , to, at the finest scale, intraspecific variation . The appropriate scale of analysis depends on the importance of individual variability for the ecosystem process of interest. In agricultural systems, many studies document the importance of biodiversity to ecosystem service provisioning. Agrobiodiversity can impact ecosystem services directly, such as when increased crop diversity increases human nutrition, or indirectly, such as when cover crop diversity increases plant biomass, which is associated with improved water quality and decreased runoff. Understanding linkages between agrobiodiversity and ecosystem services is crucial for predicting how changes in environment and management practices will impact the multiple ecosystem services provided by agroecosystems. Thus, we argue here that a trait-based approach to agriculture that is analogous to that applied in broader ecology could help better identify the mechanisms underlying the role of agrobiodiversity in providing agroecosystem services. By measuring quantifiable traits across a range of abiotic and biotic conditions, trait-based approaches to ecology have identified mechanisms underlying the impact of biodiversity on ecosystem processes. Niche complementarity has been shown to be an important mechanism influencing primary production in natural systems, because communities with a diversity of plant traits have high primary productivity. By contrast, rates of nitrification are influenced more by dominant leaf traits than by trait diversity and, thus, are controlled more by the sampling effect than by complementarity. Therefore, trait-based approaches provide a mechanistic approach to understanding linkages between biodiversity and ecosystem functioning.