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Economics of Agricultural Residuals and Overfertilization: Chemical Fertilizer Use, Livestock Waste, Manure Management, and Environmental Impacts
Economics of Agricultural Residuals and Overfertilization: Chemical Fertilizer Use, Livestock Waste, Manure Management, and Environmental Impacts R Innes, University of California, Merced, CA, USA ã 2013 Elsevier Inc. All rights reserved.
Glossary Agricultural residuals Nutrient pollution from agricultural sources due to leaching into groundwater or runoff into surface waters. Chemical (inorganic) fertilizer Nutrient-specific compounds that are dissolved and available for plant uptake immediately after application, without any required material decay. Manure Organic matter that is used as organic fertilizer in agriculture, including animal waste from livestock production.
Introduction Environmental costs of agricultural residuals – principally nitrogen, phosphorus, and other nutrient pollution from agricultural sources to ground and surface waters – are increasingly stressed by environmental groups and regulators as one of the most important environmental policy challenges today. Nutrient pollution is directly or indirectly linked to over half of environmentally impaired river and stream miles, impaired lake acres, and impaired bay and estuary square miles (contributing to 52%, 52%, and 58% of these impairments, respectively). This pollution not only has direct potential adverse health consequences, including links to methemoglobinemia (a red blood cell disorder that can afflict infants), but is also a key precursor to algal blooms that have devastating health and ecosystem consequences; for example, ingestion of algalbloom-contaminated water can cause gastrointestinal illness, acute or chronic liver damage, neurological symptoms, and even death. These risks can be mitigated in some cases with drinking water treatment by larger municipal water systems, but treatment costs are substantial and treatment opportunities miss a large swath of smaller community water systems and private wells, for which cost-effective treatment is not possible. The ecological costs of these watershed impairments are equally alarming. Nitrogen and phosphorus pollution is considered a leading cause of the 168 hypoxic zones reported in the US estuarine and coastal waters between 2000 and 2007, over 40% of all such zones identified worldwide. As the endpoint of the Mississippi/Athcatalaya River Basin, the Gulf of Mexico has the third largest hypoxic zone ever recorded, over 7900 square miles, roughly the size of Massachusetts (Mississippi River/Gulf of Mexico Watershed Nutrient Task Force 2008). Although nutrient pollution comes from some nonagricultural sources – including urban storm water runoff, municipal wastewater treatment residuals, and air deposition (due to nitrogen oxides that result from combustion) – livestock and agricultural crop farming are large sources overall and often the predominant source of nutrient water pollution.
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Nutrient leaching/runoff Nutrients from croplands that are released to subsurface groundwaters (leached) or surface waters (runoff) as rainfall or irrigation water is applied. Nutrient uptake Nutrients that are absorbed (taken up) by the crop in the course of the growing season. Organic fertilizer Plant fertilizer derived from organic animal or plant matter that typically contains multiple nutrients and requires material decay before the nutrients are available for plant uptake.
For example, in the Gulf of Mexico, crop and livestock production contribute 43% and 37% of phosphorus residues, and 66% and 5% of nitrogen residues, for a total agricultural share of 80% and 71%, respectively. In the Chesapeake Bayalso, agriculture is important if not quite so dominant; there, crop and livestock production contribute 19% and 16% of phosphorus residues, and 17% and 26% of nitrogen residues, for a total agricultural share of 45% and 43%, respectively. The central role of livestock production in nutrient pollution is not surprising. In the United States (as of 2008), producers managed 96 million head of cattle, 68 million hogs, 9 billion broilers, and 446 million laying hens, all of which produced over 1 billion tons of manure per year, over 8 million pounds of nitrogen per day, and over 3 million pounds of phosphorus per day. A loose sense of the scale of these numbers can be obtained by comparing them with the annual volume of human waste handled by municipal sewage treatment in the United States, 18 million tons or roughly 2% of animal manure volume. The purpose of this article is to discuss the production side of nutrient pollution from agricultural sources. The starting point for the discussion is the observation (and premise) that environmental discharges due to farmers’ nutrient management practices cannot be directly monitored and regulated or taxed. What is more, the practices themselves can generally not be directly regulated because the costs of monitoring this behavior are prohibitive. This article, therefore, focuses on the choices that farmers make in the absence of direct environmental regulation. Do unpriced environmental impacts of farmers’ fertilizer decisions lead to ‘overfertilization?’ If so, what is the source of the incentive for overfertilization and how can it be corrected? The article begins with a conceptual discussion of what is meant by ‘overfertilization.’ Two types of farmers are then considered: (1) crop farmers who choose how, when, and how much commercial fertilizer to apply to their crops and (2) livestock facility operators who manage the manure waste
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from their livestock, including treatment regimens and applications to surrounding croplands.
The Problem of Overfertilization What is meant by ‘overfertilization?’ For purposes of this article, the central source of market failure is an environmental externality associated with leaching of nutrients into groundwater and/or runoff of nutrients into surface waters. Farmers do not confront the costs of these environmental consequences of their fertilizer management choices. To the extent that fertilizer applications increase leaching and runoff, the environmental externality will presumably imply excess application, that is, ‘overfertilization’ relative to what a benevolent (welfare-maximizing) social planner would choose. However, this ‘overfertilization’ is not completely obvious a priori. Why? Suppose the farmer knows the plant’s nutrient uptake and can tailor fertilizer applications to meet this uptake. The literature suggests that the biology of nutrient uptake is essentially fixed coefficients (with von-Liebig–Paris production relationships as in Paris, Berck and Helfand, Holloway and Paris, and Berck et al.). Although debate continues about the extent of concavity in the relationship, the presence of a ‘kink’ (before which inputs are productive and after which they are not) can imply a technology-driven level of nutrient application that is not sensitive to economic and environmental forces. Therefore, even if farmers were confronted with marginal environmental costs of leaching, their fertilizer choices would continue to find the kink and, hence, not change. A number of considerations confound this dismissal of the ‘overfertilization’ conjecture. Most simply, if the ‘prekink’ production relationship is sufficiently concave, then the fertilizer choices will not reach the kink and will be sensitive to prices. In this case, the failure to include environmental costs in the price of application will lead to more application than is socially optimal. Other explanations, consistent with production kinks of the von-Liebig type, frame the balance of this article.
Sources of Overfertilization for Crop Farmers What are the potential causes of overfertilization when a crop farmer applies commercial fertilizers?
Rates of Application First, farmers’ fertilizer decisions are more complicated than a single ‘amount.’ They choose the number, rate, and timing of applications. (This is particularly relevant for furrow, flood, and drip irrigation systems that can deliver chemical fertilizers to local plant soils. The author is indebted to Bruce Beattie for this insight.) For example, a greater number of applications permit less fertilizer to be applied each time. With potential rainfall events leaching out applied nutrients at any point in time, larger numbers of applications (and lower rates) lead to smaller nutrient losses from leaching and runoff. Farmers trade-off costs of more numerous applications (or of continuous release devices) against benefits of reduced fertilizer need
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to achieve nutrient targets. Because this trade-off ignores the environmental benefits of more numerous/more continuous applications in reducing nutrient leaching and runoff, a farmer’s privately optimal number of applications is too small and his rate of application is too great.
Uncertainty About In-Ground Nutrients To the extent that a farmer has imperfect information about the available supply of in-ground nutrients at each location on the farm, he/she gauges an appropriate fertilizer application to cover the shortfall between plant demand and available nutrient supply (Babcock). In this choice, there is a trade-off between (i) risks (and cost) of over-application above plant needs, including potential plant burns from excessive chemical fertilizer use and (ii) costs of under-application in reduced crop yield (due to the failure to meet the crop’s ‘kink’ nutrient needs). Again, this private calculus ignores the environmental costs of over-application and thus tilts choices toward excessive application (relative to the social planner). Improved information about in-ground nutrients can mitigate this source of overfertilization, with attendant environmental dividends. Substantial literature focuses on the economics/profitability of precision agriculture technologies and the slow pace of adoption (see, e.g., the surveys of Lambert and Lowenberg-Deboer, and Bongiovanni and Lowenberg-Deboer, and evidence of Khanna et al. and Daberkow et al. on adoption and Hurley et al. on the use of remote-sensing technologies).
Choice Between Chemical and Organic Fertilizers Farmers choose not only the amount of fertilizer, but also the type of fertilizer, chemical or organic. This is a complicated choice. Chemical fertilizer has the advantage of delivering precisely known quantities of nutrients quickly and with relative ease of application. Commercially available organic fertilizers (e.g., poultry litter) can be more costly to apply, and may deliver a less precise bundle of nutrients that may also not be specifically tailored to the portfolio of nutrient needs of a given plant. When chemical and organic fertilizers are combined (as is often done), the latter portfolio concern is less important because chemical fertilizer can be used to top up unfilled nutrient needs. Organic fertilizers have the advantage of delivering nutrients more continuously over time, and also delivering a wider spectrum of desirable nutrients (beyond the NPK object of chemical fertilizer). Importantly, they are also less subject to leaching and runoff from rainfall events as organically supplied nutrients adhere more strongly to the soils. Three key aspects of this choice setting are discussed: (i) organic fertilizers leach less; (ii) organics deliver a more uncertain stream of nutrients; and (iii) when crop farmers purchase more organic fertilizer, the livestock operations that produce organic fertilizer are likely to apply less on their own cropland (proximate to their animal production facilities) as a form of waste disposal. Ignoring all other distinctions, aspect (i) – the benefit of organic fertilizer in delivering nutrients with less leaching –
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implies an environmental benefit of organic versus chemical fertilizer that is missed in the farmer’s choice calculus. Aspect (ii) has two implications. First, for a given level of organic application, the uncertainty in nutrient delivery, from the organics, compounds the uncertainty in available soil nutrients. Formally, one expects uncertainty in organic nutrient delivery to be uncorrelated with uncertainty in available soil nutrients, leading to increased uncertainty in net nutrient needs that are to be met from chemical fertilizer. With chemical fertilizer applications rising with uncertainty in net nutrient needs, the added uncertainty implies a larger extent of overapplication. This effect can be due to either actual risk aversion or something that looks like risk aversion, but is not: payoffs that are concave in the (random) net nutrient need. Second, the uncertainty adds a cost to the use of organic fertilizer that deters its use. Both these effects imply larger environmental costs of fertilizer choices, the first by raising applications and the second by reducing the proportion of organics in the applied fertilizer, which in turn increases nutrient leaching and runoff. Aspect (iii) implies an additional social benefit of organic fertilizer applications in substituting away from excess manure applications on croplands neighboring livestock facilities: the substitution reduces environmental costs of livestock waste disposal. In other words, the market price of organic fertilizer is too high for demanders (marginal social benefits are higher than marginal private benefits) and too low for suppliers (marginal social costs are lower than marginal private costs). An appropriate manure subsidy can introduce the appropriate wedge between demand and supply prices.
Policy Implications Neither fertilizer choices and practices nor environmental outcomes are generally observable to regulators. The available policy tools thus become price interventions: taxes on chemical fertilizers and/or subsidies to organic fertilizers. The foregoing discussion suggests a number of reasons to tax chemical fertilizer use in order to help internalize the environmental cost of fertilizer applications. It also suggests a motive to subsidize organic fertilizers in order to help tilt the ratio of chemical to organic fertilizers toward the environmentally advantageous organics. Thinking through the simplest model of these interactions gives three targets: fertilizer use, off-site manure (organic fertilizer) use, and livestock production that yields total (off-site and on-site) manure output. To meet these targets, the government will need three instruments: a fertilizer tax, a manure subsidy, and a livestock output tax. The fertilizer tax can be used to internalize the marginal environmental cost of fertilizer application on crop farms. The manure subsidy can be used to promote off-site manure sales/applications that yield environmental benefits in substituting for both environmentally harmful on-site manure applications by the livestock producers and chemical fertilizer applications by the crop farm buyers. Both fertilizer taxes and manure subsidies reward livestock production, despite its environmental costs; the livestock output tax can offset this incentive. Although a fertilizer tax can be used both to reduce crop farm applications of chemical fertilizers and promote off-site (crop farm vs.
livestock farm) use of organics, using only this instrument will lead (optimally in a second best sense) to a tax that excessively deters fertilizer applications (compared with a ‘first best’). Combining instruments avoids these costs. More complete models of livestock waste management, as described next, provide added motives for use of these policy instruments.
Livestock Waste from Animal Agriculture Consider now the case of livestock producers. The problem of animal waste use and disposal rises in tandem with volumes and concentration in confined animal production. The scale of this problem is large. For example, the average adult hog produces three times the amount of waste as the average adult person, and the average adult milk cow produces 20 times this amount. For Iowa and North Carolina alone, this translates into handling a hog waste volume roughly equal to the sewage from one-third of the entire US population. The magnitude of the problem is growing. Of late, this is due less to growth in livestock inventories (which have grown slightly over the 1995– 2005 period), and more to dramatic increases in the concentration of production US Department of Agriculture (USDA). Between 1995 and 2005, the number of hog operations declined by 60%, while the number of very large operations (with over 5000 head) steadily rose. From 1998 to 2004, average inventory per hog facility grew from 2589 to 4646. By 2004, the largest operations (with over 1000 animal units (AUs) each) accounted for almost half of all hog production. Concentration has a dramatic impact on the handling of livestock waste. As Key et al. document, and for reasons discussed in detail shortly, larger operations distribute much more manure waste per acre on proximate farmlands than do smaller ones. On average, large hog operations (above 1000 AUs) spread manure for 8 AUs per acre, compared with 1.6 AUs per acre by small facilities (less than 300 AUs) and 3 AUs per acre for medium-sized facilities (between 300 and 1000 AUs). Similar trends apply to cattle, dairy, and poultry industries, with more large operations and more production in Oklahoma and Texas (for cattle); the West, South-West, and Florida (for dairy); and Delmarva (for poultry). Management of livestock waste has a number of components that affect nutrient runoff and leaching. The nutrient content of the waste can be affected by both feed regimens and predispersal treatment of the waste. And, of course (the main theme in what follows), the operator determines how much manure to apply where and how much to ‘export’ off the farm. For many cases in practice, export is considered economically infeasible because of the costs of processing the animal waste into a usable and transportable fertilizer. Beyond its effects on nutrient pollution, livestock waste management affects other ‘external’ outcomes, including spills and/or leaks from animal waste stores, and ambient odors and gasses from feeding operations. To elicit producer behavior that efficiently accounts for environmental effects requires careful attention to both the relationship between producer choices and environmental outcomes, and equally importantly, the choices that can be observed by the government at a reasonable cost. Only the latter choices are the appropriate object of direct or economic regulation.
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In particular, it is generally impossible to observe exactly how much livestock waste is applied to surrounding fields by the operator of a confined animal facility. Even so, some limits on these applications may be enforceable. For example, the Clean Water Act proscribes dumping of so much waste on a farm field that the waste directly discharges into an adjacent stream (Concerned Area Residents vs Southview Farm, 2 day Cir., 1994). However, field applications of livestock waste, which do not directly discharge into surface waters (but may lead to nutrient runoff and leaching), are a different matter. As indicated by Frarey and Pratt, for example, “an almost insurmountable task faces any regulatory agency attempting to regulate polluted runoff from manure application fields through site inspection alone” because “the amount of solid or liquid manure applied to a field is virtually impossible to determine after application.” Recent changes in the US Clean Water Act regulations are intended, in principle, to require large Confined Animal Feeding Operations (CAFOs) to limit manure applications to surrounding fields so that no excess nutrients are applied. Specifically, CAFOs are defined as confined feeding operations with over 1000 AUs (where 1 AU is roughly the equivalent of one cow). Smaller operations (between 300 and 1000 AUs) are also covered if they discharge pollutants directly into public waters. Before 1999, even the large CAFOs were exempted from regulation provided they discharged only in the event of a 25-year 24-h storm (the highest level of rainfall over 24 h that is expected once every 25 years) or where a poultry operation used a dry manure handling system. Moreover, remaining facilities that were subject to the Clean Water Act requirements were only required to remove pollutants from the facility premises and were not regulated on manure applications to surrounding lands. Major changes to these regulations were made in 1999. The CAFO exemptions from U.S. Clean Water Act (CWA) requirements for discharge permits (called National Pollutant Discharge Elimination System (NPDES) permits) were removed. And, in addition to requiring no discharges except in the event of the 24-h 25-year storm event, NPDES requirements were expanded to include a nutrient management plan that limits manure applications so that no single nutrient (the limiting nutrient) exceeds uptake needs. For livestock waste, in general, the limiting nutrient is phosphorus. See Ribaudo et al. for details. Taken at face value, the new regulations would seem to eliminate the problem of excess nutrient applications from the large confined livestock facilities that are the predominant source of livestock production and waste. However, there are many reasons to dismiss this facile conclusion. First, the regulations are, to a great extent, unenforceable. For the reasons stated earlier, monitoring of actual waste application to fields is practically (and economically) impossible. Second, therefore, one must consider those choices that can be observed, for example, the land area available to a livestock facility to distribute its waste, even if all this land is not actually used to apply livestock manure. Regulating this land area amounts to a form of scale regulation, as discussed below. Third, the regulations provide incentives for their evasion by organizing livestock production into smaller units (less than 1000 AU) that are exempt from the NPDES requirements. Again, this incentive implies a form of scale regulation, although not necessarily
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an optimal one. Last, from a purely empirical perspective, there is continuing evidence from 10 years after enactment of these regulatory changes that livestock production continues to be a predominant source of nutrient pollution (see the section ‘Introduction’). For all these reasons, it behooves the economic and policy analyst to examine producer incentives for waste handling and management, the topic to which the focus now shifts.
Economics of Manure Application Economists have studied the incentives that livestock operators have to spread manure (Schnitkey and Miranda) and the policy tools that might be used to augment these incentives, as well as improve the nutrient properties of the manure being spread (Innes). The core of these analyses is that because transporting manure to distant lands is generally too costly, operators spread manure on surrounding fields. They do so in response to two forces. First, manure substitutes for the use of chemical fertilizers in providing nutrients to crops. Second, manure is costly to deliver to crop fields, and increasingly costly as the distance from the waste store to the field increases. The second force implies that operators will apply more manure close to the facility than far from the facility because the marginal cost of manure delivery is lower. However, as a farmer applies more manure to a given field, the marginal nutrient benefits that are derived from the application (in crop production) are lower. Thus, in general, the operator does not want to dump all of his waste as close to his facility as possible; rather, he will only apply manure until the additional cost of delivering to a more distant field is offset by the higher marginal nutrient benefits of the more distant application. The crucial question, from the environmental point of view, is this: Does the livestock operator want to apply more manure than just substitutes for chemical fertilizer that would otherwise be used? That is, is the manure application excessive in that it increases the total amount of nutrients being applied and thereby causes more nutrient pollution than would otherwise occur? The answer is yes: everywhere that an operator applies manure (except on the boundary of the application region), he or she will want to apply excessively – and increasingly so on fields that are closer to the facility. The reason is that, by applying manure on a given field – rather than on a more distant one – a livestock farmer not only reaps the nutrient benefits of the application but also saves the transport costs on the more distant application. This extra benefit implies that the farmer will want to apply more manure nutrients than he or she would otherwise want to apply in chemical fertilizers that only yield the benefit of supplying crop nutrients. As a result, the use of manure can be expected to worsen nutrient runoff and leaching from croplands. Of course, as with any theory, this argument abstracts from some realities. As noted above, manure may increase water retention in soils and thereby deliver its nutrients with less leaching and runoff than would an equivalent amount of chemical fertilizer (an environmental benefit). (This tendency is offset by farmers’ need to apply more water when they use manure in order to leach out harmful salts. However, if the need for irrigation water increases as more manure is applied, there will be an added cost to applying excessive amounts of
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manure – and hence, less incentive to do so.) Alternatively, because it delivers nutrients with less certainty, manure may induce more nutrient applications (an environmental cost). In addition, for two reasons, manure application may potentially yield runoff that is more damaging to the environment than chemical fertilizer (another environmental cost): (1) because manure can contain weed seeds, its application may prompt an increased use of herbicides and (2) manure can contain harmful biological pathogens that are absent in chemical fertilizers. Despite these caveats, the conclusion described here – that there is a positive relationship between livestock and per acre farm nutrient applications – is supported by the empirical observation of dramatically larger per acre manure application rates for larger facilities. And its logic is rather compelling. Even when a livestock operator’s fertilizer costs are ‘small’ relative to other costs of production and crop cultivation, the operator will want to dispose of animal waste at least cost – or maximum benefit – by trading off the crop nutrient benefits of manure with its costs of application.
Regulating Manure Spreading In view of the incentives that operators otherwise face to apply manure excessively, the government may want to embrace policies that reduce these incentives and thereby reduce the extent of nutrient pollution. For example, some economists have proposed market interventions that may raise the demand for manure and thereby deter its wasteful use in excess application. One possible form of such intervention is a chemical fertilizer tax; another is a manure subsidy (Bosch and Napit). The extent of excess nutrient applications may also be affected by other observable objects of regulation, including the technology by which manure is transported to the fields, the (pre-application) waste treatment technology, and the mix of crops cultivated on farm acreage surrounding livestock operations. Each of these topics is considered in turn.
Fertilizer taxes By raising chemical fertilizer prices, a fertilizer tax raises the opportunity cost of excess manure applications, those applications for which fertilizer substitution benefits are low. Excess manure applications are thereby deterred (Innes). In particular, the tax prompts the facility to lower the extent of excess application close to the facility, where applications are greater and marginal substitution benefits are smaller, by shifting manure to more distant farmland where applications are smaller and substitution benefits are greater. To elaborate, consider the von-Liebig–Paris (fixed coefficients) production technology with multiple nutrients, each with corresponding production ‘kinks’ (beyond which more of the nutrient does not promote crop growth). Manure contains a portfolio of nutrients that does not exactly match the production function’s relative ‘kink’ points; hence, as manure application expands, more and more nutrients reach and surpass their corresponding kinks. Now let us consider the operator’s choice between applying an extra pound of manure at two alternate locations: (1) close to the facility and (2) at the edge of the farm, where no manure has yet been applied. At the
farm’s edge, every extra nutrient delivered by the manure translates into that much less chemical fertilizer that the operator needs to purchase; when the chemical fertilizer price goes up in tandem with a fertilizer tax, the value of this fertilizer substitution also goes up. Close to the facility, however, the operator is already applying manure excessively (because of the logic described earlier) and using little chemical fertilizer (because most of the nutrients exceed their ‘kink’ points); here, the extra manure yields value by saving costs of ‘transporting’ the manure further from the facility, by substituting for some (but not all) chemical fertilizer counterparts to the manure nutrients, and possibly by providing additional (beyond the kink) crop nutrients. Clearly, this value is affected less by the price of chemical fertilizers than is the value of application at the edge of the farm because manure applications substitute for fewer chemical fertilizers close to the facility. An ad valorem fertilizer tax thus leaves the value of ‘close’ applications changed relatively little, and thereby raises the operator’s incentive to shift manure from the close location, where application is excessive, to the farm’s edge, where application is not excessive. Because the nutrient runoff from manure application – and the environmental costs of this runoff – rise with the extent of excess application, the ‘evening out’ of applications leads to reduced levels of runoff and environmental damage. A positive fertilizer tax can thus make facilities act as if they face some of the environmental costs of their manure applications, and increase economic welfare as a result.
Manure subsidies Some manure is amenable, in principle, to cost-effective offfarm marketing. Dry poultry litter is a possible example; liquid waste is generally not. For marketable manure, the government may want to subsidize sales. Assuming that marketed manure is not overapplied (relative to chemical fertilizer alternatives), such a subsidy may potentially reduce rates of excess manure application by prompting increased off-farm manure sales and thereby reducing the amount of manure that any given operator applies to his own surrounding fields. The potential cost of such subsidies is that they also subsidize livestock production, the environmental costs of which instead motivate taxation. Policy needs to account for this cost by combining manure subsidies with incentives to limit livestock production, perhaps along the lines of the scale regulation discussed below.
Regulating irrigation Producers with liquid waste have two transport alternatives: (1) hauling and spreading using a tractor and ‘honey wagon’ and (2) installing an irrigation system that pumps and pipes the slurry to the fields. An irrigation system yields lower marginal costs of delivering manure to more distant locations (within the confines of the system) at the cost of a higher initial capital investment. By lowering marginal costs of transporting manure, an irrigation system reduces private operators’ incentive to spread manure close to the facility. As with a fertilizer tax, the resulting ‘evening out’ of applications reduces the extent of nutrient runoff and attendant environmental damage. When the value of these environmental benefits exceeds the cost of installing irrigation, economic efficiency can potentially
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be enhanced by government policies which promote the use of irrigation systems, whether with regulatory mandates or cost-sharing incentive programs. Clearly, the environmental benefits of irrigation will be larger when the societal costs of a facility’s excess manure applications (and hence, the marginal benefits of reducing these excesses) are also large. This is true, for example, when a facility is larger and, therefore, has greater rates of excess manure application.
Crop selection mandates In principle, the government could mandate that livestock operators plant a conservation crop that has a high nutrient uptake. Although the higher uptake of the substitute crop directly reduces the residual (nonabsorbed) manure nutrients that can be washed into rivers, streams, and groundwater, a conservation crop mandate can also have an offsetting environmental cost. The conservation crop reduces the opportunity cost of manure application by reducing its benefits in substituting for fertilizer. With reduced substitution benefits, more manure will be applied close to the facility, which will worsen nutrient runoff. In the extreme, when there are no substitution benefits of manure, producers would like to dump all of their manure as close to the facility as possible.
Regulating waste treatment Producers make decisions on the design of their wastehandling systems that affect the nutrient content of their manure. In North Carolina, for example, the predominant treatment system used by hog producers is a single-stage anaerobic lagoon, the size of which determines the level of ‘treatment,’ or nutrient loss. Other (less costly) waste-handling systems provide lower levels of nutrient loss. By lowering the nutrient content in manure, treatment of waste directly reduces the nutrient runoff from a given amount of manure waste and a given manure spreading policy. However, there may be an offsetting environmental cost of treatment: with reduced nutrient content, manure again has less value in substituting for fertilizer. Moreover, when treatment is achieved with increased lagoon volume, it increases the gross waste volume of material that must be applied to fields, per unit of animal waste, and thereby raises costs of transporting a unit of treated waste. Both effects give producers less incentive to transport manure to more distant locations at which substitution benefits can be realized; they thereby favor more concentrated applications close to a facility. Despite offsetting environmental effects, it is likely that some increased treatment – beyond its privately optimal level – will reduce environmental damage from a livestock operation. In principle, government regulation of the treatment level could then increase economic efficiency. An optimal treatment standard will depend on the size of facilities. In particular, the nutrient-reducing environmental benefits of treatment are likely to rise when levels of excess manure application are greater, as they are when facilities are larger (all things equal). If so – or if there are economies of scale in treatment – an optimal treatment standard will be higher for larger facilities. All of these remedies – fertilizer taxes, manure subsidies, and regulation of irrigation, waste treatment, and/or the planting of conservation crops – may have merit in reducing the environmental costs of manure spreading. However, they do not correct
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market incentives for the overall organization and level of livestock production to account for its environmental costs.
The Spatial Arrangement of Livestock Operations Environmental costs of livestock production, even when reduced because of regulation, are typically not paid by livestock operators themselves. Regulation may reduce nutrient pollution, but rarely will it tax producers for the harm that they cause. Siting regulations may limit the adverse effect of odors, pests, and gasses from livestock feeding operations, but again may not confront producers with remaining external costs. Government standards on waste storage may limit the frequency and extent of waste spills, but they may not always assess full liability for harm from spills that occur nonetheless. Because these social costs of livestock production are not paid by private actors, too much production can be expected to occur. Moreover, the spatial arrangement of production need not reflect its true costs and benefits: livestock facilities may tend to be more concentrated or less concentrated than they would be if the environmental costs and benefits of concentration were taken into account. The question of whether there are environmental benefits or costs of concentration is important and one which cannot be resolved conceptually. On the one hand, waste spills are more concentrated when production is more concentrated; if larger spills are more damaging at the margin (because the assimilative capacity of the local environment is taxed more heavily), then more concentrated spills will be more harmful, giving rise to an external diseconomy of concentration. Odors, on the other hand, may perhaps be less harmful when concentrated, reflecting the notion that “once there is a smell, marginal smells don’t add much cost”; if so, there will be an external economy of concentration. Of course, this is an empirical issue; concentrated smells may alternatively be more harmful if “small smells aren’t too bad but larger ones are horrible.” There is a similar ambiguity when it comes to effects of concentration on manure nutrient applications. On the one hand, larger facilities have more manure to spread and will therefore apply more excessively than will smaller facilities; on the other hand, larger facilities will spread manure on more distant lands, which absorb some manure as a substitute for chemical fertilizer. If the second (farm expansion) effect is strong enough, average excess manure applications can fall when production becomes more concentrated. However, environmental damages from excess applications will rise with increased concentration if either the expansion effect is small or marginal nutrient runoff rises sufficiently rapidly with levels of excess nutrient applications. At least for hogs, data from Key et al. on large hog facilities’ high manure application intensities indicate that the latter case is the relevant one. If so, manure applications will give rise to an external diseconomy of concentration. Finally, all of these comparisons have fixed the wastehandling technology in the ‘other things being equal’ background. However, larger facilities may be advantageous if there are economies of scale in the technologies that can deliver environmental benefits, including irrigation systems and improved waste storage/treatment systems.
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In terms of policy, this logic implies that simply taxing livestock in order to confront producers with the external cost of increased production is unlikely to do the trick in promoting an efficient spatial organization of production. Additional spatial restrictions or incentives will be needed to elicit both efficient levels of production and an efficient spatial arrangement – producing a given level of output with facilities that are of efficient size and number and location. Consider the following scale regulation: no more than a given number of animals (A) may be located on a given number of acres (N). If N is large, this regulation limits a facility’s size to A/N animals per acre. Alternately, if N is small, the regulation directly limits facility size to A. If increased concentration is environmentally harmful – so that livestock production will tend to be more concentrated than is efficient – then this regulation can be designed to yield an efficient outcome in a homogeneous farming region. By limiting region-wide animal inventories to the per acre maximum (A/N) times the available region-wide farm acreage, the scale regulation can curb incentives for overproduction. The direct limit on facility size, in turn, can curb market incentives to concentrate production more than is efficient, with facilities that are too large. Efficient spatial arrangements can thus be induced by efficiently limiting both facility size (by choice of A) and per acre region-wide production (by choice of N). However, if increased concentration is environmentally beneficial – so that livestock production will tend to be less concentrated than is efficient – then the scale regulation can only work to limit output (with the per acre restriction) and not to prompt the more concentrated production that is favored by environmental considerations. In this case, of course, mandating waste-handling technologies that exhibit economies of scale – and making these mandates apply to all operators – can work against facilities that are otherwise too small to reap the environmental benefits of size. The efficiency of overall production incentives is not only important in its own right but also when evaluating other policies that are intended to reduce the environmental costs of livestock operations. For example, incentives for overproduction may be worsened by policies such as fertilizer taxes and manure subsidies that raise the value of manure and thereby raise the value of the animals that produce it. A similar problem can arise with government cost-sharing programs for irrigation and/or waste treatment investments. Only if such policies are combined with appropriate production restraints – such as the sale regulation discussed above – can their environmental benefits be reaped without the long-run cost of greater overproduction.
Conclusion This article considers incentives that two types of agricultural operators have to apply excess fertilizer nutrients to croplands, where ‘excessive’ application reflects ignored environmental costs of nutrient leaching and runoff into ground and surface waters. The two types of farmers are traditional crop farmers who apply commercial fertilizers and livestock producers who apply manure waste from their operations to surrounding croplands. Throughout, the importance of augmenting
incentives to farmers for fertilizer and manure management is stressed for the mitigation of environmental effects. The underlying premise is that direct regulation of everything the farmers do is either impossible or impractical. The regulatory approach, as reflected in recent changes in CWA regulation, has had limited success precisely because it ignores the enforcement and incentive realities on the ground. That is not to say that the regulation has been worthless. For example, let us consider the scope of the ‘available land’ regulation implicit in the new CWA regulations. The new regulations require either that a facility be small (less than 1000 AUs) so that it is exempt from regulation, or that it has available proximate farmlands sufficient to absorb the manure nutrients produced by its operation. Both amount to scale and spatial location restrictions on livestock facilities that may or may not exactly reflect the optimization calculus discussed above, but may tilt the spatial organization of livestock production toward smaller and more disperse operations that are potentially environmentally advantageous. This, of course, is a complex empirical issue that merits more study. In addition, for the larger facilities, the regulations will require more waste treatment or transportation of waste to more distant offsite lands. However, again, the extent to which the export of waste can be monitored and enforced, even if it is feasible, is questionable. The scope of the latter issue is noteworthy. As Gollehon et al. point out, livestock operations that cannot absorb their produced manure nutrients on their own lands account for 60% of the nation’s manure nitrogen and 70% of its manure phosphorus. More recently, Ribaudo et al. note that only 18% of large hog farms and 23% of large dairies apply manure on enough cropland to meet a nitrogen standard. What is worse, less than 2% of large dairies have sufficient land to meet a strict phosphorus-based standard. Moreover, approximately 20% of excess manure nitrogen and 23% of excess manure phosphorus are produced in counties that have insufficient cropland for absorptive application, suggesting huge costs of requisite off-site (cross-county) manure transport. Recent work examines changing manure and nutrient management practices of hog producers from 1998 (pre-CWAchange) to 2004 (postchange), finding some evidence that there has been some adoption of nutrient management approaches that also involve some off-site removals. However, these impacts are predictably modest other than the purely regulatory requirement that large CAFOs adopt a nutrient management plan. For example, manure application rates (manure per acre) were approximately the same in 1998 and 2004 for operations of different sizes, rising slightly for smalland medium-sized (unregulated) operations and falling slightly for large (regulated) operations; overall, in fact, manure application rates rose significantly in both statistical and economic senses (from 2.1 to 3 AUs per acre) as the proportion of large facilities that apply manure much more intensively than smaller facilities rose dramatically. In addition, the proportion of operators exporting manure off-site rose only modestly, from 14% to 21%, and the volume of manure that these facilities exported is not known. On the other side, however, the proportion of operators adding microbial phytase to feed rose from 4% to 13% (30% of production) and testing of manure nutrient content rose from 50% to 72% of production.
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All this suggests that, while the new regulations have had an effect, a complete policy menu targeting environmental effects of agricultural fertilizers needs to take account of on-the-ground farmer incentives. In this regard, for example, there is potential merit in promoting precision agriculture and organic fertilizer use and substituting away from chemical fertilizers, without implicitly subsidizing crop or livestock production. Precision agriculture can reduce precautionary excess nutrient application. Organic fertilizers have the virtue of reducing nutrient leaching and absorbing livestock waste. And unpaid environmental costs of chemical fertilizer applications argue for some added deterrents. While fertilizer taxes and commercial manure subsidies thus have an externalitycorrection motive, they also have the potential to implicitly subsidize livestock production. Such effects are environmentally counter-productive because they not only fail to confront livestock producers with the environmental costs of their business and thereby encourage excessive livestock numbers, but also go in the opposite direction – promoting even greater excess livestock production. Even ‘scale regulation’ that can limit facility sizes and spatial distributions need not correct this distortion. Such logic suggests potential merit in turning US agricultural policy on its head, with appropriately designed livestock taxes replacing the present array of implicit subsidies to feed, water, and other inputs.
See also: Media: Agricultural Sources of Water Pollution; Policies/ Incentives: Economics of Nonpoint Pollution; Price Instruments; Quantity Instruments; Standards; Political Economy: Public Acceptability of Incentive-Based Mechanisms.
Further Reading Babcock B (1992) The effect of uncertainty on optimal nitrogen applications. Review of Agricultural Economics 14: 271–280. Babcock B and Blackmer A (1994) The ex-post relationship between growing conditions and nitrogen fertilizer levels. Review of Agricultural Economics 16: 441–450. Berck P, Geoghegan J, and Stohs S (2000) A strong test of the von-Liebig hypothesis. American Journal of Agricultural Economics 82: 948–955.
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Berck P and Helfand G (1990) Reconciling the von-Liebig and differentiable crop production functions. American Journal of Agricultural Economics 72: 985–996. Bongiovanni R and Lowenberg-DeBoer J (2004) Precision agriculture and sustainability. Precision Agriculture 5: 359–387. Bosch D and Napit K (1992) Economics of transporting poultry litter. Journal of Soil and Water Conservation 47: 335–347. Daberkow S, Fernandez-Cornejo J, and McBride W (2000) The role of farm size in the adoption of crop biotechnology and precision agriculture. Selected Paper, American Agricultural Economics Association meetings. EPA (2009) An urgent call to action. Report of the State-EPA Nutrient Innovations Task Group. Frarey L and Pratt S (1995) Environmental regulation of livestock production operations. Natural Resources and Environment 9: 8–12. Glover T (1996) Livestock manure: Foe or fertilizer? Agricultural Outlook, pp. 30–35. Gollehon N, Caswell M, Ribaudo M, Kellogg R, Lander C, and Letson D (2001) Confined animal production and manure nutrients. USDA ERS Agriculture Information Bulletin 771: 1–39. Holloway G and Paris Q (2002) Production efficiency in the von-Liebig model. American Journal of Agricultural Economics 84: 1271–1278. Horowitz J and Lichtenberg E (1993) Insurance, moral hazard, and chemical use in agriculture. American Journal of Agricultural Economics 75: 926–935. Hurley T, Kilian B, Malzer G, and Dikici H (2001) The value of information for variable rate nitrogen applications: A comparison of soil test, topographical, and remote sensing information. Selected Paper, American Agricultural Economics Association meetings. Innes R (2000) The economics of livestock waste and its regulation. American Journal of Agricultural Economics 82: 97–117. Key N, McBride W, and Ribaudo M (2009) Changes in manure management in the hog sector: 1998–2004. USDA ERS Report No. 50. Khanna M, Epouche O, and Hornbaker R (1999) Site-specific crop management: Adoption patterns and incentives. Review of Agricultural Economics 21: 455–472. Lambert D and Lowenberg-DeBoer J (2000) Precision agriculture profitability review. Purdue University Working Paper, September 2000. Paris Q (1992) The von-Liebig hypothesis. American Journal of Agricultural Economics 74: 1019–1028. Ribaudo M, Gollehon N, Aillery M, et al. (2003) Manure management for water quality: Costs to animal feeding operations of applying manure nutrients to land. USDA ERS Agricultural Economic Report 824, 20. Roka R (1993) An Economic Analysis of Joint Production Relationships Between Pork and Swine Manure. North Carolina State University PhD Dissertation. Schnitkey G and Miranda M (1993) The impact of pollution controls on livestock-crop production. Journal of Agricultural and Resource Economics 18: 25–36. U.S. Department of Agriculture (USDA) (2006) 2005 United States Animal Health Report. APHIS. Wastenberger D and Letson D (1995) Livestock and Poultry Waste-Control Costs. Choices 2nd Quarter, pp. 27–30. Woods Hole Oceanographic Institution (2007) Harmful Algae: Ecosystems. Woods Hole, MA: WHOI.
Glossary Agricultural residuals Nutrient pollution from agricultural sources due to leaching into groundwater or runoff into surface waters. Chemical (inorganic) fertilizer Nutrient-specific compounds that are dissolved and available for plant uptake immediately after application, without any required material decay. Manure Organic matter that is used as organic fertilizer in agriculture, including animal waste from livestock production.
Introduction Environmental costs of agricultural residuals – principally nitrogen, phosphorus, and other nutrient pollution from agricultural sources to ground and surface waters – are increasingly stressed by environmental groups and regulators as one of the most important environmental policy challenges today. Nutrient pollution is directly or indirectly linked to over half of environmentally impaired river and stream miles, impaired lake acres, and impaired bay and estuary square miles (contributing to 52%, 52%, and 58% of these impairments, respectively). This pollution not only has direct potential adverse health consequences, including links to methemoglobinemia (a red blood cell disorder that can afflict infants), but is also a key precursor to algal blooms that have devastating health and ecosystem consequences; for example, ingestion of algalbloom-contaminated water can cause gastrointestinal illness, acute or chronic liver damage, neurological symptoms, and even death. These risks can be mitigated in some cases with drinking water treatment by larger municipal water systems, but treatment costs are substantial and treatment opportunities miss a large swath of smaller community water systems and private wells, for which cost-effective treatment is not possible. The ecological costs of these watershed impairments are equally alarming. Nitrogen and phosphorus pollution is considered a leading cause of the 168 hypoxic zones reported in the US estuarine and coastal waters between 2000 and 2007, over 40% of all such zones identified worldwide. As the endpoint of the Mississippi/Athcatalaya River Basin, the Gulf of Mexico has the third largest hypoxic zone ever recorded, over 7900 square miles, roughly the size of Massachusetts (Mississippi River/Gulf of Mexico Watershed Nutrient Task Force 2008). Although nutrient pollution comes from some nonagricultural sources – including urban storm water runoff, municipal wastewater treatment residuals, and air deposition (due to nitrogen oxides that result from combustion) – livestock and agricultural crop farming are large sources overall and often the predominant source of nutrient water pollution.
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Nutrient leaching/runoff Nutrients from croplands that are released to subsurface groundwaters (leached) or surface waters (runoff) as rainfall or irrigation water is applied. Nutrient uptake Nutrients that are absorbed (taken up) by the crop in the course of the growing season. Organic fertilizer Plant fertilizer derived from organic animal or plant matter that typically contains multiple nutrients and requires material decay before the nutrients are available for plant uptake.
For example, in the Gulf of Mexico, crop and livestock production contribute 43% and 37% of phosphorus residues, and 66% and 5% of nitrogen residues, for a total agricultural share of 80% and 71%, respectively. In the Chesapeake Bayalso, agriculture is important if not quite so dominant; there, crop and livestock production contribute 19% and 16% of phosphorus residues, and 17% and 26% of nitrogen residues, for a total agricultural share of 45% and 43%, respectively. The central role of livestock production in nutrient pollution is not surprising. In the United States (as of 2008), producers managed 96 million head of cattle, 68 million hogs, 9 billion broilers, and 446 million laying hens, all of which produced over 1 billion tons of manure per year, over 8 million pounds of nitrogen per day, and over 3 million pounds of phosphorus per day. A loose sense of the scale of these numbers can be obtained by comparing them with the annual volume of human waste handled by municipal sewage treatment in the United States, 18 million tons or roughly 2% of animal manure volume. The purpose of this article is to discuss the production side of nutrient pollution from agricultural sources. The starting point for the discussion is the observation (and premise) that environmental discharges due to farmers’ nutrient management practices cannot be directly monitored and regulated or taxed. What is more, the practices themselves can generally not be directly regulated because the costs of monitoring this behavior are prohibitive. This article, therefore, focuses on the choices that farmers make in the absence of direct environmental regulation. Do unpriced environmental impacts of farmers’ fertilizer decisions lead to ‘overfertilization?’ If so, what is the source of the incentive for overfertilization and how can it be corrected? The article begins with a conceptual discussion of what is meant by ‘overfertilization.’ Two types of farmers are then considered: (1) crop farmers who choose how, when, and how much commercial fertilizer to apply to their crops and (2) livestock facility operators who manage the manure waste
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Media: Biological | Economics of Agricultural Residuals and Overfertilization
from their livestock, including treatment regimens and applications to surrounding croplands.
The Problem of Overfertilization What is meant by ‘overfertilization?’ For purposes of this article, the central source of market failure is an environmental externality associated with leaching of nutrients into groundwater and/or runoff of nutrients into surface waters. Farmers do not confront the costs of these environmental consequences of their fertilizer management choices. To the extent that fertilizer applications increase leaching and runoff, the environmental externality will presumably imply excess application, that is, ‘overfertilization’ relative to what a benevolent (welfare-maximizing) social planner would choose. However, this ‘overfertilization’ is not completely obvious a priori. Why? Suppose the farmer knows the plant’s nutrient uptake and can tailor fertilizer applications to meet this uptake. The literature suggests that the biology of nutrient uptake is essentially fixed coefficients (with von-Liebig–Paris production relationships as in Paris, Berck and Helfand, Holloway and Paris, and Berck et al.). Although debate continues about the extent of concavity in the relationship, the presence of a ‘kink’ (before which inputs are productive and after which they are not) can imply a technology-driven level of nutrient application that is not sensitive to economic and environmental forces. Therefore, even if farmers were confronted with marginal environmental costs of leaching, their fertilizer choices would continue to find the kink and, hence, not change. A number of considerations confound this dismissal of the ‘overfertilization’ conjecture. Most simply, if the ‘prekink’ production relationship is sufficiently concave, then the fertilizer choices will not reach the kink and will be sensitive to prices. In this case, the failure to include environmental costs in the price of application will lead to more application than is socially optimal. Other explanations, consistent with production kinks of the von-Liebig type, frame the balance of this article.
Sources of Overfertilization for Crop Farmers What are the potential causes of overfertilization when a crop farmer applies commercial fertilizers?
Rates of Application First, farmers’ fertilizer decisions are more complicated than a single ‘amount.’ They choose the number, rate, and timing of applications. (This is particularly relevant for furrow, flood, and drip irrigation systems that can deliver chemical fertilizers to local plant soils. The author is indebted to Bruce Beattie for this insight.) For example, a greater number of applications permit less fertilizer to be applied each time. With potential rainfall events leaching out applied nutrients at any point in time, larger numbers of applications (and lower rates) lead to smaller nutrient losses from leaching and runoff. Farmers trade-off costs of more numerous applications (or of continuous release devices) against benefits of reduced fertilizer need
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to achieve nutrient targets. Because this trade-off ignores the environmental benefits of more numerous/more continuous applications in reducing nutrient leaching and runoff, a farmer’s privately optimal number of applications is too small and his rate of application is too great.
Uncertainty About In-Ground Nutrients To the extent that a farmer has imperfect information about the available supply of in-ground nutrients at each location on the farm, he/she gauges an appropriate fertilizer application to cover the shortfall between plant demand and available nutrient supply (Babcock). In this choice, there is a trade-off between (i) risks (and cost) of over-application above plant needs, including potential plant burns from excessive chemical fertilizer use and (ii) costs of under-application in reduced crop yield (due to the failure to meet the crop’s ‘kink’ nutrient needs). Again, this private calculus ignores the environmental costs of over-application and thus tilts choices toward excessive application (relative to the social planner). Improved information about in-ground nutrients can mitigate this source of overfertilization, with attendant environmental dividends. Substantial literature focuses on the economics/profitability of precision agriculture technologies and the slow pace of adoption (see, e.g., the surveys of Lambert and Lowenberg-Deboer, and Bongiovanni and Lowenberg-Deboer, and evidence of Khanna et al. and Daberkow et al. on adoption and Hurley et al. on the use of remote-sensing technologies).
Choice Between Chemical and Organic Fertilizers Farmers choose not only the amount of fertilizer, but also the type of fertilizer, chemical or organic. This is a complicated choice. Chemical fertilizer has the advantage of delivering precisely known quantities of nutrients quickly and with relative ease of application. Commercially available organic fertilizers (e.g., poultry litter) can be more costly to apply, and may deliver a less precise bundle of nutrients that may also not be specifically tailored to the portfolio of nutrient needs of a given plant. When chemical and organic fertilizers are combined (as is often done), the latter portfolio concern is less important because chemical fertilizer can be used to top up unfilled nutrient needs. Organic fertilizers have the advantage of delivering nutrients more continuously over time, and also delivering a wider spectrum of desirable nutrients (beyond the NPK object of chemical fertilizer). Importantly, they are also less subject to leaching and runoff from rainfall events as organically supplied nutrients adhere more strongly to the soils. Three key aspects of this choice setting are discussed: (i) organic fertilizers leach less; (ii) organics deliver a more uncertain stream of nutrients; and (iii) when crop farmers purchase more organic fertilizer, the livestock operations that produce organic fertilizer are likely to apply less on their own cropland (proximate to their animal production facilities) as a form of waste disposal. Ignoring all other distinctions, aspect (i) – the benefit of organic fertilizer in delivering nutrients with less leaching –
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implies an environmental benefit of organic versus chemical fertilizer that is missed in the farmer’s choice calculus. Aspect (ii) has two implications. First, for a given level of organic application, the uncertainty in nutrient delivery, from the organics, compounds the uncertainty in available soil nutrients. Formally, one expects uncertainty in organic nutrient delivery to be uncorrelated with uncertainty in available soil nutrients, leading to increased uncertainty in net nutrient needs that are to be met from chemical fertilizer. With chemical fertilizer applications rising with uncertainty in net nutrient needs, the added uncertainty implies a larger extent of overapplication. This effect can be due to either actual risk aversion or something that looks like risk aversion, but is not: payoffs that are concave in the (random) net nutrient need. Second, the uncertainty adds a cost to the use of organic fertilizer that deters its use. Both these effects imply larger environmental costs of fertilizer choices, the first by raising applications and the second by reducing the proportion of organics in the applied fertilizer, which in turn increases nutrient leaching and runoff. Aspect (iii) implies an additional social benefit of organic fertilizer applications in substituting away from excess manure applications on croplands neighboring livestock facilities: the substitution reduces environmental costs of livestock waste disposal. In other words, the market price of organic fertilizer is too high for demanders (marginal social benefits are higher than marginal private benefits) and too low for suppliers (marginal social costs are lower than marginal private costs). An appropriate manure subsidy can introduce the appropriate wedge between demand and supply prices.
Policy Implications Neither fertilizer choices and practices nor environmental outcomes are generally observable to regulators. The available policy tools thus become price interventions: taxes on chemical fertilizers and/or subsidies to organic fertilizers. The foregoing discussion suggests a number of reasons to tax chemical fertilizer use in order to help internalize the environmental cost of fertilizer applications. It also suggests a motive to subsidize organic fertilizers in order to help tilt the ratio of chemical to organic fertilizers toward the environmentally advantageous organics. Thinking through the simplest model of these interactions gives three targets: fertilizer use, off-site manure (organic fertilizer) use, and livestock production that yields total (off-site and on-site) manure output. To meet these targets, the government will need three instruments: a fertilizer tax, a manure subsidy, and a livestock output tax. The fertilizer tax can be used to internalize the marginal environmental cost of fertilizer application on crop farms. The manure subsidy can be used to promote off-site manure sales/applications that yield environmental benefits in substituting for both environmentally harmful on-site manure applications by the livestock producers and chemical fertilizer applications by the crop farm buyers. Both fertilizer taxes and manure subsidies reward livestock production, despite its environmental costs; the livestock output tax can offset this incentive. Although a fertilizer tax can be used both to reduce crop farm applications of chemical fertilizers and promote off-site (crop farm vs.
livestock farm) use of organics, using only this instrument will lead (optimally in a second best sense) to a tax that excessively deters fertilizer applications (compared with a ‘first best’). Combining instruments avoids these costs. More complete models of livestock waste management, as described next, provide added motives for use of these policy instruments.
Livestock Waste from Animal Agriculture Consider now the case of livestock producers. The problem of animal waste use and disposal rises in tandem with volumes and concentration in confined animal production. The scale of this problem is large. For example, the average adult hog produces three times the amount of waste as the average adult person, and the average adult milk cow produces 20 times this amount. For Iowa and North Carolina alone, this translates into handling a hog waste volume roughly equal to the sewage from one-third of the entire US population. The magnitude of the problem is growing. Of late, this is due less to growth in livestock inventories (which have grown slightly over the 1995– 2005 period), and more to dramatic increases in the concentration of production US Department of Agriculture (USDA). Between 1995 and 2005, the number of hog operations declined by 60%, while the number of very large operations (with over 5000 head) steadily rose. From 1998 to 2004, average inventory per hog facility grew from 2589 to 4646. By 2004, the largest operations (with over 1000 animal units (AUs) each) accounted for almost half of all hog production. Concentration has a dramatic impact on the handling of livestock waste. As Key et al. document, and for reasons discussed in detail shortly, larger operations distribute much more manure waste per acre on proximate farmlands than do smaller ones. On average, large hog operations (above 1000 AUs) spread manure for 8 AUs per acre, compared with 1.6 AUs per acre by small facilities (less than 300 AUs) and 3 AUs per acre for medium-sized facilities (between 300 and 1000 AUs). Similar trends apply to cattle, dairy, and poultry industries, with more large operations and more production in Oklahoma and Texas (for cattle); the West, South-West, and Florida (for dairy); and Delmarva (for poultry). Management of livestock waste has a number of components that affect nutrient runoff and leaching. The nutrient content of the waste can be affected by both feed regimens and predispersal treatment of the waste. And, of course (the main theme in what follows), the operator determines how much manure to apply where and how much to ‘export’ off the farm. For many cases in practice, export is considered economically infeasible because of the costs of processing the animal waste into a usable and transportable fertilizer. Beyond its effects on nutrient pollution, livestock waste management affects other ‘external’ outcomes, including spills and/or leaks from animal waste stores, and ambient odors and gasses from feeding operations. To elicit producer behavior that efficiently accounts for environmental effects requires careful attention to both the relationship between producer choices and environmental outcomes, and equally importantly, the choices that can be observed by the government at a reasonable cost. Only the latter choices are the appropriate object of direct or economic regulation.
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In particular, it is generally impossible to observe exactly how much livestock waste is applied to surrounding fields by the operator of a confined animal facility. Even so, some limits on these applications may be enforceable. For example, the Clean Water Act proscribes dumping of so much waste on a farm field that the waste directly discharges into an adjacent stream (Concerned Area Residents vs Southview Farm, 2 day Cir., 1994). However, field applications of livestock waste, which do not directly discharge into surface waters (but may lead to nutrient runoff and leaching), are a different matter. As indicated by Frarey and Pratt, for example, “an almost insurmountable task faces any regulatory agency attempting to regulate polluted runoff from manure application fields through site inspection alone” because “the amount of solid or liquid manure applied to a field is virtually impossible to determine after application.” Recent changes in the US Clean Water Act regulations are intended, in principle, to require large Confined Animal Feeding Operations (CAFOs) to limit manure applications to surrounding fields so that no excess nutrients are applied. Specifically, CAFOs are defined as confined feeding operations with over 1000 AUs (where 1 AU is roughly the equivalent of one cow). Smaller operations (between 300 and 1000 AUs) are also covered if they discharge pollutants directly into public waters. Before 1999, even the large CAFOs were exempted from regulation provided they discharged only in the event of a 25-year 24-h storm (the highest level of rainfall over 24 h that is expected once every 25 years) or where a poultry operation used a dry manure handling system. Moreover, remaining facilities that were subject to the Clean Water Act requirements were only required to remove pollutants from the facility premises and were not regulated on manure applications to surrounding lands. Major changes to these regulations were made in 1999. The CAFO exemptions from U.S. Clean Water Act (CWA) requirements for discharge permits (called National Pollutant Discharge Elimination System (NPDES) permits) were removed. And, in addition to requiring no discharges except in the event of the 24-h 25-year storm event, NPDES requirements were expanded to include a nutrient management plan that limits manure applications so that no single nutrient (the limiting nutrient) exceeds uptake needs. For livestock waste, in general, the limiting nutrient is phosphorus. See Ribaudo et al. for details. Taken at face value, the new regulations would seem to eliminate the problem of excess nutrient applications from the large confined livestock facilities that are the predominant source of livestock production and waste. However, there are many reasons to dismiss this facile conclusion. First, the regulations are, to a great extent, unenforceable. For the reasons stated earlier, monitoring of actual waste application to fields is practically (and economically) impossible. Second, therefore, one must consider those choices that can be observed, for example, the land area available to a livestock facility to distribute its waste, even if all this land is not actually used to apply livestock manure. Regulating this land area amounts to a form of scale regulation, as discussed below. Third, the regulations provide incentives for their evasion by organizing livestock production into smaller units (less than 1000 AU) that are exempt from the NPDES requirements. Again, this incentive implies a form of scale regulation, although not necessarily
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an optimal one. Last, from a purely empirical perspective, there is continuing evidence from 10 years after enactment of these regulatory changes that livestock production continues to be a predominant source of nutrient pollution (see the section ‘Introduction’). For all these reasons, it behooves the economic and policy analyst to examine producer incentives for waste handling and management, the topic to which the focus now shifts.
Economics of Manure Application Economists have studied the incentives that livestock operators have to spread manure (Schnitkey and Miranda) and the policy tools that might be used to augment these incentives, as well as improve the nutrient properties of the manure being spread (Innes). The core of these analyses is that because transporting manure to distant lands is generally too costly, operators spread manure on surrounding fields. They do so in response to two forces. First, manure substitutes for the use of chemical fertilizers in providing nutrients to crops. Second, manure is costly to deliver to crop fields, and increasingly costly as the distance from the waste store to the field increases. The second force implies that operators will apply more manure close to the facility than far from the facility because the marginal cost of manure delivery is lower. However, as a farmer applies more manure to a given field, the marginal nutrient benefits that are derived from the application (in crop production) are lower. Thus, in general, the operator does not want to dump all of his waste as close to his facility as possible; rather, he will only apply manure until the additional cost of delivering to a more distant field is offset by the higher marginal nutrient benefits of the more distant application. The crucial question, from the environmental point of view, is this: Does the livestock operator want to apply more manure than just substitutes for chemical fertilizer that would otherwise be used? That is, is the manure application excessive in that it increases the total amount of nutrients being applied and thereby causes more nutrient pollution than would otherwise occur? The answer is yes: everywhere that an operator applies manure (except on the boundary of the application region), he or she will want to apply excessively – and increasingly so on fields that are closer to the facility. The reason is that, by applying manure on a given field – rather than on a more distant one – a livestock farmer not only reaps the nutrient benefits of the application but also saves the transport costs on the more distant application. This extra benefit implies that the farmer will want to apply more manure nutrients than he or she would otherwise want to apply in chemical fertilizers that only yield the benefit of supplying crop nutrients. As a result, the use of manure can be expected to worsen nutrient runoff and leaching from croplands. Of course, as with any theory, this argument abstracts from some realities. As noted above, manure may increase water retention in soils and thereby deliver its nutrients with less leaching and runoff than would an equivalent amount of chemical fertilizer (an environmental benefit). (This tendency is offset by farmers’ need to apply more water when they use manure in order to leach out harmful salts. However, if the need for irrigation water increases as more manure is applied, there will be an added cost to applying excessive amounts of
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manure – and hence, less incentive to do so.) Alternatively, because it delivers nutrients with less certainty, manure may induce more nutrient applications (an environmental cost). In addition, for two reasons, manure application may potentially yield runoff that is more damaging to the environment than chemical fertilizer (another environmental cost): (1) because manure can contain weed seeds, its application may prompt an increased use of herbicides and (2) manure can contain harmful biological pathogens that are absent in chemical fertilizers. Despite these caveats, the conclusion described here – that there is a positive relationship between livestock and per acre farm nutrient applications – is supported by the empirical observation of dramatically larger per acre manure application rates for larger facilities. And its logic is rather compelling. Even when a livestock operator’s fertilizer costs are ‘small’ relative to other costs of production and crop cultivation, the operator will want to dispose of animal waste at least cost – or maximum benefit – by trading off the crop nutrient benefits of manure with its costs of application.
Regulating Manure Spreading In view of the incentives that operators otherwise face to apply manure excessively, the government may want to embrace policies that reduce these incentives and thereby reduce the extent of nutrient pollution. For example, some economists have proposed market interventions that may raise the demand for manure and thereby deter its wasteful use in excess application. One possible form of such intervention is a chemical fertilizer tax; another is a manure subsidy (Bosch and Napit). The extent of excess nutrient applications may also be affected by other observable objects of regulation, including the technology by which manure is transported to the fields, the (pre-application) waste treatment technology, and the mix of crops cultivated on farm acreage surrounding livestock operations. Each of these topics is considered in turn.
Fertilizer taxes By raising chemical fertilizer prices, a fertilizer tax raises the opportunity cost of excess manure applications, those applications for which fertilizer substitution benefits are low. Excess manure applications are thereby deterred (Innes). In particular, the tax prompts the facility to lower the extent of excess application close to the facility, where applications are greater and marginal substitution benefits are smaller, by shifting manure to more distant farmland where applications are smaller and substitution benefits are greater. To elaborate, consider the von-Liebig–Paris (fixed coefficients) production technology with multiple nutrients, each with corresponding production ‘kinks’ (beyond which more of the nutrient does not promote crop growth). Manure contains a portfolio of nutrients that does not exactly match the production function’s relative ‘kink’ points; hence, as manure application expands, more and more nutrients reach and surpass their corresponding kinks. Now let us consider the operator’s choice between applying an extra pound of manure at two alternate locations: (1) close to the facility and (2) at the edge of the farm, where no manure has yet been applied. At the
farm’s edge, every extra nutrient delivered by the manure translates into that much less chemical fertilizer that the operator needs to purchase; when the chemical fertilizer price goes up in tandem with a fertilizer tax, the value of this fertilizer substitution also goes up. Close to the facility, however, the operator is already applying manure excessively (because of the logic described earlier) and using little chemical fertilizer (because most of the nutrients exceed their ‘kink’ points); here, the extra manure yields value by saving costs of ‘transporting’ the manure further from the facility, by substituting for some (but not all) chemical fertilizer counterparts to the manure nutrients, and possibly by providing additional (beyond the kink) crop nutrients. Clearly, this value is affected less by the price of chemical fertilizers than is the value of application at the edge of the farm because manure applications substitute for fewer chemical fertilizers close to the facility. An ad valorem fertilizer tax thus leaves the value of ‘close’ applications changed relatively little, and thereby raises the operator’s incentive to shift manure from the close location, where application is excessive, to the farm’s edge, where application is not excessive. Because the nutrient runoff from manure application – and the environmental costs of this runoff – rise with the extent of excess application, the ‘evening out’ of applications leads to reduced levels of runoff and environmental damage. A positive fertilizer tax can thus make facilities act as if they face some of the environmental costs of their manure applications, and increase economic welfare as a result.
Manure subsidies Some manure is amenable, in principle, to cost-effective offfarm marketing. Dry poultry litter is a possible example; liquid waste is generally not. For marketable manure, the government may want to subsidize sales. Assuming that marketed manure is not overapplied (relative to chemical fertilizer alternatives), such a subsidy may potentially reduce rates of excess manure application by prompting increased off-farm manure sales and thereby reducing the amount of manure that any given operator applies to his own surrounding fields. The potential cost of such subsidies is that they also subsidize livestock production, the environmental costs of which instead motivate taxation. Policy needs to account for this cost by combining manure subsidies with incentives to limit livestock production, perhaps along the lines of the scale regulation discussed below.
Regulating irrigation Producers with liquid waste have two transport alternatives: (1) hauling and spreading using a tractor and ‘honey wagon’ and (2) installing an irrigation system that pumps and pipes the slurry to the fields. An irrigation system yields lower marginal costs of delivering manure to more distant locations (within the confines of the system) at the cost of a higher initial capital investment. By lowering marginal costs of transporting manure, an irrigation system reduces private operators’ incentive to spread manure close to the facility. As with a fertilizer tax, the resulting ‘evening out’ of applications reduces the extent of nutrient runoff and attendant environmental damage. When the value of these environmental benefits exceeds the cost of installing irrigation, economic efficiency can potentially
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be enhanced by government policies which promote the use of irrigation systems, whether with regulatory mandates or cost-sharing incentive programs. Clearly, the environmental benefits of irrigation will be larger when the societal costs of a facility’s excess manure applications (and hence, the marginal benefits of reducing these excesses) are also large. This is true, for example, when a facility is larger and, therefore, has greater rates of excess manure application.
Crop selection mandates In principle, the government could mandate that livestock operators plant a conservation crop that has a high nutrient uptake. Although the higher uptake of the substitute crop directly reduces the residual (nonabsorbed) manure nutrients that can be washed into rivers, streams, and groundwater, a conservation crop mandate can also have an offsetting environmental cost. The conservation crop reduces the opportunity cost of manure application by reducing its benefits in substituting for fertilizer. With reduced substitution benefits, more manure will be applied close to the facility, which will worsen nutrient runoff. In the extreme, when there are no substitution benefits of manure, producers would like to dump all of their manure as close to the facility as possible.
Regulating waste treatment Producers make decisions on the design of their wastehandling systems that affect the nutrient content of their manure. In North Carolina, for example, the predominant treatment system used by hog producers is a single-stage anaerobic lagoon, the size of which determines the level of ‘treatment,’ or nutrient loss. Other (less costly) waste-handling systems provide lower levels of nutrient loss. By lowering the nutrient content in manure, treatment of waste directly reduces the nutrient runoff from a given amount of manure waste and a given manure spreading policy. However, there may be an offsetting environmental cost of treatment: with reduced nutrient content, manure again has less value in substituting for fertilizer. Moreover, when treatment is achieved with increased lagoon volume, it increases the gross waste volume of material that must be applied to fields, per unit of animal waste, and thereby raises costs of transporting a unit of treated waste. Both effects give producers less incentive to transport manure to more distant locations at which substitution benefits can be realized; they thereby favor more concentrated applications close to a facility. Despite offsetting environmental effects, it is likely that some increased treatment – beyond its privately optimal level – will reduce environmental damage from a livestock operation. In principle, government regulation of the treatment level could then increase economic efficiency. An optimal treatment standard will depend on the size of facilities. In particular, the nutrient-reducing environmental benefits of treatment are likely to rise when levels of excess manure application are greater, as they are when facilities are larger (all things equal). If so – or if there are economies of scale in treatment – an optimal treatment standard will be higher for larger facilities. All of these remedies – fertilizer taxes, manure subsidies, and regulation of irrigation, waste treatment, and/or the planting of conservation crops – may have merit in reducing the environmental costs of manure spreading. However, they do not correct
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market incentives for the overall organization and level of livestock production to account for its environmental costs.
The Spatial Arrangement of Livestock Operations Environmental costs of livestock production, even when reduced because of regulation, are typically not paid by livestock operators themselves. Regulation may reduce nutrient pollution, but rarely will it tax producers for the harm that they cause. Siting regulations may limit the adverse effect of odors, pests, and gasses from livestock feeding operations, but again may not confront producers with remaining external costs. Government standards on waste storage may limit the frequency and extent of waste spills, but they may not always assess full liability for harm from spills that occur nonetheless. Because these social costs of livestock production are not paid by private actors, too much production can be expected to occur. Moreover, the spatial arrangement of production need not reflect its true costs and benefits: livestock facilities may tend to be more concentrated or less concentrated than they would be if the environmental costs and benefits of concentration were taken into account. The question of whether there are environmental benefits or costs of concentration is important and one which cannot be resolved conceptually. On the one hand, waste spills are more concentrated when production is more concentrated; if larger spills are more damaging at the margin (because the assimilative capacity of the local environment is taxed more heavily), then more concentrated spills will be more harmful, giving rise to an external diseconomy of concentration. Odors, on the other hand, may perhaps be less harmful when concentrated, reflecting the notion that “once there is a smell, marginal smells don’t add much cost”; if so, there will be an external economy of concentration. Of course, this is an empirical issue; concentrated smells may alternatively be more harmful if “small smells aren’t too bad but larger ones are horrible.” There is a similar ambiguity when it comes to effects of concentration on manure nutrient applications. On the one hand, larger facilities have more manure to spread and will therefore apply more excessively than will smaller facilities; on the other hand, larger facilities will spread manure on more distant lands, which absorb some manure as a substitute for chemical fertilizer. If the second (farm expansion) effect is strong enough, average excess manure applications can fall when production becomes more concentrated. However, environmental damages from excess applications will rise with increased concentration if either the expansion effect is small or marginal nutrient runoff rises sufficiently rapidly with levels of excess nutrient applications. At least for hogs, data from Key et al. on large hog facilities’ high manure application intensities indicate that the latter case is the relevant one. If so, manure applications will give rise to an external diseconomy of concentration. Finally, all of these comparisons have fixed the wastehandling technology in the ‘other things being equal’ background. However, larger facilities may be advantageous if there are economies of scale in the technologies that can deliver environmental benefits, including irrigation systems and improved waste storage/treatment systems.
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In terms of policy, this logic implies that simply taxing livestock in order to confront producers with the external cost of increased production is unlikely to do the trick in promoting an efficient spatial organization of production. Additional spatial restrictions or incentives will be needed to elicit both efficient levels of production and an efficient spatial arrangement – producing a given level of output with facilities that are of efficient size and number and location. Consider the following scale regulation: no more than a given number of animals (A) may be located on a given number of acres (N). If N is large, this regulation limits a facility’s size to A/N animals per acre. Alternately, if N is small, the regulation directly limits facility size to A. If increased concentration is environmentally harmful – so that livestock production will tend to be more concentrated than is efficient – then this regulation can be designed to yield an efficient outcome in a homogeneous farming region. By limiting region-wide animal inventories to the per acre maximum (A/N) times the available region-wide farm acreage, the scale regulation can curb incentives for overproduction. The direct limit on facility size, in turn, can curb market incentives to concentrate production more than is efficient, with facilities that are too large. Efficient spatial arrangements can thus be induced by efficiently limiting both facility size (by choice of A) and per acre region-wide production (by choice of N). However, if increased concentration is environmentally beneficial – so that livestock production will tend to be less concentrated than is efficient – then the scale regulation can only work to limit output (with the per acre restriction) and not to prompt the more concentrated production that is favored by environmental considerations. In this case, of course, mandating waste-handling technologies that exhibit economies of scale – and making these mandates apply to all operators – can work against facilities that are otherwise too small to reap the environmental benefits of size. The efficiency of overall production incentives is not only important in its own right but also when evaluating other policies that are intended to reduce the environmental costs of livestock operations. For example, incentives for overproduction may be worsened by policies such as fertilizer taxes and manure subsidies that raise the value of manure and thereby raise the value of the animals that produce it. A similar problem can arise with government cost-sharing programs for irrigation and/or waste treatment investments. Only if such policies are combined with appropriate production restraints – such as the sale regulation discussed above – can their environmental benefits be reaped without the long-run cost of greater overproduction.
Conclusion This article considers incentives that two types of agricultural operators have to apply excess fertilizer nutrients to croplands, where ‘excessive’ application reflects ignored environmental costs of nutrient leaching and runoff into ground and surface waters. The two types of farmers are traditional crop farmers who apply commercial fertilizers and livestock producers who apply manure waste from their operations to surrounding croplands. Throughout, the importance of augmenting
incentives to farmers for fertilizer and manure management is stressed for the mitigation of environmental effects. The underlying premise is that direct regulation of everything the farmers do is either impossible or impractical. The regulatory approach, as reflected in recent changes in CWA regulation, has had limited success precisely because it ignores the enforcement and incentive realities on the ground. That is not to say that the regulation has been worthless. For example, let us consider the scope of the ‘available land’ regulation implicit in the new CWA regulations. The new regulations require either that a facility be small (less than 1000 AUs) so that it is exempt from regulation, or that it has available proximate farmlands sufficient to absorb the manure nutrients produced by its operation. Both amount to scale and spatial location restrictions on livestock facilities that may or may not exactly reflect the optimization calculus discussed above, but may tilt the spatial organization of livestock production toward smaller and more disperse operations that are potentially environmentally advantageous. This, of course, is a complex empirical issue that merits more study. In addition, for the larger facilities, the regulations will require more waste treatment or transportation of waste to more distant offsite lands. However, again, the extent to which the export of waste can be monitored and enforced, even if it is feasible, is questionable. The scope of the latter issue is noteworthy. As Gollehon et al. point out, livestock operations that cannot absorb their produced manure nutrients on their own lands account for 60% of the nation’s manure nitrogen and 70% of its manure phosphorus. More recently, Ribaudo et al. note that only 18% of large hog farms and 23% of large dairies apply manure on enough cropland to meet a nitrogen standard. What is worse, less than 2% of large dairies have sufficient land to meet a strict phosphorus-based standard. Moreover, approximately 20% of excess manure nitrogen and 23% of excess manure phosphorus are produced in counties that have insufficient cropland for absorptive application, suggesting huge costs of requisite off-site (cross-county) manure transport. Recent work examines changing manure and nutrient management practices of hog producers from 1998 (pre-CWAchange) to 2004 (postchange), finding some evidence that there has been some adoption of nutrient management approaches that also involve some off-site removals. However, these impacts are predictably modest other than the purely regulatory requirement that large CAFOs adopt a nutrient management plan. For example, manure application rates (manure per acre) were approximately the same in 1998 and 2004 for operations of different sizes, rising slightly for smalland medium-sized (unregulated) operations and falling slightly for large (regulated) operations; overall, in fact, manure application rates rose significantly in both statistical and economic senses (from 2.1 to 3 AUs per acre) as the proportion of large facilities that apply manure much more intensively than smaller facilities rose dramatically. In addition, the proportion of operators exporting manure off-site rose only modestly, from 14% to 21%, and the volume of manure that these facilities exported is not known. On the other side, however, the proportion of operators adding microbial phytase to feed rose from 4% to 13% (30% of production) and testing of manure nutrient content rose from 50% to 72% of production.
Media: Biological | Economics of Agricultural Residuals and Overfertilization
All this suggests that, while the new regulations have had an effect, a complete policy menu targeting environmental effects of agricultural fertilizers needs to take account of on-the-ground farmer incentives. In this regard, for example, there is potential merit in promoting precision agriculture and organic fertilizer use and substituting away from chemical fertilizers, without implicitly subsidizing crop or livestock production. Precision agriculture can reduce precautionary excess nutrient application. Organic fertilizers have the virtue of reducing nutrient leaching and absorbing livestock waste. And unpaid environmental costs of chemical fertilizer applications argue for some added deterrents. While fertilizer taxes and commercial manure subsidies thus have an externalitycorrection motive, they also have the potential to implicitly subsidize livestock production. Such effects are environmentally counter-productive because they not only fail to confront livestock producers with the environmental costs of their business and thereby encourage excessive livestock numbers, but also go in the opposite direction – promoting even greater excess livestock production. Even ‘scale regulation’ that can limit facility sizes and spatial distributions need not correct this distortion. Such logic suggests potential merit in turning US agricultural policy on its head, with appropriately designed livestock taxes replacing the present array of implicit subsidies to feed, water, and other inputs.
See also: Media: Agricultural Sources of Water Pollution; Policies/ Incentives: Economics of Nonpoint Pollution; Price Instruments; Quantity Instruments; Standards; Political Economy: Public Acceptability of Incentive-Based Mechanisms.
Further Reading Babcock B (1992) The effect of uncertainty on optimal nitrogen applications. Review of Agricultural Economics 14: 271–280. Babcock B and Blackmer A (1994) The ex-post relationship between growing conditions and nitrogen fertilizer levels. Review of Agricultural Economics 16: 441–450. Berck P, Geoghegan J, and Stohs S (2000) A strong test of the von-Liebig hypothesis. American Journal of Agricultural Economics 82: 948–955.
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Berck P and Helfand G (1990) Reconciling the von-Liebig and differentiable crop production functions. American Journal of Agricultural Economics 72: 985–996. Bongiovanni R and Lowenberg-DeBoer J (2004) Precision agriculture and sustainability. Precision Agriculture 5: 359–387. Bosch D and Napit K (1992) Economics of transporting poultry litter. Journal of Soil and Water Conservation 47: 335–347. Daberkow S, Fernandez-Cornejo J, and McBride W (2000) The role of farm size in the adoption of crop biotechnology and precision agriculture. Selected Paper, American Agricultural Economics Association meetings. EPA (2009) An urgent call to action. Report of the State-EPA Nutrient Innovations Task Group. Frarey L and Pratt S (1995) Environmental regulation of livestock production operations. Natural Resources and Environment 9: 8–12. Glover T (1996) Livestock manure: Foe or fertilizer? Agricultural Outlook, pp. 30–35. Gollehon N, Caswell M, Ribaudo M, Kellogg R, Lander C, and Letson D (2001) Confined animal production and manure nutrients. USDA ERS Agriculture Information Bulletin 771: 1–39. Holloway G and Paris Q (2002) Production efficiency in the von-Liebig model. American Journal of Agricultural Economics 84: 1271–1278. Horowitz J and Lichtenberg E (1993) Insurance, moral hazard, and chemical use in agriculture. American Journal of Agricultural Economics 75: 926–935. Hurley T, Kilian B, Malzer G, and Dikici H (2001) The value of information for variable rate nitrogen applications: A comparison of soil test, topographical, and remote sensing information. Selected Paper, American Agricultural Economics Association meetings. Innes R (2000) The economics of livestock waste and its regulation. American Journal of Agricultural Economics 82: 97–117. Key N, McBride W, and Ribaudo M (2009) Changes in manure management in the hog sector: 1998–2004. USDA ERS Report No. 50. Khanna M, Epouche O, and Hornbaker R (1999) Site-specific crop management: Adoption patterns and incentives. Review of Agricultural Economics 21: 455–472. Lambert D and Lowenberg-DeBoer J (2000) Precision agriculture profitability review. Purdue University Working Paper, September 2000. Paris Q (1992) The von-Liebig hypothesis. American Journal of Agricultural Economics 74: 1019–1028. Ribaudo M, Gollehon N, Aillery M, et al. (2003) Manure management for water quality: Costs to animal feeding operations of applying manure nutrients to land. USDA ERS Agricultural Economic Report 824, 20. Roka R (1993) An Economic Analysis of Joint Production Relationships Between Pork and Swine Manure. North Carolina State University PhD Dissertation. Schnitkey G and Miranda M (1993) The impact of pollution controls on livestock-crop production. Journal of Agricultural and Resource Economics 18: 25–36. U.S. Department of Agriculture (USDA) (2006) 2005 United States Animal Health Report. APHIS. Wastenberger D and Letson D (1995) Livestock and Poultry Waste-Control Costs. Choices 2nd Quarter, pp. 27–30. Woods Hole Oceanographic Institution (2007) Harmful Algae: Ecosystems. Woods Hole, MA: WHOI.