A new study released by the USDA-Economic Research Service predicts the proposed changes to the Concentrated Animal Feeding Operation rules could shift livestock operations back to the Midwest and Plains.

That’s because large livestock operations would be required to have adequate cropland access for manure disposal, per mandatory nutrient management plans. And those regions offer plentiful cropland with producers who are accustomed to using manure fertilizer.

As you may recall, the Clinton administration called for the regulatory changes in December 2000. The proposal calls for a greater number of CAFOs to be regulated under the Clean Water Act, and requires all affected entities to implement nutrient management plans.

And, as you would expect, these requirements have economic consequences.

The ERS report indicates that on an average basis, a CAFO — any operation with 1,000 animal units or more — can expect to incur annual expenses of $1,300 for developing and planning a NMP, regardless of size. Estimated land application cost is estimated at $2 per acre, and manure transport cost ranges from $0.007 to $0.14 per ton. The authors admit these are national averages, and expenses could be significantly higher depending on where you live.

Combined with manure storage and other handling considerations, these expenses will immediately force financially unstable CAFOs out of the industry.

Overall industry effects largely depend on whether crop farmers in the various regions will be willing to apply enough manure to their fields. As of the late 1990s, only nine to 17 percent of land planted to corn and soybeans received manure as a supplement or substitute for commercial fertilizer.

For the livestock industry to retain its current geographical distribution, the report says, crop farmers would need to increase manure application levels to at least 20 to 30 percent or more of an area’s crop nutrient needs. Forty percent would be even better.

Report authors developed three manure application scenarios for prediction purposes. Low acceptance assumed crop producers would only accept manure up to 20 percent of the region’s crop nutrient needs. Medium acceptance assumed up to a 30 percent acceptance, and high acceptance assumed crop producers would accept up to 40 percent.

The report notes that in general, the implementation of NMPs on livestock operations with 300 or more animal units will not be highly disruptive if crop producers are willing to accept excess manure. Obviously, the more cropland that is available, the lower the cost of following NMPs.

If manure application increases to high acceptance levels, production impacts are minimal — regions will only see a 1 to 2 percent decrease in livestock production. The Southeast faces a 14 percent animal unit drop under the medium acceptance scenario, meanwhile the Northeast and Delta regions would see a small production increase.

Only under the low acceptance scenario, when available manure application land is highly constrained, does predicted production shift substantially among regions. Under that premise, animal units drop 19 to 30 percent in the Southeast, Appalachia and Mountain regions. The Lake, Corn Belt, Northern Plains, Delta and Southern Plans should increase animal units by 5 to 11 percent.

However, manure nutrient variability, hauling cost, potential pathogen presence and concerns over the ability of manure to adequately meet crop nutrient needs present serious challenges to increased cropland application. Therefore, it’s almost impossible to predict which scenario will evolve with the implementation of the new regulations as they are currently written.

Unregulated livestock operations will be the biggest winners, especially if higher commodity livestock prices result from reduced production.

The proposal is currently under review by the Bush administration. A final decision is expected by December.

To view the complete report go to: http://www.ers.usda.gov/publications/AgOutlook/April2002/

Dairy Herd Management and Economic Research Service