Manure Application Standards and EQIP Payments: The Distribution of Economic and Environmental Costs and Benefits across US Hog Farms

Implementation of new CAFO regulations and EQIP payments could have important implications for the structure of the hog sector. This study uses a farm-level positive mathematical programming model to estimate the distribution of the economic and environmental effects of these new policies across regional and scale typologies.Environmental Economics and Policy,

HOW MUCH DO FARMERS VALUE THEIR INDEPENDENCE? ESTIMATING THE RISK AND AUTONOMY PREMIA ASSOCIATED WITH PRODUCTION CONTRACTS

A farmer's decision to contract or produce independently depends on the distribution of income under both arrangements, and on attributes associated with both business arrangements. Risk-averse farmers should be willing to pay a risk premium for the reduction in price risk provided by a contract. Farmers with a preference for "autonomy" should be willing to pay a premium for certain attributes associated with independent production, such as the right to make management decisions and own the commodity they produce. The benefits to growers from contracting (such as risk reduction) may be over-estimated if the non-pecuniary benefits enjoyed by independent producers are not accounted for. This study uses national survey data to estimate the risk premium, the change in expected income, and the autonomy premium associated with hog production contracts.agricultural contracts, autonomy, nonpecuniary benefits, risk, Farm Management,

Agricultural Contracting and the Scale of Production

This study presents evidence that contracting is positively associated with the scale of production for six major U.S. agricultural commodities. Specifically, contract producers tend to operate at a larger scale than do independent producers, and the likelihood of an operation contracting increases with its scale. This relationship is strongest in the cattle and hog sectors, where it persists even among large commercial operations. Six theoretical explanations for the observed correlation between scale and contracting are proposed, including imperfect capital markets, contractor transaction costs, input leverage, grower risk aversion, asset specificity, and technological change. Information from five annual national surveys is used to examine the validity of three of the proposed mechanisms.Production Economics,

Characteristics and Production Costs of U.S. Hog Farms, 2004

Hog production in 2004 was characterized by wide variation in the types, sizes, and economic performance of operations. Operations specializing in a single production phase generated more than three times the product value, on average, of those using the traditional farrow-to-finish approach. Low-cost operations tended to be larger, located in the Heartland, and operated by farmers whose primary occupation was farming. Small and medium operations far outnumbered large and very large operations, but large and very large operations accounted for most of the production. Average production costs declined as the size of the hog operation increased, a result of reduced capital costs and more efficient input use. Hog production was highly concentrated in the Heartland, but the largest operations were specialized hog finishing units in the Southern Seaboard.Agriculture, swine, hogs, hog production, hog operations, Agricultural Resource Management Survey, production costs, economies of size, Industrial Organization, Livestock Production/Industries, Production Economics, Productivity Analysis,

FACTORS AFFECTING CONTRACTOR AND GROWER SUCCESS IN HOG CONTRACTING

This study analyzes a national survey of U.S. hog producers within a principal-agent framework in order to examine factors affecting contractor and grower success in hog contracting. Several factors had differential impacts on contractor and grower returns. Results suggest that there may be a role for public policy in ensuring that contract arrangements are conducted fairly.Livestock Production/Industries,

Multiple Environmental Externalities and Manure Management Policy

Livestock waste pollutes multiple environmental media along multiple dimensions. This study explores the economic and environmental implications of single-medium and coordinated multi-media policies for reducing manure-related externalities, with particular attention paid to tradeoffs that occur when policies designed to correct an externality in one medium ignore externalities in other media.Environmental Economics and Policy,

ECONOMIC AND STRUCTURAL RELATIONSHIPS IN U.S. HOG PRODUCTION

Rapid change in the size and ownership structure of U.S. hog production has created new and varied challenges for the industry. This report describes an industry becoming increasingly concentrated among fewer and larger farms, and becoming more economically efficient. These changes have not come without problems. The increasing market control and power concentrated among packers and large hog operations, and the manure management problem posed by an increasing concentration of hog manure on fewer operations, are paramount concerns. Addressing these concerns through regulations would likely impose economic costs that could be passed on to consumers. In addition, the relative mobility of the hog industry means that regulations could result in significant changes in the location of hog production facilities, with ripple effects in local economies. Balancing environmental and economic interests will challenge policymakers dealing with the implications of structural change in U.S. hog production.Hog production, industry structure, structural change, production costs, contract production, manure management, Livestock Production/Industries,

DOES CONTRACTING RAISE FARM PRODUCTIVITY? THE IMPACT OF PRODUCTION CONTRACTS ON HOG FARM PERFORMANCE

The costs and benefits of policies designed to regulate the use of production contracts will depend in part on the impact of these contracts on farm productivity. In this paper we measure the impact of contracting on 1) partial and total factor productivity and 2) the production technology for 479 US hog operations. A sample selection model accounts for the fact that unobservable variables may be correlated with both the decision to contract and farm productivity. Results also identify determinants of farmers' decisions to contract and factors influencing farm productivity.Livestock Production/Industries, Productivity Analysis,

Effects of Clean Water Act Regulations on Firm-Level Decisions in Agriculture

U.S. environmental regulations often vary by the size of the operation, with larger operations facing more regulatory stringency. When the size distribution of firms is heavily skewed, regulation size thresholds can reduce transaction costs for regulatory agencies while bringing most production within a regulatory framework. However, size-based regulation may have unintended consequences if operations downsize, slow their growth, or enter at a smaller size in order to avoid regulation. These unintended consequences from regulation may include less pollution abatement and diminished economic efficiency. In this study we examine recently revised Clean Water Act (CWA) regulations targeting large-scale livestock operations to identify and quantify farm responses to this regulation. We find statistical evidence that farms adjust size in order to avoid regulation. Additionally farms in states with relatively higher costs of regulatory compliance experience on average 23% less growth than comparable farms in other states, net of prior state-level trends in growth. In these states, regulated farms also experience a 5.8% greater chance of exit.livestock, Clean Water Act, growth, regulation, Agricultural and Food Policy, Environmental Economics and Policy, Farm Management, Q5,

RISK AND STRUCTURAL CHANGE IN AGRICULTURE: HOW INCOME SHOCKS INFLUENCE FARM SIZE

Farm-level Census data and county-level income shock data reveal that past unexpected income shocks affect the rate of change in average farm size. Average farm size increases more quickly in counties experiencing negative income shocks as compared to counties experiencing positive income shocks. This result cannot be explained by perfect-market models, which predict farm size should adjust according to changes in the relative prices of labor and capital. We posit a model wherein cash flows affect liquidity, which in turn affects farm borrowing and capital costs. In the model, farms that do not face liquidity constraints benefit from negative income shocks because they reduce land values, so these farms expand while liquidity-constrained farms contract. Observed farm consolidation patterns and farm exit rates are consistent with a model wherein liquidity constraints affect small farms more than large farms.farm size, farm structure, income shocks, liquidity constraint, risk, Agricultural Finance, Industrial Organization,