VII. Capture of Environmental Externalities

7.1 Capture of Environmental Externalities, Broiler Farms

7.1.1 Current Pathways of Nutrient Use (from manure and dead animals)

To convey a general picture of the current pathways of nutrient use from broiler farms, flowcharts showing the destinations and use of manure and dead animals by production arrangement and scale of operation are given in Figures 7.1 to 7.3. The percentage of households using such a pathway are indicated in parentheses.

The most common scenario among the farms surveyed was disposal of manure either by selling it to chicken manure traders, spreading it on their own farms, or some combination of both (80%). Other observed means of disposing waste were containing the manure in closed pits, conveniently throwing the waste into a river or canal, or just leaving this by-product on the ground to decompose.

Eighty-five percent of the broiler farms surveyed disposed of dead animals within the farm premises. The animals were buried, burned, thrown into pits, or fed to other animals.

Figure 7.1a Pathway of Broiler Manure and Dead Birds in Households Surveyed, Independent and Contract Smallholder Broiler Farms, Philippines, 2002

Figure7.1b Pathway of Broiler Manure and Dead Birds in Households Surveyed, Independent and Contract Smallholder Broiler Farms, Philippines, 2002

Figure7.2a Pathway of Broiler Manure and Dead Birds in Households Surveyed, Independent and Contract Commercial Broiler Farms, Philippines, 2002

Figure7.2b Pathway of Broiler Manure and Dead Birds in Households Surveyed, Independent and Contract Commercial Broiler Farms, Philippines, 2002

Figure7.3a Pathway of Broiler Manure and Dead Birds in Households Surveyed, Smallholder and Commercial Broiler Farms, Philippines, 2002

Figure7.3b Pathway of Broiler Manure and Dead Birds in Households Surveyed, Smallholder and Commercial Broiler Farms, Philippines, 2002

7.1.2 Scenarios Where Environmental Problems Appear Not to Occur

Some households do not seem to create environmental problems from their broiler production activities; for example, when they are able to sell the manure or spread the manure on agricultural lands. Markets for chicken manure do exist, and most of the broiler farms surveyed have access to such markets. In fact, some two-thirds of small contract growers, three-fourths of large independent raisers, and almost all of the commercial contract growers in the sample sold chicken manure. (Table 7.1). For these producers, there is more or less zero discharge of waste into the environment at the point of disposal. Small independents, however, have less access to such markets, with only 40 percent of the farms having been able to sell manure in the last two months.

Table 7.1 Distribution of farmers by method of disposition of manure (in%), Broiler Production, Philippines, 2002

Source: UPLB-IFPRI LI Field Survey, 2002-03.

For all households in the sample that have access to broiler manure markets, this by-product is sold in dry form. It is usually collected by the buyer/trader towards the end of the production cycle, about four days prior to harvest of the birds. The average price of manure across production arrangement and scale of operation ranges from 10 pesos to 22 pesos per 50-kg bag. The average number of 50-kg bags of manure that the sample broiler farms were able to sell in the last batch was highest for large contract farms at 424 bags and lowest for small independent farms at 83 bags. For the entire sample, the average volume of manure sold ranged from 35 to 410 bags. Additional revenues from manure sales per cycle range from an average low of 1,293 pesos for small independents to as high as 4,657 pesos for large contract growers. For the entire sample, the additional revenues amounted to 542-4,506 pesos on average. Standardized on a per 100 kg of output basis, Table 7.2 reveals that these farms actually benefit by about 9-86 pesos from the capture of environmental externalities through manure sales. For the whole sample, this benefit ranged from 7 to 36 pesos. Here, the independent smallholders accrue the highest benefit per 100-kg output, presumably because of the relatively lesser amount of output they generate.

Table 7.2. Volume and value of manure sales, Broiler Production, Philippines, 2002.

* Number of samples for IS, CS, IC, and CC are 13, 21, 17, and 30, respectively.

Source: UPLB-IFPRI LI Field Survey, 2002-03.

Furthermore, broiler farms use the manure as fertilizer on their own farms and on other agricultural lands that the farmers own or operate. From the sample, about 29 percent of small independents, 13 percent of small contract growers, 17 percent of large independents and 19 percent of large contract growers used their manure as fertilizer as a means of internalizing the externalities from broiler production. The volume of manure applied on lands ranges from an average of 25 bags for small independents to as high as 72 bags for commercial contract growers. For the entire sample, this ranged from 7 to 14 bags. At the existing market prices for manure, the value of this by-product applied on agricultural lands ranges from 433 pesos for commercial independents to 1,186 pesos for commercial contract producers. For the whole sample, the value on average, ranged from 75 pesos for commercial independents to 281 pesos for small independents. Standardizing on a per 100 kg of output basis, the value of environmental capture from spreading manure on lands is about 2 pesos to as high as 100 pesos, with the independent smallholders capturing the greatest value (Table 7.3). For the entire sample, this environmental capture ranged from zero to 29 pesos.

Table 7.3. Volume and value of manure used at farm, Broiler Production, Philippines,

* Number of samples for IS, CS, IC, and CC are 9, 4, 4, and 6, respectively.

The main crops grown on broiler landholdings where manure is applied include mango, banana, rice, coconut, and some fruit trees. These crops are planted on areas ranging in size from a minimum average of 0.06 hectares for the small contract growers to as large as 2.7 hectares for the commercial independents. For other agricultural landholdings, which the farms own or operate, the main crops grown are rice and coconut.

As for disposal of dead animals, the most common way of transforming these before they leave the farm is by burying them on farm premises. Some producers also incinerate dead birds, throw them into pits, or feed them to other animals (Table 7.4).

For households that are unable to sell or spread manure on lands, attempts at mitigation measures are considered nil.

Table 7.4 Distribution of farmers by method of disposition of dead animals, Broiler Production, Philippines, 2002.

* There are multiple responses.

Source: UPLB-IFPRI LI Field Survey, 2002-03.

7.1.3. Differences in Pathways of Nutrient Use Across Production Arrangement and Scales of Operation

Independent versus contract growers

There are differences in the pathways of nutrient use across production arrangements and scales of operation for those farms that sell or spread manure. Figure 7.1 shows that smallholder contract broiler farms are more likely to sell manure to traders and apply it on their lands (77%) than their independent counterparts (65%). Thus, it is probable that a higher level of pollution from improper disposal or untreated waste is generated by independent smallholder broiler farms (35%). With respect to dead birds, while almost all smallholder independents dispose of them on the farm (96%), only 84 percent of small contract growers do the same. Among smallholder independents a more common way to dispose of dead animals is to bury these; contract growers prefer to burn them.

Both commercial independent and contract producers are able to dispose of chicken manure by selling it to traders and spreading it on their farms. Nonetheless, 22 percent of the large-scale independents are unable to make any economic use of the poultry waste, whereas none of the large-scale contract producers are unable to do so. A keener look at Figure 7.2 reveals that while more large-scale independents apply manure on their lands, a greater number of the commercial contract growers sell it. On average, the size of broiler landholdings of the latter group (1.7 ha) is significantly smaller than that of the former (2.3 ha).

Regarding disposal of dead birds, all except one independent grower disposed of these within the farm, while 6 out of 31 contract farms got rid of them outside farm premises. For smallholder and commercial independents, there is a higher incidence of farms that bury the dead animals than of those who burn them. The reverse, however, is true for small- and large-scale contract farms.

Smallholders versus commercial producers

Across scales of operation, there is a greater aggregate proportion of smallholders (27%) who do not exert any apparent effort to mitigate pollution from broiler manure compared to commercial producers (9%). Specifically, a significantly higher number of large-scale farms (87% vs. 55%) sell chicken manure to traders (Figure 7.3). This finding could reflect scale economies and consequently, lesser cost on the traders' part to fill their truck-quota with the larger volume of manure coming from a single large commercial broiler farm instead of collecting the same truckload from a greater number of dispersed smallholder farms.

As far as dead animal disposal is concerned, there seems to be no significant difference across scale of operation as to where they are disposed of. The difference essentially lies in the mode of disposition: more smallholders bury rather than burn them, with the latter a more common practice among commercials. Commercial producers have higher absolute number of animal mortalities and burning proves to be a more efficient method of disposing of dead animals than burying.

7.1.4 Methods to Mitigate Negative Impact on the Environment

Air pollution and flies attracted by poultry waste and dead broilers are the most common complaints of people residing near broiler farms. In the sample, however, there were no broiler households that had offered compensation to neighbors as a means of internalizing the cost of these negative externalities

Moreover, few producers (less than 20%) paid license fees, taxes, or pollution fees/permits. None of the smallholder independent growers sampled had paid such fees. Only 4 out of 31 and 4 out of 23, respectively, smallholder contract growers and commercial independent raisers paid license fees and taxes, but none had paid pollution fees/permits. These permits were paid by only 3 of the 31 commercial contract growers surveyed. The four independent large-scale producers, on the average, pay the highest amount of fees at 16,670 pesos per batch of birds. For the entire sample, the highest amount of fees paid on average was 29,143 pesos. Per 100 kg of output, these fees range from a low of 5.1 pesos to a high of 28.6 pesos (Table 7.5). Considering the whole sample, the fees ranged from 1 to 5 pesos.

Few farms make use of family or hired labor to dispose of manure and dead animals. This is because for most of these farms manure has already been sold or applied on land. Nevertheless, 6.5 percent, 12.9 percent, and 6.5 percent of smallholder independent, smallholder contract, and commercial contract producers, respectively, make use of family labor in cleaning the surroundings. Table 7.6 shows that the highest value of such expenditures, an average of 5,765 pesos, is paid by two commercial contract growers. This average maximum value decreases to 372 pesos when computed for the entire sample. On a per 100 kg of output basis, it is still the commercial contract growers who expend the most on waste and dead animal disposal. This is 30.4 pesos as compared to only 0.8 pesos for independent smallholders and 7.1 pesos for contract smallholders. For the entire sample, the same order is preserved albeit generating much lower values at 0.1, 0.9 and 2.0 pesos, respectively.

Table 7.5. Incidence of payment of license, taxes, pollution fees and permits related to Broiler Production, Philippines, 2002.

* Number of samples for CS, IC, and CC are 4, 4, and 6, respectively.

Source: UPLB-IFPRI LI Field Survey, 2002-03.

Table 7.6. Incidence of costs in disposing manure and dead animal, and value of expenditure, Broiler Production, Philippines, 2002.

* Number of samples for IS, CS, and CC are 2, 4, and 2, respectively.

Source: UPLB-IFPRI LI Field Survey, 2002-03.

Only six farms in the entire sample had invested in equipment for dead animal disposal as a measure to contain the waste when they are unable to derive economic use from it. Four of these farms are found in Southern Tagalog where the Laguna Lake Development Authority (LLDA) is quite active in its regulatory functions. Smallholders do not have such investments. Table 7.7 provides values for depreciation and maintenance costs of such waste treatment facilities. Those values without the asterisk (*) pertain to the values for the entire sample.

Table 7.7. Value of depreciation and maintenance cost of waste treatment facilities, Broiler Production, Philippines, 2002.

* Number of samples for CS, IC, and CC are 3, 1, and 2, respectively.

Source: UPLB-IFPRI LI Field Survey, 2002-03.

Table 7.8. Total value of capture of environmental externality from livestock waste and dead animals, Broiler Production, Philippines, 2002.

* Number of samples for IS, CS, IC, and CC are 20, 24, 18, and 31, respectively.

Source: UPLB-IFPRI LI Field Survey, 2002-03.

Independents versus contract growers

The proportion of households that exert apparent efforts to internalize the environmental costs of broiler production are as follows: 64 percent of small independents, 77 percent of small contract growers, 73 percent of large-scale independent producers, and 100 percent of commercial contract growers.

On a per batch basis, the average value of environmental externalities captured by contract smallholders (4,262 pesos) is significantly higher than that captured by independent smallholders (1,286 pesos) at the 10 percent level (Table 7.8). For the entire sample, contract smallholders still capture a higher value of environmental externality (3,300 pesos) compared to independent smallholders (829 pesos). Standardizing on a per metric ton of output basis, the mean difference in the total value of capture of environmental externalities between these two groups is also statistically significant at the 10 percent level. However, the greater burden falls on the independent smallholders (513 pesos vs. 235 pesos). Using the entire sample, the independent smallholders still bear the greater burden (331 vs. 182 pesos).

There is no significant difference in the average value of capture of environmental externalities between independent and contract commercial producers, whether it be on a per batch or per metric ton of output basis.

Smallholders versus large producers

Across scales of operation, the independent commercial farms capture the highest value of environmental externalities at 7,461 pesos. If the average for the entire sample is considered, it is the contract commercial raisers who are able to capture the highest value at 7,231 pesos. However, standardizing on a per metric ton of output basis, it is the smallholder independent farms that capture the most at 513 pesos, and independent commercials actually have the least value of capture at 149 pesos. The same is true for the whole sample.

The results of the t-tests of means using per batch and per metric ton of output as bases reveal significant differences across scales of operation in the average values of capture of negative externalities from livestock waste and dead animals disposal. In particular, the mean difference in the total value of capture by independent smallholders and independent commercial producers is statistically significant at the five percent level. However, there is no significant difference at the means between contract smallholders and contract commercials. On the aggregate level, the 7,316-peso value of environmental externalities captured by all commercial growers on a per batch basis is significantly much higher (at the 1% level) than the 2,909-peso value captured by all smallholders. But on a per metric ton basis, there is a reversal in the burden of capture between these two groups (361 pesos for smallholders vs. 195 pesos for commercials).

7.2 Capture of Environmental Externalities, Hog Farms

7.2.1 Current Pathways of Nutrient Use (from manure and dead animals)

Figures 7.4 to 7.6 are flowcharts that trace the current pathway of nutrient use from hog farms. They show the destinations and uses of manure and dead animals by production arrangement and scale of operation. The percentages of households using such a pathway are indicated in parentheses.^[52]

Across all hog farms surveyed, regardless of production arrangement or scale of operation, the overriding method of hog manure disposal is by investing in impounding structures such as lagoons, septic tanks, and digesters (56%). Unlike for broiler farms, there is no ready market for this by-product; less than five percent of all households were able to sell hog manure. One-fifth spread the manure on farmlands while the remaining 20 percent exerted no effort at all to contain the waste.

As for disposing of dead animals, these are usually buried within the farm premises (85%).

7.2.2 Scenarios where Environmental Problems Appear not to Occur

Environmental problems from hog production do not seem to occur when households have access to manure markets and are able to sell manure; when they are able to spread manure on agricultural lands they own or operate; and when they adopt mitigation measures to contain the waste. Unfortunately, markets for hog manure are not as efficient as those for poultry manure. In some of the survey areas there is an absolute absence of such markets. Looking at Table 7.9, at best, only an insignificant 3 out of 30 commercial contract farms (7%) sold the manure, with a much lower incidence observed for both independent smallholders and commercial producers. Small contract growers sold no manure at all.

Table 7.9 Distribution of farmers by method of disposition of manure, Hog Production, Philippines, 2002

Source: UPLB-IFPRI LI Field Survey, 2002-03

Table 7.10 Volume and value of manure sales, Hog Production, Philippines, 2002

* Independent smallholder n = 2; medium independent n = 1; large independent n =2; commercial contract n = 3.

Source: UPLB-IFPRI LI Field Survey, 2002-03

The average volume of manure sold ranged from a low of 500 kg for medium-scale independent producers to 4,000 kg for large independents. For the whole sample, the average volume of manure sold ranged from a low of 10 kg to 471 kg. At first glance, it would seem that the larger farms are more able to capture the negative externalities from hog manure than their smaller counterparts owing to their relatively higher volume sold. But standardizing on a per 100 kg of output basis reveals that smallholders actually take on the greater burden with an average of 177 kg of manure sold compared to only 19 kg, 41 kg, and 8 kg for the medium independents, large independents, and large contract growers, respectively (Table 7.10). The same scenario can be seen for the entire sample.

Where manure is sold, the total value such sales ranged from 200 pesos to 1,700 pesos, with the small independents receiving the highest average revenues and the medium independents the lowest. The average value of sales over the entire sample ranged from 4 pesos for the medium independents to 171 pesos for the large independents. Standardized per 100 kg of output, it is still the small independents who make the highest capture, at 163 pesos.

Some households spread the manure as fertilizer on their own farms and on other agricultural lands that they operate. Yet the incidence of households that do this is relatively small for each subgroup. Only about four percent of contract smallholders and less than one-fifth of independent smallholders, medium independents, and large contract growers engage in this activity as a means of internalizing the externalities from broiler production. Nevertheless, for the subgroup that does apply manure on their lands, the volume ranges from an average 750 kg for small contract growers to as high as 43,290 kg for large independent growers (Table 7.11). For the sample, the average volume ranges from 33 kg for small contract growers to 20,372 kg for the large independents. However, using a per 100 kg output standard, again, it can be deduced that the heaviest burden of capture falls on the independent smallholders, who spread about 690 kg of manure on farmlands. This volume is more than seven times the volume applied by medium and large independents, 15 times that spread by small contract growers, and 115 times more than that applied by commercial contract growers. Across the whole sample, it is still the small independents who spread the highest volume of manure at 119 kg. At the existing market prices for hog manure, the value of this by-product applied on agricultural lands ranges from an average 270 pesos for small contract growers to about 17,466 pesos for large independents. These values decrease to only 12 pesos for contract growers and 8,219 pesos for the large independents when the entire sample is considered. For the sub-sample, the value of manure spread per 100 kg of output stands at a minimum average of only 4 pesos for commercial contract raisers to as much as 248 pesos for independent smallholders. For the entire sample, the values ranged from 1 to 43 pesos per 100 kg of output.

Table 7.11 Volume and value of manure used on farm, Hog Production, Philippines,

* Independent smallholder n = 15; smallholder contract = 1; medium independent n = 8; large independent n =8; commercial contract n = 5.

Source: UPLB-IFPRI LI Field Survey, 2002-03

Across the sub-sample, two-thirds of large commercial independents and one-third of smallholder independents, medium-scale independents, and commercial contract growers own or operate agricultural landholdings. Only 13 percent of small contract growers own or manage farmlands. The main crops grown on agricultural landholdings owned or operated by hog producers are cereals such as rice. Sizes of these lands range from a minimum average of one hectare owned by small contract growers to about 24 hectares belonging to medium commercial independent raisers. Small contract growers have the least amount of land planted to crops, an average of 0.06 hectares, and large independent producers have the most, at 32 hectares on average. Agricultural lands where manure is applied are planted predominantly to fruit trees.

Households that do not sell manure or spread it on their lands employ other mitigation measures. In fact, between selling and spreading manure on lands and investing in impounding structures to contain the waste, the latter strategy is the more common approach to capture the negative externalities from hog production. The incidence of investing in such structures is highest among commercial farms, be they independent or contract growers.

As for dead animal disposition, these are usually buried within the farm premises. Other disposal methods observed were incinerating dead pigs, throwing them into rivers and pits, or feeding them to dogs and sows (Table 7.12).

Table 7.12 Distribution of farmers by method of disposition of dead animals, Hog Production, Philippines, 2002

Source: UPLB-IFPRI LI Field Survey, 2002-03

7.2.3 Differences in pathways of nutrient use across production arrangements and scales of operation

Differences were observed in the pathways of nutrient use across production arrangements and scales of operation for the disposal of hog manure and dead animals.

Independents versus contract growers

Figure 7.4 shows that among small-scale hog farms, the contract growers are the least able to mitigate pollution from hog waste. In fact, more than half of those who raise hogs by contract (52%) simply throw the manure into canals, rivers, and open pits or just pile it on the ground to decompose. While such practices are less universal among independent growers, at 38 percent, they still are all to common. In the absence of a ready market for hog manure, about 21 percent of smallholder independents use the manure on their own farms while 40 percent have impounding structures with which to contain the waste. The situation among smallholder contract growers is similar insofar as investing in impounding structures (43%) is concerned. But quite a few of them (4%) apply manure on their farms.

With regard to disposal of dead animals, both independents and contract growers do this activity within the farm premises; and the most common way to get rid of the dead animals is by burying them.

Interestingly, large-scale hog farms seem more inclined to undertake measures to mitigate pollution from hog waste. As depicted in Figure 7.5, none of the sample of commercial farms dispose of manure in open pits, rivers, or on the ground. For both groups, most invest in lagoons (62-65%) while the rest install biogas digesters (5-9%) or apply manure on their farms (23%). Only a very few sold the manure however. For both groups, dead animals are more commonly disposed of within the farm by burial.

Smallholders versus large producers

Across scales of operation, it is quite apparent that commercial hog raisers are better able to contain the waste coming from their farms and convert it into less polluting forms. They do by investing in impounding structures such as lagoons and using the manure on their croplands. Figure 7.6 reveals that 41 percent of the smallholders sampled do nothing to properly dispose of or treat the waste they produce; they merely throw it into an open pit, a water body such as a river or canal, or leave it on the ground to decompose.

Figure 7.4a Pathway of Hog Manure and Dead Animals in Households Surveyed, Independent and Contract Smallholder Hog Farms, Philippines, 2002

Figure 7.4b Pathway of Hog Manure and Dead Animals in Households Surveyed, Independent and Contract Smallholder Hog Farms, Philippines, 2002

Figure7.5a Pathway of Hog Manure and Dead Animals in Households Surveyed, Independent and Contract Commercial Hog Farms, Philippines, 2002

Figure7.5b Pathway of Hog Manure and Dead Animals in Households Surveyed, Independent and Contract Commercial Hog Farms, Philippines, 2002

Figure7.6a Pathway of Hog Manure and Dead Animals in Households Surveyed, Smallholder and Commercial Hog Farms, Philippines, 2002

Figure7.6b Pathway of Hog Manure and Dead Animals in Households Surveyed, Smallholder and Commercial Hog Farms, Philippines, 2002

7.2.4 Methods used to mitigate negative impacts on the environment

Air and water pollution brought about by improper treatment and disposal of hog waste and dead pigs are common complaints among people residing near swine farms. Noise from the piggeries is likewise a source of nuisance. As in the broiler case, none of the hog farms surveyed offered compensation to neighbors as a means of internalizing the costs of these negative externalities.

The incidence of paying license fees, taxes, and pollution fees/permits is quite low among independent smallholders, at less than 13 percent. None of the smallholder contract growers paid such fees. The incidence of fee paying is higher among commercial farms. Specifically, 26 percent, 41 percent, and 33 percent of the medium independents, large independents, and large contract growers, respectively, paid these fees. There are more raisers paying license fees and taxes than pollution permits. Nevertheless, on a per 100 kg of output standard, independent smallholders bear the greater burden at 24.0 pesos compared to only 4.2 pesos, 8.5 pesos, and 1.2 pesos, respectively, for the medium independents, large independents, and large contract growers. For the entire sample, it is still the smallholders who pay the highest cost of permits at 5 pesos per 100 kg of output. The fixed cost of taxes and permits are spread over a larger output for the commercial raisers (Table 7.13).

Some farms employ labor to dispose of manure and dead animals: hired workers, family members, or the operators themselves. Respectively, 22 percent, 40 percent, 47 percent, and 20 percent of the total smallholder independents, medium independents, large independents, and commercial contract growers spend time cleaning their surroundings. Table 7.14 shows that the highest value of expenditures are paid for by large independent growers at an average of 1,227 pesos. Across all samples, this value is still highest for the large independents at 578 pesos. On a per 100 kg of output basis, the greater burden is borne by independent smallholders at 106 pesos. For the entire sample, the smallholders' burden is 23 pesos.

Table 7.13 Incidence of payment of license, taxes and pollution fees and permits related to pollution, hog production, Philippines, 2002

*Independent smallholder n=11; commercial medium independent n=13; commercial large independent n= 7; commercial contract n=10.

Source: UPLB-IFPRI LI Field Survey, 2002-03

Compared to farms that employ labor to dispose of dead animals, relatively more of the farms sampled had invested in equipment for containing waste and disposing of dead animals. Such investments can be characterized as measures to mitigate environmental damage when the farmers are unable to derive economic use from the by-products. Table 7.15 shows the costs of such waste treatment facilities.

Whether labor or waste facilities are used to dispose of waste, the smallholder independents bear the brunt of the capture of costs to mitigate environmental damage, owing to their relatively lower output.

Table 7.14 Incidence of cost of disposing of manure and dead animals, and value of expenditure, Hog Production, Philippines, 2002

*Independent smallholder n=19; commercial medium independent n=20; commercial large independent n= 8; commercial contract n=6.

Source: UPLB-IFPRI LI Field Survey, 2002-03

7.2.5 Differences in value of capture of environmental externalities from hog production across production arrangements and scales of operation

Table 7.16 shows the total value of capture of environmental externalities from hog production. The proportion of households that exert apparent effort to internalize the environmental costs of producing hogs are as follows: 62 percent of small independents, 48 percent of small contract growers, and 100 percent of large-scale independents and commercial contract growers.

Table 7.15 Value of depreciation and maintenance cost of waste treatment facilities, Hog Production, Philippines, 2002

*Independent smallholder n=37; contract smallholder n=13; commercial medium independent commercial large independent n=15; contract commercial

Source: UPLB-IFPRI LI Field Survey, 2002-

Table 7.16 Total value of capture of environmental externality from livestock waste and dead animals, Hog Production, Philippines, 2002.

*Independent smallholder n=53; contract smallholder n=13; commercial medium independent n=46; commercial large independent n=16; contract commercial n=26.

Source: UPLB-IFPRI LI Field Survey, 2002-03

Independents versus contract growers

The t-tests^[53] conducted across production arrangements in hog raising reveal significant differences in the value of capture of environmental externalities.

On a per farm and per cycle basis, the average value of environmental externalities captured by all independent smallholders (256 pesos) is significantly higher than that captured by contract smallholders (91 pesos) at the five percent level. For the sub-sample who actually engaged in measures to capture environmental externalities, the average value was also higher for smallholder independents at 420 pesos versus only 160 pesos for contract smallholders. Standardizing on a per 100 kg of output basis, the mean difference in the total value of capture of environmental externalities between these two groups is statistically significant. The greater burden falls on the independent smallholders (57 pesos vs. 4 pesos), for whom the value captured is 15 times more than that captured by smallholder contract growers. The same scenario is observed when the sub-sample is considered.

On a per 100 kg of output basis, the mean difference in the value of capture between medium commercial independents and contract commercial growers is highly significant at the one percent level. The medium commercial independents are able to internalize a higher value, at 17 pesos, compared to only 4 pesos for contract commercials. Considering only the sub-sample that engaged in environmental capture among medium independents and contract commercials, the first group still bore the higher burden at 19 pesos compared to 5 pesos per kg of output for the second group.

Between large commercial independents and contract commercial growers, the difference in the average value of capture of environmental externalities per 100 kg of output is significant at the 10 percent level with the commercial independents capturing the higher value of 27 pesos versus only 4 pesos for the contract commercial farms. The same observation can be made when the sub-sample is considered.

Smallholders versus large producers

The results of several t-tests of means using per cycle and per 100 kg of output as bases reveal significant differences among scales of operation in the average values of capture of environmental externalities from livestock waste and dead animals.

On a per cycle basis, the commercial independent farms capture the highest average value of 10,281 pesos. However, standardized on a per 100 kg of output basis, it is the smallholder independent farms that capture the most, at 57 pesos. This value is 14 times the value captured by the commercial contract farms, twice that for medium commercial farms, and three times that for the large independents. Considering the assumption that, all things being equal, the amount of waste generated per animal does not differ across production arrangements and scales of operation, then the magnitude of capture of environmental externalities per unit of output must differ by the mitigation expenditure made per unit of output.

In particular, on a per 100 kg of output basis, the mean difference between the total value of capture by independent smallholders (57.3 pesos) and that by contract commercials (4.1 pesos) is statistically significant at the 10 percent level. The environmental capture difference between contract smallholders (4.1 pesos) and large commercial independents (27.0 pesos) is also statistically significant at the 10 percent level. The mean differences in the total value of capture of environmental externalities between contract smallholders (4.1 pesos) and medium commercial independents (17.1 pesos) and between medium commercial independents (17.1) and contract commercials (4.0 pesos) are highly significant at the one percent level. The mean difference in the total value of environmental mitigation in hog production between smallholders (46.2 pesos) and commercial growers (14.8 pesos) is, however, not significant.

7.3 Mass Balance Calculations for Broiler and Swine Farms

Differences in the amounts of money spent on trying to capture environmental externalities, and the methods used to do so, may be determined by whether farmers have the ability to utilize all manure on their own fields or if they need to remove it. To estimate this ability, mass balance calculations were done using animal units, rough estimates of total nutrient production, and estimates of crop uptake assuming all available land is planted with rice (presented in the appendix). Use of total available land as an indicator of all land that could be planted to rice could imply a degree of overestimation of the assimilation of these nutrients on the available hectares, since some areas may have buildings and thus be unavailable for cropping.

Figures 7.7 and 7.8 illustrate the difference by scale of production in assimilating the nitrogen from swine and poultry manure on the available land. In terms of the nitrogen contained in the manure applied, only three percent of the large-scale swine producers sampled had enough land to potentially absorb all the nitrogen produced on the farm, whereas 16 percent of the small-scale swine producers had the potential to absorb all the nitrogen produced. Most of the remaining small-scale swine producers had only a minimal amount of manure (0-5 metric tons) that they needed to find markets for. Of the large-scale households interviewed, though 50 percent had only 0-5 metric tons of manure that they needed to get rid of however, 12 percent of the large-scale households had over 20 metric tons they needed to get rid of.

None of the broiler households interviewed had enough land to properly dispose of manure. Most of the small-scale producers (19 percent) only had to find markets for 0-5 metric tons, while 100 percent of the large-scale households surveyed had to find markets for more than 20 metric tons of nitrogen.

In terms of phosphorous, none of the large-scale swine producers had enough land to absorb the amount of phosphorous found in the swine manure produced. Only 13 percent of the small-scale swine producers had that potential (Figure 7.9). None of the broiler producers had enough potential to absorb all the phosphorous on their own lands. But 50 percent of the small-scale broiler producers only had to be worried with 0-5 metric tons, compared to 96 percent large-scale producers surveyed who had to dispose of more than 20 metric tons of phosphorous (Figure 7.10).

Figure 7.7 Mass balance calculations for large and small swine producers in terms of nitrogen

Figure 7.8 Mass balance calculations in terms of nitrogen for large and small poultry producers

Figure 7.9 Mass balance calculations in terms of phosphorous for large and small swine producers

Figure 7.10 Mass Balance Calculations in terms of Phosphorous for Large and Small Poultry Producers

7.4 Organic Fertilizer Markets

From the households surveyed, it is quite evident that markets for chicken manure are working efficiently, with the high demand for organic fertilizer being met by the ample supply of manure from broiler farms. However, independent smallholders have less access to such markets, as reflected in their lower affirmative response rate of only 55 percent when asked about the existence of such markets. Eighty-seven percent of the small contract growers surveyed and all of the surveyed commercial farms have access to the market for poultry manure. Moreover, while the proportion of commercial raisers and contract smallholders who were unable to sell manure ranges only from 3 to 32 percent, more than half of the independent smallholders (58%) sold no manure at all.

The existence of such relatively well-functioning markets for chicken manure was confirmed by a key informant in Phase 1 of this project. There is a vast demand for poultry manure by vegetable farms in Benguet province, which is located in the Cordillera Autonomous Region (CAR) as well as in Central Luzon (Region 3) and elsewhere in Southern Tagalog (Region 4). Needless to say, the major suppliers of broiler manure are found in Central and South Luzon.

Traders start to collect the manure about four days before the last day of harvest and finish within two to three days on a farm of 6,000 birds. This number of birds generates about 18,000 kg wet manure or 12,000-15,000 kg of semi-dry waste. This converts to 240-300 sacks of manure at 50 kg per sack. The cost to the traders is about 14 pesos per sack, which translates to farm revenues equivalent to 4,200 pesos for 300 sacks. The traders' selling price of broiler manure as an organic fertilizer is estimated at 27-40 pesos per sack or about 12,000 pesos for 300 sacks.

Peñales (2000) documented an individual trader's daily sales of about 750 sacks of chicken manure along a highway in Benguet (CAR) province. Each sack costs 65-85 pesos depending on consistency and weight.

In the households surveyed, and with the last cycle as reference point, commercial raisers sold dry manure for an average of 12 pesos for a 50-kg bag; smallholders fetched 18 pesos per 50-kg bag. The aggregate average is thus 14.5 pesos per 50-kg bag. The average volume of manure sold ranges from 83 bags for smallholder independents to 424 bags for commercial contract growers. The total value of manure sold for the sub-sample averaged between 1,293 pesos for smallholder independents and 4,657 pesos for commercial contract growers.

Despite the existence of well-functioning markets for chicken manure, there is still the unresolved issue of whether environmental pollution from this broiler production by-product is lowered and, if so, the extent to which it is decreased. According to Peñales (2000), chicken dung trading in a certain municipality in Benguet province has been rendered illegal by a municipal ordinance passed in 1990 (but implemented only in 2000). The ordinance arose from the perception of the industry being a threat to public safety, peace, and order. This ensued as stalls for selling chicken manure proliferated at locations very near residential communities and trucks containing loads of manure were parked in front of residential lots along stretches of the highway. Complaints were lodged about air and water pollution. Peñales, however, was referring to the indiscriminate methods of distribution of chicken manure rather than its pollutive effects in its final use as organic fertilizer.

As for hog manure, there are no established markets for it as confirmed by the households surveyed. The non-existence or absence of such well-functioning markets could be the result of the more problematic collection, drying, and disposal process. This is because most hog farms, particularly the smallholder farms in which most hogs are raised, are located in peri-urban areas. Handling pig waste is also relatively more offensive due to the odor.

Traders of broiler manure can fill truckloads from a single or a couple of farms. In the case of smallholder hog farms, economies of scale in collection and transport are more difficult to realize. Moreover, the organic fertilizer properties of chicken manure are tried and tested, even in commercial practice

7.5 Chemical Fertilizer Markets

In addition to using broiler or hog manure, many of the households surveyed also apply chemical fertilizer on the agricultural lands they own or operate. Across production arrangements and scales of operation, about half of the broiler farms surveyed use chemical fertilizers. The types of chemical fertilizer most commonly used were urea and complete fertilizer (14-14-14). These were applied to croplands planted to rice, coconut, mango, and other fruit trees. Of the hog farms surveyed, 17-65 percent of households apply chemical fertilizer, mostly urea and complete fertilizer, on croplands planted mainly to rice, corn, mango, citrus, and other fruit trees.

7.6 Summary of Findings

7.6.1 Capture of externalities in broiler farms

Some broiler farms seem to avoid environmental problems stemming from their activities. This occurs when they sell manure and when they spread manure on agricultural lands. Markets for chicken manure do exist and 65 percent of small contract growers, close to 75 percent of large independent raisers, and almost all of the commercial contract growers in the sample sold chicken manure. Small independents, however, had the least access to such markets, with only 40 percent of the farms reporting manure sales.

The broiler farms surveyed use the manure as fertilizer on their own lands and on other agricultural lands that they own or operate. From the sample, about 29 percent of small independents, 13 percent of small contract growers, 17 percent of large independents and 19 percent of large contract growers used chicken manure as fertilizer as a means of internalizing the externalities from broiler production.

As for disposal of dead animals, most farms bury animal carcasses within the farm premises. Other means of disposal are incinerating dead birds, throwing them into pits, or feeding them to animals.

Few farms made use of family or hired labor to dispose of manure and dead animals. This is because for most of these farms manure has already been sold or applied on land.

Another method of mitigating negative impacts on the environment is the payment of license fees, taxes, and pollution fees/permits, although the incidence of this is quite low at less than 20 percent. Specifically, none of the smallholder independent producers paid such fees.

Investments in equipment for disposing of dead animals was another measure taken to contain waste when producers are unable to derive economic use from these by-products. Of the 116 farms in the sample, only six had made such investments.

The proportion of households that exert apparent effort to internalize the environmental costs of broiler production are as follows: 64 percent of small independents, 77 percent of small contract growers, 73 percent of large-scale independent producers, and all of the commercial contract growers.

Comparing groups of smallholders, standardizing on a per metric ton of output basis, independent producers, on average, spent more on environmental mitigation than small-scale contract growers. Comparing scales of operation, smallholder independent producers captured a higher value of mitigation than the commercial producers. Contract growers of different scales, however, spent about equal amounts for environmental mitigation on a per unit of output basis.

7.6.2 Capture of externalities for hog farms

There are differences in the pathways of nutrient use across production arrangements and scales of operation for the disposal of hog manure and dead animals. Among small-scale hog farms, the contract growers are the least able to mitigate pollution from hog waste. More than half of those who raise hogs by contract simply throw the manure into canals, rivers, and open pits or just pile it on the ground to decompose. While fewer independent growers report such practices (38%), the situation is by no means encouraging. In the absence of a ready market for hog manure, 21 percent of smallholder independents use the manure on their own farms while 40 percent have impounding structures with which to contain the waste. The situation for small contract growers is similar insofar as investing in impounding structures (43%) is concerned, but quite a few of them (4%) are able to apply manure on their farms.

Both smallholder independents and small contract growers dispose of dead animals within their farm premises. The most common way to get rid of carcasses is by burying them.

Interestingly, large-scale hog producers seem more inclined to undertake measures to mitigate pollution from hog waste. None of the commercial farms sampled dispose of the manure in open pits, rivers, or on the ground. The majority of both large-scale independents and contract growers invest in lagoons (62-65%) while the rest install biogas digesters (5-9%) or apply manure on their farms (23%). Only a very few sold the manure however. For both groups, dead animals are more commonly disposed of within farm premises by burying them.

Some of the households surveyed adopt other measures to mitigate the negative environmental impacts of broiler waste. The incidence of paying license fees, taxes, and pollution fees/permits is quite low among independent smallholders at less than 13 percent. None of the smallholder contract growers paid such fees. On the other hand, the incidence of paying these fees is higher among commercial farms.

Standardizing on a per 100 kg of output basis, on average, the value of capture of environmental externalities by smallholder independents was greater than that of contract smallholders.

On commercial farms, both independent medium-scale and large-scale producers spent more, on average, for environmental mitigation per unit of output than the commercial farms.