VII. Capture of Environmental Externalities

7.1 Capture of Environmental Externalities in Livestock Farms

The utilization and disposal of animal manure and dead animals has become a concern, discussed in Chapter 3, as the structure of the industry has shifted toward fewer but larger operations, and the number of animals raised in confinement has increased. Traditionally, farmers applied the manure to agricultural land to promote plant growth thereby recycling much of the nutrients. With fewer but larger operations relying on inputs trucked from outside sources, manure has become more concentrated in localized areas. When application rates exceed the carrying capacity of the land to assimilate nutrients, repeated applications can lead to a buildup of nutrients in the soil. This in turn, increases the potential for nutrients to move from the field through leaching and runoff and to pollute ground water (Kellogg et. al., 2000).

In Brazil, there are two types of disposal of nutrients originating from livestock operations that are of concern. These are the manure generated from each animal and animals dying prematurely. It is estimated that broilers and dairy produce 80 lbs (36 kg) of manure per day per animal unit, layers produced 60.5 lbs (27 kg) per day per animal unit, and swine produce 63.1 lbs (29 kg) per day per animal unit. As discussed in chapter two Brazil currently has approximately 693 million broilers, 6.5 million swine, and 34 million dairy cattle. This would equate to approximately 55 billion pounds of broiler manure, 2,720 million lbs of dairy manure, and 416 million lbs of swine manure per day that Brazil has to manage so that it does not harm the environment.

Two measures are used to look at differences across size of farms in their ability to capture the environmental externality. One measure looks at the ability of different size farms to assimilate the nutrients produced on farm by computing the estimated mass balance of nutrients produced from the manure. The second looks at expenditure differences across different size of farms to mitigate negative environmental effects from manure and dead animal disposal. These measures are used to test hypothesis 3: Small-farmers expend a higher amount of effort/investment in abatement of negative environmental externalities per unit of output than do large farmers.

7.2 Current Pathways of Nutrient Use from Manure and Dead Animals

Disposal practices for manure and dead animals directly impact nutrient balances, and also vary across scale of operation. Traditionally, by-products of livestock production in Brazil have been disposed of by: 1) applying it to land to improve the physical properties of the soil for plants, 2) dumping into rivers, 3) burial, and 4) incineration.

7.2.1 Broiler

Figures 7.1 and 7.2 illustrate the disposal practices for different scale broiler producers for manure and dead broilers of the households surveyed. Thirty-two percent of the small holders sold manure to traders while 44 percent used it for crops on their own farms. Sixteen percent of the households surveyed report using manure both on their own farm and selling it. For these same households, dead birds were either put in a cesspool (3 percent) or composted (76 percent). For large holders surveyed the amount of manure sold to traders was slightly higher (49 percent) and the amount used on the large-scale producers own farm was slightly lower (33 percent). As with the small-scale producers, 16 percent of the large scaled producers reported both selling and using the manure on their own farm. Nearly 61 percent of all large-scale producers surveyed composted their dead animals, 24 percent placed them into cesspools and 10 percent buried them.

7.2.2 Layers

Figures 7.3 and 7.4 show the disposal practices for different size layer producers. Nearly 70 percent of both size producers sold their manure to traders. In addition nearly 30 percent of all size producers sold and used the manure on their own farm. A larger percentage of the small producers (67 percent) incinerated their dead animals than large-scale producers (25 percent). Similarly a larger percentage of small-scale producers composted their dead animals (33 percent) compared to large-scale producers (1 percent). Most of the large-scale producers buried their dead animals, contrary to what was found in the other countries.

Figure 7.1 Disposal practices for small size broilers

Source: CEPEA/ESALQ/USP

Figure 7.2 Disposal practices for large size broilers

Source: CEPEA/ESALQ/USP.

Figure 7.3 Disposal practices for small-scale layers

Fonte: CEPEA/ESALQ/USP

Figure 7.4 Disposal practices for large-scale layers

Source: CEPEA/ESALQ/USP

7.2.3 Swine

Table 7.1 shows the distribution of medium and large pig producers by manure disposal method. All of the medium size cooperative and independent farmers use the manure for crops on their own farms. Nearly 90 percent of the medium size contract farmers report using it on farm and slightly over 10 percent report using it off farm. A large percentage of the large-scale producers surveyed report using the swine manure off farm, which may be due to lack of available land. Nearly 75 percent of all large scaled swine producers reported using the manure on their own crops while nearly 25 percent reported giving away the manure. A very small percentage of the large-scale operations report selling the manure from their operations.

Table 7.1 Distribution of farmers by manure disposal methods, swine production (percent)

Source: CEPEA/ESALQ/USP

Table 7.2 shows that medium size swine producers composted (44 percent), buried (44 percent) or put the animals into a cesspit (12 percent). A larger percentage of the medium sized cooperatives used composters than other types of dead animal disposal. More of the independents chose to bury their animals. Large-scale producers used the same options but a larger percentage (37 percent) used cesspits. A higher percentage (66 percent) of the large-scaled integrators preferred composting as a method for disposing their dead piglets.

Table 7.2 Disposal of dead pig disposal by farm classes and production system

Source: Cepea/Fao

7.3 Mass Balance Calculations

Figures 7.5 to 7.10 illustrate the percentage of farmers, by size category, within a given range of nutrient balance for each commodity. Following the discussion in Chapter 4, a range of -20 to -30, for example, indicates that farmers are creating an annual excess of 20 to 30 metric tons of nitrogen (or phosphorous) per hectare. The mass balance calculations performed here are used as rough estimates of actual nutrient balances. They serve to indicate households with potential problem areas, as well as where further research and technology transfer may be more productive for certain size households. They also to serve to indicate why some households have active involvement with manure markets.

7.3.1 Broiler Farms

Figures 7.5 and 7.6 illustrate the difference by size of broiler producers in assimilating the nitrogen and phosphorous nutrients from broiler operations for a given range on the available land. Over 50 percent of the large-scale producers had an excess of more than 50 MT of nitrogen and 40 percent had an excess of more than 50 MT of phosphorous. Close to 90 percent of the small-scale producers had less than an excess of 10 MT in terms of nitrogen and approximately 95 percent had less than an excess of 10 MT in terms of phosphorous. The majority of the medium-scale producers had an excess of 20 metric tons of nitrogen and phosphorous.

7.3.2 Layers Farms

It was not useful to perform mass balance calculations for the small-scale layers as only one household surveyed had data on the amount of land available. The remaining 62 observations did not include this data point. Figure 7.7 illustrates that one small-scale layer producers could absorb all of the manure produced. Though there was a wide range of the ability of the largelayer households to absorb the nitrogen and phosphorous produced from the manure on their own farm, slightly less than 50 percent of the large-scale operations surveyed had an excess of 50 MT of nitrogen and 40 MT of phosphorous that they needed to remove from their properties. A few large-scale producers (3 percent) had plenty of land to dispose of the manure, which could be due to their location.

7.3.3 Swine Farms

There was a wide diversity in the ability of the different size producers surveyed to absorb the nutrients in the manure produced on farm. Some producers in all size categories did not have to worry about disposing the manure off farm in terms of both nitrogen and phosphorous. In terms of nitrogen, 40 percent of the large-scale producers had an excess of 50 MT of manure produced nitrogen, while 15 percent of the large farmers had little difficulty in absorbing the nitrogen in the manure on farm. Close to 60 percent of the medium and small-scale producers had to worry about disposing less than 10 MT of manure in terms of nitrogen. In terms of phosphorous the percentage decreased slightly for all size producers, however still 30 percent of the large-scale households had to worry of disposing more than 50 MT of phosphorous from the manure off- farm.

Figure 7.5 Nitrogen mass balance calculations for broiler households surveyed in Brazil, 2002

Source: CEPEA/ESALQ/USP

Figure 7.6 Phosphorous mass balance calculations for broiler households surveyed in Brazil, 2002

Source: CEPEA/ESALQ/USP

Figure 7.7 Nitrogen mass balance calculations for layer households surveyed in Brazil, 2002

Figure 7.8 Phosphorous mass balance calculations for layer households surveyed in Brazil, 2002

Figure 7.9 Nitrogen mass balance calculations for swine households surveyed in Brazil, 2002

Figure 7.10 Phosphorous mass balance calculations for swine households surveyed in Brazil, 2002

7.4 Farm-Specific Measures of Environmental Mitigation Effort by Farm Size

One of the key questions addressed in this study is to investigate the relationship between size and internalization of environmental externalities. Small producers, with limited access to expensive technology and market for waste may spend more per unit of output than larger producers. That is, economies of scale may be present with regards to mitigating environmental externalities. The study examined how environmental costs varied by size for the four countries.

Following the methodology set out in Chapter 4, each country study estimated a farm-specific index of the money value per unit of output of specific efforts to mitigate negative environmental externalities from manure and dead animal disposal. It will be recalled from Chapter 4 that an aggregate figure per farm was first calculated and this was divided by total output to get each farm specific figure, and these were averaged across farms in each class. Positive additions to mitigation came from actual expenditures on compensating neighbors or colleting manure, or to build storage facilities (suitably amortized). In addition, disposal cost of manure were included, either at the sale price, if actually sold, or the market price if spread on one's own fields. If no manure market existed, it is presumed that manure is in excess supply, and disposal methods are not environmentally mitigating.

Table 7.3 shows environmental expenditures per kilogram of output for each commodity studied. For broilers, smaller producers in the households surveyed spend twice as much on environmental mitigation per unit of output than larger producers. Small-scale producers spent on average 0.014 real/kg of broiler meat compared to 0.006 real per kg of broiler meat by large size producers. The Brazilian layer costs are much lower relative to the boiler costs. The reason for this needs to be further explored. Small-scale swine producers spend more than larger producers on environmental mitigation. The environmental costs associated with dairy production are relatively constant across farm size in Brazil.

Table 7.3 Average cost of pollution abatement for broiler