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A M
BEN

 

A MANAGERIAL PERSPECTIVE OF THE LIKELY ECONOMIC
BENEFITS AND COSTS OF ENVIRONMENTAL REGULATIONS
TO THE MICHIGAN DAIRY INDUSTRY
By

James Donald Garsow

A THESIS
Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of
MASTER OF SCIENCE
Department of Agricultural Economics

1991

ABSTRACT
A MANAGERIAL PERSPECTIVE OF THE LIKELY ECONOMIC
BENEFITS AND COSTS OF ENVIRONMENTAL REGULATIONS
TO THE MICHIGAN DAIRY INDUSTRY
By

James Donald Garsow

Agricultural trends toward fewer dairy producers and larger herds have
increased the concentration of animal manure on Michigan farmland. The
financial burden of internalizing the costs of externalities such as pollution from
livestock operations may be placed solely on farmers. This study explores the
financial obstacles and opportunities facing Michigan dairy managers as they seek
to profitably comply with increasingly strict manure management standards.
Representative dairy farms are developed and a whole farm budgeting program is
employed to assess the impacts (investment costs, labor requirements, nutrient
savings, debt considerations, etc.) of compliance with possible regulations on these
farms. Investment in manure storage facilities is found to yield a negative return
of 2.9 to 6.6 percent. Impacts for dairy farms of complying with long-term storage
plus injection regulations is estimated under strict assumptions: profitability of 60
and 120 cow herds would decline by 37100 and $9900 per year and aggregate

capital investment for the Michigan dairy industry would be $112 million.

 

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ACKNOWLEDGMENTS

Many individuals have contributed valuable information, advice, and
support to make this thesis possible. My sincere appreciation is bestowed upon
Dr. Larry Connor for serving as my major professor, chief advisor, and key
reviewer. I also express gratitude to Dr. Sherrill Nott and Dr. Lee Jacobs for
their valuable advice and role as information providers.

Tom Garsow contributed a version of the nutrient balance template, which
he developed for use by the Wisconsin Soil Conservation Service, and evaluated
the accuracy of data sources. Other individuals from the following organizations
assisted in the development of this thesis: the Michigan Agricultural Experiment
Station, Michigan Department of Agriculture, Michigan Soil Conservation Service,
and the Michigan State University departments of agricultural engineering, dairy
science, and agricultural economics.

Finally, I thank my parents, Orbert and Eunice Garsow, for giving me the
opportunity to grow up in a loving, socially-and-politically—conscious, dairy farm
environment, and my wife, Kathy, for supporting this endeavor and having the

time, love, hope, and dreams to make it happen.

 

 

 

 

TABLE OF CONTENTS

LIST OF TABLES ............................................ viii
LIST OF FIGURES ........................................... xii
CHAPTER I INTRODUCTION .................................. 1
Present Political and Social Environment ....................... 1
Interested Parties ......................................... 2
The Manure Management Problem ........................... 3
Research Objectives ....................................... 5
CHAPTER 11 REVIEW OF LITERATURE ......................... 7
Introduction ............................................. 7
Previous Studies of Manure Management Issues .................. 8

CHAPTER III CURRENT AND PROBABLE FUTURE LOCAL

STATE, AND FEDERAL LEGISLATION .................... 1 1
Federal Legislation ...................................... 12
State of Michigan Legislation ............................... 14
Air Pollution Controls .................................... 17
Other Agency Involvement ................................. 19
Township Ordinances ..................................... 19
Agency Interaction ....................................... 22
Judicial System Concerns .................................. 23
Implications for Dairy Farm Managers ........................ 24

iv

V

CHAPTER IV THEORETICAL FOUNDATIONS ................... 27
Goals of Dairy Farmers ................................... 27
Externalities ........................................... 28
Alternative Solutions to the Problem ......................... 29
Dairy Firm Adjustment to Environmental Regulations ............ 32

Increased Variable Costs ............................. 33
Increased Fixed Costs ............................... 34
Increased Fixed and Variable Costs ..................... 34
Increased Fixed Costs and Decreased Variable Costs ........ 34
Investment Costs Versus Investments ......................... 35

CHAPTER v SUMMARY OF MAJOR DATA SOURCES ............ 37
The 1987 Michigan Dairy Survey ............................ 37
Major Assumptions and Sources of Information ................. 41

CHAPTER VI ESTABLISHING A VALUE FOR MANURE

NUTRIENTS .......................................... 44
Nutrient Balance on Dairy Farms ............................ 44
Nutrient Analysis Results .................................. 47
Nutrient Balance Solution ................................. 50

CHAPTER VII USING NETWORK ANALYSIS TO AN ALYZE THE
COSTS OF DAIRY MANURE MANAGEMENT SYSTEM

ALTERNATIVES ....................................... 54
Description of Modeling Process ............................ 54
Variable Inputs and Calculations ............................ 55
Network Analysis Results .................................. 56
Storage Investment Costs ............................. 56
Labor Output ..................................... 5 8
Manure System Cost Comparison ...................... 59
Total Annual Costs ...................................... 61

Nutrient Savings ........................................ 62

vi

CHAPTER VIII FULL BUDGET ANALYSIS OF THE IMPACTS OF

ANIMAL MANURE MANAGEMENT REGULATIONS .........

Model Formulation ......................................

Procedure to Assess Regulatory Impacts .......................
Whole Farm Budget Results ...............................
Impact of Requiring Eight Months Storage .....................
Impact of Mandatory Storage and Injection ....................
Debt/ Asset Ratio Considerations ............................
Summary of Impacts of Manure Management Regulations .........

CHAPTER IX SENSITIVITY ANALYSIS OF MAJOR MODEL

ASSUMPTIONS ........................................ 76

Sensitivity Procedure ..................................... 76
Sensitivity of General Full Budget Variables ................... 77
Alternative Storage Systems ................................ 80
Altering Crop Yield Assumptions ............................ 82
Irrigation Systems Versus Spreader Tankers .................... 84

CHAPTER X AGGREGATE FINANCIAL IMPACTS OF MANURE

MANAGEMENT REGULATIONS ON THE MICHIGAN DAIRY

INDUSTRY ........................................... 87
Procedure and Limitations ................................. 87
Aggregation Qualifiers .................................... 89
Aggregation Results ...................................... 90
CHAPTER XI SUMMARY AND CONCLUSIONS .................. 94
Review of Major Assumptions .............................. 95
Summary of Results ...................................... 95
limitations of Study ...................................... 97
Managerial Implications and Alternatives ...................... 98
Further Research Needs .................................. 100
APPENDICES ............................................... 101
APPENDIX A: FARM NUTRIENT BALANCE RESULTS ....... 102

APPENDIX B: DAIRY FARM MANURE SYSTEM NETWORK
ANALYSIS RESULTS .............................. 103

vii

APPENDIX C: WHOLE FARM BUDGET ASSUMPTIONS AND

RESULTS ........................................ 1 10
Base Assumptions for Storage (cows) and Storage (all) ...... 112
Impact Analysis Considerations ........................ 1 13
APPENDIX D: SENSITIVITY ANALYSIS RESULTS ........... 122

APPENDIX E: SUPPORTING DATA FOR AGGREGATED
IMPACT ON MICHIGAN DAIRY FARMS .............. 124

LIST OF REFERENCES ....................................... 129

vii

APPENDIX C: WHOLE FARM BUDGET ASSUMPTIONS AND

RESULTS ........................................ 1 10
Base Assumptions for Storage (cows) and Storage (all) ...... 112
Impact Analysis Considerations ........................ 1 13
APPENDIX D: SENSITIVITY ANALYSIS RESULTS ........... 122

APPENDIX E: SUPPORTING DATA FOR AGGREGATED
IMPACT ON MICHIGAN DAIRY FARMS .............. 124

LIST OF REFERENCES ....................................... 129

LIST OF TABLES

Table 3.1 Michigan Agency Responsibilities for Animal Manure
Management Program Functions ............................ 23

Table 4.1 Potential Impacts on Individual Dairy Farm Level of

Compliance with Animal Manure Management Regulations ........ 33
Table 5.1 Debt/ Asset Ratio and Associated Intermediate Term Loan

Rates ................................................. 43
Table 6.1 Nutrient Removal by Dairy Farm Crops .................... 45
Table 6.2 Dairy Farm Nutrient Balance (60 cows-17,280#) ............. 46
Table 6.3 Nutrient Budget Analysis for a Representative Dairy Farm with

120 Cows .............................................. 52
Table 7.1 Sample HDWM Program Output Sheet .................... 57
Table 8.2 Investment in Fixed Technology on Representative Dairy Farms

by Farm Size, Housing Type, and Manure Handling System ........ 66
Table 9.1 Sensitivity of Variables to 10 Percent Improvements (60 Cows,

Free Stall, Medium Debt/Asset Ratio ........................ 78
Table 9.2 Sensitivity of Variables to 10 Percent Improvements (120 Cows,

Free Stall, Medium Debt/ Asset Ratio) ........................ 79
Table 9.3 Crop Yield Per Acre Assumptions-Three Soil Types ........... 83

Table 9.4 Profitability by Yield (120 Cow Farm, Medium Debt/ Asset
Ratio) ................................................ 83

Table 9.5 Energy Requirements by Operation for Conventional and
Demonstration Manure Transport-Application Systems ............ 85

viii

ix

Table 10.1 Distribution of Michigan Dairy Farms by Herd Size and

Housing Arrangement .................................... 88
Table A1 Nutrient Balance on Representative Michigan Dairy Farms by

Soil Type ............................................. 101
Table A2 Feed Needs on Representative Michigan Dairy Farms by Milk

Production Level ........................................ 102
Table A3 Acreage Needs on Representative Michigan Dairy Farms by Soil

Type, Production Level, and Number of Cows .................. 102
Table B1 Manure System Costs on Representative 60 Cow Dairy Farms

with Tie Stall Housing and Solid Storage by Interest Rate ......... 103
Table B2 Manure System Costs on Representative 60 Cow Dairy Farms

with Tie Stall Housing and liquid Storage by Interest Rate ........ 104
Table B3 Manure System Costs on Representative 60 Cow Dairy Farms

with Free Stall Housing and Liquid Storage by Interest Rate ....... 105
Table B4 Manure System Costs on Representative 120 Cow Dairy Farms

with Free Stall Housing and Liquid Storage by Interest Rate ....... 106
Table B5 Manure System Costs on Representative 250 Cow Dairy Farms

with Free Stall Housing and Liquid Storage by Interest Rate ....... 107
Table B6 Manure System Annual Costs on Farms .................... 108
Table B7 Labor Requirements on Dairy Farms ...................... 108
Table B8 Nutrient Saving on Dairy Farms .......................... 108
Table B9 Estimated Cost of Manure Storage Systems ................. 109
Table C1 Selected General Whole Farm Budget Assumptions ........... 1 10
Table CZ Base Farm Budgeting Assumptions by Herd Size and Housing

Type (Daily Haul Manure System, 20: 100 Debt/Asset Ratio) ....... 111
Table C3 Estimated Repair Rates for Manure System Components ....... 112

Table C4 Estimated Investment Cost For Expanding Manure Storage
Systems ............................................... 113

X

Table C5 Impact on Farm Profit or (Loss) of Complying with Eight
Months Storage and Injection Requirements by Herd Size,
Debt/ Asset Ratio, Housing Type, and Initial Manure System ....... 1 14

Table C6 Impact on Farm Cash Surplus (Deficit) of Complying with Eight
Months Storage and Injection Requirements by Herd Size,
Debt / Asset Ratio, Housing Type, and Initial Manure System
(Standard Earthen Storage, Loam Soil, $10.10 Per CM.) .......... 115

Table C7 Profit or (Loss) Break-even Milk Price-Impact of Eight Months
Storage and Injection (Standard Earthen Storage, Loam Soil, $10.10
Per Ont.) .............................................. 116

Table C8 Cash Surplus or (Deficit) Break-even Milk Price-Impact of
Eight Months Storage and Injection (Standard Earthen Storage,
Loam Soil, $10.10 Per th.) ................................ 117

Table C9 Change in Debt / Asset Ratio (Total Percent Debt) on
Representative Dairy Farms-Impact of Complying with Eight
Months Storage and Injection Requirements ................... 118

Table C10 Percent Return to Added Investment on Representative Dairy
Farmsulmpact of Complying with Eight Months Storage and
Injection Standards ...................................... 119

Table C12 Partial List of Machinery and Equipment Needs by Dairy
Manure Management System and Herd Size ................... 121

Table D1 Estimated Impact on Two Herd Sizes of Eight Months Storage
with Restrictions on the Type of Manure Storage System by
Debt/Asset Ratio on Dairy Farms Using Daily Haul ............. 122

Table D2 Spreader Tankers Versus Irrigation Systems ................. 123

Table E1 Distribution of Michigan Dairy Farms by Debt/Asset Ratio,
Housing Arrangement and Manure Handling Practice ............ 124

Table E2 Estimated Capital Requirements Needed on Representative
Michigan Dairy Farms to Meet Eight Month Storage (All Animals)
and Injection Requirements ................................ 125

Table E3 Increase (Decrease) in Annual Costs on Representative
Michigan Dairy Farms-Impact of Required Eight Months Storage
and Injection ........................................... 126

xi

Table E4 Increase (Decrease) in Labor Hours on Representative
Michigan Dairy Farms-Impact of Required Eight Months Storage
and Injection ........................................... 127

Table E5 Estimated Decrease in Labor Hours on Michigan Dairy Farms
from Complying with Eight Month Storage and Injection
Requirements by Herd Size ................................ 127

Table E6 Increase in Nutrient Savings on Representative Michigan Dairy
Farms—Impact of Required Eight Months Storage and Injection ..... 128

Table E7 Estimated IncreaSe in Nutrient Savings on Michigan Dairy Farms
from Complying with Eight Month Storage and Injection
Requirements by Herd Size ................................ 128

 

 

 

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LIST OF FIGURES

Figure 5.1 Outline of Thesis Structure and Models Used To Assess
Regulatory Impacts ...................................... 38

Figure 5.2 Distribution of Michigan Dairy Farms By Debt/Asset Ratio and
Length of Storage ....................................... 39

Figure 5.3 Distribution of Michigan Farms That Are Studied by Size and
Housing Arrangement (F S = Free Stall, TS = Tie Stall) .......... 40

Figure 6.1 Michigan Dairy Farm Acreage Needs by Type of Soil, Herd
Size, and Milk Production Level ............................. 47

Figure 6.2 Nutrient Balance Levels for Representative Michigan Farms
with Loam Soil by Herd Size and Milk Production Level ......... 48

Figure 6.3 Nutrient Balance Levels Per Cow For Representative Michigan
Farms with Loam Soil by Herd Size and Milk Production Level ..... 48

Figure 7. 1 Storage Investment Costs Per Cow by Size Herd, Housing Type,
and Manure System Type (S = Solid Manure, L = liquid) ........ 57

Figure 7.2 Labor Requirements for Dairy Manure System by Herd Size
and Housing Arrangement (L = liquid Storage, S = Solid) ........ 58

Figure 7.3a Manure System Cost Breakdown—Daily Haul (120 Cows,
11. 1% R) .............................................. 5 9

Figure 7.3b Manure System Cost Breakdown-Long-term Storage; Cows
Only (120 Cows, 11.1% R) ................................ 60

Figure 7.3c Manure System Cost Breakdown—Long-term Storage; All
Animals (120 Cows, 11.1% R) .............................. 60

Figure 7.4 Manure System Annual Cost Per Cow by Handling Practice,
Herd Size, and Housing Arrangement (Medium Debt/ Asset Ratio) . . 61

 

 

 

 

 

 

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Figure 7.5 Marginal Cost Savings From Improved Nutrient Retention,
Changing From a Daily Haul Manure System to Various Other
Systems by Herd Size and Handling Practice ................... 63

Figure 8.1 Profit Break-even Milk Price on Base Representative Farms
using Daily Haul by Herd Size and Type of Housing Arrangement . . . 69

Figure 8.2 Cash Flow Break-even Milk Price on Representative Dairy
Farms Using Daily Haul by Herd Size and Housing Type .......... 70

Figure 8.3 Profit Break-even Milk Price on Representative Farms Using
Daily Haul, Impact of Requiring Eight Months Storage of All
Manure, by Herd Size and Housing Type ...................... 71

Figure 8.4 Profit Break-even Milk Price on Representative Farms Using
Daily Haul by Herd Size and Housing T‘ypeulmpact of Changing to
Long-term Storage and Injection of All Manure ................. 73

Figure 9.1 Profit-Loss From Alternative Storage Systems on
Representative 60 Cow Herds by Debt/Asset Ratios ............. 80

Figure 9.2 Profit-Loss from Alternative Storage Systems on 120 Cow
Herds with Various Debt/ Asset Ratios ........................ 82

Figure 10.1 Estimated Michigan Dairy Industry Capital Needs to Comply
with Eight Month Storage and Injection Requirements ............ 91

Figure 10.2 Estimated Increase in Michigan Dairy Industry Annual Costs
to Comply with Eight Months Storage and Injection Requirements
by Herd Size .......................................... 92

CHAPTERI

INTRODUCTION

E E l' . l l S . l E .

Commercial dairy farm managers have become experts in farm program
analysis. To maximize their profits and to stay in business, dairy farmers have
necessarily participated in government programs (weighing the benefits and
drawbacks of commodity, feed grain, conservation, and dairy programs). To the
extent that programs such as the price support system and the federal marketing
order system have been capitalized into the farm cost structure, dairy farmers
have become dependent upon continuation of government support to maintain
their returns and net worth. This situation has put farmers in a compromising
position when it comes to dealing with farm environmental issues. This view is
supported by Batie (1990), that ”the social contract between urban consumers and
agriculture now implies reciprocal farmer activities." In the past, the high degree
of organization among dairy farmers had helped to concentrate their political
clout and to fulfill their legislative agenda. Yet, in recent years, incremental
changes in government policy objectives, due to growing public concern for the

environment and a deterioration of farm influence on policy decisions, are

beginning to show signs that more stringent regulations that would have broad

2
effects on the Michigan dairy industry are likely to be adopted. A few of the

reasons for these phenomena include: (1) the increased size of commercial farms,
(2) the decreasing farm population, (3) the high visibility of farm program costs in
light of the government deficit, and (4) the growing number of non-farm political
actors with air, water, and soil pollution concerns. For the purpose of this study,
management regulations will be viewed in the broad-sense as any government
interference in farm management that is undertaken with the intent to protect the
air and / or water environment.

Indications of the likely long-term effects of these changes can be seen in
the policy compromises in recent legislation, including the voluntary managerial
limitations imposed by the Michigan Right to Farm Act of 1981. If one assumes
this trend will continue, Michigan dairy farm managers and other affected groups
may be forced to confront issues such as pollution from "improper" handling and
storage of animal manure through limitations imposed by legislation and written
by non-farm interest legislators. Thus, farm managers must plan for the possibility
that they may be forced to absorb the financial burden of internalizing the costs
of externalities such as pollution attributable to socially unacceptable manure
management practices.

mm

The following groups of individuals may gain/lose in this socio-political

area and have expressed concern for animal manure issues. The groupings are

not independent. Thus, any one individual can be involved in more than one

group.

 

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3

1. miners: Consumers want the possession of safe, reasonably
priced products with the desired time, place, and form utility.
(Busch and Houston, 1985) They also are expressing concern for
a clean environment (i.e., safe groundwater).

2. W3 N eighbors, primmily non-farm
rural homeowners who have built homes in proximity to dairy
farnrs want clean air. For this study, clean air can be defined as
air that is perceived as relatively free from obnoxious odors.

3. Wes: Agencies responsible for manure

management issues such as the Michigan Department of

Agriculture, the Department of Natural Resources, and the Soil

Conservation Service, interpret and enforce laws, inform farmers

on legislative guidelines, allocate government payments, and

perform other technical and regulatory functions.

4. W: Dairy farmers wish to insure the long term

profitability and sustainability of their farms. This profit

maximizing condition entails the obtaining of a reasonable return

on investments subject to economic, managerial, and political

constraints.
The political influence of these actors will determine when, how, and to what
degree the manure management problem will be addressed.
WW

Animal manure management problems on Michigan dairy farms did not

start yesterday. The common description of livestock manure as "wastes" or
useless, superfluous material, due to their traditional misuse, high transportation
costs, low nutrient density, and other factors, suggests that the nature of the
problem is not new. Many studies have been done on the costs of disposing of
animal by-products assuming the value of manure is negative. For example, Good
(1972) virtually ignored the nutrient value of manure in his environmental impact

study. But, the magnitude of the problem has increased for many reasons. The

4

heightened public concern for air, water, and land pollution has forced legislatures
and government agencies to enact federal and state programs controlling nonpoint
source pollution such as from animal manures. (See Chapter III for an outline of
legislation). Agricultural trends toward fewer producers and larger herds have
increased the concentration of animal manure, and shortages of adequately
trained farm workers have reached critical levels. In addition, the increased
proximity of farms to urban areas has created a higher number of local / township
odor complaints. Dairy farms account for 28 percent of the odor and water
complaints in Michigan in the last four years (Abeles-Allison and Connor, 1990).
The adoption of total farm nutrient management techniques and pollution
limiting technology for manure transportation, utilization, and application has not
yet occurred on most Michigan dairy farms. Most importantly, many dairy
farmers may not be financially able to comply with the imposition of strict
pollution controls. Seventy-three percent of the responding farms in the 1987
Michigan State University Dairy Farm Survey handled their manure with systems
that probably would not meet proposed manure handling standards. According to
the survey summary, ”Of those 353 farms, 149, or 42 percent, have debt-to-asset
ratios greater than 40 percent,” (MSU Dairy Farm Survey, 1987). Because limited
‘ information is available on the financial implications of possible manure
management constraints on Michigan dairy farms, questions about the long term
sustainability of the Michigan dairy industry and the changes in farm structure
(number and type of farms) under these constraints must be answered.

Therefore, the basic problem stems from a lack of knowledge of all interested

5
parties on the adjustments that dairy farm managers would need to make given
certarn' pollution constraints and the implications of these adaptations for the
long-run viability of the Michigan dairy industry.
B I Q] . .

This study explores the financial obstacles and opportunities facing
Michigan dairy managers as they seek to comply with increasingly strict pollution
standards. The scope of this study is limited to three different size operations and
three distinct technology sets. First, existing manure storage and handling systems
are outlined. Manure management controls that are likely to be implemented and
the required farm adjustments are discussed. Given these constraints and under
certain assumptions, probable managerial responses are investigated. The
pollution abatement alternatives to be analyzed logically extend the voluntary
Michigan Right to Farm guidelines and other local, state and federal regulations
on animal manure management issues (See Chapter III). The regulation areas
deemed most likely to be addressed in rip-coming legislation, agency rules, and
court cases include:

1. Prohibition of winter application of manure

2. Mandatory injection of manure

3. Control of all barnyard runoff

4. limits on soil fertility levels or manure nutrient loadings to crop land.
Managerial alternatives focus on six areas:

1. Daily haul as a viable option

2. Manure storage facilities

3. Manure injection to limit odors

4. Marketing manure as compost for non-farm uses (i.e.,

greenhouses) or as fertilizer for other farm operators
(cooperative agreements between landowners)

 

 

5. I
By
regulation
costs (lab
responses
Thus. the

1.1

2.1

6

5. Alternative manure transportation and application systems

By analyzing the benefits and costs of different combinations of these
regulations and responses in terms of changes in variable and fixed production
costs (labor, equipment, interest, etc.) on W the probable
responses and resulting profitability of three different milk herd sizes is assessed.
Thus, the micro-oriented, firm level objectives of this research are:

1. Determine the probable directions to local, state, and federal
government regulations.

2. Collect up-to-date price and performance information for use in
comparing specific manure management systems.

3. Assess the responses of farmers with different size herds and
financial situations to regulations from their managerial

perspective.

4. Analyze the impact of these responses on their overall
profitability.

The primary objective, determining the economic impacts on the Michigan
dairy industry of the pollution abatement policies, is reached by using a systems
approach, under which the decisions of individual farm managers are generalized
to their effects on the entire industry. Through this process, an indication of the
ramifications of specific pollution regulations on the Michigan dairy industry is

ascertained.

CHAPTER II
REVIEW OF LITERATURE

Intmdnstinn

This chapter reviews some past research efforts in the area of dairy manure
management versus the environment that have formed the basis for this study. In
addition, the relevance and usefulness of the 1987 MSU Dairy Farm Survey as a
data source for this research is documented. Finally, current federal, state, and
local regulations are evaluated and projections are made relating to future (more
stringent) regulations.

The study of dairy manure management systems has centered on three
main areas: (1) modeling the environmental and economic effects of different
dairy manure management systems and associated pollution abatement policies,
(2) developing computer programs to aid farmers in designing and comparing
feasible systems, and (3) improving manure nutrient usage to minimize nutrient
losses and potential environmental pollution of various manure handling and
storage systems. Many different departments at universities (agricultural
economics and engineering, dairy science, and soil science) and government
agencies, such as the United States Department of Agriculture Economic

Research Service and Soil Conservation Service, have researched these areas in

8

the past, usually without much coordinated effort, to answer the basic question of
how to persuade farmers to adopt manure management technologies that are
deemed socially acceptable in terms of water and air pollution standards.
I? . S 1' [I I I I I

The first area, environmental and economic benefit/ cost analyses, received
much attention just before and after the enactment of the 1972 Federal Water
Pollution Control Act. Specific studies using linear programming that were
studied for their relevance to this research include: Ashraf et al. (1974), Young et
al. (1986), Coote et al. (1975), Forster (1974), and Good (1972). Ashraf et al.
(1974) estimated the direct and indirect opportunity costs to dairy farmers of
adopting management practices that would maintain water quality standards and
determined the optimum dairy farm organizations given specified constraints.
Young et al. (1986) examined 11 systems of dairy manure management in terms
of their environmental and economic effects. Coote et al. (1975) developed a
mathematical model to determine the relationships between economically optimal
management practices for New York dairy farms and the losses of soil, nitrogen,
and phosphorous which result from these practices. Forster (1974) employed a
simulation model to analyze the dynamic effects of selected water pollution
control rules on the behavior of beef feedlots. He found that compliance with
pollution abatement policies would cause reduced beef production and increased
production costs. The dissertation by Darrel Good is used extensively as the
guideline for this study due to the relevance and specificity to the Michigan dairy

industry. linear programming and / or system simulation is employed in these

9

studies to minimize the estimated costs and maximize the benefits to farmers and
to the environment of manure management systems under the assumed adoption
of new air and water regulations or more stringent enforcement of existing laws.

The second field of research focuses on the optimization of dairy farm
decision-making in the development of manure management systems and
practices. Shortest path network analysis is used by Safley (1977), Ogilvie et al.
(1975), Burney et al. (1979), Phillips et al. (1974), and Hengrrirun et al. (1988) to
formulate programs aimed at aiding dairy farmers in their manure system
selection. Hoglund (1976) developed investment costs, annual costs, labor needs,
tractor power and electrical energy requirements for several manure management
options designed for 40 to 200 cow farms. In addition, Ingalls (1980) developed
an interactive computer program at Michigan State University, based on linear
programming, for comparison of dairy manure handling systems. His study of
labor and bedding needs for different manure handling systems in Michigan is
used in this study to verify manure system labor requirements.

Loehr (1974), Midwest Plan Service (1985), Soil Conservation Service
(1990) and many others have published representative figures on the nutrient
content of animal manures. Nutrient losses from both facilities and fields are a
subject of much debate due to the multitude of uncontrollable variables (weather,
amount of mineralizable nitrogen, etc.) involved. Vanderholm (1975) described
comparable nitrogen losses for different manure systems. Loehr (1974) helped
explain the attachment of phosphorus to soil particles and Ellis and Olson (1986)

have helped to define limits to this bond. Potassium is generally not considered a

problem in wa'.

nutrients for CI

 

MSU Extension
tonl nutrient at
researchers as t‘:
p l
Horn(l990). T
nutrient uses a

removal by cro;

10

problem in water pollution. The value and proper management of manure
nutrients for crop production and water quality preservation is summarized in
MSU Extension Bulletin WQ-12 (Vitosh et al., 1988). The movement toward
total nutrient accountability in the dairy farming system, which is seen by many
researchers as the most effective way to minimize pollution, is exemplified in Van
Horn (1990). The thrust behind this research is to identify accurately the costs of
nutrient uses and losses from intake and excretion by the cow to uptake and

removal by crops that can benefit dairy farmers and the environment.

hfichh
proble

efihje

Emnu,
contrr
AEIic
'COHE
Sem'
uted
thh
POHu
'sna.

(1an

CHAPTER III
CURRENT AND PROBABLE FUTURE LOCAL

STATE, AND FEDERAL LEGISLATION

A controversial issue involved in managing air and water pollution from
Michigan dairy farms is determining which government agencies can deal with the
problems most effectively and what method or combination of methods will
efficiently meet the socially desired goals. ‘ Current efforts by federal, state, and
local officials to entice, reward, and force livestock farmers to change their
manure management practices and to make capital investments in pollution
control equipment have had limited success. The Michigan Department of
Agriculture (MDA, 1990) estimates that 75-80 percent of farmers are not in
”compliance” with the Michigan Right to Farm guidelines. The Soil Conservation
Service (1990) estimates that 1700 manure systems on Michigan farms presently
need to be updated or replaced. These figures give a clear indication that
Michigan dairy farmers must keep abreast of current and likely future policies for
pollution control to maintain their economic viability. This chapter presents a
"snapshot” of the major regulatory, zoning, and judicial trends affecting Michigan

dairy farmers.

11

Mich
prob
efic

loco

nee
Mi
pol

”Sn

CHAPTER III
CURRENT AND PROBABLE FUTURE LOCAL,
STATE, AND FEDERAL LEGISLATION

A controversial issue involved in managing air and water pollution from
Michigan dairy farms is determining which government agencies can deal with the
problems most effectively and what method or combination of methods will
efficiently meet the socially desired goals. ' Current efforts by federal, state, and
local officials to entice, reward, and force livestock farmers to change their
manure management practices and to make capital investments in pollution
control equipment have had limited success. The Michigan Department of
Agriculture (MDA, 1990) estimates that 75-80 percent of farmers are not in
”compliance” with the Michigan Right to Farm guidelines. The Soil Conservation
Service (1990) estimates that 1700 manure systems on Michigan farms presently
need to be updated or replaced. These figures give a clear indication that
Michigan dairy farmers must keep abreast of current and likely future policies for
pollution control to maintain their economic viability. This chapter presents a
"snapshot" of the major regulatory, zoning, and judicial trends affecting Michigan

dairy farmers.

11

12
E l l I . l .

The Federal Water Pollution Control Act (FWPCA) Amendments of 1972
established the current general framework for controlling agricultural water
pollution. This Act made an important distinction between "point source" and
”nonpoint source” pollution. The Act defines a ”point source” as: ”any discernible,

confined and discrete conveyance, including but not limited to any pipe, ditch,
channeL..., W or vessel or other floating craft,

from which pollutants are or may be discharged."1 The National Pollution
Discharge Elimination System (NPDES) sets effluent guidelines and permit
requirements for point sources. Environmental Protection Agency (EPA)
regulations for dairy farms include:

An animal feeding operation is a concentrated animal feeding
operation for the purposes of 122.54 if...
(a) More than the following number of animals are confined:
(2) 700 mature dairy cattle (milk or dry cows)
(b) More than the following number of animals are confined:
(2) 200 mature dairy cattle (milk or dry cows) and pollution
is discharged directly into waters through a man-made device
or direct or indirect contact with animals in the operation.
(c) The operator is notified in writing by appropriate authorities that
an NPDES permit is required. Provided, however, that no animal
feeding operation is a concentrated animal operation as defined
above if such animal operation discharges only in the event of a 25-
year, 24-th storm event.

In addition, any feedlot operations that result in direct discharge of wastes into
waters regardless of 1mm of animals involved can be required to obtain a

permit.

 

1 33 Use { 1362(14) (1982 & Supp. v 1987).
2 4o C.F.R { 122.54(a) (1982).

 

The gC
operators who
permit as obse
Natural Reso
Nonpoint sour
been discusse
discharge at a
1987 by Seem

each state to

 

meet standard
the best mama
(4) identify St
managementj
section 319, 1

devices to for

 

(Gould, 1990]

 

13

The government may initiate civil or criminal prosecution of those

operators who Emmi]! or negligently discharge from a point source without a
permit as observed in W} The Michigan Department of
Natural Resources (DNR) administers the NPDES program in this state.
N onpoint sources of pollution are not defined in the FWPCA of 1972, but have
been discussed by the EPA- as any pollution source that does not result from a
discharge at a specific, single location. Section 208 of the FWPCA, updated in
1987 by Section 3 19, indirectly regulates nonpoint source pollution by requiring
each state to provide assessment reports that: (1) identify water that does not
meet standards; (2) identifies categories of and individual polluters; (3) describes
the best management practices (BMPs) needed to control nonpoint pollution; and
(4) identify state and local programs addressing this concern. These reports and
management plans must be sent to the EPA for approval. Critics have shown that
section 319, like section 208, seems doomed to failure because of its lack of
devices to force or lure states to implement necessary nonpoint regulatory controls
(Gould, 1990).

The ”Culver Amendment" of the Clean Water Act of 1977 authorizes
subsidies to farmers for installing best management practices. Michigan dairy
farmers can receive up to $10,500 for developing a total system for animal manure

4

management. The Soil Conservation Service, a technical support agency, and

 

3 US. v. Frezzo Bros, 602 F.2d 1123 (3rd Cir. 1979).

4 Stacy, James. Personal interview on the role of SCS in manure management,
Michigan State SCS Office (April, 1990).

14
the Agricultural Stabilization and Conservation Service (ASCS) cooperate in

apportioning the Limited funds available through this program.
5 [1 1° 1 . I . l .

The Michigan Right to Farm (MRTF) Act (PA. 93 of 1981) as amended
provides considerable protection to farmers who voluntarily follow the "generally
accepted agricultural practices for manure management and utilization."5 The
latest version of accepted practices was adopted by the Michigan Agriculture
Commission in May, 1991. Management practices are outlined for runoff control,
odor management, construction design for manure storage systems, and manure
application to land. Benefits to following MRTF include: (1) exemption from
MDNR water and air quality permits, (2) exemption from Polluters Pay liability,
(3) eligibility to receive Soil Conservation Service cost-saving assistance, and (4)
protection from nuisance lawsuits. The state of Michigan has also adopted the
federal NPDES permit standards that, in effect, exempt nearly all the dairy farms
in the state, owing to their scale of operation (few larger than 700 cows), from
point source water pollution controls unless there is a direct discharge or a
problem is discovered.

The Michigan Department of Agriculture (MDA) and Department of
Natural Resources (MDNR) agreed upon a "Memorandum of Understanding”
outlining the terms of cooperation of the two agencies for response to agricultural

odor and water complaints.6 This agreement allows MDA to receive,

 

5 MICH. COMP. LAWS {{ 286.471-474 (1981).
6 MDA-DNR. Writ-mama; (1989)-

 

 

investigate, ant
lithe farm c
accepted pract
Understanding

The is
procedures to
Schuette in M
program proc

1. MD

 

15
investigate, and resolve complaints under the Michigan Right to Farm guidelines.
If the farm cannot be documented by MDA to be following the ”generally
accepted practices for manure management and utilization," the ”Memorandum of
Understanding" requires that the case be turned over to the MDNR after 90 days.
The Michigan Commission of Agriculture approved an outline of
procedures to be used by the MDA as recommended by MDA Director Bill
Schuette in March, 1991. Following is a synopsis of MDA manure management
program procedures:
1. MDA receives a complaint from the public or the MDNR.
2. The farmer is immediately sent a letter indicating a complaint has
been filed, a copy of the "Generally Accepted Agricultural and
Management Practices,” and statement of encouragement to
follow the voluntary guidelines.
3. An MDA representative visits the farm to assess the situation.
4. Four scenarios result:

a. W: No problem exists, and the farmer and
complainant are sent a letter stating so.

b. WWW: Problem
exists, but farmer is using acceptable management practices. A
letter stating this situation is sent to both parties and the file is
closed.

 

Letter rs sent to the farmer stating that the situation can be
rectified under the Right to Farm guidelines, or case will be
turned over in 90 days to MDNR. A copy of the letter is sent
to the appropriate Conservation District office, Cooperative
Extension Service, Soil Conservation Service and Agricultural
Stabilization and Conservation Service to offer assistance.

If not resolved after 60 days, MDA will call, ask if assistance is
needed, and refer the farmer to the appropriate agencies.

 

 

lhe 5p
enforces state
the MDhR It
not limited It
violation M1

191 and all r

1.111%
2.111
3.1},
4.111

 

 

 

16

If not resolved after 90 days, MDA will send a letter to the
farmer stating so, also that the issue will be brought before the
Agriculture Commission within 14 days, an ”Ag Team" may
visit, and MDNR regulatory action may commence.

d. W: Farmer resolved the problem by
following some Right to Farm practices. Farmer is sent a letter
stating the problem was corrected and encouraging the use of
all approved practices.

5. If the problem continues to exist, an ”Ag Team” may visit the
farm. The team is comprised of members of the agricultural
community including technical advisors, Agriculture Commission,
farm organizations, educational institutions, and others.

The MDNR (Water Resource and Air Pollution Control Commission)
enforces state and federal statutes. If the farm is found in to be causing pollution,
the MDNR may initiate regulatory action. ' Regulatory action may include but is
not limited to permits, fines, cleaning costs, consent agreements, and notices of
violation. MDNR’s enforcement power in this area is granted under the following
laws and all rules properly promulgated under these laws:

1. The Michigan Water Resources Act (PA. 245 of 1929 as amended)
2. The Air Pollution Control Act (PA 348 of 1965 as amended)

3. The Water Pollution Control Act Amendments of 1972 (federal)

4. The Michigan Environmental Protection Act (PA 127 of 1970)

5. The Michigan Dam Safety Act (PA 300 of 1989 as amended)

6. The Solid Waste Management Act (PA 641 of 1978)

7. The Michigan Hazardous Waste Management Act (PA. 64 of 1979)
8. The Environmental Response Act (PA 307 as amended)

9. The Michigan Drain Code of 1956 as amended

10. The "Polluters Pay” Act (PA 19 of 1990)

The MRTF Act was found in W not to affect the
application of local, state, and federal statutes.7 The court decided in this case

that the statute did not prevent the enforcement of a local ordinance requiring

 

7 Village of Peck v. Hoist, 153 Mich App 787 (1986); 396 N.W.2d 536.

17

owners of buildings within a community to use the public sewer system. The
same rationale applies if farmers do not voluntarily operate under the MRTF
guidelines. It is important to note that once the MDNR becomes involved, the
agency enforces statutes listed above, and the rules promulgated under these
statutes and net the guidelines adopted by the Michigan Agriculture Commission.
For example, Section 6(a) of the Michigan Water Resources Act (PA 245)
provides, ”It shall be unlawful for any person directly or indirectly to discharge
into the waters of the State any substance which is or may become injurious to the
public health, safety or welfare..."8 Civil and criminal penalties for violations
have been increased substantially in Polluters Pay Act (PA. 19 of 1990).9 No
farmer could afford to stay in business with these penalties, which include up to
five years prison time and five million dollars. Thus, farmers have ample
opportunities to bypass regulatory action mm, but should seek expert advice
if they have any doubts regarding the status of their operation.
AiLI’nllntiDnEnntmls

livestock manure odor emissions, because of their non-toxic nature, are
regarded only for their nuisance value. A nuisance is defined broadly as an act
that unreasonably interferes with an individual’s enjoyment of his / her property.
Under the regulatory scheme created by the federal Clean Air Act Amendments
of 1970, states possess almost complete authority to control agricultural air

pollution.

 

3 MICH. COMP. LAWS ANN. { 323.6(1) (1990).
9 Id, { 323.10.

 

 

‘9'?"lhe M
defense agaim
his operation
by the Agricu
in use of occu
change.10 ' ll
constitutional
process.11
preliminarily
farmers from
Odor c
53-1116 fashion
Und“~‘fStandin
emirOrllnenta
To Farm ma,
mu“ 56cm

promuhation

P01101101} AC

 

 

 

18
,%The Michigan Right To Farm Act provides that a farmer has an ahsnlnte

defense against a public or private nuisance action if he can show either (1) that
his operation conforms to generally accepted agricultural practices as determined
by the Agriculture Commission or (2) that his operation existed before a change
in use of occupancy of land within one mile and was not a nuisance before such a
change. 1% In Walker, a district court found that the statute was

constitutional and did not deprive property owners of their property without due

process.11 This protection has weakened, however, because a court has
preliminarily held in mm that 129.111 criteria must be met to bar

farmers from nuisance suits. 12

Odor complaints stemming from agricultural operations are handled in the
same fashion as water pollution grievances as outlined in the ”Memorandum of
Understanding" between the MDA and DNR. Some legal professionals in
environmental law have doubted whether this document and the Michigan Right
To Farm manure management ”guidelines” would stand up to a direct challenge in
court because of a lack of statutory support and an absence of formal
promulgation. 13 Complaints turned over to DNR are pursued under the Air

Pollution Act of 1965 PA. 346, as amended. Amendments to this act in 1987

 

1° MICH. COMP. LAWS ANN. {{ 286.471-473 (Supp. 1982).
11 Rowe v. Walker, 81-228769 6th Cir. (1982).
12 Point v. N orville Tp., Wayne County Cir. Court (1990).

13 Haywood, David. "Conflict Resolution for a Price", Presentation at Conference on
Manure Management; MSU (1990).

 

 

 

exempt farme
accepted agril
r n
The N
manure stora,
five or more
years Inspec
criteria, even
for all new fa
The 1"
Michigan Dra
any Sewage
0bjcctional o
130111111011 of l
fiveS‘OCk des

Commission

determinatior

 

 

19

exempt farmers from suits if they are in an agricultural zone and follow generally

accepted agricultural practices. 14

WW

The Michigan Dam Safety Act of 1989 PA. 300 requires that all animal
manure storage facilities whose dikes are six foot or above in height and impound
five or more surface acres need to have a permit and an inspection every five
years. Inspection requirements apply to all earthen storage basins that meet these
criteria, even if they were built before the law was passed. Permits are required
for all new facilities, meeting the criteria, before construction can begin.

The Michigan Drain Commission has responsibilities granted under the
Michigan Drain Code of 1956 as amended. In cases where there is a discharge of
any sewage or waste matter capable of producing ”detrimental deposits,
objectional odor nuisance, injury to drainage conduits or structures, or such
pollution of the waters of the state receiving the flow from the drains as to injure
livestock, destroy fish life or be injurious to public health,” the Water Resources
Commission can order the Drain Commissioner through an “order of
determination” to clean up the problem and charge the costs back to the drainage
district 15
MW

Loom townships have adopted more stringent water pollution guidelines

than federal or state standards by widening the definition of intensive livestock

 

14 MICH. COMP. LAWS ANN. { 691.1202(1) (1988).
15 MICH. COMP. LAWS ANN. {{ 280.422-424 (Supp. 1982).

 

l

operations (re

i operation), 1

agn'olltural a
{Schoolcraft T
operation (IL
design require
(3) limited
monitoring 1
townships has
Many

and state sta
future (Lem
fafining diff:
°P¢ration§ a
Second, the
exception pe
Voluntary pr

 

 

environment

 

and federal I

 

preempt 10C

debatable

\

6
schOOICrafl .-

20

operations (reducing the number of cows needed to be considered a concentrated
operation), requiring additional permits, creating buffer zones between
agricultural and other districts, and many additional means. For example,
Schoolcraft Township in Kalamazoo County has; (1) defined an intensive livestock
operation (11.0) in terms of 300 cattle, (2) required five different permits/ facility
design requirements in order for an ILO to receive a special exception use permit,
(3) limited manure transport and application practices, and (4) required
monitoring wells for ILO’S manure storage facilities. 16 Other Michigan
townships have or are considering Similar ordinances. >7Z
Many potential areas of conflict exist between these ordinances and federal
and state statutes. Four areas are likely to receive considerable attention in the
future (Lohr, 1990). First, the zoning ordinances in this regard often define
farming differently federal and state laws. For instance, ”intensive livestock
operations" are generally defined by fewer numbers of animals in ordinances.
Second, the ordinances require specific practices to be followed to obtain an
exception permit, while certain laws (i.e., Michigan Right to Farm Act) specify
voluntary practices. Third, zoning ordinances that restrict the amount of land
available to farmers for application of manure may increase the risk of
environmental problems and lead to violations of other regulations. Finally, state
and federal laws (supported by public policy interests to protect farms) may
preempt local ordinances. Consequently, the legality of these ordinances is

debatable, especially the issue of state and federal preemption, and is being

 

16 Schoolcraft Tp. (Kalamazoo Cty) Ordinance No. 116, Adopted Dec. 13, 1988.

 

 

decided on a
court found ii
that a farm
ordinance.17

The us
other landoa

recent years.

County)” in

 

management
WIS), estab‘
livestock Ope
restrictive deg
effective natil
intensive Ope

mliSince to “1

Dairy

 

21
decided on a case by case basis. For instance, in W the

court found that the Right to Farm Act is a valid defense to an action alleging
that a farm building is a nuisance per se because it violates a zoning
ordinance.17

The use of local ordinances to resolve the conflict between farmers and
other landowners over odor emissions from livestock operations has increased in
recent years. Starting with Brady Township Ordinance No. 48 (Kalamazoo
County) 18 in 1987, many townships are considering ordinances limiting manure
management practices (i.e., application means such as injection only in some
areas), establishing buffer zones, and requiring various permits for "intensive”
livestock operations. These ordinances have varied greatly in terms of their
restrictive degree, definitional differences, and scope, owing to a perceived lack of
effective national / state standards, a variety of opinions about what is seen as an
intensive Operation, and no consensus on what level and type of odor constitutes a
nuisance to whom.

Dairy farmers should be concerned with these developments for many
reasons. For example, the Kalamazoo County Circuit Court has found in Brady
W that an ordinance restricting application methods for liquid manure
to injection only is defensible.19 This requirement will affect the fixed and

variable costs, labor requirements, and timing for crop production on those

 

17 Northville Tp. v. Coyne, 170 Mich App 446 (1988), 429 N.W.2d 185.
18 Brady Tp. (Kalamazoo Cty) Ordinance No. 48, Adopt. Nov. 3, 1987.
19 Brady Tp. v. Strong, B9o-1606 Kalamazoo Cty Cir. Court (1989).

. ,. ’Ill—JI—l

 

 

operations de'

property 131!

Michigan has

 

attempt to ed;

 

ReSponsihilit

inridecn‘On
pollution c:
5110““ Pay
contr015 , .
benpficial

22

operations defined as intensive operations. Issues of property value loss and
property tax effects from different size operations and zoning practices in
Michigan has received some attention (Abeles-Allison and Connor, 1991). In an
attempt to educate township and zoning officials and to provide a legal framework
for meeting the goals of these officials, the MSU Animal Management Task Force
has proposed the development of a guidebook publication (a step-by-step outline
of legally acceptable wordings) to assist township leaders and serve as a guide to
explore various options townships could use in this area of concern.
Wu

Federal, state, and local officials have employed a variety of techniques to
reduce air and water pollution from livestock manure. As a result, many
government agencies have responsibilities for animal manure management
research, education, technical and financial assistance, and regulation programs.
Responsibilities of Michigan agencies are outlined in Table 3. 1.

Because many of these programs are in an early stage of development and
lines of responsibilities are not well-defined, many manure management
jurisdiction questions remain unanswered. How effective is judicial resolution to
pollution conflicts? What level of air and water pollution is acceptable? Who
should pay for the manure management changes to meet more stringent pollution
controls - the farmer or society? Which regulatory approach will yield the most
beneficial effects? Who should implement and be responsible for program

functions in the future?

H 'a ' “KW-WE”

 

 

 

Table 3.1 M»
Program Func

 

 

 

Mi. DNR

 

Conservation

 

23

Table 3. 1 Michigan Agency Responsibilities for Animal Manure Management
Program Functions (Source: Michigan Manure Management Task Force, 1990)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

" erensll"ty T

' .1 responsr-B ty

I l' . l S C

Farmers should be careful to avoid judicial confrontations. According to
Keene (1983), ”Judges are not equipped with the technical and financial expertise
needed to decide whether or not existing techniques for reducing the injurious
impact of a particular land use are adequate or financially practical." This
situation places farmers, who have traditionally been left to do as they please, in a
vulnerable position when judges interpret or fill the gaps of laws, regulations, and
ordinances. They may be forced to change their management practices, to incur

capital expenditures, and to quit farming all together if the costs are too high.

LII-ELM“ "' ”Hg-fl

 

 

 

Reduci

pay this cost
'ertemality.‘

for good or b:
to, the activ
problem If
price of mil‘r

programs so

 

 

600110111)! and
aghcultural p
little ability t.

24

Reducing agricultural pollution will be costly, and determining who should
pay this cost is not an easy task. Agricultural pollution is an economic
"externality.” An externality exists when an activity by one or more parties affects,
for good or bad, another one or more parties who are not part of, or are external
to, the activity.20 "Internalization" is the typical solution to this type of
problem. If the external costs are internalized, borne by the dairy farmers, the
price of milk will reflect the real cost of production. Yet, past government
programs, such as price support policies, have helped to structure the farm
economy and have been indirectly encouraging farming practices responsible for
agricultural pollution (Torres, 1989). In addition, farmers are "price takers" with
little ability to pass on costs to consumers.

Many farmers are ”trapped” by their current technology (methods or
techniques relating inputs and outputs). This fixed asset situation has been shown
to lead to chronic overproduction (Johnson and Quance, 1972). A similar logic
can be employed to Show that dairy farmers are being caught in an environmental
bind. The management practices and manure handling systems that farmers have
traditionally used are starting to become obsolete and inadequate as social and
political pressures increase. Changing management practices and adopting to new
technology is costly and time-consuming. The whole of our society has benefitted

from the high productivity of American agriculture, and to force potentially

 

20 Encyclopedia of Economics 357 (D. Greenwald ed. 1982).

 

 

bankruptins C
acceptable. '1'

In 0rd
manure mana
be set HOW
circumstances
management
for varying c.
protecred fro
supplemented
CrOSS-cornpliz
POUution cor
'SOdbuster' p
soil magma,

Resea
must lllldergr
reglliationsy ;

with PTOduq

 

Often the 011

must 0brain

 

 

25
bankrupting costs on these same farmers may not be socially or politically

acceptable. Thus, a compromise must be ,found to balance these concerns.

In order for dairy farmers throughout the country to be fairly affected by
manure management controls, clear, equitable national standards would need to
be set. However, Since this outcome appears unlikely in the present political
circumstances, the next-best combination of strategies would be to determine
management restrictions on a state-by—state and region-by-region basis, to account
for varying conditions and values (Keene, 1983). Agricultural areas should be
protected from incompatible development by state or local land use controls,
supplemented by incentives to make it possible for farmers to keep farming.
Cross-compliance, which refers to tying subsidies from existing programs to
pollution control measures, may be an effective solution. For example, the
”sodbuster" program denies subsidies to farmers who do not follow an approved
soil conservation plan.

Research and education are also a key. Federal, state, and local officials
must understand the benefits and costs to farmers and society of environmental
regulations, and be urged to avoid drastic policies such as mandatory compliance
with production practice guidelines. Dairy farmers and their families, who are
often the ones at greatest risk of pollution (for instance, nitrates in groundwater),
must obtain information on least cost alternatives to present harmful practices.

The state government has shown the willingness to protect farmers from
nuisance litigation and particular regulatory actions, if certain conditions are met

(farms follow the "voluntary" accepted practices). The federal government has

 

shared part
managements
idiom is pre

some, but not

 

 

 

26

shared part of the initial investment costs of developing a total manure
management system on farms. Therefore, if the best indicator of future regulatory
actions is present policies, then Michigan dairy farmers will be forced to bear

some, but not all, of the costs of air and water pollution control.

 

 

 

The c
regulations 0
0i public 11

Operations 3*

 

however, ma
making hav
311311318, ant
Welly/lug

somfiwhat ll

meld str

f D:
Dair

evaluate d3

h-fi
OONOSL/tjifpgx).
O O U A

CHAPTERIV

THEORETICAL FOUNDATIONS

The conceptual framework to analyze the impact of possible pollution
regulations on Michigan dairy farms has not changed considerably since the surge
of public interest and research in environmental pollution from livestock
operations started over twenty years ago. From a manager’s point of view,
however, major technological advances, such as computer use for on-farm decision
making, have increased the number of alternatives analyzed, the precision of
analysis, and the ease of examining complex decisions. Furthermore, the
underlying motivations for engaging in dairy production may have shifted
somewhat to adapt to the pressures from urban sprawl, environmental concerns,
financial stress, technological advances, labor shortages, and production increases.
W

Dairy farmers keep one or more of the following goals in mind when they
evaluate dairy manure management system options:

Farm sustainability and subsistence

Cash consumption and savings combination
Safety and environmental concern

Profit maximization

Cost minimizaton

Leisure time optimization

Maximum crop yields/ milk production
Status in the community

PNF‘MPP’N!‘

27

. ., .. .,_._._t'£.aull

 

 

9
1(

This stu
regulatit
balancil
prograr
pounds
equipn
were ;
conve

covep

aban
98).
Com

“F

28

9. Convenience objectives
10. Minimize soil loss, equipment failure, etc.

This study assumes that farmers attempt to minimize the costs of pollution
regulations to effectively meet the other goal(s). AS a result, the dairy ration
balancing performed for this study using the Spartan Dairy Ration Balancing
program (1987), follows a least-cost formulation to meet a herd average of 19,200
pounds of milk. In addition, the minimum investments in new facilities and
equipment necessary to comply with long-term storage and injection regulations
were presumed. Individual farmers may invest in costly ”Cadillac" systems for
convenience, status, or other legitimate reasons, but these alternatives are not
covered in this study.

Darrel Good (1972) presents a thorough framework for pollution
abatement impact analysis in Chapter IV of his dissertation (PhD Thesis, pp. 61-
98). The following sections on extemalities, firm adjustment to environmental
controls, and constraints on compliance are a brief, updated overview of these
arguments.

E l' .

Pollution from livestock manure is normally categorized in economic terms
as an externality. An externality occurs whenever the activities of one economic
agent affect the activities of another agent in ways that are not taken into account
by the operation of the market (Nicholson, 1989). Externalities exist because
property rights for such goods as water and air are not adequately defined and
allocated. Property rights establish the legal owner of a resource and specify the

pl. .. . “a,

 

 

trays i
innerv
but 011
3C1 as
nnuke
view

produ
an us
produ

(mega

regar.

29

ways in which the resource can be used. For example, the water of ”navigable"
waterways in Michigan is recognized as belonging to all the people of the state,
but ownership of the water is not endowed in any one agent or agents who could
act as a guardian(s) for the people. Therefore, water cannot be traded in a
market and no price is affixed to its use or misuse. As a result, dairy producers
view the air and water environment as a "free” resource that contributes to
production. In other words, no one normally charges farmers for the water and
air used as inputs in milk production and altered in the process. Yet, dairy
producers’ attempts to reclaim the nutritive value of manure may have direct
(negative) effects on other users of the water and atmosphere.

The use of water and air resources by dairy farmers is generally not
regarded as a cost of production. Thus, the supply and demand mechanism of the
milk market does not adjust to incorporate all the costs of production.
Mechanisms to protect the quality of the environment may need to be developed
externally from the market by government agencies. The goal of these programs
should be to establish a socially optimal balance between desired milk production
and allowable levels of pollution.

E l . S l . l E l i

There are many different ways of dealing with animal manure management
problems. These alternatives can generally be grouped as: (1) voluntary actions,
(2) legal suits initiated by individuals, (3) regulations and zoning, (4) taxation, and
(5) subsidies. Major advantages and disadvantages for each of these resolution

processes exists.

L...

Volunt
concern over
storage and
livestock and
avoid legal 51
effective to

I
reasons. Tht
the amount

increases. A

 

OitlIVironmel
indivi
attention) it
majomy of
“‘9 ttttdesir:
it that i,
Offensivene.
financial c
Witness)!
311d regu]
“tandem
(Amen
Only affet

30
Voluntary actions by dairy farm managers may alleviate much of the

concern over livestock manures. By following established guidelines for manure
storage and handling, farmers can minimize production costs, protect their
livestock and families, continue to be good stewards of the land, and possibly
avoid legal suits and government regulations. Still, voluntary actions may not be
effective to reach socially-desired, environmental protection levels for several
reasons. The economic incentive to reduce the level of pollution deteriorates as
the amount of capital investment and / or annual costs for the manure system
increases. Also, individual farmers have no way of determining the "right amount"
of environmental pollution.

Individual legal actions against farmers often have very visible (high media
attention) and unpredictable results. Many reasons for this situation exist. A
majority of suits brought by individuals are nuisance-based (odor complaints).
The undesirable nature of an odor, as perceived by any one individual, is affected
by that individual’s concern for the frequency, intensity, duration, and
offensiveness of the odor emission. Besides the lack of judges’ knowledge about
financial considerations, etc., as mentioned in Chapter III, courts use equity
(fairness) principles in the absence of clear precedence or judicially-approved laws
and regulations. The high cost of legal representation is an important
consideration. Qualitative factors include: (1) the quality of each party’s lawyer,
(2) difficulties in proving an agricultural pollution claim, (3) decisions that often
only affect the immediate parties to the case, and (4) the long time lags and

overloading in the present judicial system. For these reasons, it is generally

 

 

accepted that
neither party

State 2
not be an e
lhurow (197:
and the chic
regulations a
situations (it

336C160), or

rtfgulation a
bureaucratic
Furthermore
800d for pre"

AnonL
Pollution (ofl
{0’ disPosal.
manure pml
msponatig
lfldiydea] f;
limiting leg}
(1)

appIOPriate I

measurj

allowing em:

 

 

31

accepted that anything one can do to avoid legal action should be done, because
neither party in the suit normally gets everything the individual desired.

State and federal regulation and local township zoning laws may or may
not be an effective way to control pollution. According to Heilbroner and
Thurow (1975), "This depends on two things: the quality of the regulation itself
and the efficiency with which it is carried out.” For example, poorly designed
regulations and zoning laws may fail to differentiate among distinctive farm
situations (i.e., farms that are not a hazard to the environment may be adversely
affected), or they may leave "loopholes” for some individuals. Efficiency of
regulation and zoning depends on the ease of enforcement, amount of
bureaucratic "red tape,” and the overall cost of reaching the desired objectives.
Furthermore, zoning laws usually apply only to new firms in an area; they are
good for prevention, but bad for existing problems.

Another way to deal with pollution problems is to tax it. Taxation of
pollution (often called effluent charges) establishes an administered pricing system
for disposal. In the case of livestock manures, a charge could be levied on all
manure produced, unless the farmer installed an appropriate treatment,
transportation, and application system. This type of program would allow
individual farmers the choice between paying the tax or adopting pollution-
limiting technologies and practices. Yet, problems with this approach include:
(1) measuring and monitoring emissions (especially odor), (2) selecting an
appropriate tax schedule to limit pollution, yet keep farmers in business, and (3)

allowing enough flexibility for farms that are not a hazard to the environment (for

 

 

 

example, dail

contaminatior

 

The fill

 

farmers to st
install the 11
complete sub
would be ze
impacted dii '
in annual pr
Operations.
Way ‘0 avoid
the true eco
“9 be high
Years,
12%
The
Comtrainec
and “1311111
mil-hurt ar.
the feed r-

quantities

the nume]

32

example, daily haul of manure on flat land with low-surface-and-groundwater—
contamination potential).

The final way of addressing pollution from livestock manure is to subsidize
farmers to stop polluting; that is, the government pays the polluting farmers to
install the necessary equipment and facilities to avert the pollution. With a
complete subsidy, farmers’ capital investment in pollution abatement technology
would be zero. Consequently, individual farms (small vs. large) would not be
impacted differently, and farms would not initially go out of business. The change
in annual production costs and labor requirements, etc., may still adversely affect
operations. Another advantage is that subsidies are usually the easiest and fastest
way to avoid pollution. Subsidies are disadvantageous because they tend to distort
the true economic costs of producing goods cleanly, direct costs of these programs

can be high, and other farm program subsidies have been dwindling the last few

years.

 

The solutions to the animal manure management problem in Michigan are
constrained by the milk production technology available. The production of milk
and manure continue to be joint products. Although the pr0portion of milk to
manure and nutrient makeup of manure can be modified somewhat by changing
the feed ration or milking a different breed of cattle, manure is produced in large
quantities. In addition, the cost of managing manure continues to be greater than

the nutrient value of the manure to crops.

 

Compl:
have a variet
Changes in ti

different form

Table
Compi

co'

Fl
No

_
‘

 

 

 

inc:
_ l

 

 

In each com
level Where
farmer’s rest
dairy ftirrnel
9055th (”ml

4.41 ml

COm;

Variable co

___

 

lDCOrPOrati

 

33

Compliance with possible dairy manure management regulations would
have a variety of impacts on the cost structure of the individual milk producer.
Changes in the fixed and variable costs of production could take a number of
different forms (as signified by each box in Table 4.1).

Table 4.1 Potential Impacts on Individual Dairy Farm Level of
Compliance with Animal Manure Management Regulations

VARIABLE

 

No Change Increase Decrease

$$$$$$$$$$$$$$
$$$$$$$$$$$$$$

sssssssrsss ssssssssssssss ssssssssss
3333335“ 3W5“- 1 '

 

 

 

 

 

 

In each compliance case, if the total costs (variable plus fixed) are increased to a
level where the opportunity cost of resources (the value of the next best use of a
farmer’s resources) used in milk production is less than its value when sold, the
dairy farmer may utilize his / her buildings and labor for other purposes (and
possibly exit farming all together).

4.4.1 WW1:

Compliance with certain environmental regulations may only increase the
variable costs of producing milk. For example, a directive requiring the
incorporation of all manure applied to land may only increase variable costs
(labor, energy, repairs, etc.) on dairy farms that already own the necessary
equipment. Variable costs that are affected by the timing of input use also could

be included in this category. For example, crop production variable costs may be

 

 

increased if 11
year.
4.42 Increase
Manur
instances; an
the sole impa
sized famrs t
90515, from 1.
these farms’
c‘llllprnent.
4.43 mm
One (I
remillions is
Pt0duction
enCllsive USE
(Variable),
inmate in r
105910565111;

4.44 ml

 

34

increased if manure could only be spread on certain crops at certain times of the
year.
4.4.2 IncreaseiEisedsnsts

Manure management controls may only affect fixed costs in some
instances; an additional investment in storage, machinery, or equipment may be
the sole impact on the milk production function. For example, small-to-medium-
sized farms that use mostly family labor may not have an increase in variable
costs, from the hours needed to inject manure, if injection was required. Yet,
these farms’ fixed costs will definitely increase if they must purchase injection
equipment.
4.4.3 WW

One common financial impact on dairy farms of manure management
regulations is an investment in fixed assets that also affects the variable costs of
production. For example, compliance that entails the fixed investment in and
extensive use of spreader tankers generally leads to an increase in repair costs
(variable). Another example is investment in injection equipment and the
increase in fuel needed to use the equipment. These scenarios can be seen as
lose-lose situations for the farmer.
4.4.4 WWW

Compliance with some manure management controls may have the effect
of increasing the fixed costs of production but decreasing the variable costs. For
instance, the investment in technology that can reduce manure nutrient loss to the

environment can decrease crop fertilizer costs. The total costs of production may

 

 

 

increase, decr
the various cc
he s n t

lnvestr
investment (1
budgeting the
machines is 3
These cash l‘.
and operatin~
new €qume
liability from
Change in We

The i
Qualitative f
to Search for
new techno),
titantify. ~14
anal-“i5 t0 81

There
manure marl

I
lEgaL and le

 

”5 “Til

35

increase, decrease, or stay the same in this case, depending on the magnitude of
the various cost components.
WWW

Investment costs and investments are defined differently. The cost of an
investment (i.e., new manure handling equipment) can be expressed using capital
budgeting theory. Using this method, the replacement of old equipment by new
machines is analyzed by taking the net present value of the change in cash flows.
These cash flows include the initial cost, salvage values, tax effects, depreciation,
and operating expenses. The initial cash outflow is a function of the cost of the
new equipment, the market value of the old equipment (if sold), the tax savings or
liability from the sale of the old equipment below or above book value, and the
change in working capital (i.e., parts that must be held).

The investment cost is only one component of an investment decision.
Qualitative factors are also important. The time and effort that farmers expend
to search for the ”right" new equipment to meet their needs and to adopt to the
new technology exemplify factors in the investment decision that are diffith to
quantify. This study concentrates on the investment cost portion of investment
analysis to simplify the research.

Therefore, the theoretical financial impact on dairy farms of possible
manure management regulations can take a variety of forms. Other financial,
legal, and technical factors may constrain a farmer’s ability and need to invest in
the necessary pollution abatement facilities and equipment. Financially, dairy

farmers with a high debt load may not be able to obtain additional loans and

 

 

 

older farmers
the farmer m
bound by leas
Technically, t

for solving ll'll

 

 

36
older farmers may not want to make additional long-term investments. Legally,

the farmer may choose not to comply due to "loopholes" in the rules, may be
bound by leasing or renting agreements, or believe that he / She will not be caught.
Technically, the present supply of government and university-outreach assistance

for solving individual farmers’ manure management problems is limited.

 

 

This
dependent or
deserve reco
general each
dairy farm Cl
A complete
Al’l’ttndir C.

The I
1989) provit
manure-ham
Operations
Charaderisti

5'6 Percent

 

dedde Whici
fl |
0W chan S

the frame“
I

 

CHAPTERV

SUMMARY OF MAJOR DATA SOURCES

This study of the impacts of environmental regulations on dairy farms is
dependent on many data sources. The major sources of information for this study
deserve recognition in terms of their quality and relevance in raw form. In
general, each source is primary in nature, based on direct survey, typical Michigan
dairy farm costs, current government and university guidelines, or expert opinion.
A complete summary of the basic data assumptions of this study can be found in
Appendix C.

I] lEflZM’P D' S
The 1987 Michigan State University Dairy Farm Survey (Connor et al.,

1989) provides valuable insight into current dairy cow housing arrangements,
manure-handling practices, manure storage facilities of various size dairy
operations in Michigan. For example, sixty-cow herds have the following
characteristics: 43 percent utilize free stall housing, 44 percent haul manure daily,
5.6 percent have long-term storage for all manure, etc. This data was used to
decide which technology sets to employ in the model for different size farms. The
flow chart shown in Figure 5.1, based on the MSU Dairy Farm Survey, presents
the framework for this study:

37

Figure 5.1 C
ltttpms

(Pcrccl

Size Herd

 

60 COW

 

 

 

1M cow

 

 

 

38

Figure 5.1 Outline of Thesis Structure and Models Used To Assess Regulatory
Impacts
(Percentage of Michigan Dairy Survey Herds Analyzed)“

"Barn Type Manure Handling Prohibition of Mandatory
Assumption Practice Winter Haulrng Injection Laws—fl1

-->Daily haul ----- > Concrete hbunker --->No Impact

 

 

 

 

 

 

 

(44.3) & stacker (50‘) >
--«-Tie Stall-«u > Short-term storage > - > Standard pit- >
(40.7) g (39.0) liquid (50") .
bterm (cows) ------ > Expand present --- > Injection !
(10.2) system-~-«-----> --->costs d
L-term (all -- ----- > >
‘ 60 COW (6.5) .
Dally Haul ------- - > t
(43.4) - > Standard pit- > 1
m >Free Stall-u > Short-term ---------- > ?
(43.3) (38.3) --->Injection
-- > costs
L-term (cows) ------ > Expand present 3
(14.7) system ----------- > l
L-term (all) -------- > > '

Daily Haul-«mm- > - >Standard pit->
(23.1) Pit /clay liner->

--—>Free Stallm> Short-term--—-----> Pit w/concrete->
(81.5) (38.0) Concrete tank--> --->Injection
-- > costs

 

 

L-term (cows) ------ > Expand present
(34.7) system--——--->

 

,- -4”)

Daily Haul ----- >
(31.1) ->Standard pit->

250 COW --->Free Stall-u > Short-term------- >
(77.3) (173)

 

 

L-term (cows)------ > Expand present
(41.9) system-«um >

WP OF Dairy Survey HDWM Network Full Bridget— Full A#HalBI-‘ldg—et
Results

 

 

 

 

Acorn

barn type,
quesrion whe‘
finance the

storage faci

0.3]
0.25

i
i
r

 

p
N
i

 

Percent of Farms
0
w
t

 

 

 

39

A complete breakdown of dairy farms by debt/ asset ratio, number of cows,
barn type, and manure storage capability is found in Appendix Table E1. The
question whether or not farms with medium to high debt-to-asset ratios could
finance the construction and afford annual costs of the manure-handling and

storage facilities necessary to comply with more stringent environmental

 

 

.°
04
I

n
,,,,,

 

.0

N

U‘
l

O
.....
........

 

.°
N
I

 

IIIIIII
.......
. .; ’0 OOOOOOOOOO
IIIIIIIIIIII
...........
IIIIIII
IIIIIII
IIIIIII
-------
.......
IIIIIII
IIIIIII

 

P
d
1

Percent of Forms
o
at

 

............
................
........

’l .r
O O
I r N
e, O". ‘0
t O ‘0 _
l-
u u, o, :
'1 .I \.l.\‘
C O O O I
v ~ 3 u I c ; l
I: g. 0, J nnnnnnn ' .. .O; ,I‘ I '
‘0 ,0’ ,0; ooooooo 0 ,0, ‘0, I. I
- o, ,0 ‘1 ooooooo - go, go, ‘4 _ 0
o, .0, (O OOOOOOO o .0, .0, .. '
' 0 . _' IIIIIII s' Q g . . H c
. 9‘ ‘Q ccccccc y. .0, 'O“ n '
. o; o‘ \o '
O - - 4 : .

Short-term L-ierm for cow L-lerm for ol
Storage Capacity

 

 

 

IIIIIII
.......
uuuuuuu

     

 

 

 

 

 

 

 

m< 20% Debt - 20-697. Debi m > 69% Debt

 

 

 

 

 

 

Figure 5.2 Distribution of Michigan Dairy Farms By Debt /Asset Ratio and
Length of Storage (Source: MSU Dairy Farm Survey, 1987)
regulations is a crucial issue in this research. The distribution of the dairy farms
by debt/ asset ratio is shown in Figure 5.2. The distribution of dairy farms by size
is also extremely important because many manure system components to be

analyzed are scale-based, meaning the total costs per cow decline as the number

 

 

90-149 cor

 

\

Figure 53
Housing A
9 cows is i
919 farmsi
It wa
Storage Won

regllléllions y

 

 

40

 

> 149 cows (F5) (9.7%)

   

50-89 cm (Ts) (33.8%)

90-149 cows (rs) (22.5%)

50—89 cows (rs) (54.12)

 

 

 

Figure 5.3 Distribution of Michigan Farms That Are Studied by Size and
Housing Arrangement (Source: MSU Dairy Farm Survey, 1987)
(F8 = Free Stall, TS = Tie Stall)
of cows is increased. The current distribution of the representative Michigan
dairy farms is Shown in Figure 5.3.

It was assumed in this study that those herds with less than 3 months
storage would be in need of a complete manure handling/storage system if
regulations were adopted that required long-term storage for all animals on the
farm. With this assumption, it was estimated that 2,380 herds in Michigan need a
complete long-term storage system. This study represents a sizable majority of the

surveyed Michigan dairy farms, 340 out of 489. Of the 149 herds from the

Michigan Dairy Survey not covered by this study, 78 have less than 30 cows, 37

 

 

have a coml
pack barns. :
.\l ' I As ur
The
information
systems ant;
manure pro
P0tassium) 1
tsastewater V
These figure
and as inpl
Swimarized
The s
1990’s” by 1
Source. Ass
Com silage
Same in this
to comm]

550 (1985)

 

updated 1151
11,1990).-F
expatlded

Funhennor

41

have a combination of housing arrangements, 1 1 have dry lots, 10 have bedded
pack barns, and 13 have ”other” types of housing.
11 . E . l 5 £1 E .

The livestock Waste Facilities Handbook (MWPS- 18, 1985) provides
information on the bedding requirements for dairy cattle in various housing
systems and the amount of bedding required for solid manure. In addition, dairy
manure production rates, and nutrient content (nitrogen, phosphorous, and
potassium) for various size dairy cattle are presented. Milkhouse and parlor
wastewater volume estimates are given for different herd sizes and equipment use.
These figures were used to calculate total manure volume over the storage period
and as inputs for the network costing system that was employed and are
summarized in the assumption section of the appendix.

The study on the "Projected Profitability of Michigan Dairy Farrrrs in the
1990’s" by Nott, Garsow, and Darling (1990) was used extensively as a data
source. Assumptions pertaining to the category of all feeds grown (roughage half
corn silage and half alfalfa haylage on a dry matter basis) generally remain the
same in this study except some significant deviations. Crop yields were changed
to conform with the average yield potentials in Table 3 1 of Extension Bulletin E-
550 (1985) for different soil types. Crop and livestock costs estimates were
updated using the Michigan Estimates For Crop and livestock Budgets (Nott et
al., 1990). The types and costs for manure handling and storage equipment were
expanded and updated with information from a number of SCS offices.

Furthermore, the first-year value of manure nutrients was explicitly considered

 

 

(See Chapte
budgeting m
financial imp
equipment v
match the an
to compens.
intermediate
per hundred1
interest rates
Credit Senri,
Pam“ Cite.
determine 1h
me, include,
loan/56mph3
in the debt,

debt/amt r1

 

 

42
(See Chapter VI). In addition, a tie stall barn technology set was added to the

budgeting model, with cost estimates provided by Bickert (1990), to enable the
financial impacts on sixty cow, tie stall farms to be assessed. Depreciation for
equipment was changed from a seven to ten year schedule for equipment to
match the assumptions of the Halifax Dairy Waste Management network system,
to compensate for buying all new equipment, and to meet the assumed
intermediate debt period of ten years. The base milk price was lowered to $10.10
per hundredweight to reflect the lower support price in the 1990 Farm Bill, and
interest rates for borrowed capital were updated to 1990 levels based on Farm
Credit Service (FCS, 11 / 90) rates for various quality intermediate term loans.
Factors cited by Bill Henquinnette of Farm Credit Services as factors that
determine the quality of the loan, and thus the interest rate to be charged in each
case, include: (1) current equity, (2) total equity, (3) past repayment, and (4)
loan/security ratio. In this study, these factors were assumed to be encompassed
in the debt/ asset ratio. Table 5.1 shows the study assumptions regarding the

debt/ asset ratios and associated interest rates.

43

Table 5.1 Debt/Asset Ratio and Associated Intermediate Term
Loan Rates

Debt / Asset Ratio Interest Rate
< 20 % Debt

 

 

 

20—69 % Debt

 

 

 

 

 

> 69 Det _ i

 

 

ES'

Manur.
and handled 1
The Michiga
management,
their on go
200d econom
rescatchers 1
dairy/Crown
mm

A stu
(mUOgen, pl
assumptiOng
acreage req

I
CIOpS Were E

 

CHAPTER VI

ESTABLISHING A VALUE FOR MANURE NUTRIENTS

Manure can be a valuable resource if analyzed for nutrient content, stored
and handled properly, and spread in areas where it can be fully utilized by crops.
The Michigan Right to Farm Guidelines outline procedures in manure
management, which livestock producers are encouraged expected to adopt for
their own good and for the good of the environment. Do these procedures make
good economic sense from a manager’s point of view? To answer this question,
researchers must attempt to incorporate the value of manure into the total
dairy/ cropping system that is balanced in nutrient (input and output) terms.

I! . E l D . E

A study was performed to determine the balance of major nutrients
(nitrogen, phosphorous, and potassium) on various size operations under different
assumptions regarding the milk production level and crop yields and to summanze'
acreage requirements based on these assumptions. Nutrients removed by field

crops were assumed to be as presented in Table 6.1.

”I’LL-WW

 

 

Table 6.1 Nu

Crop

 

Corn grain

 

Corn silage

Alfalfa hay
source: fern:

 

 

Crep)
management
(lields as ass
(17300, 1920
these levels
35' combinin
and half alf
acreage neet

Assur
18) for milk
deVClOped u
requiremenI

com grain a

 

 

Seeding to a

 

45
Table 6.1 Nutrient Removal by Dairy Farm Crops

Crop Measure Unit ' N P K

 

 

 

 

 

 

 

Corn grain per bushel 0.90 0.35 0.27
Corn silage per ton 9.4 3.6 7.8
Alfalfa hay per ton 45.0 10.0 45.0 ‘

ource: e lzer ' ecommenoatlons, V0 enston" Iet1n if: ‘1'.

Crop yield assumptions were taken from the table of yield potentials of soil
management groups: one clay, one loam, one loamy sand, and one base type
(yields as assumed by N ott, Garsow, and Darling 1990). Milk production levels
(17300, 19200, and 21100 pound averages) and the feeds required to maintain
these levels were obtained from research by N ott, Garsow, and Darling (1990).
By combining the crop yields and average feed needs (assuming half corn silage
and half alfalfa silage in the balance ration) at various production levels, an
acreage needs assessment was obtained for 36 different scenarios.

Assuming manure production levels and manure nutrient content (MWPS-
18) for milk cows, dry cows, and heifers, dairy farm nutrient balance sheets were
developed to compare the total production of nutrients (from animals), total crop
requirements, and resulting balance assuming no system nutrient losses. A sample
nutrient balance sheet is provided in Table 6.2. The nitrogen requirements for
corn grain and corn silage were reduced by 50 units for each acre of new alfalfa

seeding to account for legume plowdown credits.

 

=

=

—l.— I— llh i— 1:

Ililh I

_ ih ihitg i~ 1|: o

i F...

m.5-mdfli

' Table 6.2

4 A. A Y v

Nutrient Production

Number

46

Dairy Farm Nutrient Balance
(60 cows-17 ,280#)

N

Nutrient Content (lbs / day)
P205

K20

 

. Milk cows

0.57

0.232

0.458

 

Dry cows

0.57

0.232

0.458

 

Bred Heifers

0.149

0.293

 

‘ Heifers 6-15 mo.

0.169

 

, Hrfeers 0-5 mo.

 

 

 

 

 

 

 

‘ Total/year

“ “Does not include bedding’“

L 55522 I 17556 I 7138 I 14149

 

Crop Nutrient Requirements

‘ Crop

Feed
Needed

W0) _ __

Removed

 

Removed t

 

Haylage

181.3

1812.8

8157.6

 

Hay

400.4

1801.8

 

1 New Seed

202.0

909.0

 

‘ Corn su.

2048.9

 

4439.3

 

   

 

 

 

TOTAL 9739
(PRODUCED-REMOVED) _

 

 

 

1148. 6

 

866.9

VI. Ia crops ayage, ay, an new seemg are assume to -- a e as“ .
from the air all the nitrogen which they need. Thus, though removal of nitrogen
is 45 units per ton, current crop and soil science research shows that no added
nitrogen is required. However, if given nitrogen through manure or other source,
alfalfa will use the nitrogen instead of fixing its own.

47

 

 

    

     

 
 
   

 

     
  

              

 

 

 

     

 

 

 

  

 

 

 

 

 

 

 

   
  

     
 

 

 

700
a 3
7
000 g g
a I I
s s ; s
Q g i g s g
b 5 . \ ,
50° kl? SI; 5:?
0’ 0‘ l’
‘-I ‘-r ‘:I
\:I §:l §.a
‘00 ~55 u: :z;
t 4 5.: do '1
'" s5? 35 NE:
325 E: §:5
a :55 :3 :5:
\' .2 a:
300 r :5; 7': 5::
~ ’ \‘o’ E- 5"
\ ; 5:5 3: 5:;
\.1 s: \' Ni;
V is? 55 55:
20° w 35; é:; 95 :1;
:f " 3: So a
5: is; 5:5. .5 i5;
.1 S: s: 5: 5:
100.. =4 V5 n? a: 5:5
: 3" 53' 3:' 55'
:p \:5 5:, 3:: 5.5
:u izg s2; .:5 x:;
:5 5:! i=1 sit s5;
0.. " ~-’. 36 i?! \r!
if
17.3 19.2 21.1 17.3 10.2 21.1 17.3 19.2 21.1
[K I’M/l COWS
BO 120 250
IIIIIIIIE IIIHICLAV IIHBIJIII EIIILINWSAIDT]

 

 

 

 

Figure 6.1 Michigan Dairy Farm Acreage Needs by Type of Soil, Herd Size,
and Milk Production Level

Acreage needs for the modeled farms are presented in Appendix Table A3
and Figure 6.1. Results of this nutrient balance analysis for loam soil are
summarized in Figure 6.2 and 6.3.

II . E l . B l

The results of this analysis confirm the conclusions one would reach using
common sense, and highlights some possible trouble areas of concern. For
example, higher concentrations of animals on farms with bigger herd sizes are
shown to have a higher nutrient imbalance (Figure 6.2). Yet, on a per cow basis
(Figure 6.3), a larger herd size appears to slightly decrease nutrient imbalance.
Therefore, dairy farms with more livestock may actually be less of a problem for

the environment than farms with lower concentrations of animals.

48

 

 

250 cows

 

 

4O

 

30

 

 

 

120 cows

 

 

20

g 60 cows
g 10
V

0-4.1.1..

17.3'19.2'21.1 17.3'19.2'21.1 17.5'19.2'21.1
MLK PROD. /# cows

 

 

 

 

 

 

PRODUCED - REWVED

 

 

 

 

 

 

 

- N P205 m K20

 

 

 

 

 

 

Figure 6.2 Nutrient Balance Levels for Representative Michigan Farms with
Loam Soil by Herd Size and Milk Production Level

 

200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q 150 Wvgvmv
g 100

E 60 cows 120 cows 250 cows

' 50

g * H :: ’1 fi : fl
g 0

 

 

 

 

 

17.5 1972 21.1 17.5 13.2 21.1 17.5 13.2 21.1
MLK PROD./# cows

 

"1'- N + P205 '5— K20

 

 

 

 

 

 

Figure 6.3 Nutrient Balance Levels Per Cow For Representative Michigan
Farms with Loam Soil by Herd Size and Milk Production Level

49
This rationale assumes that the dairy managers are producing all feeds, which

allows the farmer to distribute the manure over a large number of acres.

Higher production levels should result in a better balance of nutrients as
cows are more efficient and acreage needs increase. As acreage needs increase,
the dairy farmer can disperse the manure on a larger area and can reduce the
concentration of nutrients spread on any one field. Nitrogen and phosphorous,
the two nutrients that can be environmentally harmful, are produced in greater
levels than removed in the dairy/ cropping system.

Nitrogen imbalance, which has been linked to groundwater contamination,
must be carefully considered. Though much of the nitrogen in manure may be
lost into the air, depending on the manure management system used, farmers
sometimes use excessive amounts of commercial nitrogen fertilizer because of its
relatively inexpensive nature and the difficulty posed by applicator inaccuracies.

Phosphorous at first glance seems less of a threat than anticipated. Yet,
very little phosphorous is lost in the system, while manure is stored, agitated,
transported, and placed in the soil. The result often is a build up of the
phosphorous levels over time to levels that may increase the risk of phosphorous
loss to surface water contamination. Thus, farmers should be very careful to
monitor their soil tests and application rates of this relatively expensive nutrient.
Potassium was the only nutrient found in short supply in the confined dairy

operation, and it generally is not considered a potential environmental hazard.

50
I! . B l S l .

Therefore, farmers must carefully. consider the total nutrient balance on
their individual farm. Manure tests, soil tests, proper dairy balancing (to avoid
excess nutrient production), accurate fertilizer recommendations, and reliable
calibration techniques must be used as part of a total management system on the
dairy farm. If farmers base their manure application rates on one nutrient, the
nutrient balancing for crop production must be done in terms of phosphorous
instead of nitrogen. Balancing on nitrogen needs of the crop (i.e., corn grain)
generally leads to excess application of phosphorous. Balancing on phosphorous
needs of the crop is much safer for the environment. Ideally, a farm manager
should balance all the nutrients simultaneously.

To consider the total nutrient value of manure to the cropping system in
this study, a nutrient budget analysis was performed on the modeled farms using a
spreadsheet template developed by Garsow (SCS-WI, 1990). Because soil tests
were not. applicable in this case, crop nutrient removals (as described previously)
were used to determine crop needs. Rates of manure spreading for each crop
area were calculated; manure was assumed to be used in areas where it would
yield the highest first-year nutrient savings. Thus, manure was spread: first on
corn ground, then on new seeding, finally on standing alfalfa. The template
fertilizer budget was employed to find the amount of commercial fertilizer that
needed to be applied, in addition to the manure nutrients. Table 6.3 is an
example of this analysis for a 120 cow herd, assuming injected liquid manure.

The fertilizer requirements from the analysis were transferred to a whole farm

5 1
budgeting program. Nutrient savings calculated from the Halifax Dairy Waste

Management (HDWM) system were used to increase the fertilizer requirements
in the budget program to compensate for various handling assumptions. For
example, moving from a system of long-term storage and injection of all manure
to daily haul of solid manure on a 120 cow farm would cost the farmer an
additional $1528 per year in fertilizer expense.

The economic analysis in this study takes an important step forward in
analyzing the total nutrient balance from a manager’s point of view. The value of
nutrients available in the first year is estimated and accounted for in the budget
models. Farm managers must extend this type of analysis to multiple cropping
seasons, must carefully monitor their soil tests, and must follow other prudent
management guidelines to gain maximum control and economic benefit from their

manure.

52

Table 6.3 Nutrient Budget Analysis for a Representative Dairy Farm with 120
Cows (Assuming Injection of Manure)

FOR) MS Thanh DATE: (5/03/91
31') Ill: Garaow TRACI‘S)
ANIMAL TYPE) 1 (1-DAIRY2-BEEF3-M4-SWINEO-OI'HER)
N0.) 120 cows 60 HEIFERS 60 CALV
E
SOLID/LIQUID) 2 (l-SOLIDJ-LIQUID)
VOLUME TO SPREAD) 132,875 CUFF. - 993915 GAL. - 4,139 TONS
SPREADER CAPACITY) 3.1!!) GALLONS 331 LOAD
S/YR-
NUTRIENPSAVAIL. INPIRSI‘M (OR USEMANURETESI'VALUES)
LBS/1M GAL. ) 10 -N 8 -P205 21 -1(20
CALC. VOLUME IN STORAGE FACILITY) 1 (l-RECI'.,2-ROUND)
70 WIDTH) 59 SSLOPE 2 10
LENGTH ) DEPTH)
>
TOILVOL: 541199 GALLONS OR: 72,43 CUJ'T.
To-F'L Gal Teen. Gal. To-Pt. Gal. To-FI. Gal.
9 78,363 6 61,044 3 45,875
8 72,354 5 55,743 2 41.297
7 66,587 4 50,699 1 36,966
CROP AREAS OR FIELD NO.
> Corn 1 Corn 811. Haylap Hay New Seed
ACRES ) 33 58.1 74.6 11.9 19.1
(1-(DRN.2-OATS.3-HAY.4-wYBFANS.5-WHFAT,0-OIHER)
CROP ) 1 1 3 3 3 0
YIELD GOAL ) 130 211 3 5 22 o
(1-BU.,2-TON8) ) 1 2 2 2 2 0
IS A SOIL TEST AVAILABLE FOR THIS AREA (1-Y2-N)
) 2 2 2 2 2 2
CROPNEEDS-Ifnflteunotdonopthmaoflubvehmm
N ) 117 188 0 0 0 0
(I/AC.) P203 ) 46 72 30 50 22 0
K20 ) 33 136 28 m 99 0

N cnaorr pop. mow DOWN;1-HAY(%3'I‘AND),2-SOYEFAN(BU.YLD)
source > 1 1
Guam > 25 a
cur amen 9/151 >

53

Tabla 6.3 Combined
(1-Yu 2-No) : 2 2
N CREDIT (O/AC): 522 m
MANURE SPREADING RATE. LOADS/ACRE
(BASED ON CROP N NEEDS ONLY)
CALCULATED RATE : 3.6 6 0 0 0 0
MANURE UTILIZED
ACTUAL RATE ) 1.9 3.3 1.6
ACRES SPREAD ) 58.0 58.5 74.6 17.9 19.1 0.0
GAL/ACRE : 5,71!) 9,900 0 0 4,800 o
LOADS THIS AREA : 110 193 0 0 31 0
% USED THIS AREA: 33 58 0 o 9 0
TOTAL 100 % USED
MANURE CREDITS, LBS/ACRE
N 57 99 0 0 48 0
P205 46 79 0 0 38 0
K20 120 zoo 0 0 101 0
FERTILIZER BUDGETLBS/ACRE

N CROP NEED : 117 188 o 0 0 0
CREDITS : 65.22 107.2 0 0 48 0
FERTREQ'D: 51.78 80.78 0 0 48 0
P205 CROP NEED: 46 72 50 50 22 o
CREDITS : 46 79 0 0 38 0

K20 CROPNEED:

a
E-
E
E
a

CREDITS : 120 one 0 0 101 0

> so.» - N soz - P203 son -
no
om Nauru: Value/Ace
N : $12 $19 so so so so
9205 : s12 :13 so so so so
no : s4 :19 so so :12 so
TOTAL/AC. : :23 :56 so so 313 so
Total NM Vales/Ana or more
81.624 33.276 80 $0 $344 30
mm. savmos $5.2M Downs

CHAPTER VII
USING NETWORK ANALYSIS TO ANALYZE THE COSTS

OF DAIRY MANURE MANAGEMENT SYSTEM ALTERNATIVES

Selection by farm managers of a particular dairy manure management
system is based on many factors including: labor availability, soil profile, ground
and surface water proximity, investment capital supply, net annual costs of
ownership and operation, energy requirements, distance from residential areas,
size of herd, and the farmers’ individual goals (Chapter IV). Any attempt to
optimize these criteria in a single system would be an extremely difficult research
project. Only the farmer can make the final decision, given all relevant
information, regarding which system best suits his / her farm. Given these
constraints, this chapter outlines manure handling practices that are currently used
by most farmers and/ or meet the minimum requirements for effective dairy
system management.

12 . . [II I l' E

The network model used in the incremental cost analysis section of this
study is the Halifax Dairy Waste Management (HDWM) system. Originally
developed by Burney et al. (1979), the system was updated and adapted to a

microcomputer environment by Hengnirun (1987). The costing program,

54

55

DWM, contains information defining the dairy manure network and generates a
set of activity costs for a given herd size, type and amount of bedding used,
housing arrangement, and manure handling choice.

1! . l l I l C l l .

The HDWM variables include machinery and equipment (sizes and costs),
fixed and operating cost factors, storage system construction and maintenance
costs, and environmental factors (for example, distance to land). The data in the
system was changed to reflect Michigan producers’ costs with information
provided by the SCS (Wisconsin and Michigan), equipment dealers, electric
companies, Midwest Planning Service, Michigan Telfarm, and expert opinion from
various departments at Michigan State University.

The static fixed cost fractions in the HDWM system were changed to
incorporate the time value of money. This study used the procedure
recommended by Hunt (1983) to calculate the annual fixed cost, capital recovery
charge, of equipment, machinery, and storage systems. The following equal
payment series formulation was followed:

Annual fixed cost = Depreciation + Interest on Investment 1-
Taxes + Insurance + Shelter
COOIOOOOOOOICOOOIIOIOOOCIOIGOOOOOOOOOOOOOCIOIIOOCOOOOOIOOOCO
Annual fixed cost = P(1-S)/N + P(1-S)((I(1+I)"N)/(1+I)"N-l) +
PSI + .005P + .02P
Where P = Purchase Price (3)
S = Salvage Value (% of Purchase Price)
N = Useful Life (yr)
I = Interest Rate (Opportunity Cost of Capital)

Interest rates for low (0:100), medium (20: 100), and high (70: 100) debt to

asset ratios were assumed to be 9.9, 11.1, and 13.4 percent in this study (See

56

Chapter V). Insurance and shelter costs were assumed to be 0.5 and 2 percent
respectively. The useful life of nearly all equipment and machinery was assumed
to be ten years, and life of storage systems was presumed to be twenty years.
W

The HDWM network analysis yielded manure system time and material
needs and costs. The variable costs included labor ($6.5 / hr), energy (S.08/kw.h),
repairs, maintenance, and tractor expenses (320/ hp / hr). Tractor expenses
included fuel, repairs, maintenance, and other operating costs. Fixed costs
included the capital recovery charge and nutrient savings in a negative cost
format. Total variable and fixed costs were added to obtain total annual cost
figures. It was assumed that farmers would purchase all needed equipment rather
than rent, lease, or contract out custom operators. Sample results for a 120 cow
herd with a medium debt/ asset ratio, daily manure haul, and cold free stall
housing is shown in Table 7.1.
73.1 W

Estimates of storage system investment costs for six volume levels and six
different types of facilities, which were used in this framework, were developed by
Garsow (SCS-WI, 1990) given excavation, concrete, earth moving, etc., cost
assumptions. A complete matrix of storage cost estimates is presented in
Appendix Table B9. A standard earthen basin system was assumed as the system
of choice for long-term liquid manure storage, while a stacker and concrete slab
with walls on three sides was used for the solid manure storage system for 50

percent of the 60 cow tie-stall operations. Initial capital outlays for these

57
Table 7.1 Sample HDWM Program Output Sheet

YOUR SELECTED PATH IS AS FOLIDW

mom no
Avmoaoowsrza 6351.

smacnaomnm ColdPreeStallBan: When
mommmm 0.1m

mom or? anomo MATERIAL (rum/yr): as

NETWORK acnvmas mu Labor any Annual
00‘ (In/yr) (Ru/7r) Cast

1. RESTRIC. BED & STALL A‘I'IN. 3 no 247. 0. 3875.12

2. TRACTOR SCRAPE TO POINT 3 SM.” 293. 44”. 3229.”
3. 140. 220.07

3. BUCKWALL/LOAD 4oo.oo
4. mm! sour) more mono 235. 3531. 3672.39
5. VALUE or W .oo 0. 0. «4963.10

MAL 8479.82 780. ML 3033.68

CU S'T'OM OPERATION FOR LAND APPLICATION

EQLJII’MEN'I‘

1. BOX SPREADER FOR SOLID PORTION

2. IRRIGATION SYSTEM FOR LIQUID PORTION

3- VACUUM TANKER FOR LIQUID PORTION

4. VACUUM TANKER WITH TNJECI‘ORS FOR LIQUID PORTION

MALCXET 1+2 I 9961. OR 1+3 I 11394. OR 1+4 I 11270.

2

fisaé

 

 

.M
m

.\
\

 

1‘1

 

 

 

 

 

 

.. _\F

150 \

«1'11 110' 1'5 250 rs
# of Cows

 

 

 

 

II
8
a1
8
ad

 

 

[at Stores- (csm) 'I- Stores— (ol) I

 

 

Figure 7.1 Storage Investment Costs Per Cow by Size Herd,
Housing Type, and Manure System Type (S = Solid Manure, L =
Liquid)

58

storage systems, including transfer device, are presented in Figure 7.1. As
expected, storage systems exhibit scale economies. Thus, investment costs decline
as the herd and storage system size is increased.
7.3.2 W

The calculated labor requirements for the manure systems, which were
analyzed, are summarized in Figure 7.2. Farms with tie stall barns (TS) need less
labor because the barn cleaner equipment replaces the tractor scrape method
used for free stall barns (FS). It is important to note that labor requirements
decrease when one moves from a daily haul system to long-term storage for cows

only or to long-term storage for all animals on the farm. However, labor

 

Hours per cow
‘

 

so rss so 11 so 11 120 rsr 250 r51.
# of Cows

 

|-ooinHwI mange (cowomsromae (on) |

 

 

 

 

Figure 7.2 Labor Requirements for Dairy Manure System by Herd Size and
Housing Arrangement (L = Liquid Storage, S = Solid)

59

requirements are entirely dispersed throughout the year using a daily haul system,
while long-term storage bunches labor needs to the spring and fall when manure
can best be hauled onto and incorporated into fields. In addition, labor efficiency
increases as herd size increases. Therefore, fewer labor hours per cow are needed
for the manure system as herd size is increased.
7.33 W

The decline in fertilizer (nutrient saving increase), labor, and bedding
expenses (if one switches from solid to liquid handling) as a farm changes from a
daily haul system to a long-term storage system is offset by an increase in energy,
repairs, maintenance, and capital recovery expenses. The following charts

(Figures 7.3a to 73¢) clearly display these conclusions.

 

Wrmuy slum 657)

  
              
     

113&9s§

00000000000000000

'10,. ‘0 O 000000
63(6130 ooooo
oooooooooooooooo
3133933709993

0000000,” 01
..,,‘,\.~,\.’.a..;.~.11usooososr1st11
000663Tۤ403

. ,........ munuuoururu
' . . \. \'91..~.!.\..a.0..l’
, . . .ao sloooolalourr
o s s e o’fo‘srofloxo‘ '
1.0.0'.'..o‘o,9.0,..°,-,0"rouse-nonsu-
0

”of“, {(1,331onus-Insurer
ogeg..ose
. ”"|IIIIIIIIIIIIIIII
"31"." 9.3.3,

”I, v.,a.nonnlsooonrrl
I. 'I'\ a
'2..°.°..°...'.4’...usuuusono11v
"In?! sssssssssss noun
8.

011!
was costs ($2. 827)

  

 

 

.
..............
........

 

 

 

Figure 7.3a Manure System Cost Breakdown-Daily Haul
(120 Cows, 11.1% R)

 

[Mtg «:51 (3|, 622)

   

Ldior cost ($4, 715)

Copild recovery
duge ($11, 030)

 

Energy cost ($1, 250)

 

 

 

Figure 7.3b Manure System Cost BreakdownnIong-term
Storage; Cows Only (120 Cows, 11.1% R)

 

Cupildncowy

dwgo($lo,472) E E i i ?

  
 

 

 

 

 

Figure 7.3c Manure System Cost Breakdown--Long-term
Storage; All Animals (120 Cows, 11.1% R)

61
W

Taking into account these expense categories, the total annual costs
calculations performed in this study yielded some dramatic results (Figure 7.4).

The total annual costs (TAC) per cow for the various manure systems declines

 

240

 

220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

T f
so 155 so 151 earn. 120 r51 250 rsr
# of Cows

 

-A- Daily had + Storage (cows) -+- Storage (11)

 

 

 

 

 

 

Figure 7.4 Manure System Annual Cost Per Cow by Handling Practice, Herd
Size, and Housing Arrangement (Medium Debt / Asset Ratio)

sharply as herd size is increased. For example, the TAC per cow was cut in half
as farm size was increased from 60 to 250 cows. The TAC for long-term storage
(cow) systems was greater than the TAC for long-term storage (all) due to several

factors. First, the capital recovery charge for storage (cow) included a box

62

manure. The additional spreader activity also increased repairs, maintenance,
tractor, and energy expenses. Though the liquid storage system (a standard
earthen basin) for the representative farms was found to be the most inexpensive
alternative, annual costs for a storage system for eight months manure were still
found to be twice that of a daily haul type system. For example, assuming an 11.1
percent interest rate, a 60 cow (free-stall) operation had TAC of $5,183 for daily
haul vs. $9,759 for storage (all). Three immrtant rational conclusions can be
drawn from this information: (1) farmers should consider renting, leasing, or
custom operation instead of buying equipment outright, (2) constraints such as a
high water table, lack of proximity to compactible clay, or proximity of bedrock
that restrict the type of storage facility, which can be built, will further increase
annual costs, and (3) alternatives such as composting and large tanker hauling,
which are currently under investigation at Michigan State University, should be
considered.

II . S .

Nutrient savings is another area of significant interest because of the
continued benefits manure has for cropland and potential concerns over soil,
water, and air pollution. Although manure offers many benefits for the soil such
as increasing water holding capacity, only the first-year values of nitrogen,
phosphorous, and potassium were considered in this study. The value of a pound
of N, P205, and K20 in manure was set at 3.18, 3.25, and 3.12. Liquid manure

was expected to be incorporated with 24 hours of application.

63

 

 

 

 

 

 

 

.. [a W

6,: f/

 

 

 

 

 

 

0 —‘ t t t
80 rss '0 IS. 80 1'1 120 '9. 250 PS.
# of Cows

 

+ Doly W + Storage (cows) -0— Storage (d) + + hjecllon

 

 

 

 

 

 

Figure 7.5 Marginal Cost Savings From Improved Nutrient Retention,
Changing From a Daily Haul Manure System to Various Other Systems by
Herd Size and Handling Practice

The term savings must be used carefully when describing a marginal cost
reduction from more efficient use of manure nutrients. While it is true that
excess nitrogen and other nutrients are produced in the milk production/ cropping
system (Table 6.2), a large portion of these nutrients, predominantly nitrogen, is
presently lost from the system to the air and water environment. Dairy farmers
who are able to reduce these nutrient losses can achieve a marginal cost savings
(commercial fertilizer purchase reduction). The base manure handling system, to
which all other systems are compared, is the daily haul system. For this reason, a
daily haul manure handling system has zero marginal nutrient savings. For

example, a representative 120 cow farm that handles manure by daily haul retains

64

about $5000 worth of nutrients over a 240 day storage period (nutrients used in
crop production in the first year). By changing to a long-term liquid storage
system (cows only), the same farm would retain about $6,200 worth of nutrients
($1,200 marginal cost savings). likewise, changing to a long-term storage system
for all animals would yield an additional $600 nutrient savings, and adding
injection would not the farmer a further savings of about $750. The nutrient
savings are summarized in Figure 7.5.

Thus, the HDWM system was found to be a flexible tool for examining
manure system scenarios. Appendix Tables B1-B8 summarize the manure system
cost outputs for the HDWM system. With few exceptions and some modification,
the results from the HDWM network system were used as data for the next two

sections of this study, the full budget and sensitivity analysis.

CHAPTER VIII
FULL BUDGET ANALYSIS OF THE IMPACTS
OF ANIMAL MANURE MANAGEMENT REGULATIONS

In order to assess the impacts of possible manure regulations on the total
farm operation, this study employed a whole farm budget analysis. The computer
program for long range budgeting, FINLRB (1987), developed by the University
of Minnesota, was the system used to analyze the changes to farm financial well-
being from various alternatives.

ModaLEormrflation

Initial financial conditions and technological sets (base farms) were
developed in a balance sheet format based on the herd size (60, 120, 250 cows),
housing arrangement (tie-stall, cold free-stall), manure handling system (daily
haul, long-term storage for cows, long-term storage for all cows and heifers), and
debt / asset ratio (low-0: 100, medium-20: 100, and high-75:100). A sample
representative farm balance sheet is provided in Appendix Table C11. Table 8.1
shows the capital investment in fixed technology on the base farms. Both tie—stall
(solid or liquid storage) and cold free-stall (liquid storage) housing options were
modeled for the 60 cow herd, while the only arrangement modeled for 120 and

250 herds was the cold free-stall (liquid storage) scenario.

65

66

Table 8.2 Investment in Fixed Technology on Representative Dairy Farms by
Farm Size, Housing Type, and Manure Handling System

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Description Daily Haul L-term Storage (cow) L-term Storage (all)
60 Cows (tie stall barn) 195,889 195,889 195,889
Field equipment 79,595 79,595 79,595
Milking and feeding 113,350 113,350 113,350
Manure collection 7,936 7,936 7,936
Man. transfer & storage 0 19,3“) 20,700
Man. agitate & applicate 50!) 22,711) 17,7“)
_ Totals: 401,770 68,770 435,170
60 Cows (free stall barn) 155,075 155,075 155,075
! Field equipment 79,595 79,595 79,595
Milking and feeding 99,550 99,550 99,550
Manure collection 980 980 500
Man. transfer & storage 0 19,3“) 20,700
i Man. agitate 8'. applicate 5,011) 22,7“) 17,700
, Totals: 340,200 377,200 373
120 Cows (free stall barn) 267,124 267,124 267,124
Field equipment 118,03) 118,02) 118,0m
Milking and feeding 113,868 113,868 113,868
Manure collection 980 980 500
Man. transfer & storage 0 25,300 27,7“)
Man. agitate & applicate 7,500 30,500 25,500
Totals: 507,492 555,792 552,712
250 Cows (free stall barn) 531,81!) 531,81!) 531,81!)
Field equipment 257,71!) 757,71!) 757,71!)
Milking and feeding 147,300 147,31!) 147,300
Manure collection 14,980 14,980 14,500
Man. transfer & storage 0 33,5“) 37,300
Man. agitate & applicate 7,5“) 30,5“) 25,51!)
Totals: 959,280 1,015,780 1,014,100

 

 

 

67

Note: The storage systems outlined above are all standard earthen basins

for liquid manure, and the transfer system consists of a piston pump or

gravity feed system. The technology set for the 60 cow farm with long-term
solid storage (stacker and concrete slab with walls) is not shown; adding
$9,486 to long-term storage (cow) and $ 15,983 to long-term storage (all)
will create this scenario.

As a result, a total of 45 different farm budget models were assembled as the

foundation with which to consider various impacts.

II I l' E .

Many assumptions needed to be made to simplify this process. A summary
of major assumptions (model variables) can be viewed in the Appendix of this
document. The sensitivity of the models to these assumptions is presented in
Chapter IX to figure out the consequences of possible errors. Procedural
assumptions are also important. The financing of new investments was assumed
to be achieved solely with borrowed capital. To assess a worst-case scenario, dairy
farmers are assumed to purchase any required new storage facilities, machinery,
and equipment. In addition, the ratios for current, intermediate, and long-term
debts to assets were assumed to be identical. For example, if the total debt/ asset
ratio was twenty percent, then the ratio of intermediate liabilities to assets was
presumed to be twenty percent as well. Intermediate loans (equipment and
machinery) calculations were based on a ten year horizon, and long-term loans
(buildings and storage system) were amortized over 30 years.
WW

Three categories of potential regulations receive primary attention in this

study: (1) the prohibition of spreading manure on frozen ground, (2) mandatory

68

control of lot runoff, and (3) mandatory injection of livestock manure. The first
two regulatory options are grouped into alternative one in the FINLRB analysis,
long-term storage of all manure. A 240 day storage period is used for this
purpose. Though six months storage capacity may be adequate to meet the first
regulatory class, engineers generally design storage facilities with W
W future herd expansion, etc. Also,
the initial and annual marginal costs of a slightly larger system are minimal,
especially for a standard earthen basin type, when compared to the environmental
cost of an overflow or future expansion of a present system. Alternative two in
the FINLRB procedure addresses the financial impact to the dairy farm operation
of the injection activity.
W

Profitability of the farm models was assessed in terms of profit or (loss)
before taxes, i.e., revenue from milk and livestock sales minus cash operating
expenses and plus a fixed depreciation charge. Cash surplus or (deficit) was
defined as cash available after principal payments on debts, family living, and
federal income taxes, and ignoring depreciation expenses and equity-based capital
replacement expenditures.

In order to establish a control group for this ”experiment,” the profitability
of the base farms (base plans in FINLRB procedure) was recorded. The profit or
(loss) and break-even milk price by size operation, debt/ asset ratio, and manure

system type is presented in Appendix Tables C5-C6. Figure 8. 1 is a graphical

69

 

 

‘
Oi

 

J

/
/

 

 

 

Milk Price
a;

 

1.
I

 

 

 

 

W
I

soiss sorsr eo'rs 120FS zsors
Size and Type

 

+Low D/A +1191: D/A +H¢1 D/A

 

 

 

 

 

 

Figure 8.1 Profit Break-even Milk Price on Base Representative
Farms using Daily Haul by Herd Size and Type of Housing

Arrangement

representation of farms with a daily haul manure handling system, which a
majority of Michigan dairy farms presently use. The profit break-even milk price
increases substantially as debt level is raised. Each dollar per cwt of milk
contributes $10,900 for a 60 cow herd, $21,900 for a 120 cow herd, and $45,600
for a 250 cow herd.

The cash flow break-even milk price shows a similar picture as seen in
Figure 8.2. One should notice, however, that although the break-even milk price
is practically equal on a profit or cash flow basis for medium debt levels, for low
or high debt levels, the break-even milk price is significantly different in Figures

8.1 and 8.2. Low debt levels allow farmers to balance their cash inflows and

70

 

 

d
m

i
l

/
/

 

 

 

 

‘
p

 

Milk Price
a:

d
N

 

 

 

 

 

 

 

 

 

10 \ar
9 '—I I; H: N
8 I I T I I
60TSS 60TSl 60FS 120FS 250FS
Size 1nd Type

 

-I— Low D/A +ued D/A “*Hidl D/A

 

 

 

 

 

 

Figure 8.2 Cash Flow Break-even Milk Price on Representative

Dairy Farms Using Daily Haul by Herd Size and Housing Type
outflows at a lower milk price than is needed to break-even on a profit basis. For
example, the representative 60 cow farms (tie stall) could break-even on a cash
flow basis with a $9 per hundredweight milk price, yet to break-even on a profit
basis, $10 per hundredweight of milk is required. High debt levels create an even
larger disparity between the cash flow and profit break-even. The cash flow
break-even milk price exceeds the profit break-even milk price by almost $2 for
each scenario. The profitability of the base farms with long-term storage for cows
or long-term storage for all were only slightly less profitable in most cases under

the same debt constraints. This proves the relative importance of debt level

71

versus total investment in manure system assets in determining profitability of
dairy farms.
I [B . . E. l I ‘ l S

The prohibition of winter hauling of manure and lot runoff to reduce
surface water contamination would force many farmers to make capital
investments in storage and handling equipment, to alter their labor requirements,
and to incur other operating cost changes. The increase in capital requirements,
change in labor hours, and difference in annual costs on Michigan dairy farms for
the 45 base models are summarized in Appendix Tables E2-E4. The change in

profitability for the prevalent daily haul system is presented in Figure 8.3. When

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

15

I4
.3. 13
i.
4
.5 12 Tg -

9 I 1 r F I
50135 BOISL SOFS IZOFS 25013
Size Cid Type
l-I'Low D/A +11u1 0/1 +1191: D/A |

 

 

Figure 8.3 Profit Break-even Milk Price on Representative Farms
Using Daily Haul, Impact of Requiring Eight Months Storage of All
Manure, by Herd Size and Housing Type

72

one contrasts these results with the base system results in Figure 8.1, one can
draw some important conclusions. Although every size farm is less profitable
(higher break-even milk price), as shown in Appendix Tables C5-C8, when long-
term storage is required, smaller herds and herds with higher debt/ asset ratios are
disparately impacted. For example, 60 cow (free-stall, medium d/ a) herds would
need an additional 60 cents per cwt to break-even after investing in a complete
earthen basin system, while 250 cow herds in the same financial and initial system
situation would only need an additional 19 cents per cwt. Additionally, 120 cow
herds with an initially low debt/ asset ratio (0:100) would need a milk price 39
cents higher to obtain the same profit margin (as before possible storage
regulation), while 120 cow herds with a high debt/ asset ratio (75:100) would need
a price 48 cents higher. Therefore, the worst position for a dairy farmer to be in,
assuming the same storage and runoff restrictions for all farms, is to be a small
farmer with a high debt/ asset ratio.

I [I I I 5 l I . .

Forcing dairy farmers to inject all their manure into the soil has been
suggested and used in some town ordinances as a means to reduce unpleasant
odors that emanate from the dispersion of manure [Simlilitya Try using ‘by‘.]by
other means (especially with the agitation and irrigation of liquid manure). This
type of regulatory action can be expected to require farmers to purchase injector
equipment or contract out custom hauling.

This study assumes farmers will choose to inject the liquid manure with

their own equipment. In the solid manure storage systems, no system changes

73

 

 

 

 

 

 

 

 

 

 

 

 

 

15

15

14
3 15
11:
g

9 I I I I I
50TSS 50131. 5013 1 ZOFS 25013
Size 1nd Type
+Low D/A +11“ D/A + 11911 D/A

 

 

 

 

 

 

Figure 8.4 Profit Break-even Milk Price on Representative Farms

Using Daily Haul by Herd Size and Housing Type--Impact of

Changing to Long-term Storage and Injection of All Manure
were exacted as farmers were expected to incorporate the manure as part of the
tillage program. The impact of this decision is increase in capital requirements,
labor hours, and annual costs (including the decrease due to nutrient savings).
Appendix Tables E2-E4 present the complete results of this analysis. The impact
on the modeled farms was small when compared to the consequences of requiring
long-term storage. The profitability results in Figure 8.4 closely resemble the
information presented in Figure 8.3. The increase in break-even price from
adding injection into a liquid storage system varies from six cents per cwt for a 60

cow herd with a high debt/ asset ratio to less than one cent per cwt for a 250 cow

herd with a low debt/ asset ratio.

74

The labor hours, repairs, maintenance, and tractor expenses required on
the dairy farm to inject the manure are important factors when one considers the
”make" or "buy” decision. The total cost and timing of injection activity must be
considered. Injection for a 60, 120, and 250 cow herd takes approximately an
additional 33, 65, and 101 hours when compared to a spread and cover option
(using a spreader tanker and incorporating with a disk within 24 hours).
Irrigation takes even less time and costs less for large farms (See Chapter IX).

D l I! B . C .1 .

Assumrng' all investments are financed through additional debt, requiring
long-term storage and possibly injection of all manure would increase the percent
intermediate (equipment and machinery) and long-term (storage facility) debt. As
a solvency measure, the increase in total percent debt for the modeled farms is
displayed in Appendix Table C9. The percentage increase in debt for a 120 cow
herd is shown in Table 8.3.

Table 8.3 Increase in Debt Percentage for a Representative 120 Cow Herd
Due to Two Possible Regulations

 

 

Size Manure System Medium (20%) High (75%)
(Initial) Store Inject Store Inject Store Inject
* _
120 Solid-daily 5.5 5.7 4.4 4.6 1.4 1.4 I
FS Liquid-cow 0.4 ' 05 0.3 0.5 0.1 0.2
Liquid-all 0.3 0.2 0.1
fl — — _

 

 

 

 

 

 

 

 

Thus, a 120 cow herd with no initial debt and a daily haul system would

experience an increase from zero to 5 .5 percent debt if eight months storage

75
capacity was required, and a 120 cow herd with 20 percent debt and a daily haul

system would have its debt elevated to 24.4 percent.

 

In summary, it is not surprising to discover that even with rising
commercial fertilizer costs effectively making manure nutrients more valuable and
labor costs rising dramatically, manure handling and application systems that
require less labor continue to yield a net negative financial return to the farm; the
cost of handling and applying manure produced by the dairy cows and
replacements is more than the return from nutrients used by crops. Proposed
policies that require dairy farmers to make additional investments in manure
system will damage farmers’ competitive capacity. For instance, farms with free-
stall barns, who presently haul their manure daily, can expect a negative return to
earthen basin system investment of between 2.9 and 6.6 percent depending upon
size of operation (Appendix Table C10). If more expensive storage facilities must
be built due to environmental restrictions, these returns would be much worse
(Chapter IX). Likewise, injection activity investment returns a negative 12 to 13
percent to added investment. Thus, mandatory long-term storage, control of
barnyard mnoff, and injection regulations will adversely affect individual farm
financial well-being.

CHAPTER IX

SENSITIVITY ANALYSIS OF MAJOR MODEL ASSUMPTIONS

The enormous number of variables used in this study requires an analysis
of how sensitive major assumptions are to possible fluctuations. Four different
groups of variables were tested, including general full budget expenses, manure
storage system investment costs, crop yield assumptions, and hauling system
annual costs.

The sensitivity of the general full budget expenses was achieved by
improving a single variable by ten percent in the long range budgeting models,
while holding all other variables constant, and taking note of the difference in
profit or (loss) of the base and impacted farms. Improvement of expenses
indicates a reduction in costs. The 60 and 120 cow free stall herds (medium
debt/ asset ratio) were chosen because these sizes represented a large number of
Michigan herds and the 20 percent debt/ asset ratio closely resembles the average
asset structure in the industry. The impact of farm investment in alternative
storage systems was by changing the initial costs and annual costs (repairs,
maintenance, depreciation, interest, etc.). No adjustment was made in this section

for differences in nutrient retention. Sensitivity of yield assumptions consisted of

76

77
analyzing two additional sets of yield assumptions for the 120 cow herd. Using

the Michigan Crop and Livestock Budgets (Nott et al., 1990) and the Fertilizer
Recommendations (Ext. Bull. #E—550, 1985), the relevant crop variables were
changed. The choice between spreader tankers and irrigation systems was
analyzed separately to show why some farms, large ones in particular, often use
irrigation type systems. This technological decision was explored using the
HDWM network analysis program.

Table 9.1 and Table 9.2 rank selected variables in order from most to
least sensitive. A ten percent improvement in a revenue-related variable such as
price per cwt. of milk sold should be considered an increase in the magnitude of
that variable, holding all other variables constant. A ten percent improvement in
an expense-related variable such as fertilizer cost should be viewed as a decrease

in the cash expenditure for that component.

78

Table 9.1 Sensitivity of Variables to 10 Percent Improvements
(60 Cows, Free Stall, Medium Debt/ Asset Ratio)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Profit or (Loss)

I Variable Improved Daily Haul Storage (all)T Store+ Inject

Fries per cwt. of milk sold 10,994 10,944 10,944

I Depreciation 2,627 2,955 2,980

I Hourly wage paid to workers 1,754 1,688 1,710

1 Interest paid, all loans 1,167 1,584 1,612
Initial percent in debt 1,167 1,167 1,167
Repairs-buildings and equip 741 835 843
Intermediate interest rate 640 942 970
bterm interest rate 486 604 604
Fertilizer cost 434 345 308
Farm tam 425 443 443

I Utilities 417 418 431

I Manure system labor cost 289 223 245 I
Manure nutrient savings 248 308 337 I
Bedding cost 114 65 65 I

F Short-term interest rate 51 51 51 I
Investment in manure pumps 0 167 167J
Inv-standard earthen basin 0 115 115 I
luv-spreader &/or tanker 0 113 113
luv-injection equipment 0 0 28 I

 

 

 

 

79

Table 9.2 Sensitivity of Variables to 10 Percent Improvements

(120 Cows, Free Stall, Medium Debt/Asset Ratio)

 

 

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Profit or (Loss)

Variable Improved Daily Haul Storage (all) Store +Inject
Price per cwt. of milk sold 22,107 22,107

Hired labor 4,883 4,798

Depreciation 3,739 4,180

Hourly wage paid to workers 2,183 2,098

Interest paid, all loans 1,977 2,553

Initial percent in debt 1,978 1,978

Repairs-buildings and equip 1,505 1,722

Intermediate interest rate 992 1,380 1,409
Fertilizer cost 938 759 685
L-term interest rate 900 1,092 1,093
Utilities 816 840 866
Farm taxes 800 830 830
Manure system labor cost 507 421 463
Manure nutrient savings 496 615 675
Bedding cost 227 130 130
Short-term interest rate 105 105 105
Investment in manure pumps 0 200 200
luv-standard earthen basin 0 187 187
Inv-spreader &/or tanker 0 167 167 I
lav-injection equipment 0 0 28 I

Using these tables, one can clearly observe the importance of variables

under a particular manure handling alternative and the change in importance of

some variables if storage for all animals or storage and injection regulations were

enacted. For instance, repairs, depreciation, interest paid, utilities etc. become

80

more significant, while fertilizer, bedding, and manure system labor costs become
less significant as investment in storage and handling equipment increases.
MW

There is a high probability that many dairy farmers who currently employ a
daily haul system would be unable to construct a standard earthen basin system, if
long-term storage was required, due to various environmental constraints. If this
statement is true, many farmers would need to invest in more expensive storage
facilities. It is expected that farmers would successively choose the minimum

investment necessary according to their particular situation. Appendix Table D1

 

 

 

 

 

 

o -
-1 000 ‘
-2000+ .
g -3000 - N
x; ,
2 —4000 - \
§ .5000. §
L. ‘x
a -6000« §
\
4000 a ‘\\
-8000 ‘
-9000 1 I
Clay Plt Concrete Flt Concrete Tait
Storage System

 

Elm -Mm-Hid1

 

 

 

 

 

Figure 9.1 Profit-Loss From Alternative Storage Systems on Representative
60 Cow Herds by Debt/Asset Ratios

81

presents the profit and cash flow results for different types of structures including
a pit with a three foot clay liner, a pit with a concrete liner, and an above-ground
concrete tank. Figures 9.1 and 9.2 demonstrate the impact in terms of
profitability on representative 60 and 120 cow free stall herds under these
circumstances.

Profitability decreases rapidly for the 60 cow herd as the cost of the storage
system increases or the initial debt load of the farm is raised. The break-even
milk price for the base farms with low debt varied from $10.02 per cwt with a
standard earthen pit to $10.55 per cwt with an above ground concrete tank. The
break-even price on base farms with 70 percent debt ranged from a low of $15 to
a high of $15.75.

A similar story can be told about the 120 cow herds with some differences
(Figure 9.2). The apparent similarity of the two pictures is deceiving. The 120
cow farms with a low debt to asset ratio kept a positive profit margin when larger
investments were assumed. Additionally, the 120 cow herds with medium and
high debt ratios had larger losses than the 60 cow herds when the storage cost
increased. Lastly, a transfer device that was not analyzed as an alternative, yet
may receive a much attention in the future, is the gravity flow system. If an
appropriate grade can be established between the barn and the pit, this type of
system entails funneling the manure into a pipe to the storage facility. Initial
costs are similar to a piston pump system, but repairs, maintenance, and utility

bills can be reduced tremendously (Garsow, 1990).

 

o - \, \ \
§ \
\ b t
4000- >5 \
....... \_\\\
\\
-2ooo~ « *\
-3000- 3.30::

‘.‘ e ~ .

. 4.r \

. \.I

'. I \ :
'l o. _., . ,

» e, ‘o,

e

    
   
 
   
    

.
p\I\v\;\t\I\F\III\/~1\l\l \ /~\

0, \ No one one ‘0“ on. ,9. 0,, ,0 o ’o“. .9. .

O... O... QOOO'OO

0.x I.\ l.‘ o.\.’.\ I.‘ 4“ I.‘ ’.\I \_4.\ 1“ a.\ 4“ 1“ t.\ 1.. \ I.\ l.‘ 1“ 1.\ .

-5000 n

,Is,

e‘ ’0

Profit Decrease

ee,e
v9.0.0

. r \ I \ u ‘ z x t \ \ I \ \ I ~
.,9.. .9. 3. t. .
‘I&-¢.\.I \.I.\_I \ \ l \ a.\ I \ I. I e I \ o

 

 

 

4000-
wow \
—aooo- §
.9000. l\\\\\
-10000 T I
Clay Flt Comrete Flt Concrete Tori
Storage Syrian

 

“Low -W-W

 

 

 

 

 

Figure 9.2 Profit-Loss from Alternative Storage Systems on 120 Cow Herds
with Various Debt/Asset Ratios

El . C If I l E .

Crop yields also can significantly alter the profitability of dairy farms. The
summer drought that occurred in the Midwest a few years ago is testament to this
statement. The soil on the base farms was assumed to be loam in this study.
Two different soil types and their crop yield potential were analyzed. The impact
of altering the base yield assumptions presented in Table 9.4 for one herd size (all

crop yields adjusted simultaneously).

83
Table 9.3 Crop Yield Per Acre Assumptions-Three Soil Types

Crop Loam (base) Clay Loamy Sand
Corn grain 130.0 108.0 90.0
Corn silage 20.0 17.5 15.0
Alfalfa silage 10.0 8.8 7.8
Alfalfa hay 5.0 4.4 3.9
New seeding 2.2 2.0 2.0

Source: Fertilizer Recommendations. Ext. Bull. #E—SSO, 1985.

Table 9.4 Profitability by Yield (120 Cow Farm, Medium Debt / Asset Ratio)

Financial Variable Loam (base) Clay Loamy Sand

— 22222 22222

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Select Expenses 3, 623 4 054
I Fertilizer 9,379 9,858 9,729 1
Chemicals 3,695 4,275 4,942 ;
Custom hire 1,199 1,450 1,733 .
Fuel & oil 3,762 4,144 4,509 :
Repairs 15,045 16,034 16,389
Hired labor 48,833 50,560 52,465
Farm taxes 8,005 8,565 9,198
Insurance 2,535 2,632 2,743
Interest 19,773 20,273 20,839
Misc. 1,656 1,726 1,805 ,
Total Expenses 215,070 221,064 226,312
I Depreciation 37,393 37,393 37,393 I
Profit or (loss) (4,460) (10,454) (15,703) 2

 

 

 

 

84
Every variable crop expense increased as yields were reduced. To meet all the
dairy farm roughage and grain needs without outside purchase, it was expected
that additional acres would need to be cropped if the land was less productive.
Wm
Irrigation systems are sometimes used on larger farms to reduce costs of
handling manure and to utilize the efficiency of these type systems for hauling
longer distances. In this study, a pump / spreader tanker system was assumed for
all with liquid manure. Appendix Table D2 shows the impact of using a irrigation
system instead of the tanker system for 120 and 250 cow herds. Total annual
costs for the irrigation system for the 120 and 250 cow farms were calculated to
be $8,372 and $12,814 compared with $10,119 and $15,263 for a tanker system.
Farmers should also consider alternative manure transport and application
systems, which are currently being studied by Person and Crane (1990). Various
systems and approximate specifications for a 120 cow herd, including replacements
(adapted from Person and Crane, 1991), include:
1. Conventional spreader tanker with injection
a. Distance: 0.25 miles
b. Transport: 1-100 hp tractor with 3000 gallon vacuum wagon
c. Application: 4 point injection system
(1. Annual time requirement: 165 hours
2. Conventional system with extended travel
a. Distance: 3.0 miles
b. Transport: 1- 100 hp tractor with 3000 gallon vacuum wagon
c. Application: 4 point injection system

d. Annual time requirement: 330 hours
3. Nurse tank transport system

85

a. Distance: 3.0 miles
b. Transport: 2-6000 gallon nurse tanks with cabs

c. Application: 1-3000 gallon vacuum wagon and 100 hp tractor
d. Annual time requirement: 95 hours

4. Large volume tank haul and field apply

a. Distance: 3.0 miles

b. Transport: 2-5500 gallon tank trucks
c. Application: surface apply

(1. Annual time requirement: 100 hours

5. Long distance pumping with field injection
a. Distance: 3.0 miles
b. Transport: 165 bhp pump @ 500 gpm, 8" pipe, 660’ of 4.5" hose

c. plication: 1-140 hp tractor with 5 point injection system
(1. Annual time requirement: 36 hours + set up time

6. Long distance pumping with traveling big-gun application

a. Distance: 3.0 miles
b. Transport: 1-60 bhp pump @ 500 gpm, 8" pipe, 660’ of 4.5" hose

c. Application: 1500 gpm traveling big-gun with diesel cable drive

d. Annual time requirement: 36 hours + set up time
Estimated energy costs (gallons diesel fuel per year) for a 120 cow herd with 1.1
million gallons of manure per year for these systems are presented in Table 9.5.

Table 9.5 Energy Requirements by Operation for Conventional and
Demonstration Manure Transport-Application Systems (120 Cow Herd)

 

Operation

 

 

Agitation and Transport 845. 1678. 804. 1016. 621. 603.
Field application 563. 2093. 379. 300. 246. 24.|

 

     

 

Total energy required 1408. 3771. 1183. 1316. 867. 627.
Labor required (hrs)

 

 

 

 

 

 

 

86

These alternative systems appear to greatly reduce energy costs for transport and
application of manure. However, further research needs to be done to determine
the overall economic feasibility of these systems.

Custom manure irrigation and haulers should also be considered.
Advantages of custom hauling include: (1) reduced labor needs in busy times of
the year, (2) zero investment in tankers or irrigation, and (3) reduction in other
operating costs (repairs, maintenance, energy, etc.). The main disadvantages of
custom hauling are the reduction in control over the desired application time, the
limited number of custom applicators, and the variation in custom rates. Dairy
farmers should compare the custom application rates in their area to the total

annual cost of owning, maintaining, and operating their own equipment.

CHAPTER X
AGGREGATE FINANCIAL IMPACTS OF MANURE MANAGEMENT
REGULATIONS ON THE MICHIGAN DAIRY INDUSTRY

The aggregate impacts on the Michigan dairy industry of different
regulatory actions has been an area of great concern for many parties. The
Michigan dairy industry has been shown in the Animal Industry Initiative of
Michigan State University to be a valuable contributor to the Michigan economy.
Any regulations that compel farmers to adopt alternative, more costly production
practices will put them at a competitive disadvantage with farmers who do not
have the same restrictions to follow, and ultimately may force them into
bankruptcy. For example, Michigan environmental policies may raise production
costs in this state, yet if similar laws are not established in Wisconsin, Wisconsin
farmers could produce milk at a lower cost.

2 l l I . . .

Policy analysts should exercise considerable restraint when using the results
presented in this chapter for several reasons. Aggregation from microeconomic
budget models is not an exact science. Careful attention must be given to the

assumptions employed in this study for possible fluctuations in the future.

87

88

As Bonnen (1989) argues,

”One cannot accept one-shot static or comparative static analysis as

if it were adequate for policy analysis. When working to support

policy makers, you are likely to have to redo analysis with different

assumptions and variables several times before a policy decision is

final.”
Furthermore, the Michigan dairy survey may not accurately represent each of the
45 categories of farms modeled, especially in some cases where few or no farms
were tabulated. In addition, the cross tabulation by housing, size herd, and
manure handling practice generated a distribution that covered a majority of dairy
farms in the Michigan dairy survey, but not all (See Table 10.1).

Table 10. 1 Distribution of Michigan Dairy Farms by Herd Size and Housing
Arrangement

 

 

 

 

Homing < I) ”-44 45-59 60-89 90-119 120-149 150-209 210-269 > 269

Stanchlon/tle 6 136 27.8
stall barn

Stanchlon/tle, 6 34 7.0
om bean;

Free dell born 6 133 27.2
Free all. 8 10! m
om leading

Beaded pack 2 6 1.2
ban

nodded pack. 5 3 1 1 1 11 22
0M being

Dry lot. 3 5 1 3 1 1 14 2.9
outdo berth.

Other 2 2 2 6 1.2
Com 3 8 5 9 4 5 3 3 40 8.2
of Above

Total 78 ms 71 99 48 44 22 13 7 489 100

 

urce: my arm urvey, .

89
The following blocked groups were analyzed: 60 cow tie stall farms, 60 cow free

stall farms, 120 cow free stall farms, and 250 cow free stall farms (starting from
upper left to right).

Farms were grouped by debt/ asset ratio with low equal to zero debt,
medium equal to 20 percent debt, and high equal to 75 percent debt to more
accurately project annual costs. Finally, half the tie stall operations were assumed
to install solid-type, long-term storage facilities. With these limitations in mind,
the resulting distribution table from the MSU Dairy Farm Survey (Appendix
Table E1) was crossed with the impact tables in the full farm budget analysis and
multiplied by a factor of ten (the survey represents approximately ten percent of
the Michigan herds) using a spreadsheet to obtain estimates of particular group
impacts and total impacts on the Michigan dairy industry of requiring long-term
storage for all animals and injection of manure. In summary, aggregation was
completed by weighting the financial impact of the pollution abatement policies
on each representative farm by the number of farms in the MSU Dairy Farm
Survey represented by each particular farm.

5 . Q m
The aggregation results that follow are subject to the following qualifiers:

1. Figures are based on all firms mmplx'mainmnifonnsiandatds

(no adjustment for farm size)

2. Herd sizes below 30 cows are not included. The 60 cow, tie stall
system was assumed to represent all tie stall systems with 30-89
cows. The 120 cow, free stall system represented 90-149 cow
farms and the 250 cow, free stall system was assumed
representative of all operations with greater than 149 cows.

9O

3. Locational specifics that may allow daily haul to continue in some
areas are omitted.

4. Whole farm budget assumptions get magnified. For example, all
farms changing to a liquid system are expected to use a basic
earthen basin system.

5. Bedded pack barns can be regarded as a system for long-term
storage.

6. Farms are not expected to change their milk production
technology or herd size because of particular regulations.

mum

Four variables were deemed important enough to justify aggregation; labor
hours, nutrient savings, capital requirements, and annual costs. Approximately
two-thirds of the total industry capital requirements were found to be needed by
30-89 cow operations. Total industry capital requirements for these two
regulatory alternatives were found to be $105 million and 8 111.7 million (Figure
10.1).

Yearly nutrient savings would be expected to increase if mandatory storage
and injection were implemented industry-wide. Appendix Tables E6-E7
summarize these results of first year nutrient savings. Labor requirements would
show a decrease overall in the Michigan dairy industry under these circumstances.
Appendix Tables B4-E5 indicate the aggregate difference in yearly labor hours
from the proposed changes in mamrre storage and handling system. The industry
labor savings in dollar terms is significantly more difficult to assess because of the
inherent problems with valuing farm family contributions. Thus, many of the

labor hours that would be saved under these conditions, especially in the case of

91

 

 

 
  
 

 

 

 
 

vvvvvvv‘
82:42:44.
0009960

60- %
40-
20

  

 

 

 

 

Dollars Required
(Millions)

 

 

 

 

 

 

Storage (all)r Storage + Inject
Regulatory Option

 

.30-89 TS -30-89 FS ESQ-149 FS m>l49 FS

 

 

 

 

 

 

Figure 10.1 Estimated Michigan Dairy Industry Capital Needs to Comply
with Eight Month Storage and Injection Requirements

30-89 cow farms that represent most of the total industry labor reduction, may
add more to farm family leisure time than a reduction of hired labor expenses.
The procedure outlined by Nott et al. (1990) was used in this study to obtain an
estimate of hired labors’ contribution to annual costs.

The change in industry annual fixed and variable costs due to the possible
regulations was also calculated, including nutrient and hired labor savings. Figure
10.2 depicts these results. Under the assumptions employed in this study, the total
annual costs on Michigan dairy farms with storage (all) and storage plus injection
would increase $16.5 million and $18.1 million per year, respectively. Nearly 70

percent of these costs would be borne by farms with a herd size from 3089 cows.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dollars Required
(Mlllions)
8

 

 

 

 

 

 

 

Storage (at) 1 Storage + hject
Regulatory Option

 

-30-89 TS .30-89 FS @90-149 FS WNW FS

 

 

 

 

 

Figure 10.2 Estimated Increase in Michigan Dairy Industry Annual Costs to
Comply with Eight Months Storage and Injection Requirements by Herd Size

Many people may ask the following questions: do these results make
sense, and if they do, what are the aggregate implications? Although many
assumptions are employed in this aggregation procedure, the significant use of
microeconomic foundations and primary survey data validates these results as
informed ”guesses.” Also, many important variables were set at minimal levels.
For example, the cost of earthen basin systems were determined on the
assumption that a basic "hole in the ground" could be dug on each farm, and crop
yield assumptions for the base models were set at levels that some experts may

claim are too high. Therefore, the actual industry costs in terms of capital, labor,

etc., may be significantly higher.

93

Certain conditions could result in the actual impacts of compliance to be
much law. For instance, if the farms that properly use daily haul or another
system under the generally accepted agricultural practices for manure
management and utilization, in a farm environment conducive to this system,
could be deemed exempt from more restrictive "standards," then actual industry
impacts may be smaller. It is possible that many farms that are not contributing
to the pollution of the environment would not be required to invest in new
facilities or to change their management practices. A long compliance period
(period between enactment of regulations and the date on which all farmers must
be in compliance) and subsidies could also lessen the financial impact.

These aggregation results should be viewed as a starting point to assessing
financial impacts on the Michigan dairy industry of selected, mandated manure
management regulations. The sensitivity analysis section of this study could be
used to calculate aggregate figures under different assumptions. Yet, the general
implications of this aggregation exercise would likely remain the same: (1) capital
requirements for the industry will exceed $100 million; (2) fewer nutrients
(predominantly nitrogen) and accompanying gases would be lost to the
environment; (3) a small amount of labor hours (per farm per year) would be
saved; and (4) small farms could be asked to absorb a large percentage of the
total bill of pollution regulation and would have somewhat higher cost increases

than large farms.

CHAPTERXI

SUMMARY AND CONCLUSIONS

Controlling manure management activities on individual dairy farms to
minimize potential air and water pollution problems is an extremely complex task.
Each farm has a unique set of financial, environmental, and managerial
conditions. Important financial considerations include the level of debt, the price
of milk, labor costs, etc. Environmental factors encompass conventional areas
such as climate, labor availability, soil typography, technical assistance, and farm
concentration, as well as increasingly important domains including proximity to
non-farm homeowners and ”manure management-related” regulation by various
levels of government. The degree of managerial competence, adaptability, risk
aversion, and good fortune affects the choice and outcome of specific manure
management practices. For example, many farmers have their soil and manure

tested, yet some fail to use the results to their complete advantage.

95
B . EM . E .
Key assumptions in the following areas needed to be made to simplify the
analysis:

1. Milk technology and production levels

2. Crop yields

3. Housing arrangements and other fixed technology
4. Debt / asset ratios

5. Interest rates

6. Labor costs
7. Depreciation costs
8. Farms with less than three months storage capacity are expected
to need a complete manure storage system.
9. New investments are achieved with borrowed capital.
10. Outright purchase of new facilities, equipment, and machinery
1 1. Other operating income and expense levels
The implications of these complexities for attaining reasonable solutions to
the environmental conflicts between farmers, neighbors, and political entities are
tremendous. Each party must recognize the positions and constraints of the other
parties to arrive at a mutually beneficial resolution of these issues. Therefore,
those involved in solving the manure management problem in Michigan must
recognize the social, economic, and political impact of their actions as they search
for alternatives to protect the environment, consumers, and farmers. Allowing
common sense to prevail will assure that the Michigan dairy industry will continue
to grow and to provide key support for the economic prosperity and diversity of
the state.
W
This study provides estimates of incremental capital, labor, and annual cost

requirements for individual dairy operations under different financial conditions,

96
and evaluates these firms’ and the industry impact of applying selected manure

management controls. Total annual costs per cow for the manure handling and
storage system declines sharply as herd size is increased. Total annual costs for
60, 120, and 250 cow dairy farms with free stall barns and liquid storage for all
livestock is estimated to be $9759, 514309, and 319815, respectively. The basic
messages imparted by this study should call attention to the key issues that need
to be addressed.

First, under strict assumptions, the financial impacts on representative
farms of forced adoption of specific manure management technologies such as
long-term storage of all manure on the farm and injection of manure are
tremendous. For example, the profitability of 60, 120, and 250 cow herds with a
20 percent debt/ asset ratio that currently use daily haul would decline
approximately $7100, $9900, and $9200 per year, respectively, if they complied
with long-term storage plus injection requirements. Though labor and fertilizer
costs can be reduced somewhat, the general affect on farm profitability and cash
flow of compliance with these regulations is negative. Dairy farms with free stall
barns, who daily haul manure, can expect a negative return of between 2.9 and 6.6
percent on an investment in an earthen basin system (depending on herd size).
Similarly, an investment in injection equipment would return a negative 12 to 13
percent for an operation currently having long-term storage. Secondly, the
impact of regulations would differ by farm size, financial condition, location,
housing arrangement, and other factors. For example, 60 cow herds (free stall,

daily haul, and no debt) would have profits decline about $6,600 per year if eight

months storage (prohibition of winter hauling and control of feedlot runoff) plus
injection was required. Sixty cow herds with high debt obligations, in the same
situation otherwise, would have profits decline by $8, 100.
dairy industry would be detrimentally affected by any attempt to force mandatory
compliance to select manure management practices.
employed in this study, total annual costs on Michigan dairy farms of complying

with uniform standards for storage and storage plus injection would increase 3 16.5

97

million and $ 18.1 million, respectively.

I . . . [S 1
Limits of this study include:

1.

The whole farm budget analysis has static components that limit
the applicability in a dynamic world.

. Only the most prevalent Michigan dairy farms systems are

analyzed.

. Dairy farms are grouped by debt/asset ratio, size, etc., for

simplification reasons. Yet, this process leads to declines in
precision and prediction capability of the models.

. The financial situation of dairy farms in Michigan may have

changed significantly since the MSU Dairy Farm Survey was
completed in 1987.

. Various costs (i.e., storage system investment) are estimated;

average numbers may not represent any particular farm’s cost
structure.

6. Little information is available to suggest how dairy farmers may

7.

actually respond to government regulation (i.e., cease milk
production, change herd size, and/ or change production
technology).

Dairy farmers can reduce nutrients excreted by cows
by more closely balancing feed rations.

Lastly, the Michigan

Under the assumptions

98

I I . I I l' . l E] .
Dairy farmers have the ability and financial capability to alleviate many of

the problems associated with manure management. The following list outlines

some simple tips for farm managers to follow:

1.

Learn the present rules. All dairy farm managers should be
aware of the Right to Farm guidelines on manure management
and seek assistance if they have any questions regarding their
farm practices.

. Be wary of the quick and easy fix. Though many technologies

such as refeeding, digesters, composting (adding value to the
manure and selling it), chemical additives, etc., offer much
promise to help solve parts of the problem, proper handling and
spreading of manure on crop land using traditional methods will
likely remain the dominant manure management option.

. Pay attention to detail. By keeping adequate records, farmers

can avoid being perceived as guilty before proven innocent if a
complaint is filed. Simple things such as keeping the farm
looking good (keeping garbage picked up, landscaping around
areas where manure is stored, etc.) can go a long way to making
neighbors feel better about a producer‘s operation.

. Practice good public relations. Inform neighbors of spreading

intentions, and ask if it is a particularly bad time for them.

Never ignore complaints, even if they may appear to be
insignificant.

. Analyze the benefits and costs. For example, avoiding the

unnecessary overfeeding of protein and minerals can
simultaneously reduce costs of milk production and nutrient
imbalances in the system. Manure must be looked at as a
fertilizer resource and as an integral part of the total farm
production system instead of a waste, in order to minimize
nutrient loss, reduce odors, and obtain maximum benefit from its
dispersal.

99

6. Find innovative ways to use your manure. The best ideas for
solving these problems are probably already in use on farms with
innovative managers and workers. Finding and adopting these
techniques would be helpful. Cooperative agreements between
milk producers and cash crop farmers also could alleviate much
of the excess nutrient problem.

7. Specialize farm management functions, it possible. Larger farms

can hire laborers that are experts in agronomic issues, animal

nutrition, etc., so the manager can concentrate on the total
farming system.

I l' . fl Li I l l E l .

Environmental concerns such as livestock manure management offer
unique opportunities for government agencies, dairy industry leaders, and
university research and extension experts to establish strong, integrated, cross-
functional approaches to analyze and unravel agricultural issues. Accusations and
stricter regulations (i.e., recent township ordinances and other directives) may not
be the most effective way to reach a socially optimal outcome. Are these
approaches the most efficient way to achieve the desired balance between
maximum production and protection of the environment, or would livestock
producers respond to more positive, innovative policies? To answer this question,
the benefits and costs of each approach must be carefully considered. Many dairy
farmers fear the worst. With milk price supports declining, financial stress or
discontinuation of milk production may be unfortunate consequences of restrictive
regulatory policies that limit the flexibility and increase the production costs on
dairy farms.

Michigan dairy farmers are willing to take on the challenge posed by social

and political pressure in the "age of the environment," and rigorous regulations

100

dictating the use of particular management practices and/ or production
technology will not accelerate his adjustment process. The continued
development and support of a solid, cross-disciplinary program such as the MSU
Animal Manure Management Task Force with outreach assistance would be very
beneficial to facilitate the study of environmental / management issues. Outreach
programs dealing with manure management issues must be integrated with
general management education. Totally integrated, user friendly decision support
systems need to be developed to allow farm managers to analyze the nutrient flow
(accountability), to design and estimate costs of manure management systems, to
pinpoint areas of excess losses, and to balance the profitability and sustainability
of the farmers’ operations within their particular financial, technical, and
environmental constraints. Michigan dairy farmers need consistent educational,
technical, and political support to continue expanding their competitive capacity
into the next century.

WM

Further research is needed to answer the following questions that remain:

1. What dynamic adjustment process will dairy farmers go through
to meet the environmental challenge?

2. How can government agencies, educational institutions, and farm
organizations support dairy farmers at an optimal level and avoid
inhibiting their competitive capacity?

3. What are the financial implications of alternative means of
manure management control?

4. Can better ways of measuring pollution from livestock sources be
found?

5. How much pollution from livestock operations could be reduced
by adopting specific manure management practices?

APPENDICES

APPENDIX A

FARM NUTRIENT BALANCE RESULTS

101

 

 

 

 

 

 

 

 

:83 3.4 “8.8 :83 3.4 84.8 :83 3.4 848 $8.3 3... 86.8 .8
$8... 83 48.: $8.: 23 83. $8.3 83 8...: $8.... 83 88.: 8.
.83 :3 83 $8.: :3 83 $8.: :3 83 $8.: :3 B3 8 3.8
$8.3 8.8 .88 $93: 8...... 84.8 $23 89.... 5.8 $3.3 .8..." .88 98
.83.. 3 83. A843 83 «8.2 .845 2.3 8...: .83.. 3 84.: 3
3.3. 83 2.3 $8.: 83 23 $8.: 83 3.3 .33. 83 83 8 8a.:
$83 a... 5.8 $8.3 83 «8.8 A83 8... 88.8 .33 a... 88.8 .8
$8.: 83 83.3 $8... 83 85: $8.3 83 :33 $8.: 83 3.3 8.
$93. 83 «8.. $8.3 83 83 $8.”. 83 83 $8.“. 83 82 8 83—
aa. 88 2 ea. 88 z 5. 83 2 ea. 88 z 85 an: a!
958 S 36: >50 mm:— E 359

A320 .3 @2683— 352 nooaaaiv

 

09¢. new .3 «88m .380 53:32 o>ufiaomoaom .8 353m 803:2 ~< 038,—.

102

Table A2 Feed Needs on Representative Michigan Dairy Farms by Milk
Production Level (Per Cow, Assuming 50/50 Corn Silage & Haylage in Ration on

 

 

 

 

 

 

a Dry Matter Basis)
Crop Produced Unit 17,280# 19,200# 21,120#
Haylage Ton 3.02 2.88 2.77
l Hay Ton 0.67 0.67 0.67
New seeding Ton 0.34 0.32 0.3 1
Corn silage Ton 9.49 9.03 8.68
Corn grain Bushel 54.18 62.82 80.10

 

 

 

 

Table A3 Acreage Needs on Representative Michigan Dairy Farms by Soil Type,
Production Level, and Number of Cows

 

 

 

 

 

 

 

 

 

60 17,280 130.3 123.2 106.9 141.4 II
19,200 130.9 124.1 1075 142.8 II
21,120 1372 103.8 112.8 150.9
120 17,280 277.2 261.8 227.4 300.4
19,200 277.7 263.1 228.1 302.4
21,120 289.7 275.8 238.2 318.0
250 17,280 576.9 544.9 473.4 625.3

 

 

 

 

 

 

 

 

 

 

APPENDIX B

DAIRY FARM MANURE SYSTEM NETWORK ANALYSIS RESULTS

103

Table B1 Manure System Costs on Representative 60 Cow Dairy Farms with Tie
Stall Housing and Solid Storage by Interest Rate

 

DallyHaul I’m-w. L-termrtorm

 

(can only) (can and heflore)
\oosr rum 9.995 11.195 13495 9.995 11195 13.496 9.995 11196 13496 ‘

 

 

 

 

 

 

 
  

 

 

 

 

 

 

 

 

 

 

     

(2a) (2482) (24820 (2818) (28 )
i eevln'
TOTAL 11,779 13,169
ANNUAL
(1381’
' te = opportumty cost 0 capr -

‘ " Capital recovery charge = Sum of all manure equipment & storage
(depreciation + interest + taxes + insurance + shelter).
’ ‘ ‘ Other variable costs include repairs, maintenance, and tractor expenses.

104

Table B2 Manure System Costs on Representative 60 Cow Dairy Farms with Tie
Stall Housing and Liquid Storage by Interest Rate

 

 

 

(00" Oil!) (can and heifers)
003T / RAW , 9.995 11195 13495 9.995 11.15 13495 9.995 11195 13.995 ‘
Labor (hr/y) 310 310 310 290 290 290 235 238 238 ‘
. mm. . _ _ _ _ f3" ‘3“ . “2° ‘4” “i“ ?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

to = opportumty cast a capr

" ' Capital recovery charge= Sum of all manure equipment & storage
(depreciation + interest + taxes + insurance + shelter).

' ' ' Other variable costs include repairs, maintenance, and tractor expenses.

105

Table B3 Manure System Costs on Representative 60 Cow Dairy Farms with
Free Stall Housing and Liquid Storage by Interest Rate

DailyHaIl [Aer-W Mean-tongs

 

 

, (00"? 00'!) , (mum) 7
0081‘ / RATE 9.995 11.195 13.495 9.995 11195 13.495 9.995 11195 13.495 ‘
worm/y) 444 444 444 437 431 431 343 343 343 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ate: opportumty cost— 0 cap1
‘ " Capital recovery charge = Sum of all manure equipment & storage
(depreciation + interest + taxes + insurance + shelter).
‘ ‘ ‘ Other variable costs include repairs, maintenance, and tractor expenses.

106

Table B4 Manure System Costs on Representative 120 Cow Dairy Farms with
Free Stall Housing and Liquid Storage by Interest Rate

DallyHoul mm mm

 

 

(0M 0"!) (can and heifers)
oosr/ 77 A 7 9995 7 77711.95; 13.495 , 11 77 4 g i 1”“- 1195 13495 ‘
Labor (hr/y) no no no 713 m 723 543 541 543
W (hr/y) 13.071 13.071 13.o71 13,513 13.43 15,523 mo“ 15,045 15,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ate=opportun1ty cost 0 cap1
' ‘ Capital recovery charge= Sum of all manure equipment & storage
(depreciation 4» interest + taxes + insurance + shelter).
" ‘ ‘ Other variable costs include repairs, maintenance, and tractor expenses.

107

Table B5 Manure System Costs on Representative 250 Cow Dairy Farms with
Free Stall Housing and Liquid Storage by Interest Rate

Dollyl-loul Utes-w beer-Indoor.

 

(can only) ,7 (com and heifers)
0081‘ / RATE 9.995 11195 13495 9.995 11.195 13.495 9.995 11195 13.495
Labor (hr/y) 1.567 1,561 1,567 1,431 1.431 1,431 1.311 1.311 1,311

 

Emu (Iv/y) 33,934 33,904 25,954 31.o1o 31,o13 31313 32,670 non 32.51o

 

 

 

 

 

 
 

1,569 1,656 1.831 12.021 12,680 13,994 11.711 12.3“ 13,610

4M 4030 4030 42819 42819 42819 44158 44058 44158
ANNUAL
. COST |
’ ate = opportumty cost 0 cap1 .
’ ‘ Capital recovery charge = Sum of all manure equipment & storage
(depreciation + interest + taxes + insurance + shelter).

‘ ’ ‘ Other variable costs include repairs, maintenance, and tractor expenses.

 

 

 

 

 

 

 

 

 

 

108

Table B6 Manure System Annual Costs on Farms
(Per Cow, 11.5 % Interest Rate)

 

 

 

 

 

 

Handling practice
# cows Barn type Daily haul L-term (cows) L-term
(all)
60 tie-stall (solid) 102 204 221
60 tie—stall (liquid) 102 198 162
60 cold free-stall 86 203 163
120 cold free-stall 66 136 119
250 cold free-stall 56 89 79
Table B7 Labor Requirements on Dairy Farms
(Per Cow, 11.5 % Interest Rate)
Handling practice
# cows Barn type Daily haul L-term (cows) L-term
(all)
60 tie-stall (solid) 5.17 5.00 4.85
60 tie-stall (liquid) 5.17 4.83 3.97
60 cold free-stall 7.40 7.28 5.72
120 cold free-stall 6.50 6.04 5.40
250 cold free-stall 6.27 5.72 5.24
Table B8 Nutrient Saving on Dairy Farms
Handling practice
# cows Barn type Daily haul L-term (cows) L-term
(all)
60 tie-stall (solid) $2,482 $2,818 $3,049
60 tie-stall (liquid) $2,482 $3,076 $3,374
60 cold free-stall $2,482 $3,076 $3,374
120 cold free-stall $4,963 $6,153 $6,748
250 cold flee-stall $10,340 $17,819 $14,058

109
Table B9 Estimated Cost of Manure Storage Systems

 

\Herd 60Cows 60Cows m‘Cows 120Cows
Structure\ + Heifers + Heifers

250Cow8250

4

 

. Cubic 51 55,335 72,855 97,835 132,875 132,746 755,460 '5
Gallons 413,906 544,955 731,806 993,905 1366895 1910841

Pit w\3’ Clay
Liner
Per Cow
Pit

w\Membrane
Liner

Per Cow

Pit w\Concrete
Liner

Per Cow
Concrete Tank,

1 Part in Ground

Per Cow

Steel Tank

 

 

 

 

 

Per Cow
sts st” u-e structure .' tr.u er system 0 y. '.
costs, hauling, etc. are not included!
Source: Garsow, Tom. WI SCS, 1990.

      
    
    

 

 

tenance,0perat1ng

APPENDIX c

WHOLE FARM BUDGET ASSUMPTIONS AND RESULTS

1 10
Table Cl Selected General Whole Farm Budget Assumptions

 

   

AMOUNT
VARIABLE UNIT ASSUMED
Income related variables _ _ ' ,1 a a
Cows Per head $1,100.00
Bred heifers Per head $1000.00
Heifers 6 - 15 months Per head $500.00
Calves under 6 months Per head $200.00
Cull cow sold Per head $574.00
Herd cull rate % 30.00
Bull calf at birth Per head $110.00
Calf death loss % 5.00
Milk per cow Lbs. 19,200.00
Percent of milk sold % 95.00
Price of milk sold th. $10.10
Land and feed related variables
Land price Acre $697.00
Land tax rate, % of value % 2.30
Crop yields (loam soil), as fed
Hay and haylage Ton per acre 5.00
Corn silage Ton per acre 20.00
High moisture corn Bu. per acre 130.00
Annual expense variables
Labor cost at the margin Per hour $6.50
Cost of herdperson Per year $27,000.00
Debt/ asset ratios 0/ .20/ .75
Short and intermediate debt APR 9.9/11.1/ 13.4
Long term debt APR 92/ 10.7/ 12.7
Purchased supplements Per Cow / Year $337.74
Soybean meal Ton $350.00
Corn grain Bu. $2.50
Alfalfa hay Ton $65.00
Corn silage Ton $18.00
W

except for the interest rates on debt, crop yields, and debt/ asset ratios.

111

Table CZ Base Farm Budgeting Assumptions by Herd Size and Housing Type
(Daily Haul Manure System, 20: 100 Debt/ Asset Ratio)

\HERD SIZE 60 cows
VARIABLE\ Tie stall

       

_ 120 cows - - , -
Free stall Free stall

60 cows
Free stall

       

Crop acres
Corn grain 29.0 29.0 58.0 121.4
Corn silage 27.1 27.1 58.5 121.3
Alfalfa haylage 34.6 34.6 74.6 154.9
Alfalfa hay 8.0 8.0 17.9 37.5
New seeding 8.8 8.8 19.1 39.7
Balance sheet
Current assets 3,163 23,163 47,370 97,560
Interm. assets 308,982 288,225 446,848 859,680
L-term assets 260,811 231,397 428,201 867,266
Current liabilities 4,633 4,633 9,474 19,512
Interm. liabilities 61,796 57,645 89,374 171,936
L-term liabilities 52,162 46,279 85,640 173,453
Operating costs ‘
Labor hrch 67 67 53 46
Labor hr-manager 2,560 2,560 2,400 2,144
Bedding costs 2,267 1,136 2,270 4,730
Hired labor 16,665 17,537 48,833 97,543
Farm insurance 1,536 1,536 2,535 4,926
Farm tam 4,726 4,252 8,005 16,278
Utilities 4,006 4,165 8,164 16,966
Fuel and oil 1,806 1,806 3,762 7,830
Repairs 8,226 7,414 15,045 32,244
Miscellaneous 897 897 1,656 3,640
Other coats
Depreciation 29,813 26,266 37,393 69,338
Family living 18,693 18,693 25,385 39,886
expense

 

‘ Labor hours for the milk production and cropping enterprise were estimated
using equations formulated by Nott et al., 1989. Insurance for cows and crops,

real estate taxes, and miscellaneous costs were sourced from N ott, W

W 1988.

112
W
The base representative farms with long-term storage for the milking herd
or long-term storage for all animals are assembled by changing many of the
variables on the long range budgeting sheets. The following is an overview of
those variables that are changed.

1. Cropping system: Acreage usage was not altered, but fertilizer
costs in the crop budgets were reduced by the increase in nutrient
savings, presented in Tables Al-AS.

2. Balance sheet: Table 8.1 presents the investment differences
between the manure systems. The cost of the earthen basin
increases long-term assets and long-term liabilities (asset value X
debt percent). Similarly, intermediate assets and liabilities are
increased by the additional equipment investment.

3. Operating expenses: Labor, utility (energy), and bedding costs
are increased or decreased according to the figures presented in
Tables Al-AS. Farm real estate taxes are increased by the
earthen basin cost times the tax rate (2.3%). Interest expense
increases as the percent of outstanding debt increases. Repair
costs are raised by multiplying the additional investment in
manure storage and equipment by the following rate schedule:

Table C3 Estimated Repair Rates for Manure System Components

     

       
         
     

  

Equipment Storage system
rate (%) rate (%)

60 cows 3.2% 0.5%

1 120 cows 5.9% 0.6%

9-17

 

Herd size

 

 

 

 

 

4. Other costs: Depreciation expense is increased using a straight
line approach with zero salvage value; long-term assets over
twenty years, equipment and machinery over ten years.

113
I EI'C'I'

The columns labeled Alternative # 1 and Alternative #2 in the FINLRB
budgeting sheets coincides with compliance with eight months storage of all
manure and storage (all) plus injection costs. Few dairy farmers in Michigan, less
than ten percent from expert opinion presently inject their manure (Bickert and
Ferris, 1990). As a result, the assumption is made that all farmers would need to
purchase injection equipment ($2500 per injector set). The data inputs are .
changed as specified on the previous page with a correction for extra costs of
expanding an existing manure storage system. Table B4 presents the estimated
investment cost increases for expanding a concrete slab with walls for solid
storage and a standard earthen basin for liquid storage.

Table C4 Estimated Investment Cost For
Expanding Manure Storage Systems

I Volume Incrasee
(cubic ft)

 

 

 

 

 

 

These figures are used to determine the impact on the representative dairy farms
that were assumed to already have storage for some or all of the animals on the

farms.

114

,. :83 38.3. x

. 88.8 w 98.3 98.31883 88.;

, Evans €33 QEEV 32.4 mm} 3% ,
. 98.3: A835 $35 an a...” E?
, 335 A853 553 and $35 $3

 

 

62.9

:26

$8.3
$9.5 :85 . . -w 5.“
38.8
33:

 

 

98.3 A8:
5.35 68.9

 

6433 $6.3 $83 933 G33 at

6.3% . 89.5 G23 $8.3 Eai 83
83 888m 3.5 .83 6835 can .88. 8.8.6. 8.5 86.1% 3.3 86
A83: .3: 628 5:82 63.3 33 33. 88.33

 

35 8.— 8.2» .mom 853 .8865 Seam “528$
808% 0.352 REE can .05 mamas: 623— .094pr can Eu: .3 35823601
886...: 28 883m 8582 23m 55 9.2980 a6 83V 8 521 gm 8 can: 8 28...

115 -

. 39.3 3343
, 33.3 38.3

38.3 33.3

_. 33.3 33.3
1 33.3 33.3

38.3 33.3
no? 8.83
323 .3:

33.83
3:33
33.83

3333
33.33
@533

38.8
33.33
33.3

33.3 33.3 ,,
33.3 33.3
33.3 333

8...:

oufiSm
32.3 .5362

 

038% can Box—mm 0352 88
32.8 33 8.3on

.35 8.. as: 38 .53 .6383

 

858m 28.83 82% 63.82 3.3 as .25. «53.8: .23. .3228 .83 26: E 383238...
8:66....— 28 63.863 3.82 39m .33 3:53.80 .6 c363 3&3. 3.5 gm .3 83.... 8 2%...

116

 

. 60....

an...
8.. . w ,

9.3
nud—
965 $55

0386 60...... 09.85 80.8— owasfi 03m

.833 .3. 335$ 828.... .82.. 3.:

 

35 3.. 3...: 4.8 .83 .0389... 8.5m .5..ng
5.60.?— E... Quasi 3.5.82 Emm— uo «own—5:35 “a: .83....35 Amusv .8 ES.— 8 033.

117

 

, 8... 8....
8.... 8...
an...» 88

 

80...: 09.3% 03m 60m..— 0m03.w 000m .00.?— 0335 , 005m Bola 0.5.32 03m
.8. .3 .0... .8. .8. 5.82 .8. a. 33 8.... <3.

 

.85 3.. 8...... 4.8 .53 .0833 8.8.... 88.5....
8.80.... a... 0883 .582 a»... .8 685:8... a... 85...»... .880... s 3.8.3 .30 8 2......

118

Table C9 Change in Debt/ Asset Ratio (Total Percent Debt) on Representative
Dairy Farms—Impact of Complying with Eight Months Storage and Injection
Requirements ,

(Assuming All Investments Debt Financed)

 

““070 e Wim (2)°% _ 8 “‘9 757) e

      

 

 

 

 

 

 

 

 

 

 

 

 

 

119

Table C10 Percent Return to Added Investment on Representative Dairy Farms-
Impact of Complying with Eight Months Storage and Injection Standards

 

 

 

(Standard Earthen Storage)
Base System Daily Haul Storage For Cows itlorage For
Size and Type Storage Injection Storage Injection Injection
60 Tie Stall-Solid (7.0) (7.0) (5.4) (5.4) 0.0
60 Tie Stall (3.7) (4.3) 43.7 15.2 (12.1)
60 Free Stall (6.2) (6.6) 41.8 12.8 (12.1)
120 Free Stall (6.6) (6.9) i 28.3 11.0 (13.3)
250 Free Stall (2.9) (3.3) 26.5 16.2 (12.9)

 

Note: "Storage" refers to impact of eight months storage of all manure.

Injection refers to ”storage” plus injection.

120
Table C1 1 Representative Farm Balance Sheet

Herd Size: 60 Cows (Free Stall) Manure System: Long-term Storage (all)
W
Cash
Accounts receivable - milk
Crops held for feed Corn grain, bu. 1,885 $2.50 4,712
Corn silage, tons 271 181!) 4,879
Haylage, tons 192 32.50 6,250
Hay, tons X) 65.00 1,305

Total feed 17,147

Total Current Farm Assets:
Wm
Livestock
Cows
Bred heifers
Heifers 6-15 mo.
Heifers 0-5 mo.

Total dairy livestock:
Cropping equipment
Farmstead equipment

mass
3
l3
8

$8,163

Total Intermediate Assets:
Farm land Cropland, acres 107.5 $697 $74,928
Farmstead, acres 2.0 69 71,394
Total farm land: ----

Manure earth basin system
Farm buildings

Total Long Term Assets:

TOTAL FARM ASSETS:
Total current farm liabilities 4,633
Total intermediate liabilities 61,989
Total long term farm liabilities 48,519

Total Far- Uabillties:

Net Worth for the Farm:
Total Liabilities and Net Worth:

Farm RE. Tans: 4,432 Farm Depreciation: 28,998
Family Draw: 18,693

Line Code Interest Years Base Prin.

400 10 11.1 1 4,633

401 13 11.1 10 61,989

402 2 10.4 30 48,519

121

Table C12 Partial List of Machinery and Equipment Needs by Dairy Manure
Management System and Herd Size

__ Herd Size and Manure Management System

" Technology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 2 4 6 7 8 9 1o 11 13 i
45 hp tractor 1 1 1 1 1 ‘
90hptractor l 1 1 l l 1
. 110 hp tractor l 1 1
V 130 hp tractor 1 1 l
Skidsteer ' l 1 1 l 1 1 1
Barn cleaner 1 l 1 1
Buckwall 1 1 1 1 l 1
Box spreader (205 bit) 1 1 l 1 1
Box spreader (300 bu) 1 1 1 1
Stacker
Concrete slab with walls
Piston pump 1 1 l 1 1 l 1 l
Earthen basin system 1 l l 1 l 1 1
1500 gal spreader 1 1 1 1
tanker
3200 gal spreader l l l l
. tanker
Agitation pumv 1 1 1 1 1 1 1 1
1: 60 cows, tie stall barn, daily haul
2: 60 cows, tie stall barn, solid manure storage
3: 60 cows, tie stall barn, liquid mam1re storage for cows
4: 60 cows, tie stall barn, liquid manure storage for all livestock
5: 60 cows, free stall barn, daily haul
6: 60 cows, free stall barn, liquid manure storage for cows
7: 60 cows, free stall barn, liquid manure storage for all livestock
8: 120 cows, free stall barn, daily haul
9: 120 cows, free stall barn, liquid manure storage for cows
10: 120 cows, free stall barn, liquid manure storage for all livestock
11: 250 cows, free stall barn, daily haul
12: 250 cows, free stall barn, liquid manure storage for cows
13: 250 cows, free stall barn, liquid manure storage for all livestock

APPENDIX D

SENSITIVITY ANALYSIS RESULTS

122

Table D1 Estimated Impact on Two Herd Sizes of Eight Months Storage with
Restrictions on the Type of Manure Storage System by Debt/ Asset Ratio on
Dairy Farms Using Daily Haul .

(S 10. 10 Milk Price)

 

60 Cows Profit Cash Flow Break-Even Milk
Price
D/A Ratio Low Med High Low Med High Low Med High
Wm

Standard 908 (11,223) (53,606) 9,552 (10,847) (74,332) 10.02 11.13 15.00
Earthen Pit

Pit w/3 ft Clay (321)89 (12,544) (55,104) 8,639 (11,841) (75,484) 10.13 11.25 15.14
Liner

Pit w/Concr. (3,993) (17,491) (60,578) 5,911 (15,808) (79,928) 10.46 11.70 15.64
Liner

Above Ground (4,979) (18,454) (61,781) 5,178 (16,508) (79,607) 10.55 11.79 15.75
Concr. Tank

120Cows

Standard 6,700 (13,714) (85,313) 20,358 (15,285) (126,090) 9.79 10.73 14.00
Earthen Pit

Pit w/3 ft Clay 4,791 (15,766) (87,639) 18,940 (16,828) (127,880) 9.88 10.82 14.10
Liner

Pit w/Concr. (886) (21,869) (94,558) 14,721 (21,417) (133,206) 10.14 11.10 14.42
Liner

Above Ground 460 (20.501) (93,108) 14,911 (21,207) (132,911) 10.08 11.04 14.35
Concr. Tank

123

Table D2 Spreader Tankers Versus Irrigation Systems
(Average Distance = .5 mile)

 

 

 

120 Cows Tanker Irrigation
Investment 25,500 18,820
Operating Expenses
Fixed Cost-CRC " 5,355 3,939
Variable Costs

Labor 1,365 598
Energy (kw) 850 816
Other “‘ 2,549 3,019
Total Annual Cost 10,119 8,372
250 Cows Tanker Irrigation
Investment 25,500 18,820
Operating Expenses
Fixed Cost-CRC ” 5,355 3,939
Variable Costs
Labor 2,821 1,112
Energy (kw) 1,752 1,650
Other "“ 5,335 6,113
Total Annual Cost 15,263 12,814

‘ ' CRC: Capital Recovery Factor

" " ‘ Other: Repairs, maintenance, and tractor
expenses ($.2/hp/hr)

APPENDIX E

SUPPORTING DATA FOR AGGREGATED
IMPACT ON MICHIGAN DAIRY FARMS

”1'33""

”-0“.de M';M\‘_s. 1‘ :0
. .

124

Table E1 Distribution of Michigan Dairy Farms by Debt/Asset Ratio, Housing
Arrangement and Manure Handling Practice
(Farms With < 30 Cows Not Included)

 

Debt/Asset Ratio 7 7
Low Medium High
Herd Size Manure # Percent # Percent # Percent Total Percent
System

 

 

Short-term 44 13.8%
L-term (cow) ' 3

  
 
 

 
  

1333333. 333 .3333 33 3333 333 333%

Source: MSU Dairy Farm Survey, 1987.

 

125

Table E2 Estimated Capital Requirements Needed on Representative Michigan

Dairy Farms to Meet Eight Month Storage (All Animals) and Injection
Requirements

7 Storage 7 7 7‘
Injection

Steorag (all)

    
 
 
 

  

Size and Initial System 7
Manure State _ -_ f

Daily Haul $39,300 $655 . F; ‘31
L-term (cow) ‘ .
L-term (all) I
Daily Haul

 

 

 

 

L-term (cow)

 

 

 

l
I
|
l
l
1
ltm‘.L . .40.”: r ‘. .
l

 

 

 

 

 

 

 

 

 

, 120 cows Daily Haul $53,200 $443 $55,700 $464

(liquid) L-term (cow) ‘ $3,500 $29 $6,000 $50
L-term (all) $0 $0 $2,500 $21 3

250 cows Daily Haul $62,800 $251 $65,300 $261

(liquid) L-term (cow) ’ ‘ $8,200 $33 $10,700 $43

L-term (all) $0 $0 $2,500 $10

 

Assuming: 7 Concrete slab with walls (solid), standard earthen basm
(liquid), spreader tanker and pump(s) purchased where needed.

‘ = Expanding existing storage system
“ = Digging a new earthen pit

126

Table E3 Increase (Decrease) in Annual Costs on Representative Michigan Dairy
Farms-Impact of Required Eight Months Storage and Injection
(Stande Earthen Storage, Loam Soil, $10.10 Per th.)

  

  

, 0: 1) 7 Mdmme (:17 WE‘
Initial System Storage Inject Storage Inject Storage Inject

     
    

  

    
  

   

   

Daily Haul 6,306 7,673 7,673
L-term (cow) 1,573 1,951 1,951 i
Tie-stall L-term (all) 0 0
‘ Daily Haul 6,187 7,131
(liquid) L-term (cow)
Tie-stall L-term (all)
‘ 60 cows Daily Haul 6,084 6,635 6,546 7,127
‘ (liquid) L-term (cow)

Free-stall L-term (all)
120 cows Daily Haul 8,613 9,193
(liquid) L-term (cow) (674) (95)
Free-stall L-term (all) 0 579
250 cows Daily Haul 7,799 8,370
(liquid) L-term (cow) (1,224) (653)
Free-stall L-term (all) 0 571

    
   
 
    
   
  

         
     
   
     
     
       
         
 

   

 

   

 
    
    
  

 

  

     

. v, “-3 v frank—q
a—"‘
..

 

 

127

Table E4 Increase (Decrease) in Labor Hours on Representative Michigan Dairy
Farms—Impact of Required Eight Months Storage and Injection

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Low (0: 100) Medium High===
I (20:100) (75:100)
Size and Type Initial System Storage Inject Storage Inject Storage Inject
60 cows Daily Haul (19) (19) (19) (19) (19) (19)
(solid) L-term (COW) (9) (9) (9) (9) (9) (9)

’Tie-stall L-rmte (all) f 3 0 0 0 0 0
60 cows Daily Haul (72) (39) (72) (39) (72) (39)
(liquid) L-term (cow) (52) (19) (52) (19) (52) (19)
Tie-stall L-term (all) 0 33 0 33 0 33

’ 60 cows Tally Haul (101) (68) (101) (68) (101) (68)
(liquid) L-term (cow) (94) (61) (94) (61) (94) (61) I
Free-stall L-term (all) 0 33 0 33 0 33
120 cows Daily Haul (132) (67) (132) (67) (132) (67)

' (liquid) L-term (cow) (77) (12) (77) (12) (77) (12)
Free-stall L-terrn (all) P 0 65 0 65 0 65
250 cows Daily Haul (233) (122) (233) F (122) (233) (122)

. (liquid) L-term (cow) (120) (19) (120) (19) (120) (19)
Free-stall L-term (all) 0 101 0 101 0 101

 

 

 

 

 

 

 

 

Table E5 Estimated Decrease in Labor Hours on Michigan Dairy Farms from
Complying with Eight Month Storage and Injection Requirements by Herd Size

 

  
      
    
  

 

 

 

Herd Size Storage (all) Storage + Injection

- 3089 cows (ot- stall) (44,305) (26,485) I
30-89 cows (03.- stall) (104,930) (68,960) I
90149 cows (free stall) (77,330) (30,530) I
> 149 33333 (033 stall) (50,550) (17,740) '

 

 

    
     

    

i

I'H- -,_’ Z.c' ' ‘

128

Table E6 Increase in Nutrient Savings on Representative Michigan Dairy Farms-
Impact of Required Eight Months Storage and Injection
Standard Earthen Storage, Loam Soil, $10.10 Per th.

 

. Storage (all) Storage 4» Injection

Size and Initial System Total Per Cow Total Per Cow
Manure State 3 f f

Daily haul $567
L-term (cow) $231
L-term (all) $0

Daily haul

   
 

 

 

 

 

L-term (cow)

 

 

’ 120 cows 7

 

 

 

 

 

 

 

 

 

 

 

 

Daily haul $1,785 515 $2,528 521 1
(liquid) L-term (cow) $595 $5 $1,338 $11
L-term (all) so so 5743 $6
250 cows Daily haul $3,718 515 $5,266 321
(liquid) L-term (cow) $1,239 $5 $2,787 $11
L-term (all) $0!”I $0 $1,548 $6

 

 

Table E7 Estimated Increase in Nutrient Savings on Michigan Dairy Farms fi'om
Complying with Eight Month Storage and Injection Requirements by Herd Size

Herd Size Storage (all) Storage + Injection
30-89 00“ (tie mu) $685,645 $886,525
30-89 cows (free stall) $841,560 $1,247,040
90-149 cows (free stall) $464,100 $835,820
> 149 cows (free stall) $200,790 $455,270

_m

 

  

       
     

  

 

  

 

 

    

    

 

 

 

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