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3.4 Impact of Scaling-Up of Livestock Production on the Environment

3.4.1 Environmental Problems Associated With Growing Livestock Sectors

A major problem associated with increased livestock production is that it also results in an increased amount of manure and dead animals during the grow-out period. Environmental problems may result if these by-products of the production process are improperly utilized or disposed of. The main environmental problems of concern are water pollution, air pollution, and land degradation. Water pollution may occur if nutrients from manure enter the water table because they are either improperly used or disposed of, or may be associated with improper disposition of dead animals that consequently release nutrients into the ground water as they decompose. Air pollution may result as the nitrogen in manure is converted to ammonium, and also through incineration of dead animals. Land degradation may occur if the carrying capacity of animals is too high, leading to over-grazing in the case of ruminants, or if the application of nutrients over a number of years causes buildup of nitrogen, phosphorous and salt, resulting in reduced crop yields.

The problems outlined above are not necessarily scale-specific. In theory they arise from the concentration of animals in one place, regardless of how many ownership units are involved. It is possible that 1,000 animals belonging to 100 smallholders could create the same physical problems that the same number of animals belonging to one owner could. Chapter 7 will in fact explore this issue explicitly in terms of the nutrient mass balance impacts of large and small farms in the study countries. Chapter 7 will also assess scale differences in farmer efforts per unit of output to mitigate the negative environmental effects of livestock production. The present section focuses on the nature of environmental problems arising from concentration of production, introduce the notion of mass nutrient balances, and briefly assess as the state of policymaking for environmental regulation of livestock production in the study countries.

Environmental problems may occur in livestock production if producers follow any one or combination of the following practices: a) directly dump the by-products (slurry, manure, or processing water) of livestock production into water ways; b) stock-pile undesirable by-products in a way that as the nutrients go through nutrient cycles such that components volatize into the air[10]; c) fail to credit the nutrient content in this organic source and thus over-apply it as a soil amendment in conjunction with chemical fertilizers[11]; d) apply the nutrient at the wrong time of the growing season; e) apply manure in areas where the hydro-geomorphic profile is such that it is difficult to prevent run-off (areas with high water tables, sandy soils, the terrain is slopping); f) base land applications solely on nitrogen requirements of the crop, which may result in over- application of phosphorous (also found in the manures); g) use a inadequate technology or otherwise fail to address hazards until problems arise due to storms and runoff; and h) chose inappropriate methods of disposing of the carcasses of dead animals.

Most of the cases described here are non-point source in nature; this is pollution arising from ill-defined or diffuse sources. The impact of the problems described above may not be immediate and over time are likely to result in non-point sources of pollution, as the build up of nutrients enters ponds, streams, or rivers, promoting eutrophication[12]. If nutrients in livestock production by-products are continually mismanaged, they will cause water pollution problems that threaten the safety of drinking water to both humans and animals[13]. Of the cases described above only two, the direct discharge into waterways or the incineration of products, are usually considered as "point sources" of pollution, pollution coming from a specific, traceable, discharge.

Degradation and eutrophication of water bodies and ammonium released into the air are the principal environmental concerns from livestock pollution. Non-point sources such as runoff from the over-application of manures over many tears, and unregulated point sources of pollution are of major concern. Typical point sources of water pollution include man-made conveyance structures such as feed pens or corrals, confinement buildings, slurry storage tanks, pipes or culverts, conveyance channels, holding ponds or lagoons, stockpiles, irrigation systems and dead animal disposal facilities. Non-point sources of water pollution include diffuse runoff from areas such as feeding and watering sites, working corrals, spray pens, and grazed pastures or rangeland. Improperly managed nutrients can also be a source of disease-causing bacteria that contaminate wells and surface waters, harm sport and commercial fishing industries, cause a ban on harvesting shellfish beds, or offend neighbors.

There are various conditions in which nutrients from livestock farms may result in pollution. First, farmers lack the knowledge or information concerning the adverse impacts that their farming practices and input uses have on water quality, more specifically on "their" water supply. Second, farmers may not be concerned about water pollution costs imposed on their neighbors or those living downstream. Third, farmers may have decided that the use of chemicals or improper disposal of manure (and the resulting increased net income) is more important than clean water, especially downstream. Fourth, farmers may have imperfect information concerning the optimum use and application of manure as an input. Fifth, farmers are also responding to the risk created by uncertain economic and weather conditions that affect their crop production and incomes. In addition, nutrients from livestock farming may not be properly disposed of because of the failure of the market to assign a value to the proper disposal/utilization of the by-products and the lack of an enforceable regulatory regime. If markets did exist for these by-products or there was an enforceable regulatory regime in place, then the benefits of the by-products (and their collection) and the cost of not doing so are likely to be incorporated into the decision-making process of the producer. The absence of markets to equate social costs and benefits of livestock keeping once production exceed a certain amount per square-kilometer levels leads to the creation of environmental externalities.

3.4.2 Environmental Externalities and the Rationale for Government Intervention

As discussed in Chapter 1, externalities occur when an economic agent reaps a benefit from an activity whose cost is born in part by others, but they are not compensated for this. Agents "capture" benefits from negative externalities if they get a benefit (e.g. livestock sales), but someone else bears part of the cost (odors, flies, polluted water, etc.). Agents "internalize" at least part of these negative externalities to the extent that they themselves suffer from these ills, and also if they incur expenses to compensate those who bear the cost, or to prevent the bad side effects. If farms of different sizes capture negative externalities that differ per unit of output across farms, then those with larger capture per unit or output gain a cost advantage relative to those who do not. If such differences vary systematically by scale, environmental externalities could provide an incentive to scale-up, or may in fact slow down scaling-up, depending on how they go.

There are four potential sources of negative environmental externalities in livestock production and processing that will cause problems over time in the absence of effective polices and institutions to deal with them. The first source of externalities has to do with the manure. In the study countries, manure was traditionally spread directly on farmland as a nutrient source and soil enhancer, used as a fish food, or used as a source of fuel. As a fertilizer, manure is a valuable source of nitrogen, phosphorous and organic material, and improves soil structure and water-retention on leached tropical ferruginous soils. As such, it can be a source of positive externalities in some cases. However, too much of a good thing can have a deleterious effect, as the amounts of manure applied increase. Furthermore, some soils benefit less than others. Nutrients from animal waste create negative externalities when the excess nitrogen and/or phosphorous in them is not taken up by plants, and leaches into the groundwater or contaminates surface water and also leads to bacterial contamination of surface water and groundwater. Currently, none of the studied countries have regulations requiring or otherwise regulating application of manures, but Philippines, Thailand, and Brazil do require swine operations to have production permits.

A second source of externalities has to do with the disposal of dead animals. Normal mortality for broiler production is 5 percent over the production cycle; under extreme conditions, such as great heat or an epidemic, it can be as high as 25 percent a day. Mortality rates per cycle for sows under developing country conditions are 5 percent, for pre-weaning piglets 19 percent, for layers 8 percent, and for dairy 4 percent. In the countries studied, these dead animals are buried, incinerated, rendered or go into a secondary food consumption market. The incineration process itself can result in air pollution and the burial process results in the same problems and/or benefits as for manure. Currently, none of the study countries have regulations regarding dead animal disposal practices.

A third source of externalities is embedded in the release of ammonia, which in zones of high animal density can be a source of air pollution, producing acid rain and/or odor problems. Both the Thai and Brazilian country studies report that farm neighbors have complained about odor; in the case of Thailand, producers were forced to compensate the neighbors for the smell (Poapongsakorn, 2003). A fourth externality has to do with the discharge of wastewater from processing plants. Brazil, Thailand, and the Philippines have regulations concerning disposal of this sludge, which in effect attempt to force companies to internalize this negative externality.

In principle, governments will improve the social good by intervening when there are externalities or imperfect information, to better equate social costs and benefits. Intervention requires a clear definition of property rights associated with the market failure being corrected. The economic rationale behind policy intervention would be to get the private individuals to incorporate the full costs (including environmental) of production back into their decision-making process. Brazil, Thailand, and the Philippines have implemented environmental regulations, which will be discussed later in this chapter concerning livestock, but enforcement remains the problem.

Nevertheless, there are a variety of reasons why a government may have difficulty intervening or controlling livestock pollution. First, economic reasons may not be paramount in policymaking. If true, it could mean either that powerful large firms get away with more than small ones, or that it is more appealing to governments to go after one or two large farms, while leaving problems created by tens of thousands of small one untouched. Results in Chapter 7 will show whether large or small farms make a bigger average effort per unit output to internalize negative environmental externalities.

Second, government regulators also have to deal with information and attribution issues. There is always the non-point source problem. Furthermore, although a given livestock farm may be the source of the nutrients involved in pollution, they may have limited control over what happens once they leave the farm, say for a sale to another farmer. All four of the country studies indicate that there is an active market for poultry manure. Yet none of the four have regulations concerning the spreading of manures on land. Furthermore, there may be a latency period between the actual application and the effect.

It may also have to do with the changing structure of the industry and the fact that producers are increasingly relying on imports from outside the farm, which may limit disposal options. Specifically as there has been a move toward specialized farms in both crop and animal production, there have also been changes in the nutrient balances of agricultural regions, soils, and individual farms. Specialization across crops on the one hand, and livestock on the other, concentrates nutrients and increases feed and transportation costs. It also leads to high ratios of livestock per unit land in certain areas, leading to nutrients coming from the by-products of production being applied at higher rates than required by crops. Stoyke and Waibel (1993) suggest that growth of this type of specialized farms in many countries was facilitated by the absence of regulation as regard to the number of animals per unit of farm area, rather liberal animal protection laws, and the availability of low-price imported feedstuffs.

The splitting of custody of animals from ownership, as in the case of contract farming, complicates finding one party responsible for pollution. Brazilian swine integrators, who have contracts with a large number of small producers, are starting to recognize the potential legal liability. They have written demands for internalizing potential negative environmental externalities into their contracts with growers. These contracts include stipulations as to the adequate handling of the waste. All the integrated farmers have to go through an environmental authorization process led by the integrator. The costs involved in this process are discounted from the payments to growers. Thus growers bear the costs, but integrators make the decisions. This opens scope for new externalities that benefit integrators at the expense of growers.

Increasingly it is being recognized that there are economies of scale associated with control options. Schwart et. al. (1995) have noted that there are not only economies of size in production technologies, but also in manure management, which reinforces the trend toward large production units. Thus the costs of improved manure management may fall disproportionately on broiler and dairy producers who tend to concentrate in areas classified as environmentally vulnerable (Westenbarger and Letson, 1995).[14]

3.4.3 Policies and Institutional Mechanisms to Mitigate Environmental Pollution Problems Stemming from Livestock in the Study Countries

Countries that appear to be having problems have implemented policies such as: (a) licensing policies that restrict locations where certain amounts of pollution may be discharged; (b) clean water and air legislation; (c) regulations on disposal of poultry by-products; (d) limits on number of animals per area, and (e) the improvement of markets for poultry waste. Though many are just beginning to be implemented, it seems likely that most of them will retard overall growth in output as production becomes more expensive. If enforcement differs by scale of farm, it will also affect the size distribution of farms. If enforcement differs by locality, it will also shift production among locations.

To prevent water quality problems from rapidly growing livestock production, many countries have developed regulations concerning the application of either nitrogen or phosphorous. The premise behind this is that the rate of animal waste applied should not provide more plant-available nitrogen than that required by the crop in question, in order to avoid the contamination of groundwater by nitrates (NO3). Studies indicated that nitrate and phosphorous contamination in groundwater in areas with high animal densities are due to the unfavorable nitrogen-to-phosphorous ratios in animal wastes, relative to the uptake of these nutrients by crops. This results in the excessive phosphorous in the soil. A potential environmental problem will develop if a transport process exists to redistribute phosphorous that originated in the animal waste to a surface water body sensitive to eutrophication

Different rules and regulations have been developed in the different study countries to control potential environmental problems from lives. Brazil, Thailand, and the Philippines have the most comprehensive set of rules of the four countries. India has minimal environmental rules regarding livestock. The Annexes give details, but the outline of the approaches in each country is as follows.

In Thailand, the National Environment Quality Act (NEQA) was first enacted in 1969 as a comprehensive package for institutionalization of environmental policy and planning. The act was amended in 1992 as the Enhancement and Conservation of National Environmental Quality Act. Following the NEQA, the cabinet made a resolution in 1996 to adopt the "Policy and Plan for National Environmental Quality Preservation and Promotion (1997-2016)" (PEQP). Under PEQP, the line ministries and every province have to come up with their own respective action plans. PEQP produces yet another action plan called Environmental Quality Management Action Plan (EQFIGURE), of which water pollution is its priority area. Specifically, water quality standards were set for two periods, 2001 and 2006, for the Chao Phraya river and the Tha Chin river. Regulations were announced in February 2001 in respect of waste dumping into watercourses, including effluent standards for pig farms. The new standards became effective on February 24, 2002. Thus far, standards will be enforced and monitored only on large and medium farms.

A series of strict laws at both the federal and state have been passed in Brazil since 1965 to aid in the general protection of the environment, and they all have ramifications for the livestock sector, especially large-scale enterprises. Details are given in Annex V (Camargo Barros, 2003) The original and most significant is Law no. 4771 on forest management, was passed in 1965 and amended in 1989 and 1996. Inter alia, it protects areas around rivers, lakes, springs, and dams as well as any area surrounding watercourses.

A series of other measures on water use and protection have also been passed. As of writing, a law project on this topic is being discussed in the Brazilian congress. The River Basins Committee, whose members are municipalities, non-governmental organizations, industries, farmers, and public offices, is an instrument created by the federal government (now being adopted by state governments) according to which small producers also have access to environmental discussions. Its function is to discuss and make decisions about subjects related to the management of water resources in one or more river basins. Financial institutions have also become involved in environmental issues through the implementation of credit and financing policies to the agricultural and urban zones. The Environment Conservation and Control Financing Program - "FNE Green", implemented through state-run development banks for the benefit of rural industry and agro-industries (persons and companies), cooperatives and associations, has the objective of promoting the development of productive environmental activities, and the financing of items of conservation.

Environmental regulations issued periodically from 1976 to 2001 to control pollution are quite stringent in the Philippines. The 1978 law is in fact patterned after the U.S. Environmental Impact Statement System. Details are given in Annex I. Environmental laws on pollution in the Philippines originally targeted the regulation of pollution from heavy and light manufacturing and assembly industries. These standards were initially applied only to commercial livestock farms with more than 1,000 animals in the inventory (Catelo, 2002). However, since smallholders constitute close to 80 percent of hog inventories, and since backyard production in the major producing towns, provinces, and regions are also densely configured, the issue of pollution from these operations has since been raised. The rationale is that these farms must create as much potential pollution per animal as commercial farms, and they are now concentrated in commercial densities in per urban areas. If so, the thinking goes, they too must be regulated. The question of whether large-scale farms pollute more than small-scale farms is a pressing policy issue for the Philippines that has yet to be empirically established.

3.4.4 Enforcement Problems and Differential Impacts of Enforcement on Scale of Production

All four-study countries report problems with environmental enforcement. Although a number of rules and regulations on wastewater management have been developed in Thailand and some incentives are offered to the livestock farms in investing in waste treatment technology, there has been a lack of enforcement. The Department of Livestock and Development (DLD) is one of the inspection offices and is expected to be a key institution to enforce the environmental protection law. Ironically, DLD's main job is extension and it serves as a support unit for livestock farmers. To act as an inspection office might cause conflicts between the Department and farmers, which will lead to difficulties in working with farm owners. Consequently, DLD may not be able to act efficiently as an inspection agency. Thus, the more effective enforcement and implementation of existing laws are needed to achieve responsible environmental management.

Similarly for Brazil, though laws exist, there are problems with the enforcement of these laws due to the limited number of personnel relative to the number of farms, and the lack of agreement from farmers with government policies in this area. In a survey done in Brazil in 2001 of 3,505 agricultural producers, 76 percent considered environmental issue as a theme that must be managed with the applications of technical regulations, scientific knowledge and skilled personnel. They recognized the importance of promoting environmental conservation, observing, however, that the procedures must be based on technical knowledge. Yet, only 5 percent of the producers approved the current environmental plan of the government.

As the livestock sector has been more industrialized, livestock farms tend not only to be larger in size, but also run more as big businesses. As such, they tend to be under closer scrutiny by national, state, and local authorities than is the case for smallholders. Also, in Thailand they tend to face a more stringent standard than do medium and small farms. Moreover, there may be a policy bias in terms of enforcing regulations against big firms first, in contrast to the standard "political economy" view that the rich get away with more than the poor.

In Thailand, most attention has been paid to large swine farms, both in regulation and enforcement. All pig farms of sizes greater than 500 sows have invested in water treatment, while some small-scale farms (12.7 percent) have no sewage treatment system at all (Poapongsakorn, 2003). In terms of treatment techniques employed by farms of different size, all of the large-scale farms (with 5,000 pigs or more) use a pond system or a solid-liquid system to treat their sewage. Medium-scale and small-scale farms tend to use a single reception pond; this is not very effective in treating the sewage, as the water that is spilled-over to the drainage channel is still very polluted. Mainly small and medium farms use biogas digesters. It is possible that large farms do not find this technique cost-effective. As most of the large farms are new farms settled in land-ample areas, they have enough land to build a pond system instead.

The Philippines has begun to recognize the growing problem of pollution from smallholder livestock. Regulatory agencies that have in the past cracked down on large farms have begun contemplating issuing regulations on pig waste disposal by small farms. One such agency in the high density Metro Manila livestock zone is the Laguna Lake Development Authority (LLDA) in Southern Luzon. In addition to spearheading the management of lake water resources of the Laguna de Bay (Laguna Lake), the largest freshwater lake in the country, the LLDA also functions as a special environmental authority. As such, it has regulatory and juridical functions in the enforcement of environmental laws and the issuing of penalties on firms violating environmental standards for the lake. Very recently the LLDA issued Resolution No. 169 approving policy guidelines governing the operation of backyard/small-scale hog farms in the Laguna Lake region.

[10] For instance some of the nitrogen in uncovered manure will volatize into the air as it goes through the nitrogen cycle.
[11] In all the countries of this study the animal manures are considered "organic". thus safe and applied to crops on top of chemical fertilizers particularly in areas and the nutrients are not credited.
[12] This results in growth of plants such as algae, whose blooms result in the blocking of light for other aquatic plants. When these blooms die the decomposition uses up the oxygen in the water, reducing its availability for other organisms. The levels of nitrogen required to induce eutrophication in fresh and estuarine waters are much lower then in marine or estuarine environments (Sims and Wolf, 1994).
[13] High nitrate levels pose a health risk to infants in particular; nitrate has led to methemoglobinemia in babies under 6 months of age. Methemoglobinemia is not caused directly by nitrate-nitrogen, but it occurs when NO3-N is reduced to nitrite (NO2-N) by bacteria found in the digestive tract of human infants and animals. The nitrite can then oxidize the iron in the hemoglobin molecule from Fe+2 to Fe+3 forming methemoglobin, which cannot perform the essential oxygen transport function in the hemoglobin. (Sims and Wolf, 1994).
[14] Fallert, Weimar, and Crawford (1993) have shown that in the U.S. that there are economies of size in waste management. According to estimates done by Outlaw et al. (1993), the cost per cow to comply with waste management rules would be $400 per cow from a 50 head farm, compared to $288 per cow from a 175 head farm. Furthermore, the results from the study indicated that there could be a restructuring of the industry in response to proposed standards for confined feeding operations developed by the United States Environmental Protection Agencies' Regional Office 6. The study also noted that though larger dairies will be able to assume the extra capital costs, smaller producers would require several years to recover their investments.

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