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Ontario Pork Research Report
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Summary (Beechey, 2012)
This study measured the compliance cost of the current and possible future nutrient management regulations on pig production facilities in Ontario. Two farm types were examined: farrow to finish and finishing facilities. Three farm sizes were considered for each category: a small farm with 900 pigs produced per year, a medium farm with 4,500 pigs produced per year and a large farm with 10,500 pigs produced per year. Each scenario was then tested with uniform manure application and optimal manure application that varied application rates by crop type based on plant nutrient needs. These scenarios were then examined under nutrient management regulations from the Nutrient Management Act (2002) and the Clean Water Act (2007). The Nutrient Management Act includes two separate calculations for determining the maximum manure application rate. The crop nutrient requirement calculation bases the maximum manure application rate on the amount of phosphorus each crop requires and then allows for additional phosphorus application of 15.15lbs per acre. The second calculation to determine the maximum nutrient application rate involves the amount of phosphorus removed by the crop. This calculation allows for manure application to meet the amount of phosphorus the crop will remove at harvest plus 69.5lbs of phosphorus per acre. The Clean Water Act results assumed that regulations would restrict the nutrient application rate to 115% of the crop requirements of nitrogen and phosphorus. The medium and large production facilities were then subjected to sensitivity analysis of the soil phosphorus test as well as changes in the nutrient application rate allowable under the Clean Water Act. Lastly, the medium and large scenarios were also subjected to changes in the prices of inputs and outputs for crops and pigs to determine the sensitivity to prices.
Key Findings
The ratio of acres of land to barn capacity has an impact on how the model reacts to different regulatory scenarios. Often, the medium size farms felt the most restriction under the regulatory scenarios, mainly due to the amount of manure produced per acre being the highest in the medium farm scenario. Additionally, farrow to finish pig production facilities experienced higher compliance costs because of their higher production of manure and relatively higher cost of production than finishing pig production facilities.
All sizes of pig production facilities with uniform manure application experienced decreases in annual gross revenue and faced compliance costs under the Nutrient Management Act nutrient requirement scenario for farrow to finish and finishing production facilities. The Nutrient Management Act nutrient removal scenario also decreased the annual gross revenue and created compliance costs for farrow to finish production facilities of all sizes but created small compliance costs for finishing pig production facilities of all sizes.
Farrow to finish pig production facilities with a crop requirement based manure application rate only experienced decreases in annual gross revenue and faced compliance costs in the medium size scenario under the Nutrient Management Act nutrient requirement scenario. Finishing pig production facilities saw no changes to annual gross revenue or annual gross margin under the Nutrient Management Act nutrient requirement scenario with crop requirement based manure application except in small pig production facility, which saw a very small cost of compliance.
Decreasing the soil phosphorus test value decreases the annual gross margin in medium and large size farrow to finish and finishing pig production facilities. This is mostly attributable to the increased amount of phosphorus required by crops, which triggers increased fertilizer expense. Increasing the soil phosphorus test decreases the number of pigs produced on medium and large farrow to finish production facilities under the Nutrient Management Act nutrient requirement restriction as well as the Clean Water Act restriction. Only medium finishing production facilities produce fewer pigs under the Nutrient Management Act nutrient requirement restriction and the Clean Water Act restriction when the soil phosphorus test decreases.
All sizes of farrow to finish pig production facilities produce fewer pigs on each size of farm under the Clean Water Act regulations. This results in a decrease in the annual gross revenue and annual gross margin for farrow to finish pig production facilities under the Clean Water Act. When the Clean Water Act restriction is relaxed, the production facility still produces fewer pigs than in the base scenario but more than under the original Clean Water Act restriction. Similarly, a stricter Clean Water Act restriction forces the pig production facilities to produce even fewer pigs than under the original Clean Water Act restriction.
Finally, only medium size finishing pig production facilities produce fewer pigs under the Clean Water Act regulations. The annual gross revenue decreases and producers face compliance costs on the medium size finishing pig production facilities under the Clean Water Act. By relaxing the Clean Water Act restriction to 120% of the nutrient requirements, medium size finishing production facilities are once again allowed to produce the maximum number of pigs each farm’s barn capacity will allow. A stricter Clean Water Act regulation does not affect the large size finishing production facilities but does restrict the medium size finishing pig production facilities even further.
Policy Implications
The current regulations under the Nutrient Management Act have a small effect on Ontario pig producers as producers are required to comply with the calculation of maximum nutrient application that least affects manure application on their farm. A producer following the uniform manure application strategy would feel negative effects of the Nutrient Management Act, but because of the way the standards are currently applied they would not have a compliance cost of more than 1.53%. If the producer converted to a crop requirement based manure application rate strategy, the highest possible compliance cost would be 0.25%. So, the regulations provide an incentive for farmers to test nutrient content of their manure and to integrate manure nutrient supply with their fertilizer purchasing decisions. Producers who are in the medium and large categories and any producer who has built a building which contains manure since 2003 are required to comply with the Nutrient Management Act. Communication with Sam Bradshaw at Ontario Pork indicates that over 70% of producers hire a certified crop advisor to write their Nutrient Management Plans and pay between $1,500 and $3,500 (Bradshaw 2012). These plans must be revised every five years. Producers are also required to test their soil every year and apply manure according to crop requirements, however most other farmers test their soil approximately every three years (Bradshaw 2012). Therefore the Nutrient Management Act seems to have made soil testing more regular but not introduced something producers were unfamiliar with doing before the Act. Bradshaw also indicates that most producers will soon fall under the Nutrient Management Act.
The possible Clean Water Act standards as described by Poon (2009) and found in the original Tables of Drinking Water Threats would negatively impact farrow to finish producers, which make up over 58% of the total producers in Ontario (Ontario Ministry of the Environment 2009b). Finishing pig producers would also be negatively impacted but not to the same extent as farrow to finish producers. Much of the negative impact would be a result of the zero nitrogen requirement for soybeans but manure application rates would be restricted even with a positive soybean nitrogen requirement. If these standards were implemented, Ontario pig producers would face significant costs of compliance and would need to rent additional land or reduce the number of pigs they produce.
Future research could also explore the impacts of nutrient regulations in Ontario on the production practices of pig producers to determine if producers are managing their production in a more environmentally conscious manner. Key et al. (2011) examine pig production in the United States from 1998 to 2009. They find that pig producers in the United States have altered production practices over time including applying manure at rates to meet but not exceed the nutrient requirements of the crop, applying manure over more land, increased nutrient testing of manure, using less commercial fertilizer on land receiving manure application and using feed additives to reduce phosphorus in the manure. These changes in production practices for pig producers in the United States indicate an effort by producers to be more environmentally aware. Key et al. (2011) conclude that some of the changes in pig production are likely as a result of environmental regulations. Further research could examine changes over time in Canada in a similar manner to determine if the environmental policies enacted in this country are having the desired effects on manure management. Further applications of this research also include using the model created in this study to provide farm management consulting to pig producers to determine compliance costs under their specific production practices as well as their input and output costs. The model created in this study could also be turned into a more user accessible tool for farmers to download and use.
Bradshaw, S. Personal Communication (January 6, 2012).
Key, N., W. D. McBride, M. Ribaudo and S. Sneeringer. Trends and Developments in Hog Manure Management: 1998-2009. EIB-81. U.S. Dept. of Agriculture, Economic Research Service, 2011.
Ontario Ministry of the Environment. "Ontario's New Clean Water Act: Why We Need It, How It Will Work." Ontario Ministry of the Environment. October 18, 2006. (accessed March 31, 2010).
Poon, Ken (2009) , Measuring the Compliance Cost of Nutrient Management Regulations of Ontario Dairy Farms, MSc Thesis, University of Guelph.