THE ECONOMIC IMPACTS OF PHOSPHORUS-BASED MANURE MANAGEMENT POLICIES ON A REPRESENTATIVE NORTH CENTRAL INDIANA HOG-GRAIN FARM

Federal and State regulatory agencies are considering switching from a nitrogen-based manure disposal policy to one that is phosphorus-based. This analysis estimates the compliance costs of this policy change for a representative hog-grain farm in Wabash County, Indiana. The representative farm includes 1,500 acres of cropland and has the capacity to raise 11,970 grow-finish hogs annually. The farm model also has the potential to produce four different crops on six different land types. A non-linear math-programming model was developed for this study to determine the optimal mix of management activities for a phosphorus-based regulation. The model maximizes farm returns above variable costs, subject to resource and regulatory constraints. The model allows mitigation of compliance costs via the choice between four different pig diets, three alternative methods of disposing manure, changes in timing of manure application, and crop pattern adjustments. This analysis concludes that the new regulation will result in a decrease in whole-farm returns above variable costs, use of alternative pig diets, and an increase in wheat acres planted. The model also reveals that it is optimal for the farmer to hire a custom hauler to assist in application of manure in an effort to reduce the degree to which available field days constrains farming activities. The estimated cost to the farmer, as a result of the policy change, ranges between $0.56 to $21.74 per pig capacity. The range of this estimate depends on the performance of markets for custom manure disposal, new feed ingredients, and off-farm spreading contracts. Thin markets for these factors reduce the flexibility the farmer has in mitigating the compliance costs via changes in diet, application method, cropping systems, and land activities.