Where to begin—there are so many areas that impact this general topic, Environmental Regulation (I will refer to this as Env’t Reg) pressure on agriculture. But we must all remember this fact: the large majority of farming operations in the United State are owned and operated by families and thus are not publicly traded companies/organizations.
I have looked at many articles on this topic and there are many approaches to take and subtopics to cover to truly understand the severity and shear headache of dealing with the impacts of ever increasing and costly env’t regs. For this post, (and for the purpose of not losing my readers), I will look at just one reference.
Many in defense of large farms, Concentrated Animal Feeding Operations (CAFO), or ignorantly referred to as “factory farms,” illustrate the high standards of environmental quality they uphold. This point is verifiable, as these operations (CAFOs) have their own set of env’t regs. Thus, in most cases, many activists and environmental agencies have claimed that increased env’t regs are focused on the larger farms and thus lessens the burden on smaller farms. In various ways this is true, as farm size does mandate differing compliance levels, but there are many standards that have to be met industry wide. Here is the catch, and where farm size depends on your financial ability to meet these general evn’t regs. In simple terms, larger farms can distribute the installation costs of needed apparatuses to meet standards over more producing units and thus having less impact on their margins and bottom lines. Interestingly, the University of Nebraska-Lincoln’s Agricultural Economics Department concluded the following after their extensive look at the Environmental Regulations and the Exit of Small Hog Farms.
Empirical results show that environmental regulations had a negative and statistically significant effect on the supply of hogs from small and as well as large farms, and on the number of small hog farms. The negative effect provides indirect evidence that regulations induced a greater shift in the marginal cost curve for large farms than for small farms. Stated differently, the negative effect implies that environmental regulations significantly affected the entry and exit of U.S. small hog farms thereby contributing to the changing structure of the U.S hog industry during the period 1994- 2006. (p, 21,22).
Changing Structure For many involved in agriculture, this is very apparent, but for those in the general public, it seems to be even more apparent and certainly increasingly misunderstood. What many see as a shift to “factory farming” is seen by the actual farmers/producers as a shift towards a more efficient means of operating through the advantages of size and a “means of survival.” Production cost pressures are constantly increasing in agriculture. Energy, feed and other inputs have always existed. But in the last 20 years costs associated with env’t regs have emerged and have (in many ways negatively affected) the bottom lines of farmers industry wide.
This topic is far from being completely covered and will be addressed in future blog posts. The issue(s) are very complex, but need to be presented—as they bite the hand that feeds you!
Nene, G., Azzam, A. M., & Schoengold, K. (2010). Environmental Regulations and the Exit. Retrieved Feb 27, 2011, from Faculty Publications: Agricultural Economics: http://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1107&context=ageconfacpub