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Knee deep in feedlot feuds

As the livestock industry consolidates and animal farms get bigger, their neighbors worry about the consequences

July 1, 2001


Douglas Clement Senior Writer
Knee deep in feedlot feuds

This past spring, as the nation monitored river levels in the Upper Midwest to see if water would crest over thousands of carefully laid sandbags, Margaret Millerbernd of Waverly, Minn., had her eye on another potential flood. Soon enough, it came: An estimated 100,000 gallons of cow manure surged over the brim of a 9.5 million gallon waste lagoon at nearby Metro Dairy. The brown liquid poured into a county ditch that feeds a creek running through Millerbernd's farm, just a thousand feet away.

A state regulatory body, the Minnesota Pollution Control Agency (MPCA), was alerted, and an investigator affirmed that yes, indeed, there was a problem. The dairy was ordered to block the spill, but the effort—hindered by ice on the creek's surface—was only partly successful. Gallons of manure continued toward the wetlands of a state-owned wildlife management area near the Crow River and the town of Montrose.

Over a month later, the state's investigation of the spill continued as agency engineers tried to determine why the manure basins—just five years old and legally permitted—had been allowed to get so full. Moreover, while no health problems have been linked to the spill, officials are troubled that Metro Dairy employees didn't report the spill when they first noticed it, as required by law, a move that might have staunched the flow before it reached the creek.

But in Millerbernd's view, the spill was pretty much inevitable. The lagoons (there are two, with a total capacity of 15.5 million gallons) are just too big, to her way of thinking. "When you've got millions of gallons of manure and something goes wrong, it's bound to be catastrophic," she said. And Millerbernd is not a hypersensitive city slicker. She and her husband are retired dairy farmers themselves, used to feeding cows, slopping hogs and cleaning out barns. "It's just that it's much harder to manage that much manure."

The spill, moreover, is just part of the problem, in the eyes of Metro Dairy's critics. Even if lagoons don't overflow, they say, the waste leaches into the ground, contaminating aquifers and water supplies. And the smell? "If you were out here today," said Millerbernd, "you would understand. They're emptying the lagoons, and the smell is just horrific." Fear of such problems moved Millerbernd and other neighbors to try to stop the expansion of Metro Dairy back in 1996, but the MPCA reviewed the dairy's waste management plan and found it adequate. The recent spill, said Millerbernd, vindicates her early opposition.

It hits the fan

Millerbernd is hardly alone in her distaste for the smells and spills associated with large livestock feedlots, often called concentrated animal feeding operations (CAFOs). Disputes over feedlots have taken center stage in the Minnesota Legislature at the last three sessions, leading one observer to call it "the most contentious issue in Minnesota agriculture." Elsewhere in the Ninth District, legislators, regulators, livestock owners and environmentalists are also at loggerheads over the issue, with court battles in South Dakota, zoning disputes in North Dakota, legislative initiatives in Montana and township tussles in Wisconsin. And the controversy extends across the country. South Carolina's governor, for example, imposed a temporary ban this April on new hog farms, and the Legislature is considering an indefinite moratorium.

The conflict finds its heart in the increasing scale of the livestock business in the United States. As is true for many industries outside agriculture, the cattle, dairy, swine and poultry industries are consolidating rapidly. Small operations are fading away—just as Millerbernd's did—and midsize farms are expanding to increase profitability by lowering costs through economies of scale. But the increased scale means increased concentration of animal waste and no cheap, easy and safe means of disposing of it.

In the anything-but-pungent terminology of economists, the problem is one of externalities: costs generated by producers that are borne by others. Some of these costs are difficult to quantify, but they're as plain as the nose on your face. Other costs are easier to measure: changes in property values if a feedlot moves in next door. But feedlot owners say that communities derive benefits from large feedlots. Feedlots provide jobs, for example, supply fertilizer to nearby farmers and buy agricultural inputs from the local economy. A broader economic argument for large feedlots: They deliver economies of scale and lower product prices, and thereby increase overall economic efficiency and social welfare. But that's only true, say critics, if they clean up after themselves.

And then there's another complication: No one seems to agree whether large feedlots actually pollute more than small ones. In other words, given that 1,000 cows will create the same amount of manure wherever they live—and assuming the willingness of their owners to clean it up—is it less costly to deal with that waste problem at one big farm or at 10 small ones? The jury's still out.

Regulators at many levels have stepped into the mess—promulgating standards and complicated permit procedures that burden producers and disappoint critics. And as few solutions seem immediately apparent, it's likely that the stink over feedlots will get worse before it gets better.

Fewer farms mean crowded cows

While the total number of feedlots in the nation or our district remains vague (see sidebar), what is clear is that animals—and therefore manure—are being produced on fewer and larger farms, and those larger farms are raising the animals at increasing levels of confinement and concentration. "The structure of animal agriculture has changed dramatically over the last two decades," said a December 2000 U.S. Department of Agriculture (USDA) study. "Small and medium-sized livestock operations have been replaced by large operations at a steady rate. The total number of livestock has remained relatively unchanged, but more livestock are kept in confinement."

USDA figures show that the average size of cattle and calf farms increased in all Ninth District states between 1987 and 1997. The average size of swine operations has jumped even more dramatically. For all district states combined, the number of farms with hogs dropped by 56 percent over the decade, while the number of hogs increased 3 percent, resulting in a 135 percent increase in average hog farm size: climbing from 215 pigs in 1987 to 504 a decade later.

Slippery numbers

Accurate feedlot numbers don't exist, in part because definitions vary from state to state, but also because the industry is, in some sense, in its infancy. Farms have always had animals, but large-scale concentrated animal feeding operations are a relatively modern development. And measuring both the number of operations and the quantity of their byproducts appears to be problematic.

The Environmental Protection Agency (EPA) estimates that 376,000 livestock operations confine animals in the United States, generating about 128 billion pounds of manure each year. A December 2000 U.S. Department of Agriculture (USDA) analysis of the 1997 agricultural census comes up with a very different figure: 529,658 livestock operations with confined livestock producing 900 billion pounds of manure. Obviously, it's been hard for the government to get a handle on the problem.

Using the USDA figures, Ninth District states (including all of Michigan and Wisconsin) have about 93,000 operations with confined livestock (17 percent of the nation's total) producing 157 billion pounds of manure each year. Whether USDA or EPA figures are closer to the mark, suffice to say, we're full of it.

States, too, appear to have a poor handle on total numbers of feedlots since they currently issue permits to a limited portion of the total. Generally speaking, only the largest operations (those with 1,000 "animal units" or more—an animal unit (AU) roughly defined, is enough of a given species to produce as much manure as does one head of cattle, so a horse is 2 AUs and a pig is 0.4 AUs) or those close to vulnerable bodies of water are required to get permits. South Dakota has issued permits for 115 feedlots but doesn't have an official estimate of the total number. Montana has 72 permitted feedlots, but no statewide inventory. Wisconsin believes that it has about 40,000 livestock operations, 86 of which are currently permitted. Minnesota estimated in 1997 that it had 45,000 feedlots, using a broad definition that included any animal confinement area where a vegetative cover cannot be maintained. Of those, 16,000 had received MPCA permits and 23 received National Pollution Discharge Elimination System permits, meaning that they were large feedlots with the potential to discharge into the state's waters.

Getting a handle on the feedlot controversy will require an accurate count. South Dakota District III recently received a grant to create a geographic information system (GIS) database on feedlots. Montana's Farm Bureau Federation is hoping for an EPA grant to create a Montana inventory. And Minnesota just spent $400,000 to create its own GIS feedlot inventory.

The reasons behind the trend are apparent. Livestock farmers are hoping to lower average costs by specializing and growing, and they're doing it with an eye to global competition. Paul Zimmerman, a corn, soy and hog farmer in Waseca, Minn., recently decided to shift heavily into dairy and just received a feedlot permit from the MPCA. "We see Brazil increasing agricultural production 4, 6, 8 percent per year, and we know that long-term up here in Minnesota, corn and soybeans is going to be tough being profitable without a large infusion of government help," said Zimmerman, who co-owns the farm with his brother and his cousin.

"Okay, how are we going to stay competitive in agriculture, not against Joe down the road but José down on the next continent? And we say, livestock production is still a way we can compete, and dairy production particularly." Zimmerman crunched the numbers, looking at efficiencies of labor and building design. "There are economies of scale in any industry that you get into," he observed. "And 1,600 [cows] was a profitable cash-flow model that we ran for here in the Midwest."

In addition, large livestock customers—Tyson, Cargill and IBP, for example—are increasingly seeking uniform inputs. By contracting with large farmers and making explicit product requirements, such customers encourage larger feedlots that produce relatively uniform animals that meet their specified standards. Critics call it factory farming, and animal rights activists say it's inhumane. But as long as American consumers expect a Big Mac in Duluth to taste like a Big Mac in Helena, the industry trend is unlikely to reverse.

Corporate pigs?

It is the costs of such operations—or rather, those costs not paid directly by the feedlot owners—that are creating the controversy. Critics of feedlots are usually those who live near them, consider them blights on the community and often view feedlot owners as noxious neighbors.

They complain of unbreathable air, lower property values and the risk of biological contamination of local groundwater. They also point to more global problems, including greenhouse gases produced by animals and eutrophication of rivers, lakes and, increasingly, the hypoxic "Dead Zone" in the Gulf of Mexico, thought by many to be the result of excess nitrogen runoff from the Mississippi. In the Ninth District, each of these arguments has been used to defeat—or delay—the spread of feedlots.

In early 2001, when Heine Farms Inc., a family business with a 10,000-head cattle operation in Nebraska, sought a permit to build a 20,000-head feedlot across the Missouri River in Yankton County, S.D., the owners encountered a firestorm of opposition. "Don't let huge feeding operations give family farms a black eye in the clean air and water department," read a typical Yankton Daily Press & Dakotan letter to the editor. Another protest letter, signed by 16 physicians, warned of serious health threats from excess livestock manure produced by "large corporate feedlots," including chemical and bacterial water pollution, "strong odors, airborne particles and toxic gases."

The Heines said they're family farmers just trying to grow. "You've got to expand to make it in this business," said Ron Heine. And they rallied considerable support for their effort, including South Dakota Agriculture Secretary Larry Gabriel and much of the Yankton business community, not to mention the four local banks that ran newspaper ads in favor of the feedlot.

But in March, Yankton residents voted 2-to-1 for an ordinance that restricted feedlot size and established distance setbacks from residences that effectively prohibited the Heine venture. The Nebraskans immediately appealed to the courts and are still seeking South Dakota permits.

For Julie Kenefick, a sheep farmer in western Wisconsin, the "bottom line is the groundwater contamination." She has adamantly opposed efforts by a local Pierce County dairy farmer to build a feedlot near the Rush River because of the area's geological vulnerability to manure leaching into the aquifer. And scientific studies reinforce such concerns. A 1999 literature review conducted for the Minnesota Environmental Quality Board concluded that because of its high nutrient loads, feedlot runoff "can severely degrade surface water quality" if not contained; similar work substantiates the risks of groundwater contamination.

But economics matter, too, said Kenefick. "If you look at all of that land without proper drinking water," she said, "what happens to valuation of that land? Leaving out even a shred of interest in the environment and fish kill, just the dollars. It seems to me that that's where policy could be more visionary."

In Waseca County, Minn., where the Zimmermans plan to expand their dairy operation, property values are a prime concern. The county assessor has designed a "smell location chart," which factors in a home's proximity to a feedlot, the number of feedlot units and the presence of a manure lagoon in order to arrive at a write-down percentage for any given residence. A home within a quarter mile of a feedlot with seven animal barns and a waste lagoon, for example, would lose about 30 percent of its value.

(In March, the MPCA granted the Zimmermans a permit for their operation, but a month later a group called Citizens Concerned for Waseca County sued the agency and called for a full environmental impact statement. One of the group's leaders is a relative of Paul Zimmerman—an indication of how divisive these battles can become.)

Others object to feedlots because they see them as harmful to the local economy, replacing small farms with large animal factories. Opposing the Heine expansion into South Dakota, Yankton magazine publisher Bernie Hunhoff, a former state legislator, argued that in addition to their environmental problems, large livestock operations dominate local markets and create unfair competition. Many economists would disagree with Hunhoff, pointing out that even large livestock operations operate on thin margins—hardly the mark of a monopolistic cash cow.

Or fertile rainmakers?

It is precisely their economic contributions to the local community that advocates point to when critics of feedlots try to stop them. Advocates say that feedlots increase the value of livestock and grain businesses, a benefit that farmers, and their communities, would be foolish to ignore. By feeding local grains to local livestock, feedlots add value and increase profits.

"If we can utilize some of the resources we have here in grains and stuff,"said John Youngberg, a lobbyist with the Montana Farm Bureau Federation, "then we can add a few cents to what we get for [our cattle]." Selling Montana cattle to feedlots in other states, then shipping off grain to feed them, is like giving away your profits, he said. "We need to add some value before [livestock] leaves the state if we're going to keep having a viable farm economy."

Moreover, large feedlot operations spend money locally and create jobs for local residents. "They represent a fairly significant source of employment and a market for a lot of grain that we grow," said William Lazarus, an agricultural economist at the University of Minnesota. Lazarus co-authored a 2000 study for the Minnesota Pork Producers Association that found that the Minnesota pork industry accounted for $2.2 billion in total farm and processing output and $4.1 billion when industry "multiplier" effects were considered. The Minnesota pork industry provided nearly 9,000 jobs on farms and in processing plants, with 19,000 additional jobs dependent on the industry.

South Dakota feedlot advocates point to similar effects. Doug Johnson is on the board of a farmer cooperative trying to raise $2 million to build a 20,000-head cattle feedlot in Moody County, near the Iowa/Minnesota border. "Once we build," said Johnson, "we create a tax base that's better for the townships and the counties and their schools, and we create jobs for farmers and truckers and builders, you name it. ... So to me, it's just a financial benefit for the farmers. It's a value-added type business."

Critics dispute many of these claims, arguing that the employment effects of feedlots are minimal and that most profits flow out of local communities into corporate pockets. "We'd like to see genuine value-added agriculture,"said Mark Trechock, staff director of the Dakota Resource Council in Dickinson, N.D., which supported campaigns for feedlot ordinances recently passed in Grand Forks and Divide counties. " doesn't help communities when the profits from a so-called value-added industry are all going out of state to some big corporation or to out-of-state investors, and not staying in the community. Yes, there will be some jobs, but they're low-end jobs."

Crux of the issue

In any given community, these oft-heard feedlot arguments—over jobs lost or found, over virtues of small farms vs. large, over grain sold locally or shipped across the border—hold definite importance. But at the broader level, such issues are less critical. After all, for the nation as a whole, it might be a more efficient allocation of resources to produce all our beef products in just a few states rather than try to preserve cattle operations throughout much of the country. And improving the overall productivity of livestock operations—a goal most would support—might mean that fewer people will be employed in the industry: fewer jobs but cheaper meat. Similar trends occur whenever industries consolidate and become more efficient.

So the heart of the matter, from a broad economic standpoint, is determining how to provide society with the benefits of scale economies in livestock operations while still guaranteeing that producers pay the full costs of production. Or more explicitly, the challenge for policymakers is to ensure that as livestock producers grow larger and larger (a trend that seems likely to continue given the economies involved), they don't shift the burden of their pollution to their local community, county, state or beyond. Ultimately, then, policy would assure that the price of the final product—be it bacon, burger or broiler—reflects the cost of producers cleaning up after themselves.

Corralling cowpies

Lawmakers in the Ninth District have an uneven record in creating such policy, and their difficulties doubtless reflect the contentious nature of the issue. This is a debate both bitter and complex, evidently capable of tearing apart families, neighbors and counties. But in their attempts to deal with the dispute, states and communities have generated a slew of ordinances, zoning regulations, permitting procedures and legislation to govern the environmental impact of feedlots.

North Dakota, for example, issued a model zoning ordinance for animal feeding operations in March 2000 through its state health department, and several counties around the state have since adopted or considered it. South Dakota has developed state permitting procedures for both hog and other livestock operations that require feedlots to discharge no waste into water systems. Wisconsin's Department of Natural Resources regulates large livestock operations and reports an increase in the number of operations applying for permits. Last April, the town of Porter, in south-central Wisconsin, cited environmental concerns in denying a local permit for what would have been a 2,850-cow dairy operation.

chart-average size of swine farms

A Montana legislator drafted a tough bill for the 2001 session that would have regulated animal feeding operations with liquid animal-waste management systems—aimed at swine CAFOs. But she decided not to introduce it when a far less controversial feedlot measure faced substantial opposition from lawmakers and lobbyists who felt measures to regulate the livestock industry would inhibit its viability. The former administration's economic development plan highlighted Montana's pork industry as a vital front for growth, and many observers anticipate it will remain a favorite in the current administration.

Of Ninth District states, Minnesota has taken the most vigorous approach to the issue. At the direction of the 1998 state Legislature, the state's Environmental Quality Board launched an extensive study of the impact of animal agriculture and feedlots on the state's economy, health, environment and quality of life, beginning with a literature review that runs 1,500 pages. The study is due for completion in December 2001, and its authors hope to accurately inventory the number and size of all the state's feeding operations and, more importantly, to come to some level of consensus about the complicated social, economic and environmental issues in play.

"I guess the Legislature can choose to pay attention to it or not," noted University of Minnesota professor Lazarus, but he hopes the final study will calm the waters in future Minnesota feedlot debates. "It might somewhat constrain people in the future, because [it will say that] this is more or less agreed on," he said.

In addition, the state developed a new set of feedlot regulations, hammered out in intensive statewide meetings with stakeholders and agency officials and then batted about in the Legislature. The new regs are considerably tougher than previous standards—though not as tough as feedlot critics wanted—and this year's Legislature designated funds to help small feedlot owners upgrade their facilities to bring them into compliance. But some say compliance is unlikely to be strictly monitored if the Legislature also follows through on its threat to cut funding to the MPCA, the state agency charged with enforcing feedlot regulations.

The feds step in

Just two months after Minnesota issued its new feedlot regulations and prepared to implement them, the EPA announced that it, too, had developed a new set of standards. To put it mildly, Minnesota officials weren't pleased. "It just doesn't make a lot of sense," said Perry Aasness, Minnesota's assistant agricultural commissioner. "Here we just went through some fairly rigorous development of feedlot rules in Minnesota and now EPA's coming in and saying, well, we want these additional ones put on." Aasness said the new EPA standards would require that far more feedlots be regulated. State officials elsewhere in the Ninth District have also expressed their displeasure with the rules.

But the EPA proposals were developed by the Clinton administration. President Bush's agriculture secretary indicated that she's interested in reopening discussions on national feedlot standards, and the EPA extended the comment period on the EPA rules until July 30.

Costs of compliance

The difficulty of resolving the feedlot controversy reflects in part the confusion over the many issues that get wrapped together in any discussion of feedlot costs and benefits. Extraneous, if important, questions about job creation or tax bases tend to muddy the waters. But the central question will remain how to ensure that as livestock operations grow larger, they pay the costs of their externalities, either through adherence to sound environmental regulations or even through direct taxation so that municipalities are compensated for the costs they must bear.

Surprisingly, though, very little empirical research has been done on the actual costs of livestock operation compliance with environmental regulations, according to the exhaustive literature review done for Minnesota's Legislature. "One reason for the dearth of work on this area may be that the regulations are evolving so rapidly and vary so much," noted the review. One study showed that general economic variables had more influence on hog operations than did costs of compliance with environmental regulations. Another said that large dairies could afford the costs of compliance more easily than smaller ones.

Other analysts suggest that as standardized environmental regulations on feedlots are implemented at the federal level, livestock operations will increasingly decide where to locate based on local community reactions. That is, only communities that actively welcome feedlots (for the jobs they might offer, or tax-base benefits) will become home to them. It's an outcome that makes sense, but whether it will make peace is another matter.

One rural economy that initially sought the benefits of a large-scale hog operation was the Rosebud Sioux Indian Reservation. Tribal leaders, eager for jobs promised by developers, signed a contract in 1998 with Sun Prairie, a subsidiary of North Dakota's Bell Farms, to build the nation's third-largest hog farm on tribal lands in South Dakota. Sun Prairie built 24 hog barns, but in 1999 a newly elected tribal council announced its opposition to the project. The Bureau of Indian Affairs also withdrew its support, called for a full environmental impact statement and canceled its lease. Sun Prairie sued the BIA, and the tribal council subsequently issued an order stopping all work on Sun Prairie's next building phase, another 24 barns.

The tangled dispute stands before the U.S. Circuit Court of Appeals. But whatever the court decides, the Rosebud Sioux now seem unlikely to be hospitable hosts to a 1,200 acre complex that could eventually raise about a million pigs a year. "Economic development is something we need," said tribal activist Oleta Mednansky, who contends that the operation will disturb ancient Sioux gravesites, "but not the kind that will destroy our land, air, water, wildlife and historical artifacts."

Pigs might fly

Ultimately, resolution of the feedlot issue will depend not on counting the number of jobs created or the cross-border flow of grain and calves, but on implementing the most efficient scale of production once costs of feedlot externalities are incorporated into the equation. Again, little empirical research exists on this question.

Some observers believe that campaigns by environmentalists to force producers to internalize more of the actual costs of concentrated livestock production may actually encourage further concentration in the livestock industry. Amon Baer, owner of the Baer Brothers egg farm operation in Clay County, Minn., and president of the North Dakota Pigs Cooperative, says the cost of adhering to stringent environmental requirements tends to push smaller farmers out of business—they can't afford the expenses of hiring an engineer, filing environmental worksheets, building leak-tight manure lagoons and testing water supplies and air quality. "I think that part of the goal of the environmental movement is to maintain the smaller-sized family farm," said Baer. "But the more stringent they succeed in making the regulations, the more they drive the industry to the economies of scale and size."

Indeed, when the Zimmermans of Waseca ran the numbers on their dairy operation, they factored in the costs of filing for the environmental permits. "We've got upwards to $70,000 in the environmental review process," Zimmerman noted. "And so are you going to spread that over a 200-cow operation or are you going to spread that $70,000 over a 1,600-cow operation?"

South Dakota farmer Doug Johnson contends that large feedlots can actually be better for the environment than smaller livestock operations. "From our point of view, we're taking 20,000 head of cattle off the river in farm lots and pasture and putting them on a controlled area that allows no runoff. ... We have to meet all the environmental standards ... so that makes it a lot more environmentally friendly than what's going on now."

Feedlot critics counter this, saying that large feedlots concentrate too many animals in one location, exceeding the capacity of nearby lands to assimilate waste nutrients, resulting in polluting runoffs. In addition, they say, large feedlot technologies like waste lagoons, which combine water with manure, create environmental risks not posed by small animal farms which tend to use solid-waste handling methods rather than lagoons.

Feedlot supporters then argue that regardless of what the environmental dangers may be, it is far easier and cheaper for regulators to monitor and enforce regulations at a few large facilities rather than at countless small ones.

Ultimately, this debate, too, comes down to an economies-of-scale problem. Clearly there are some scale economies in livestock production when environmental costs are ignored by the feedlot owner. Do they disappear when operators are forced to pay their full costs? Or are there also economies of scale in handling animal waste? The research has yet to reach answers to these questions.

At least one economist argues that the most efficient scale for livestock operation is considerably smaller than the large feeding operations now being built, and he argues that the trends point toward a gradual decline of American livestock production. "I can't find anything [in the data] which shows much of an increase [in efficiency] after you get past about [a] 650-sow farrow-to-finish operation, which is a fairly small operation," said Colorado College economist William Weida.

And Weida said that the high cost of implementing stringent environmental regulations will force even large feedlots out of business, pushing livestock processors toward foreign suppliers whose governments might not consider the environmental costs. "They'll go overseas, because there the situation is ideal," said Weida. "There are lots of countries where there's virtually no cost of handling the waste at all. You can flush it wherever you want to."


Douglas Clement
Senior Writer

Douglas Clement was a managing editor at the Minneapolis Fed, where he wrote about research conducted by economists and other scholars associated with the Minneapolis Fed and interviewed prominent economists.