These new rules could tack on another $300 million-plus in costs for confined feeding operations each year.

These new pressures could have "powerful implications" for costs of production, industry competitiveness, and the structure of U.S. agriculture, says Mark Jekanowski, vice president, agricultural economist for Sparks Cos., Inc., who spoke at USDA’s annual Agricultural Outlook Forum at Arlington, Va.

"The regulatory environment faced by agriculture is rapidly changing, growing both in scope and severity," he says.

Although the agricultural sector was once largely exempt from the full force of regulatory oversight, especially under the Clean Air Act and Clean Water Act, "production agriculture is increasingly implicated by environmental groups and government agencies as an industry in need of tighter environmental control."

Environmental and regulatory pressures facing agriculture "are unlikely to abate over the long term," Jekanowski says, despite occasional political efforts to roll back regulatory oversight.

Regulation forces

Rather, the forces leading to increased regulation "reflect structural changes occurring in agriculture at the same time the non-farm population is growing and becoming less attuned to the unique characteristics of farming."

Additionally, he says, there is a widely-held belief within the Environmental Protection Agency and many environmental interest groups that existing efforts to regulate air and water emissions from industrial and municipal facilities — in place for more than 30 years — have largely achieved their goals.

The focus is "increasingly shifting" toward minimizing non-point source emissions, pollutants that enter the air or water bodies from general runoff from land, roads, and forests.

"Runoff from agricultural fields and livestock facilities, including fertilizer, manure, and pesticides, is often implicated as a primary contributor of non-source pollution," Jekanowski says.

Regulating these non-point source emissions has been somewhat limited by "relatively primitive monitoring and measurement technology, especially since it is extremely difficult to identify a specific source of agricultural runoff that might travel long distances and across legal boundaries."

As a result, he says, regulators tend to take a broad brush approach to rules for the agricultural sector, mandating or encouraging specific land uses and/or best management practices aimed at reducing runoff from all farms in a given area or watershed.

"This is the center of the EPA’s Total Maximum Daily Load (TMDL) program, which requires states to identify all impaired water bodies and identify measures to reduce the total amount of pollutants entering a body of water from any source, including agriculture."

Pressures remain

While the most recently-proposed rules for implementing the TMDL program, developed by the EPA in 2000, have never been enacted and are currently under review to be repealed, "the pressures that prompted the rule’s development remain intact, and are likely to lead to continued scrutiny of agriculture as a source of water pollution concerns."

On Dec. 15, 2002, the EPA released its long-awaited new rule governing the permit process for Confined Animal Feeding Operations (CAFOs). It will, Jekanowski says, apply primarily to large CAFOs, but it also can apply to some smaller operations if a man-made ditch of pipe carries manure or wastewater from the operation to surface water, or if confined animals come into contact with surface water running through the confinement area. The EPA has established size criteria for these large and medium CAFOs.

In addition, regardless of the size of the operation, the permitting authority could designate a livestock operation as a CAFO if an inspection determined that it threatened nearby surface waters.

The EPA estimates that the new regulations will affect about 15,000 existing livestock operations, with compliance costs across the sector of about $326 million per year.

"The burden is expected to be especially acute among medium-size fed cattle operations," Jekanowski says. "The EPA predicts that 96 percent of fed cattle operations between 300-1,000 head that are designated as CAFOs would likely become unprofitable as a result of this new rule."

About 18 percent of medium-sized operations "will find themselves in a similar predicament," while "moderate financial stress" is predicted for 14 percent of large and 7 percent of medium CAFOs.

Despite the apparently high cost of compliance, he notes, the new rules are in fact "somewhat less stringent and will apply to fewer operations than originally proposed."

Minimum standards

The rule also sets only the minimum standard for CAFO regulation, expressly providing states "substantial flexibility and oversight" to develop and enforce their own standards that might exceed those set in the CAFO rule.

"So, it’s safe to assume these cost estimates represent a minimum to the sector and to individual operations, with actual costs potentially much higher, and applying to a greater number of operations, as individual states develop and enforce their own guidelines."

In addition to the new CAFO regulations, Jekanowski says, other sources of regulatory pressure "are building on several fronts," including clean air issues, regulation of agricultural inputs such as pesticides and antibiotics, and pressures from various special interest groups that "are becoming increasingly influential in determining how food is produced."

All these regulatory pressures, he says, "are building at a time when knowledge of production agriculture among the general public — and often among lawmakers and regulators as well – is generally on the decline.

"As the farm population continues to decline, regulatory control becomes much more subject to the whims of popular opinion and emotion, rather than the true benefits and costs to society."

Although there are important instances where environmental and food safety regulations should be updated or more broadly enforced to reflect structural change, Jekanowski says, "it is also important that credible scientific information be used to identify the actual problem areas and determine the true benefits and costs of regulatory controls. It’s important that the USDA, land grant universities, and industry organizations remain involved and informed in the regulatory process to insure that the interests of agriculture are fully represented."

e-mail:hbrandon@primediabusiness.com