Environmental issues and export competitiveness in U.S. animal agriculture

United States’ animal agriculture experienced dramatic structural changes over the last three decades. As technology advances, the industry has featured the growing prevalence of concentrated animal feeding operations (CAFOs) that can keep animals in confined spaces and feed them at a lower cost than historical practices. Higher productivity and lower operating costs also help the U.S. livestock sector enhance its competitiveness in international markets. However, concentrated feeding also concentrates pollution externalities. Manure, a byproduct of CAFOs, contains high nutrient contents and is a major source of water pollution. In addition, recent trade disputes have created significant challenges for U.S. livestock producers.This dissertation contains three essays studying these two pressing issues confronting U.S. animal agriculture: (1) the environmental externalities from industrialized animal farms and the effectiveness of environmental regulations on CAFOs; and (2) the competitiveness of the U.S. livestock sector in the international markets.Chapters 1 and 2 provide the general introduction to the dissertation, and the background on environmental regulations in U.S. animal agriculture and the development of the industry.Chapters 3 and 4 together examine the effectiveness of the Clean Water Act (CWA) regulations, administered by the Environmental Protection Agency (EPA), on CAFOs. In 2003, EPA significantly increased the stringency of its CWA regulations of animal operations above a certain size threshold, and thus designated as CAFOs. However, empirical evidence has documented that such size-based regulations incentivize operations to downsize to the regulatory threshold to avoid compliance, raising concerns about the effectiveness of the regulations.Chapter 3 proposes a theoretical framework adapted from Garicano et al. (2016) to study the effects of size-based CWA regulations on CAFOs. The model highlights an important adverse consequence of size-based regulations: less productive operations may be better off reducing their operational sizes to legally avoid compliance obligations. Downsizing leads to output losses that increase in compliance costs. This result suggests that both the cost-effectiveness and environmental benefits of the CAFO regulations may be overestimated by the EPA.Chapter 4 empirically investigates whether water quality around CAFOs has improved since the EPA updated the regulations in 2003. Using data from Iowa, the chapter studies water quality impacts of the CWA updates on CAFOs. Estimates show that ammonia-nitrogen concentration, a key surface water pollutant from animal agriculture, downstream of a hog CAFO decreases 4 to 6 percentage points on average after the regulation updates. The effects are the largest during high precipitation months, providing suggestive evidence the regulations reduce onsite spillage and over-application of manure to nearby fields.Chapter 5 shifts the focus to trade issues in the U.S. livestock industry. The chapter examines the long-run impacts of trade shocks on U.S. beef competitiveness, using the export bans imposed on U.S. beef exports following the outbreak of bovine spongiform encephalopathy (BSE) in December 2003 in the U.S. Results show that the U.S.’s comparative advantage in beef has not recovered to its pre-outbreak level, and that the U.S. would have maintained its comparative advantage had the BSE event not occurred. This study sheds light on the implications of recent trade disputes for U.S. farmers.Chapter 6 summarizes the previous sections and discusses future research moving forward.