Open Collections

UBC Theses and Dissertations

UBC Theses Logo

UBC Theses and Dissertations

Impacts of trade, environmental and agricultural policies in the North American hog/pork industry on… Savard, Marielle 1997

Your browser doesn't seem to have a PDF viewer, please download the PDF to view this item.

Item Metadata

Download

Media
831-ubc_1997-251519.pdf [ 6.52MB ]
Metadata
JSON: 831-1.0088316.json
JSON-LD: 831-1.0088316-ld.json
RDF/XML (Pretty): 831-1.0088316-rdf.xml
RDF/JSON: 831-1.0088316-rdf.json
Turtle: 831-1.0088316-turtle.txt
N-Triples: 831-1.0088316-rdf-ntriples.txt
Original Record: 831-1.0088316-source.json
Full Text
831-1.0088316-fulltext.txt
Citation
831-1.0088316.ris

Full Text

IMPACTS OF TRADE, ENVIRONMENTAL AND AGRICULTURAL POLICIES IN THE NORTH AMERICAN HOG/PORK INDUSTRY ON WATER QUALITY, TRADE PATTERNS AND WELFARE by MARIELLE SAVARD B . S c , M c G i l l , 1982 M.Sc, M c G i l l , 1989 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY i n THE FACULTY OF GRADUATE STUDIES Resource Management and Environmental S t u d i e s We accept t h i s t h e s i s as conforming t o the r e q u i r e d standard THE UNIVERSITY OF BRITISH COLUMBIA September 1997 © M a r i e l l e Savard, 1997 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of The University of British Columbia Vancouver, Canada DE-6 (2/88) 1 1 ABSTRACT The o b j e c t i v e s o f t h i s study were: (1) t o d e s i g n a framework t o measure the impact o f t r a d e , a g r i c u l t u r a l and environmental p o l i c i e s on water q u a l i t y and (2) t o ass e s s t r a d e p a t t e r n s and market w e l f a r e ( M a r s h a l l i a n measures of producer and consumer s u r p l u s e s p l u s government payments) under v a r i o u s combinations o f a g r i c u l t u r a l , environmental and t r a d e p o l i c i e s . To reach those o b j e c t i v e s , an environmental model, EPIC, was l i n k e d t o a model of the North American hog/pork s e c t o r . R e s u l t s show t h a t t r a d e l i b e r a l i z a t i o n does not c o n t r i b u t e t o water p o l l u t i o n i n the two cases studies': R a l e i g h , North C a r o l i n a o r Pont-Rouge Quebec. In f a c t , l e a c h i n g , o f n i t r a t e s decreases i n Quebec f o l l o w i n g the e l i m i n a t i o n o f c o u n t e r v a i l i n g d u t i e s , s t a b i l i z a t i o n payments and the ban on US l i v e hog exports t o Canada. When n u t r i e n t management pl a n s are implemented, both s u r f a c e and groundwater q u a l i t y i n c r e a s e . Environmental p o l i c i e s , i n c l u d i n g n u t r i e n t p l a n s , a l s o have a c l e a r impact on t r a d e p a t t e r n s . The r e d u c t i o n i n Quebec i n v e n t o r i e s t r i g g e r s a decrease o f Canadian l i v e hog exports t o the US and an i n c r e a s e o f US pork exports t o Canada. Trade and a g r i c u l t u r a l p o l i c y s c e n a r i o s have a l a r g e r impact on t r a d e p a t t e r n s than on w e l f a r e and water q u a l i t y . When the ban on US l i v e hog exports t o Canada i s l i f t e d , US l i v e hog exports t o Canada i n c r e a s e a t the expense o f US pork exports and I l l Canadian l i v e hog exports t o the US. Market w e l f a r e impacts from t r a d e p o l i c i e s are d i f f e r e n t from impacts induced by environmental p o l i c i e s . Trade p o l i c y s c e n a r i o s t r i g g e r i n c r e a s e s i n North American market w e l f a r e w h i l e environmental p o l i c i e s are r e s p o n s i b l e f o r decreases i n market w e l f a r e . S i n c e t r a d e l i b e r a l i z a t i o n has a p o s i t i v e impact on w e l f a r e , the w e l f a r e decrease from environmental p o l i c y i s somewhat a t t e n u a t e d under f r e e t r a d e c o n d i t i o n s . i v TABLE OF CONTENTS ABSTRACT i i LIST OF TABLES v i LIST OF FIGURES v i i ACKNOWLEDGEMENTS v i i i CHAPTER 1 - INTRODUCTION 1 Problem Statement . . . . 1 O b j e c t i v e s 6 O r g a n i z a t i o n o f the T h e s i s 6 CHAPTER I I - LITERATURE REVIEW . . . . 8 Trade S t u d i e s w i t h Environmental V a r i a b l e s 9 Hog/Pork S t u d i e s w i t h Trade V a r i a b l e s 12 Environmental S t u d i e s 14 CHAPTER I I I - THE CONCEPTUAL MODEL . 18 D e s c r i p t i o n o f the Conceptual Model 18 Impacts of Trade and A g r i c u l t u r a l P o l i c i e s on Water Q u a l i t y , Welfare, and Trade 21 Impacts of N u t r i e n t Management Plans on Water Q u a l i t y 23 Impact of N u t r i e n t Management Plans on Welfare and Trade 2 3 S c a l e s o f the Environmental and Economic Models . . 24 Trade and Environmental S c e n a r i o s 26 Design of S c e n a r i o s 4 t o 7 30 CHAPTER IV - THE ECONOMIC MODEL 36 The O b j e c t i v e F u n c t i o n 36 Feed Costs and Pork Demand as D r i v i n g Forces of the Model 37 Output V a r i a b l e s 38 Important Features of the Model 39 Dynamics 39 R e g i o n a l i t y 40 I n c o r p o r a t i o n of R i s k 42 Data Values and Sources 44 Expected R i s k and S t a b i l i z a t i o n Payments . . . 44 Refinement of Canadian and US Trade Data . . . 46 Refinement of Canadian and US Cost Data . . . . 47 Refinement of Canadian and US C o e f f i c i e n t s . . 48 E m p i r i c a l T o o l s Used f o r E v a l u a t i o n 52 Comparison of Simulated and A c t u a l Data . . . . 55 S e n s i t i v i t y A n a l y s i s 62 Dynamic Response of the Model 65 P o s s i b l e M o d i f i c a t i o n s 66 V CHAPTER V - THE ENVIRONMENTAL MODEL 68 D e s c r i p t i o n of Chemical T r a n s p o r t Models 68 The E r o s i o n P r o d u c t i v i t y Impact C a l c u l a t o r (EPIC) . 72 Environmental I n d i c a t o r s 74 Data Inputs 75 Management Information f o r North C a r o l i n a . . . 79 Management Information f o r Quebec 81 Output V a r i a b l e s 82 V a l i d a t i o n R e s u l t s 84 V a l i d a t i o n R e s u l t s f o r North C a r o l i n a 85 V a l i d a t i o n R e s u l t s f o r Quebec 86 S e n s i t i v i t y A n a l y s i s 90 P o s s i b l e M o d i f i c a t i o n s 91 CHAPTER VI - ANALYSIS AND EMPIRICAL RESULTS 93 Manure N i t r o g e n I n s e r t e d i n t o EPIC under Two Trade P o l i c i e s 93 Manure N i t r o g e n I n s e r t e d i n t o EPIC under Two N u t r i e n t Management Plans 96 E f f e c t of Two Trade S c e n a r i o s and two Environmental S c e n a r i o s on Hog Management 101 E f f e c t of Two Trade S c e n a r i o s and Two Environmental S c e n a r i o s on Water Q u a l i t y 103 E f f e c t o f Nine Trade and Environmental S c e n a r i o s on Welfare, Trade, Hog I n v e n t o r i e s and S l a u g h t e r Amounts 114 S c e n a r i o s 1 and 2 124 S c e n a r i o 3 125 S c e n a r i o s 4 and 6 126 S c e n a r i o s 5 and 7 126 Comparisons Between S c e n a r i o s 4 and 5, and 6 and 7 127 S c e n a r i o s 8 and 9 127 Trade P a t t e r n s Across S c e n a r i o s 128 North American Welfare Changes Across S c e n a r i o s . . 132 R e g i o n a l Market Welfare Versus Environmental Impacts 134 CHAPTER VII - CONCLUSIONS AND POLICY IMPLICATIONS . . . . 137 C o n c l u s i o n s 137 P o l i c y i m p l i c a t i o n s 139 BIBLIOGRAPHY 144 APPENDIX - THE ECONOMIC MODEL 151 v i LIST OF TABLES Tabl e 1 C h a r a c t e r i s t i c s of the B a s e l i n e and Nine S c e n a r i o s 27 T a b l e 2 Kilograms of N i t r o g e n and Phosphorus P e r m i s s i b l e under Two N u t r i e n t Management Plans i n the Southeast and i n Quebec Us i n g EPIC Crop A b s o r p t i o n Rates . . . 31 T a b l e 3 Hog Inventory P e r m i s s i b l e under Two N u t r i e n t Management Plans i n the Southeast and i n Quebec . . 33 T a b l e 4 P r o d u c t i o n , Slaughter, Demand Regions and t h e i r Centers 41 T a b l e 5 Standard D e v i a t i o n s 1981-1986 Used i n the S i m u l a t i o n P e r i o d as a Proxy f o r R i s k . 45 T a b l e 6 Q u a r t e r l y Death Rates of P i g l e t s by Region . . . 49 T a b l e 7 Sources of Data f o r the Economic Model 50 Table 8 Hog Inventory and S l a u g h t e r V a l i d a t i o n S t a t i s t i c s f o r the 1981-1986 P e r i o d 57 Table 9 Hog Inventory and s l a u g h t e r V a l i d a t i o n S t a t i s t i c s f o r the 1987-1992 P e r i o d 59 Table 10 S e n s i t i v i t y A n a l y s i s f o r the 1987-92 P e r i o d . . 64 T a b l e 11 Components of the EPIC Model 73 T a b l e 12 S e l e c t e d EPIC Inputs S p e c i f i e d by the User . . . 77 T a b l e 13 Frequency of E f f l u e n t I r r i g a t i o n s on the Experimental S i t e 80 T a b l e 14 Harvest Dates f o r the Experimental P e r i o d . . . 81 T a b l e 15 Comparison between Simulated and Experimental North C a r o l i n a Data 85 T a b l e 16 Comparison between Simulated and Experimental Quebec Data 88 T a b l e 17 Impact of Trade S c e n a r i o s on Hog Inventory Percentage Changes Compared t o the B a s e l i n e . . . . 94 T a b l e 18 Impact of Trade and Environmental S c e n a r i o s on Kilograms of N i t r o g e n (N) and Phosphorus (P) A p p l i e d per Hectare i n North C a r o l i n a and Quebec . . 95 T a b l e 19 Impact of Trade and Environmental S c e n a r i o s on Market Hogs Numbers per Hectare i n North C a r o l i n a and Quebec 102 T a b l e 20 Impact of Trade and Environmental S c e n a r i o s on Water Q u a l i t y i n North C a r o l i n a 110 T a b l e 21 Impact of Trade and Environmental S c e n a r i o s on Water Q u a l i t y i n Quebec 113 T a b l e 22 Market Welfare, Hog I n v e n t o r i e s , S l a u g h t e r Amounts, L i v e Hog and Pork E x p o r t s and Percentage D i f f e r e n c e from the B a s e l i n e f o r Three Trade S c e n a r i o s 115 T a b l e 2 3 Market Welfare, Hog I n v e n t o r i e s , S l a u g h t e r Amounts, L i v e Hog and Pork Exports and Percentage D i f f e r e n c e from the B a s e l i n e f o r S i x Environmental S c e n a r i o s 118 T a b l e 24 Water Q u a l i t y and Market Welfare Changes i n North C a r o l i n a and Quebec 134 v i i LIST OF FIGURES F i g u r e 1 Conceptual Model 20 F i g u r e 2 Input and A b s o r p t i o n of N i t r o g e n by Forage i n North C a r o l i n a and Quebec 98 F i g u r e 3 Input and A b s o r p t i o n of Phosphorus by Forage i n North C a r o l i n a and Quebec 99 F i g u r e 4 Input and A b s o r p t i o n of N i t r o g e n and Phosphorus by Corn i n Quebec 100 F i g u r e 5 Impact of Land A p p l i c a t i o n of Swine Lagoon E f f l u e n t on Mass T r a n s p o r t of Phosphates i n Runoff i n North C a r o l i n a and Quebec 106 F i g u r e 6 Impact of Land A p p l i c a t i o n of Swine Lagoon E f f l u e n t on Forage on Mass T r a n s p o r t of N i t r a t e s i n North C a r o l i n a and Quebec 107 F i g u r e 7 Impact of Land A p p l i c a t i o n of Swine Lagoon E f f l u e n t on Corn on Mass T r a n s p o r t of N i t r a t e s i n Runoff and i n Leaching i n Quebec 109 F i g u r e 8 Sum of L i v e Hog Exports from 1987 t o 1992 under the B a s e l i n e and A l t e r n a t i v e S c e n a r i o s . . . . 130 F i g u r e 9 Sum of Pork Exports from 1987 t o 1992 under the B a s e l i n e and A l t e r n a t i v e S c e n a r i o s . . . . 131 F i g u r e 10 North American Welfare from 1987 t o 1992 under the B a s e l i n e and A l t e r n a t i v e S c e n a r i o s . . . . 133 v i i i ACKNOWLEDGEMENTS I have had a l o t of support i n the course o f my graduate s t u d i e s from extremely d e d i c a t e d p r o f e s s i o n a l s who can e s t a b l i s h r e l a t i o n s h i p s o f mutual r e s p e c t w i t h o t h e r s . My o n l y d e s i r e i s to g i v e back a t l e a s t as much as I have r e c e i v e d . F i r s t , I would l i k e t o thank Garth C o f f i n , my Masters T h e s i s S u p e r v i s o r whom I c o n s i d e r as my f i r s t mentor. Garth i n t r o d u c e d me t o Robert Romain, w i t h whom I worked f o r two years as a Research A s s o c i a t e a t L a v a l U n i v e r s i t y . Researchers o f the Groupe de Recherche A g r o - A l i m e n t a i r e (GRAAL) i n c l u d i n g Robert, have an excitement f o r r e s e a r c h which i s contagio u s and which c o n t r i b u t e d t o my d e c i s i o n t o pursue my s t u d i e s . In times o f doubt d u r i n g my Ph.D., Robert i s the one who t o l d me I c o u l d do i t . L a v a l U n i v e r s i t y a l s o f i n a n c e d my s t u d i e s d u r i n g f i v e y e ars which made t h i s p r o j e c t p o s s i b l e . At UBC, I would l i k e t o thank my s u p e r v i s o r Mary Bohman who pr o v i d e d an i n c r e d i b l e support, academic, moral and l o g i s t i c i n c l u d i n g r i d e s home a f t e r work and l a s t minute photocopying. To complement her academic s k i l l s , Mary i s a good e d i t o r , communicator and s t r a t e g i s t t o d e a l w i t h a d m i n i s t r a t i v e procedures. I would a l s o l i k e t o thank Les L a v k u l i c h , D i r e c t o r of Resource Management and Environmental S t u d i e s . He was and w i l l remain I hope an i n v a l u a b l e a d v i s o r due t o a g r e a t combination o f l i s t e n i n g s k i l l s , i n t e l l i g e n c e and expe r i e n c e . Furthermore, c o n v e r s a t i o n s w i t h him and Hans S c h r e i e r , one of my committee members, a m p l i f i e d my p a s s i o n f o r ecology and r e s e a r c h . P i e r r e - P h i l i p p e Claude, a c o n s u l t a n t i n s o i l s c i e n c e , p l a y e d a c r u c i a l r o l e due t o h i s knowledge o f the environmental model, EPIC. For t h r e e y e a r s , I had an o f f i c e i n the Department of A g r i c u l t u r a l Economics and I wish t o acknowledge Kathy Shynkaryk and Retha Gerstmar f o r c r e a t i n g a f a m i l y atmosphere so important when one works long hours. I would a l s o l i k e t o mention the c o n t r i b u t i o n o f E s t e l l e Brooke, my t e a c h e r o f t r a n s c e n d e n t a l m e d i t a t i o n . Not o n l y d i d t h i s technique h e l p me cope wi t h the s t r e s s e s o f graduate s t u d i e s but i t brought a l o t o f growth and happiness i n t o my l i f e . F i n a l l y a word f o r my paren t s , Paul and G i l Savard and e s p e c i a l l y my mother, who's reverence f o r h i g h e r e d u c a t i o n has had a s t r o n g i n f l u e n c e on me. 1 CHAPTER 1 - INTRODUCTION Problem Statement The i n t e r a c t i o n between t r a d e and environmental p o l i c i e s has become a hot i s s u e i n i n t e r n a t i o n a l p o l i c y forums such as the North American Agreement on Environmental C o - o p e r a t i o n and the Committee on Trade and Environment (CTE) of the World Trade O r g a n i z a t i o n (WTO). The t o p i c s r a i s e d i n c l u d e : 1) the impact of environmental p o l i c i e s on t r a d e p a t t e r n s and c o m p e t i t i v e n e s s , 2) the c o n t r i b u t i o n of i n t e r n a t i o n a l t r a d e t o environmental d e g r a d a t i o n , 3) the i n t e r n a t i o n a l harmonization of environmental p o l i c i e s , and 4) the use of t r a d e measures t o ensure a g i v e n l e v e l o f environmental q u a l i t y . Dean (1992) i d e n t i f i e s two important q u e s t i o n s . F i r s t , w i l l the removal of t r a d e b a r r i e r s decrease n a t u r a l c a p i t a l and l e a d t o u n s u s t a i n a b l e development, a n n i h i l a t i n g the g a i n s from trade? Second, i f we assume t h a t environmental p o l i c y can compensate f o r the p o t e n t i a l l y n e g a t i v e environmental e f f e c t s of t r a d e l i b e r a l i z a t i o n , what i s the combination of t r a d e and environmental p o l i c i e s p r o v i d i n g the h i g h e s t w e l f a r e ? T h i s t h e s i s addresses these two key q u e s t i o n s w i t h an e m p i r i c a l a n a l y s i s of the North American hog/pork i n d u s t r y . While the f i r s t - b e s t and second-best o p t i m a l t r a d e and environmental p o l i c y combinations have been i d e n t i f i e d t h e o r e t i c a l l y (e.g. K r u t i l l a , 1991), e m p i r i c a l s t u d i e s are necessary s i n c e many of the t h e o r e t i c a l f i n d i n g s depend on the 2 magnitude of environmental c o s t ( i . e . the v a l u e of p h y s i c a l damage) and on supply and demand e l a s t i c i t i e s o f goods produced. The hog i n d u s t r y i s a good case study from an environmental p e r s p e c t i v e . The hog i n d u s t r y , and the l i v e s t o c k s e c t o r i n g e n e r a l , are important c o n t r i b u t o r s t o p o l l u t i o n , e s p e c i a l l y water p o l l u t i o n . In the US, i t i s e s t i m a t e d t h a t the a g r i c u l t u r a l s e c t o r i s r e s p o n s i b l e f o r 64% and 57% o f nonpoint source p o l l u t i o n of r i v e r s and l a k e s , o f which 2 0% may be a t t r i b u t e d t o l i v e s t o c k waste (United S t a t e s Department o f A g r i c u l t u r e (USDA) c i t e d i n Bouzaher e t a l . , 1993b). P o t e n t i a l environmental problems from the l i v e s t o c k i n d u s t r y i n c l u d e : e u t r o p h i c a t i o n of s u r f a c e waters by phosphate emissions, p o l l u t i o n of groundwater by n i t r a t e emissions, contamination by heavy metals, such as cadmium, copper, mercury, l e a d and z i n c o r i g i n a t i n g from c o n c e n t r a t e d f e e d s t u f f s , contamination by pathogenic micro-organisms, and odor nuisance. N i t r a t e s and phosphates have r e c e i v e d the most a t t e n t i o n i n the l i t e r a t u r e . N i t r a t e s a f f e c t human h e a l t h : i n f a n t s under s i x months o f age are s u s c e p t i b l e t o the p o t e n t i a l l y l e t h a l b l o o d d i s o r d e r , methaemoglobinaemia, caused by l a r g e amounts of n i t r a t e s i n d r i n k i n g water. A l i n k between e x c e s s i v e n i t r a t e l e v e l s and stomach cancer i s a more c o n t r o v e r s i a l i s s u e . Contamination by phosphates causes e u t r o p h i c a t i o n of i n l a n d waters which i s a s s o c i a t e d w i t h i n c r e a s e d a l g a e and a q u a t i c p l a n t growth, oxygen d e p l e t i o n , pH v a r i a b i l i t y , and changes i n p l a n t s p e c i e s q u a l i t y and f o o d - c h a i n e f f e c t s . C e r t a i n blue-green 3 a l g a e i n e u t r o p h i e d waters form potent t o x i n s , cause t a s t e and odor problems, and i n t e r f e r e w i t h d r i n k i n g water treatment. Growth of l a r g e r p l a n t forms l i m i t the u s e f u l n e s s o f i n l a n d waters f o r r e c r e a t i o n a l and n a v i g a t i o n a l purposes, and decreases the p o t e n t i a l f o r commercial and s p o r t f i s h i n g (Sharpley e t al., 1994) . U n f o r t u n a t e l y , the economic c o s t s a s s o c i a t e d w i t h these environmental damages have not been assessed. The widespread nature of the problem r e q u i r e s i n f o r m a t i o n r e g a r d i n g a l l c a t e g o r i e s of damages ( h e a l t h r i s k s , r e d u c t i o n of commercial and r e c r e a t i o n a l f i s h i n g , etc.) and t h e i r c o s t s f o r d i f f e r e n t r e g i o n s . Hence, these c o s t s are not i n c o r p o r a t e d i n t o supply d e c i s i o n s of l i v e s t o c k producers, c r e a t i n g a market f a i l u r e (market p r i c e s d i f f e r from s o c i a l c o s t s which equal p r i v a t e and environmental c o s t s ) . S i n c e the t o t a l c o s t s a s s o c i a t e d w i t h n i t r a t e and phosphate p o l l u t i o n i n North America would have t o be i n c l u d e d i n a measure of s o c i a l w e l f a r e , t h i s t h e s i s measures market r a t h e r than s o c i a l w e l f a r e . Market w e l f a r e i s d e f i n e d as the M a r s h a l l i a n measures of producer and consumer s u r p l u s e s p l u s government payments. To c o r r e c t the market's f a i l u r e t o i n c o r p o r a t e environmental c o s t s , p o l i c i e s and r e g u l a t i o n s o r "command and c o n t r o l " approaches (such as standards, bans, and r e s t r i c t i o n s on i n p u t use), and i n c e n t i v e - b a s e d mechanisms (such as taxes, s u b s i d i e s , and marketable permits) are implemented. R e g u l a t i o n s are c h i e f l y used i n the l i v e s t o c k s e c t o r t o r e s t r i c t p o l l u t i o n 4 because many environmental problems a s s o c i a t e d w i t h a g r i c u l t u r a l p r o d u c t i o n are nonpoint source p o l l u t i o n problems; t o implement an i n c e n t i v e - b a s e d mechanism l i k e t a x a t i o n , policymakers must f i r s t i d e n t i f y the p o l l u t e r and determine the e x t e n t of the p o l l u t e r ' s r e s p o n s i b i l i t y . Examples of environmental r e g u l a t i o n s i n food and a g r i c u l t u r e i n c l u d e : r e s t r i c t i o n s on l a n d use, quotas on the p r o d u c t i o n and a p p l i c a t i o n of manure, r e s t r i c t i o n s on the number of animals per h e c t a r e or s i z e o f l i v e s t o c k o p e r a t i o n s , and r e s t r i c t i o n s on dumping p o l l u t a n t s i n t o s u r f a c e or groundwater s u p p l i e s ( K r i s s o f f e t al., 1996). Another type o f p o l i c y , i d e n t i f i e d as Best Management P r a c t i c e s , s p e c i f i e s t i l l a g e and crop r o t a t i o n p r a c t i c e s , t e r r a c e , g r a s s e d waterways, f e r t i l i z e r , and water and p e s t i c i d e a p p l i c a t i o n s . While environmental p o l i c i e s t a r g e t e d t o the l i v e s t o c k s e c t o r have used "command and c o n t r o l " instruments, Canadian income s t a b i l i z a t i o n p o l i c i e s designed t o a t t e n u a t e r i s k s i n c u r r e d from p r i c e v a r i a t i o n s have used s u b s i d i e s as p o l i c y instruments. These support programs are not n e c e s s a r i l y r e s o u r c e - n e u t r a l : environmental e f f e c t s can be a m p l i f i e d when p u b l i c p o l i c i e s r a i s e output p r i c e s above the market l e v e l . Furthermore, these f e d e r a l and p r o v i n c i a l programs are t a r g e t e d when c o u n t e r v a i l i n g d u t i e s are l e v i e d by the U n i t e d S t a t e s a g a i n s t Canadian hog e x p o r t s . Numerous government programs were judged c o u n t e r v a i l a b l e on the b a s i s of the US " s p e c i f i c i t y t e s t " i n the case brought by the U n i t e d S t a t e s a g a i n s t Canadian hog and pork exports i n 1984 and a g a i n s t Canadian e x p o r t s o f f r e s h , 5 c h i l l e d , and f r o z e n pork i n 1989. However, payments under the f e d e r a l A g r i c u l t u r a l S t a b i l i z a t i o n A c t (ASA) and the Quebec Farm Income S t a b i l i z a t i o n Insurance Program (QFISIP) accounted f o r 80% of the t o t a l c a l c u l a t e d subsidy i n the 1984 i n v e s t i g a t i o n . F u r t h e r , payments from the N a t i o n a l T r i p a r t i t e S t a b i l i z a t i o n (NTS) program, which r e p l a c e d ASA f o r hogs, and from the QFISIP accounted f o r n e a r l y 90% of the t o t a l c a l c u l a t e d s u b s i d y i n the 1989 i n v e s t i g a t i o n (Moschini and M e i l k e , 1993). T h i s t h e s i s s t u d i e s the economic and environmental impacts o f the removal of these programs and consequently of the e l i m i n a t i o n of c o u n t e r v a i l i n g d u t i e s l e v i e d a g a i n s t Canadian hog and pork exports by the US. Only one t r a d e b a r r i e r remains: a n o n t a r i f f b a r r i e r banning l i v e US hog imports i n Canada t o prevent the spread o f pseudorabies. Pseudorabies i s a v i r a l d i s e a s e a f f e c t i n g most warm-blooded mammals except people, f o r which t h e r e i s no v a c c i n e or treatment. Swine are i t s n a t u r a l h o s t s . The d i s e a s e has not o c c u r r e d i n Canada, though s p o r a d i c outbreaks have occured i n the US s i n c e 1931. These outbreaks k i l l p i g l e t s and cause r e p r o d u c t i v e problems i n sows. Pseudorabies can be i n t r o d u c e d i n t o a h e a l t h y herd of swine by an i n f e c t e d c a r r i e r animal t h a t shows no s i g n s of i l l n e s s , by c o n t a c t between i n f e c t e d and s u s c e p t i b l e p i g s , contaminated c l o t h i n g , or commonly by meat products ( A g r i c u l t u r e Canada, 1988). Removal of the ban on US imports of l i v e hogs i n Canada i s s i m u l a t e d but the p o t e n t i a l t r a d e r e l a t e d e x t e r n a l i t i e s a s s o c i a t e d w i t h 6 pseudorabies are not analyzed i n t h i s t h e s i s . To summarize, the hog/pork s e c t o r i s an expanding i n d u s t r y i n an open i n t e r n a t i o n a l market. I t s r a p i d growth t r i g g e r s environmental concerns from l o c a l communities w i t h "command and c o n t r o l " r e g u l a t i o n s as a consequence; an i n c r e a s i n g demand f o r e s t i m a t i n g economic and environmental impacts and t r a d e - o f f s of new r e g u l a t i o n s i s a r e s u l t . O b j e c t i v e s The f i r s t o b j e c t i v e of t h i s study i s t o develop a framework t o measure the impact of t r a d e , a g r i c u l t u r a l and environmental p o l i c i e s on water q u a l i t y . Water q u a l i t y i s measured by the l e v e l s of two environmental i n d i c a t o r s , n i t r a t e s and phosphates. The second o b j e c t i v e i s t o assess t r a d e and market w e l f a r e impacts of v a r i o u s combinations of a g r i c u l t u r a l , environmental and t r a d e p o l i c i e s . O r g a n i z a t i o n o f the T h e s i s Chapter I I reviews the l i t e r a t u r e on t r a d e , environmental and hog/pork models. Chapter I I I d e s c r i b e s the c o n c e p t u a l model used i n t h i s t h e s i s f o r l i n k i n g t r a d e and environmental v a r i a b l e s . Chapters IV and V p r e s e n t a l l a s p e c t s of the economic and environmental models, i n c l u d i n g data t r a n s f o r m a t i o n s , sources, v a l i d a t i o n r e s u l t s and p o s s i b l e m o d e l l i n g e x t e n s i o n s . Chapter VI analyzes the impacts of p o l i c y s c e n a r i o s on water 7 q u a l i t y , w e l f a r e , t r a d e p a t t e r n s , s l a u g h t e r amounts and hog i n v e n t o r i e s ( i . e . hog numbers). Chapter V I I d i s c u s s e s c o n c l u s i o n s and t h e i r p o l i c y i m p l i c a t i o n s . The economic model i s pre s e n t e d i n Appendix. 8 CHAPTER I I - LITERATURE REVIEW A survey of l i t e r a t u r e on t r a d e and the environment by Dean (1992) p r e s e n t s an overview of the main p o i n t s of debate. Almost 2 0 y e a r s ago, s e v e r a l s t u d i e s were conducted on the impact of environmental p o l i c i e s on the comparative advantages and r e l o c a t i o n of p r o d u c t i o n . The pros and cons of harmonized i n t e r n a t i o n a l standards were d i s c u s s e d and a l t e r n a t i v e p o l i c i e s ( l i k e s u b s i d i e s and c o u n t e r v a i l i n g d u t i e s ) capable of a l l e v i a t i n g changes i n comparative advantages were s c r u t i n i z e d . The a n a l y s i s was extended t o i n c l u d e transboundary p o l l u t i o n and t o the t r a d e of hazardous substances. In 1992, v i r t u a l l y no a n a l y t i c a l work e x i s t e d on the impact of removal of t r a d e b a r r i e r s on environmental d e g r a d a t i o n (Dean, 1992) . To date, s t u d i e s a c c o u n t i n g f o r changes i n s o i l and water q u a l i t y due t o p o l i c y reform o f t e n l a c k m u l t i p l e - c o u n t r y coverage because the environmental and economic e f f e c t s of p o l i c y reform are r e g i o n - s p e c i f i c and depend c r i t i c a l l y on s i t e -s p e c i f i c l a n d , c l i m a t e , and farm s t r u c t u r e c h a r a c t e r i s t i c s ( K r i s s o f f e t al., 1996). Linkages between t r a d e and environmental components have not y e t been made f o r the hog/pork i n d u s t r y . The f i v e most e s s e n t i a l elements i n t h i s study: t r a d e , m u l t i - s t a g e m o d e l l i n g of pork p r o d u c t i o n (from the sow herd t o pork p r o d u c t i o n ) , government s t a b i l i z a t i o n programs, Subsequently, the l i t e r a t u r e was reviewed by J a f f e e t al. (1995) . 9 environmental p o l i c y and the r e s u l t i n g environmental d e g r a d a t i o n have not been adequately l i n k e d . Hence, the l i t e r a t u r e i s reviewed f o r each component s e p a r a t e l y : t r a d e models, models of the a g r i c u l t u r a l s e c t o r i n c o r p o r a t i n g the environmental dimension and models of the hog/pork s e c t o r . Trade models are d i s c u s s e d i n the next s e c t i o n . Trade S t u d i e s w i t h Environmental V a r i a b l e s R e c e n t l y , the impact of t r a d e l i b e r a l i z a t i o n on environmental q u a l i t y has been assessed w i t h i n a g e n e r a l e q u i l i b r i u m framework. Copeland and T a y l o r (1995) developed d i f f e r e n t t h e o r e t i c a l models i n v o l v i n g North-South t r a d e , and Es p i n o s a and Smith (1995), Beghin, Roland-Hoist and van der Mensbrugghe (1995) and P e r r o n i and Wigle (1994) used Computable General E q u i l i b r i u m (CGE) models t o o b t a i n e m p i r i c a l r e s u l t s . The l a t t e r authors use an environmental model i n c l u d i n g damage and v a l u a t i o n f u n c t i o n s where the e l a s t i c i t y o f damage w i t h r e s p e c t t o emissions i s assumed t o be g r e a t e r than u n i t y . They r e c o g n i z e t h a t these e l a s t i c i t i e s a re l i k e l y t o be d i f f e r e n t f o r s p e c i f i c types of emissions and v a r y a c r o s s r e g i o n s , t o r e f l e c t d i f f e r e n c e s i n a s s i m i l a t i v e c a p a c i t y . These d i f f e r e n c e s are b e s t accounted f o r w i t h i n a p a r t i a l e q u i l i b r i u m framework. P a r t i a l e q u i l i b r i u m r e s u l t s are more r e l e v a n t f o r policymakers i n v o l v e d i n waste management s i n c e environmental p o l i c i e s are s p e c i f i c t o the l i v e s t o c k s e c t o r and t r a d e p o l i c i e s , such as t a r i f f s , are s e t commodity by commodity. 10 Many s t u d i e s use p a r t i a l e q u i l i b r i u m models of the a g r i c u l t u r a l s e c t o r t o assess the p r o d u c t i o n , consumption, t r a d e and market w e l f a r e consequences of e l i m i n a t i n g a g r i c u l t u r a l p o l i c i e s f o l l o w i n g t r a d e l i b e r a l i z a t i o n . S t u d i e s , which are e i t h e r s t a t i c or dynamic, i n c l u d e d i f f e r e n t numbers o f r e g i o n s , commodities, and a g r i c u l t u r a l p o l i c i e s . H e s t e r e t al. (1993) i s the o n l y e m p i r i c a l t r a d e study c o n t a i n i n g both t r a d e and environmental p o l i c i e s r e l a t e d t o the pork s e c t o r (among oth e r s e c t o r s ) . T h e i r most i n t e r e s t i n g c o n t r i b u t i o n i s the comparison of the e f f e c t s o f m o d i f i c a t i o n s of a g r i c u l t u r a l w i t h environmental p o l i c i e s . These authors compare the e f f e c t s of t r a d e l i b e r a l i z a t i o n f o r a g r i c u l t u r a l p o l i c i e s w i t h the e f f e c t of environmental p o l i c y on world p r i c e s and t r a d e volumes of v a r i o u s commodities i n c l u d i n g pork. The environmental p o l i c y modelled c o n s i s t s of a 1% r e d u c t i o n i n l i v e s t o c k d e n s i t y f o r s p e c i f i c l i v e s t o c k i n d u s t r i e s o f the European Community where i n t e n s i v e l i v e s t o c k p r o d u c t i o n has caused s e r i o u s adverse environmental e f f e c t s . As p a r t o f the r e c e n t Common A g r i c u l t u r a l P o l i c y reforms, l i m i t s were imposed on s t o c k i n g d e n s i t i e s . A 1% r e d u c t i o n i n pork d e n s i t y i n Belgium/Luxembourg, Denmark, France, Germany and the Netherlands induced an estimated decrease of 0.4% i n pork p r o d u c t i o n , an estimated decrease of 8.9% i n net exports and an e s t i m a t e d i n c r e a s e of 0.4% i n p r i c e . The S t a t i c World P o l i c y S i m u l a t i o n Model (SWOPSIM), a s y n t h e t i c model i n t e g r a t i n g parameters such as e l a s t i c i t i e s o b t a i n e d from the l i t e r a t u r e , was used. T h i s 11 model i n c o r p o r a t e s data from many c o u n t r i e s and many commodities. SWOPSIM i n c l u d e s the g r a i n s e c t o r , an a s s e t , s i n c e the e l i m i n a t i o n o f i t s p o l i c i e s might have a g r e a t e r e f f e c t t o the pork s e c t o r , than the e l i m i n a t i o n o f d i r e c t income support p o l i c i e s (Shagam, 1990). In the model, the feed s e c t o r i s l i n k e d t o the pork s e c t o r by i n c o r p o r a t i n g a d e r i v e d demand f o r fe e d by the l i v e s t o c k s e c t o r i n the demand f o r feed. The p r i c e o f feed i s a l s o an important v a r i a b l e i n the supply o f l i v e s t o c k . SWOPSIM i n c o r p o r a t e s p o l i c i e s even though i t i s not a p o l i c y s p e c i f i c model where, f o r example, a l l formulas f o r p r i c e s t a b i l i z a t i o n are endogenized. A p o l i c y i s r e p r e s e n t e d as a f i x e d d i f f e r e n c e between the t r a d e d p r i c e and the domestic i n c e n t i v e p r i c e . The p o l i c y p r i c e wedge data a re o b t a i n e d from the Economic Research S e r v i c e 1 s c a l c u l a t i o n s o f producer and consumer subsidy e q u i v a l e n t s . Hartman (1993) uses an a d a p t a t i o n o f SWOPSIM, the Trade and Environmental P o l i c y S i m u l a t i o n model (TEPSIM), t o estimate the t r a d e and w e l f a r e e f f e c t s o f n i t r o g e n taxes i n the European Community. Her study i n c l u d e s both a g r i c u l t u r a l output (e.g. pork) and i n p u t markets. The r e s u l t s show t h a t a l e v e l o f t a x a t i o n o f 25%, 50%, 100% and 200% would i n c r e a s e the European Community's net exports o f pork by 1%, 2.6%, 4.4% and 7% r e s p e c t i v e l y . Bohman and Lindsey (1997) model the North American sheep and lamb markets t o e x p l o r e the market and non market 12 consequences of environmental r e g u l a t i o n s and t r a d e l i b e r a l i z a t i o n . They conclude t h a t producers can g a i n from r e g u l a t i o n enforcement by s h i f t i n g a s i g n i f i c a n t p o r t i o n of the c o s t of r e g u l a t i o n t o consumers and nonmarket e f f e c t s are u n l i k e l y t o r e v e r s e the s i g n of market g a i n s or l o s s e s . Hartman (1993), Hester e t al. (1993) and Bohman and Lindsey (1997) do not attempt t o assess the e n v i r o n m e n t a l l y o p t i m a l l e v e l of r e d u c t i o n i n l i v e s t o c k d e n s i t y , which i s the major drawback o f a l l a g r i c u l t u r a l t r a d e l i b e r a l i z a t i o n s t u d i e s . Consequently, the e f f e c t s of reforms on w e l f a r e have not y e t been f u l l y e v a l u a t e d (Anderson, 1991). Three o t h e r s t u d i e s f o c u s i n g on the hog and/or pork s e c t o r and i n c o r p o r a t i n g t r a d e components are reviewed. Although they do not c o n s i d e r environmental p o l i c i e s and d e g r a d a t i o n , these v a r i a b l e s c o u l d be added. Hog/Pork S t u d i e s w i t h Trade V a r i a b l e s Wahl e t al. (1992) measured the e f f e c t s of g r a d u a l l i b e r a l i z a t i o n i n Japanese pork import p o l i c i e s by u s i n g an annual multimarket econometric l i v e s t o c k s e c t o r model. T h i s model c o n t a i n s t h r e e b l o c k s c o r r e s p o n d i n g t o pork, beef, and p o u l t r y markets. The b l o c k s are l i n k e d by a r e t a i l meat demand system t h a t i n c l u d e s pork, Wagyu beef, i m p o r t - q u a l i t y beef, p o u l t r y , and f i s h e x p enditures. Wahl e t al. (1992) use an econometric model which i s not as convenient as a programming model t o impose c o n s t r a i n t s and o f f e r v a r i o u s t e c h n o l o g i c a l 13 c h o i c e s . In f a c t , most s t u d i e s i n c o r p o r a t i n g the c o s t s of c o n t r o l l i n g n i t r a t e p o l l u t i o n use l i n e a r programming models (Hanley, 1990). For example, Hahn (1993) b u i l t a s t a t i c mathematical programming model f o r North American t r a d e of animal products which can be l i n k e d t o a g r a i n model i f necessary. Hogs and pork, among o t h e r l i v e s t o c k commodities, are i n c l u d e d . A dynamic model i s p r e f e r a b l e because i t shows the adjustment p a t t e r n whereas a s t a t i c model o n l y p r e d i c t s market e q u i l i b r i u m . The f a c t t h a t t a r i f f s and s u b s i d i e s are not n e c e s s a r i l y phased out i n equal i n s t a l m e n t s , and d i f f e r e n t e l i m i n a t i o n schedules induce d i f f e r e n t c o s t s can be i n c o r p o r a t e d i n a dynamic model. In s t a t i c models, s t o c k s are not modelled and assumed t o be unchanged. T h i s i s a s e r i o u s weakness, s i n c e , i n hog p r o d u c t i o n , p o l i c y v a r i a b l e s f i r s t a f f e c t b r e e d i n g s t o c k s which determine hog marketings nine t o t e n months l a t e r . S p i n e l l i (1991) modelled the Canadian and US hog/pork s e c t o r w i t h a m u l t i - s t a g e dynamic mathematical programming model. He modelled c o u n t e r v a i l i n g d u t i e s imposed on Canadian e x p o r t s t o the US, but d i d not i n c l u d e government programs, p r i c e e x p e c t a t i o n s and r i s k , and the f o r e c a s t i n g power of h i s model has s u f f e r e d because of t h i s . These programs must be i n c l u d e d because they are not n e c e s s a r i l y r e s o u r c e n e u t r a l and can change environmental impacts. S p i n e l l i d i v i d e d Canada i n t o Western and E a s t e r n r e g i o n s , which would c a p t u r e the r e a l l o c a t i o n of p r o d u c t i o n i n Canada f o l l o w i n g m o d i f i c a t i o n of 14 the Western G r a i n S t a b i l i z a t i o n A c t . I t would not, however, r e f l e c t the e f f e c t s of p r o v i n c i a l s t a b i l i z a t i o n programs o r p r o v i n c i a l environmental l e g i s l a t i o n s . Economic s t u d i e s m o d e l l i n g the l i v e s t o c k s e c t o r and i n c o r p o r a t i n g environmental v a r i a b l e s are reviewed i n the next s e c t i o n . Environmental S t u d i e s Heady and Vocke (1992) use a l i n e a r programming model o f the US t o analyze a s e t of p o l i c i e s designed t o a l t e r c u r r e n t a g r i c u l t u r a l p r a c t i c e s t o reduce US a g r i c u l t u r e ' s impact on the environment. The endogenous crop p r o d u c t i o n s e c t o r i n c l u d e s a l t e r n a t i v e p r o d u c t i o n a c t i v i t i e s f o r g r a i n sorghum, sorghum s i l a g e , b a r l e y , corn, corn s i l a g e , c o t t o n , legume and non-legume hay, oats, soybeans, sugar beets, and wheat. Endogenous l i v e s t o c k p r o d u c t i o n a c t i v i t i e s i n the model are d e f i n e d f o r hogs, beef cows, beef f e e d i n g , and d a i r y . The advantage of l i n e a r programming i s t h a t i t can i n c l u d e environmental c o n s t r a i n t s . The authors use a n i t r o g e n balance e q u a t i o n where a l l n i t r o g e n produced i n wastes i s a p p l i e d on the l a n d . The f i r s t s c e n a r i o r e s t r a i n s n i t r o g e n use t o a maximum o f 50 pounds per acre w h i l e the second s c e n a r i o r e q u i r e s the c o n s t r u c t i o n o f r u n o f f c o n t r o l f a c i l i t i e s a t a d d i t i o n a l c o s t s . Saygideger and Heady ( c i t e d i n Heady and Vocke, 1992) s t u d i e d t r a d e - o f f s between s o i l e r o s i o n c o n t r o l and c o s t s of produci n g output. T h e i r o b j e c t i v e f u n c t i o n minimizes p r o d u c t i o n 15 and t r a n s p o r t a t i o n c o s t s and t o t a l s o i l l o s s . Two problems are a s s o c i a t e d w i t h t h e i r approach. F i r s t , m i n i m i z i n g p o l l u t i o n l e v e l s below a t h r e s h o l d might be an o v e r k i l l and second, the r e s e a r c h e r must a r b i t r a r i l y a s s i g n r e l a t i v e weights t o each o b j e c t i v e , which has a s i g n i f i c a n t impact on the s o l u t i o n . Abrams and Barr (1974) s t u d i e d the l e a s t c o s t way of a c h i e v i n g t a r g e t n i t r o g e n emissions from i n o r g a n i c sources r a t h e r than from o r g a n i c and i n o r g a n i c sources. They used a s p a t i a l , l i n e a r programming model of the US c a t t l e - f e e d complex and an environmental model. They d i d not, however, study the impact of l i m i t i n g o r g a n i c wastes on f i e l d s . A m u l t i p l e r e g r e s s i o n model was used t o r e l a t e n i t r a t e l e v e l s t o f e r t i l i z e r usage, f o l l o w e d by a d d i t i o n of the i d e a l f e r t i l i z e r u s i n g environmental c o n s t r a i n t s on r e g i o n a l crop p r o d u c t i o n i n the programming model. A c c o r d i n g t o the authors, t h i s procedure should be regarded as e x p l o r a t o r y . V a r i a b l e s such as r a i n f a l l , s o i l type, s l o p e of c u l t i v a t e d land, drainage, crop, t i m i n g of a p p l i c a t i o n , l o c a t i o n of the l a n d w i t h i n the watershed, and l e v e l o f a p p l i c a t i o n per acre cropped were not used. Moon e t al. (1994) conducted a p i l o t study t o determine the u t i l i t y o f an i n f o r m a t i o n system t o support animal waste management d e c i s i o n s f o r the F r a s e r V a l l e y . T h e i r primary g o a l was t o d e f i n e the probable magnitude of l i v e s t o c k c o n t r i b u t i o n t o groundwater n i t r o g e n . They p a r t i t i o n e d e x i s t i n g s o i l n i t r o g e n and added manure n i t r o g e n t o i n o r g a n i c a d d i t i o n s , m i n e r a l i z e d n i t r o g e n , v o l a t i l i z a t i o n , d e n i t r i f i c a t i o n , crop uptake, and deep 16 l o s s e s , choosing t o impose a maximum c o n c e n t r a t i o n o f n i t r o g e n i n l e a c h a t e r e a c h i n g groundwater. Although economic assessment was conducted t o determine the impact of a l t e r n a t i v e l a n d use and manure t r a n s p o r t r e s t r i c t i o n s , i t was l i m i t e d t o an e n t e r p r i s e budget, i g n o r i n g the demand s i d e , s l a u g h t e r i n g , p r o c e s s i n g , and t r a d e a c t i v i t i e s . These v a r i a b l e s can be si m u l a t e d w i t h an economic model. Th e r e f o r e , i t i s necessary t o l i n k economic and environmental models t o f u l l y i n t e g r a t e economic and environmental components. T h i s i n t e g r a t e d systems approach has been a p p l i e d a t the farm, watershed and r e g i o n a l l e v e l (Bouzaher e t al., 1993a). The t h r e e most r e l e v a n t s t u d i e s f o r t h i s t h e s i s used the E r o s i o n P r o d u c t i v i t y Impact C a l c u l a t o r (EPIC) or one of i t s v a r i a n t s . Lakshminarayah e t al. (1996) e v a l u a t e d r e s o u r c e n e u t r a l i t i e s o f two s t a b i l i z a t i o n programs and t h e i r a s s o c i a t e d r i s k r e d u c t i o n s emphasizing l a n d use and s o i l d e g r a d a t i o n i n Western Canada. The o b j e c t i v e o f a second p r o j e c t was t o determine t e c h n o l o g i e s , management methods, p o l i c i e s , and i n s t i t u t i o n a l s e t t i n g s r e d u c i n g the n e g a t i v e impacts o f the d a i r y i n d u s t r y on the environment and a t the same time r e s u l t i n g i n a c o m p e t i t i v e i n d u s t r y (Osei e t al., 1995). Research on d a i r y p o l l u t i o n i n E r a t h County, Texas, served as the b a s e l i n e study. The economic model d i s t i n g u i s h e s between s m a l l , medium and l a r g e herd s i z e s because of the economies of s i z e and s c a l e i n m i l k p r o d u c t i o n and waste h a n d l i n g systems. A l i n e a r programming model i s used t o capture the complex i n t e r r e l a t i o n s h i p s among 17 p o l i c y , economic, n u t r i e n t and odor parameters a t the farm l e v e l . The model i d e n t i f i e s both f a r m - l e v e l economic impacts of a l t e r n a t i v e p o l i c i e s and farm l e v e l n u t r i e n t and odor emissions. Mapp e t al. (1994) compared the q u a n t i t a t i v e d i s t r i b u t i o n s o f n i t r a t e s and p e s t i c i d e s l o s t i n r u n o f f and p e r c o l a t i o n f o r d i f f e r e n t r e g i o n s and s o i l s under a l t e r n a t i v e water q u a l i t y p o l i c i e s such as p e r - a c r e r e s t r i c t i o n s and t o t a l n i t r o g e n r e s t r i c t i o n s . They l i n k e d an economic mathematical programming model t o a v a r i a n t of EPIC, i n c o r p o r a t i n g a p e s t i c i d e s u b r o u t i n e and MODFLOW (an a q u i f e r model which determines the amount of drawdown and water l e v e l s i n the a q u i f e r ) . The framework of the t h r e e s t u d i e s d e s c r i b e d p r e v i o u s l y i s comparable t o the approach chosen i n t h i s t h e s i s , which i s e x p l a i n e d i n the conceptual framework i n c h a p t e r I I I . 18 CHAPTER I I I - THE CONCEPTUAL MODEL To assess the impacts of environmental, t r a d e and a g r i c u l t u r a l p o l i c i e s on water q u a l i t y , t r a d e p a t t e r n s and market w e l f a r e , t h i s r e s e a r c h l i n k s a model o f the North American hog/pork s e c t o r t o an environmental model. M o d e l l i n g the r e l a t i o n s h i p s between l o c a l environmental impacts from a g r i c u l t u r a l p r o d u c t i o n and i n t e r n a t i o n a l p o l i c i e s poses a severe c h a l l e n g e . Trade l i b e r a l i z a t i o n a f f e c t s p r i c e s and has widespread e f f e c t s on p r o d u c t i o n and consumption i n more than one country. In c o n t r a s t , environmental impacts o f changes i n output depend on l o c a l environmental c o n d i t i o n s . The c o n c e p t u a l model, presented i n the next s e c t i o n , shows how t h e s e s c a l e d i f f e r e n c e s are d e a l t w i t h i n t h i s t h e s i s . D e s c r i p t i o n o f the Conceptual Model O b j e c t i v e s of t h i s study are achieved by i n t e g r a t i n g an environmental model w i t h an economic model u s i n g a c o n c e p t u a l framework (F i g u r e 1). Outputs of the models are c i r c l e d , w h i l e p o l i c y s c e n a r i o s , which are compared t o a base s c e n a r i o , are i n r e c t a n g l e s . Output v a r i a b l e s of most i n t e r e s t t o reach the o b j e c t i v e s of t h i s t h e s i s are i n b o l d type. The economic model i s a s p a t i a l mathematical programming model of US and Canadian swine i n d u s t r i e s . The model s o l v e s f o r e q u i l i b r i u m q u a n t i t i e s such t h a t markets c l e a r a t a l l l e v e l s . Important output v a r i a b l e s are l i v e hog i n v e n t o r i e s , q u a n t i t i e s 19 marketed and tra d e d , and p r i c e s o f hogs and pork i n the US and Canada. These v a r i a b l e s are used t o c a l c u l a t e r e g i o n a l market w e l f a r e . R e c a l l t h a t market w e l f a r e i s d e f i n e d as the M a r s h a l l i a n measures of producer and consumer s u r p l u s e s p l u s government payments. The E r o s i o n P r o d u c t i v i t y Impact C a l c u l a t o r (EPIC) i s the environmental model used i n c o n c e r t w i t h the economic model. I t i s a f i e l d - s c a l e model s i m u l a t i n g 158 output v a r i a b l e s . T h i s t h e s i s focuses on l e a c h i n g and r u n o f f o f n i t r a t e s , r u n o f f o f phosphates and n u t r i e n t a b s o r p t i o n o f n i t r o g e n and phosphorus. Procedures t o measure impacts of t r a d e and a g r i c u l t u r a l p o l i c i e s on water q u a l i t y , w e l f a r e , and t r a d e , can be f o l l o w e d from l a t o l c and the impacts o f n u t r i e n t management p l a n s on water q u a l i t y are d e p i c t e d i n st e p s 2a t o 2c. Under these p l a n s , l a n d a p p l i c a t i o n o f manure must not exceed crop agronomic requirements. Procedures t o assess the impact o f n u t r i e n t management p l a n s on w e l f a r e and t r a d e can be t r a c e d from 3a t o 3c. The impact o f a moratorium p r o h i b i t i n g i n c r e a s e s above the 1987 hog i n v e n t o r y l e v e l i s shown from 4a t o 4c. In the f o l l o w i n g s e c t i o n s , each of these f o u r procedures measuring d i f f e r e n t impacts, i s d i s c u s s e d i n more d e t a i l . Figure 1. Conceptual Model 20 Trade & Agricultural Policy Scenarios (1 to 3)** Environmental Policy Scenarios (Moratoriums) (8 and 9)** r REGIONAL ECONOMIC MODEL OF HOG/PORK INDUSTRY Live Hog Inventories • • Supply • Demand Welfare Trade Field Application of Manure/Hectare under Trade and Agricultural Policies 1b . I 4b • T Manure Production 3c Nutrient Plan (Quantity of Nutrient/Hectare of Arable Land) T Environmental Policy Scenarios (Nutrient Plans) (4 to 7)* Regional Hog _ Numbers 3b <• i Nutrient per Region 3a * N u m b e r s (e .g . 1a) refer to the t ype o f po l i cy a n a l y z e d . T h e l inks be tween m o d e l s a n d o ther c a l c u l a t i o n s a re s h o w n by the a r rows . 1a , 1b a n d 1c: Impac t of t r ade a n d agr icu l tu ra l po l i c i es o n w a t e r qual i ty , w e l f a r e a n d t rade - - - ^ 2 a , 2 b a n d 2 c : Impac t of nutr ient m a n a g e m e n t p l a n s on w a t e r qua l i t y ^ 3 a , 3b a n d 3c : Impac t of nutr ient m a n a g e m e n t p l a n s on we l f a re a n d t rade — . — - — • 4 a , 4 b a n d 4 c : Impac t of m o r a t o r i u m s on w a t e r qual i ty , we l f a re a n d t rade — * * S e e T a b l e 1 21 Impacts o f Trade and A g r i c u l t u r a l P o l i c i e s on Water Q u a l i t y , Welfare, and Trade Trade and a g r i c u l t u r a l p o l i c i e s ( l a i n F i g u r e 1) are i n c o r p o r a t e d w i t h i n the economic model which p r e d i c t s the r e g i o n a l hog i n v e n t o r y from which the r e g i o n a l amount o f manure produced can be c a l c u l a t e d . In order t o use thes e r e s u l t s i n the environmental model, r e g i o n a l r e s u l t s must be t r a n s l a t e d t o per h e c t a r e v a l u e s , the s c a l e o f the environmental model. A s i g n i f i c a n t assumption must be made t o l i n k the two models. One o p t i o n i s t o d i v i d e the t o t a l amount of manure produced by the area o f farmland owned or ren t e d by pork producers t o o b t a i n the q u a n t i t y o f manure a p p l i e d per h e c t a r e . T h i s o p t i o n i s not chosen s i n c e i t i s not r e a l i s t i c t o assume t h a t the whole l a n d base i s used as p o i n t e d out by A b d a l l a e t a l . : "Since most animal manure i s c o s t l y t o t r a n s p o r t and u s u a l l y has low economic v a l u e , i t o f t e n i s spread on or near ( s i c ) farm f i e l d s " ( A b d a l l a e t al., 1995). An a l t e r n a t i v e method i s s e l e c t e d . In the base s c e n a r i o , the n i t r o g e n from manure and m i n e r a l f e r t i l i z e r , e q u a l l i n g t h r e e times the recommended r a t e o f m i n e r a l f e r t i l i z e r , i s a p p l i e d . A c c o r d i n g t o Ganbazo (1995), the common p r a c t i c e i s t o apply the recommended amount of f e r t i l i z e r and add tw i c e as much manure. "Producers c o n t i n u e d t o apply f e r t i l i z e r because they had no con f i d e n c e i n the n u t r i e n t v a l u e o f manure. Manure was spread on the l a n d a t h i g h r a t e s simply t o get r i d o f i t " (Ganbazo, 1995) . Hog manure having a lower dry matter content and lower 22 f e r t i l i z i n g v a l u e than beef and p o u l t r y manure, t r a n s p o r t a t i o n c o s t s per k i l o g r a m of n i t r o g e n t o spread hog manure o f f the farm are h i g h e r than the c o s t s t o t r a n s p o r t p o u l t r y o r beef manure. In t r a d e s c e n a r i o s , the amount of n i t r o g e n i s a d j u s t e d a c c o r d i n g t o changes i n l i v e hog i n v e n t o r i e s s i n c e the amount of manure produced i s d i r e c t l y p r o p o r t i o n a l t o these i n v e n t o r i e s . Hence, i f i n v e n t o r i e s i n c r e a s e by 1%, the k i l o g r a m s o f n u t r i e n t a l s o i n c r e a s e by 1%. T h i s method assumes t h a t farmers use a c o n s t a n t q u a n t i t y of l a n d . The q u a n t i t y of manure n u t r i e n t s a p p l i e d t o one h e c t a r e i s then i n c o r p o r a t e d i n t o the environmental model w i t h weather, s o i l and p l a n t data ( l b i n F i g u r e 1) . L i k e f i e l d experiments performed on s m a l l p l o t s , model s i m u l a t i o n s on s m a l l areas are i n d i c e s o f n a t u r a l processes o c c u r r i n g a t a l a r g e r s c a l e l e a d i n g t o the l e a c h i n g and r u n o f f of n i t r a t e s and phosphates. Thus, changes i n p r o d u c t i o n l e v e l s , s i m u l a t e d w i t h the economic model, are i n p u t s i n the environmental model t o compare the impact o f d i f f e r e n t t r a d e and a g r i c u l t u r a l p o l i c y s c e n a r i o s on water q u a l i t y ( l c i n F i g u r e 1). R a l e i g h , North C a r o l i n a and Pont-Rouge, Quebec are the s i t e s chosen t o run the environmental model. Both r e g i o n s are f a c i n g environmental t h r e a t s from the hog i n d u s t r y . For example, i n North C a r o l i n a , emergency i n s p e c t i o n s by 2 s t a t e agencies f o l l o w i n g s p i l l o v e r s 2 found 124 lagoons f i l l e d t o the b r i n k and 2 | l A f t e r heavy r a i n s l a s t s p r i n g , the e a r t h w a l l o f a lagoon b u r s t on June 21, 1995 and sent 22 m i l l i o n g a l l o n s of water and p i g waste i n t o the new r i v e r above J a c k s o n v i l l e , k i l l i n g 4,000 f i s h , 23 526 dangerously overloaded (The Economist, September 2-8, 1995). In Quebec, a group of 18 non-governmental o r g a n i z a t i o n s r e g i s t e r e d a complaint w i t h the Environmental Co-operation Commission of the North American Free Trade Agreement (NAFTA), i n A p r i l 1997, a l l e g i n g t h a t the Government o f Quebec n e g l e c t e d t o adhere t o environmental norms r e l a t e d t o a g r i c u l t u r a l p o l l u t i o n o r i g i n a t i n g from animal, e s p e c i a l l y hog, p r o d u c t i o n . Impacts o f N u t r i e n t Management Plans on Water Q u a l i t y The optimal q u a n t i t y o f manure needed t o meet crop agronomic requirements i s determined w i t h the environmental model and n u t r i e n t management p l a n s are designed (2a and 2b i n F i g u r e 1) . The optimal q u a n t i t y o f manure a p p l i e d i s based on the q u a n t i t y o f n i t r o g e n and phosphorus absorbed by crops on a he c t a r e b a s i s . When s t u d y i n g the impact o f n u t r i e n t management p l a n s on water q u a l i t y (2c i n F i g u r e 1) , t h e r e i s no s c a l i n g problem s i n c e the onl y model used i s the environmental model. Hence the assessment i s on a per h e c t a r e b a s i s . Impact o f N u t r i e n t Management Plans on Welfare and Trade To o b t a i n the maximum r e g i o n a l l e v e l o f n u t r i e n t s r e q u i r e d f o r a n u t r i e n t management p l a n , based on crop agronomic requirements (3a i n F i g u r e 1), the a b s o r p t i o n o f n u t r i e n t s i s m u l t i p l i e d by the number o f h e c t a r e s owned o r r e n t e d by hog c l o s i n g a nearby r i v e r t o swimmers and b o a t e r s , and t h r e a t e n i n g s h e l l f i s h beds 15 m i l e s downstream. F i v e o t h e r s p i l l s f o l l o w e d . " (The Economist, September 2-8, 1995 p.24) 24 producers. The r e g i o n a l q u a n t i t i e s o f n u t r i e n t s can be t r a n s l a t e d i n t o a maximum hog i n v e n t o r y i . e . a maximum number of hogs p e r r e g i o n (3b i n F i g u r e 1) by assuming t h a t manure c o n t a i n s a f i x e d amount of n u t r i e n t s every year a c r o s s r e g i o n s . When t h i s s u s t a i n a b l e i n v e n t o r y l e v e l i s lower than a c t u a l i n v e n t o r i e s , a c o n s t r a i n t , which f i x e s a maximum i n v e n t o r y l e v e l , i s i n s e r t e d i n t o the economic model. Hence t h e op t i m a l q u a n t i t y o f manure i s t r a n s l a t e d i n t o environmental p o l i c i e s which are i n c o r p o r a t e d i n t o the economic model and used t o c a l c u l a t e t h e i r impact on market w e l f a r e (3c i n F i g u r e 1). Thus, a loop l i n k s the economic t o environmental and back t o the economic model. S c a l e s o f the Environmental and Economic Models An i n t e r e s t i n d r a f t i n g a methodology t o l i n k a l a r g e - s c a l e economic model comprising t r a d e w i t h an environmental model motivated the adoption of the procedures d e s c r i b e d above. I f the environmental model were l i m i t e d t o study the impact o f n u t r i e n t management p l a n s on water q u a l i t y (2c i n F i g u r e 1) , s c a l i n g problems would be e l i m i n a t e d . The o b j e c t i v e would be reached by u s i n g the environmental model without the economic component on a p e r h e c t a r e b a s i s . I n c o r p o r a t i n g the assessment of the impact of i n t e r n a t i o n a l t r a d e p o l i c y on water q u a l i t y r e q u i r e s making s t r o n g , but necessary, assumptions. Furthermore, the l i n k a g e from the environmental t o the economic model c o u l d be avoided. Environmental p o l i c i e s i n s e r t e d 25 i n t o the economic model c o u l d be designed without u s i n g the environmental model, thus e l u d i n g s c a l i n g problems. For example, the moratorium s c e n a r i o s (4a i n F i g u r e 1) are not founded on environmental endowments. The moratoriums p r o h i b i t i n c r e a s e s above the 1987 hog i n v e n t o r y l e v e l , 1987 b e i n g the f i r s t y ear of the s i m u l a t i o n p e r i o d . The maximum l e v e l does not take account of s i m u l a t i o n r e s u l t s on the l a n d a s s i m i l a t i v e c a p a c i t y p r o v i d e d by the environmental model. Hence the box i n c l u d i n g these two p o l i c y s c e n a r i o s i s not i n t e g r a t e d i n the arrow l i n k i n g the environmental t o the economic model (4a i n F i g u r e 1). Although the procedure i s seen as e x p l o r a t o r y , the use of EPIC t o d e s i g n n u t r i e n t p l a n s f o r f o u r of the s i x environmental s c e n a r i o s d e s c r i b e d i n the next s e c t i o n i s seen as a c o n t r i b u t i o n t o an area of e c o l o g i c a l economics needing f u r t h e r r e s e a r c h . 26 Trade and Environmental S c e n a r i o s The f o u r types of l i n k a g e s 1 i d e n t i f i e d i n F i g u r e 1 i n c o r p o r a t e nine p o l i c y s c e n a r i o s : t h r e e t r a d e l i b e r a l i z a t i o n s c e n a r i o s and s i x environmental p o l i c y s c e n a r i o s (2 moratoriums and 4 n u t r i e n t p l a n s ) . L i b e r a l i z a t i o n s c e n a r i o s encompass important l i b e r a l i z a t i o n endeavors w h i l e environmental p o l i c y s c e n a r i o s address d i f f e r e n t l e v e l s o f p o l i c y h a r m o n i z a t i o n t a k i n g i n t o account c u r r e n t p o l i c i e s . The b a s e l i n e d e p i c t s the t r a d e p o l i c i e s i n f o r c e d u r i n g the study p e r i o d and the common p r a c t i c e r e g a r d i n g waste management. C h a r a c t e r i s t i c s o f the b a s e l i n e and the nine s c e n a r i o s are found i n T a b l e l . 3 D e t a i l e d r e s u l t s from an a d d i t i o n a l s c e n a r i o w i t h a c o n s t a n t exchange r a t e equal t o 1 are not r e p o r t e d s i n c e t h i s s i t u a t i o n i s not expected t o occur i n the near f u t u r e . I t would induce decreases i n Canadian l i v e hog and pork exports t o the U.S. o f 16% and 22% r e s p e c t i v e l y . These changes are i n accordance w i t h the 20% i n c r e a s e i n v a l u e of the Canadian d o l l a r . 27 Tabl e 1 C h a r a c t e r i s t i c s o f the B a s e l i n e and Nine S c e n a r i o s S c e n a r i o s N o n t a r i f f b a r r i e r S t a b i -l i z a t i o n payment Coun-t e r v a i l % o f 1987 Quebec i n v e n -t o r y l e v e l % I n c r e a s e i n non feed c o s t s i n 5 r e g i o n s (other than Quebec) % of 1987 i n v e n -t o r y l e v e l a l l r e g i o n s B Yes Yes Pork & Hog Any l e v e l No Any l e v e l 1 Yes Yes Hog Any l e v e l No Any l e v e l 2 Yes No No Any l e v e l No Any l e v e l 3 No No No Any l e v e l No Any l e v e l 4 Yes Yes Pork & Hog 96.5 50 Any l e v e l 5 Yes Yes Yes 96.5 No Any l e v e l 6 Yes Yes Pork & Hog 35 50 Any l e v e l 7 Yes Yes Yes 35 No Any l e v e l 8 Yes Yes Pork & Hog 100 No 100 9 No No No 100 No 100 B: B a s e l i n e 28 In the f i r s t c ategory ( l a i n F i g u r e 1), l i b e r a l i z a t i o n i s i n c r e a s e d by steps from s c e n a r i o 1 t o 3. F i r s t , the pork c o u n t e r v a i l i n g duty i s removed, f o l l o w e d by the hog c o u n t e r v a i l i n g duty and s t a b i l i z a t i o n programs. F i n a l l y , the ban on US l i v e hog imports i n Canada imposed because o f the t h r e a t o f the spread of pseudorabies i s e l i m i n a t e d . S c e n a r i o s 4 t o 9 are environmental s c e n a r i o s chosen t o cover d i f f e r e n t p o l i c y harmonizations. Harmonization of p o l i c i e s i s an important i s s u e t o c o n s i d e r when implementing environmental p o l i c i e s w i t h i n an i n t e r n a t i o n a l c o n t e x t . Environmental p o l i c i e s v a r y a c r o s s r e g i o n s mainly because of v a r i a t i o n s i n p r e f e r e n c e s and endowments of environmental q u a l i t y (through a s s i m i l a t i v e c a p a c i t y ) . Thus, v a r y i n g demand and supply of environmental q u a l i t y suggests d i f f e r e n t o p t i m a l l e v e l s o f environmental p r o t e c t i o n . There i s a p e r c e i v e d danger t h a t d i f f e r e n c e s i n the s t r i n g e n c y of p o l i c i e s or i n t h e i r implementation, however, may c r e a t e p o l l u t i o n havens where p o l l u t i o n - i n t e n s i v e f i r m s can r e l o c a t e . T h i s i s an argument f o r p o l i c y harmonization, where the d i s t i n c t i o n must be made between the harmonization of o b j e c t i v e s and the instruments used t o reach those o b j e c t i v e s . Two r e g i o n s can have the same o b j e c t i v e e.g. l i m i t the amount of n i t r a t e s i n r u n o f f t o 6 mg/L and use d i f f e r e n t p o l i c y instruments t o a t t a i n t h i s o b j e c t i v e . One r e g i o n can r e q u i r e the c e r t i f i c a t i o n o f n u t r i e n t management p l a n s w h i l e the o t h e r r e g i o n can l i m i t the hog numbers per h e c t a r e . 29 S c e n a r i o s 4 and 6 s i m u l a t e m u l t i l a t e r a l implementations of n u t r i e n t management p l a n s u s i n g p o l i c y instruments which are s p e c i f i c t o r e g i o n a l needs, w h i l e s c e n a r i o s 5 and 7 s i m u l a t e the u n i l a t e r a l implementation of n u t r i e n t p l a n s i n Quebec (3c i n F i g u r e 1). The d e s i g n of s c e n a r i o s 4 t o 7 r e q u i r e d a number o f c a l c u l a t i o n s which are exposed i n next s e c t i o n . S c e n a r i o s 8 and 9 harmonize p o l i c y instruments m u l t i l a t e r a l l y by s i m u l a t i n g the implementation o f a moratorium under a c t u a l and f r e e t r a d e c o n d i t i o n s ( s c e n a r i o s 8 and 9, r e s p e c t i v e l y ) . A moratorium on the 1987 i n v e n t o r y l e v e l s i s s i m u l a t e d i n s c e n a r i o 8. Moratoriums have been used f o r many years i n Quebec and were r e c e n t l y implemented i n North C a r o l i n a . Moratoriums are not e c o n o m i c a l l y and e n v i r o n m e n t a l l y o p t i m a l because they do not a l l o w supply t o respond t o market p r i c e s and they are not designed a c c o r d i n g t o a s s i m i l a t i v e c a p a c i t y but they are e a s i e r t o monitor than n u t r i e n t management p l a n s . I t i s almost i m p o s s i b l e f o r i n s p e c t o r s t o v e r i f y t h a t a l l l a n d necessary t o r e s p e c t the p l a n s i s u t i l i z e d f o r manure a p p l i c a t i o n s . On the o t h e r hand, r e g i o n a l data on i n v e n t o r y and marketing are p u b l i s h e d i n Canada and the US a l l o w i n g a l l i n t e r e s t e d p a r t i e s t o assess t h i s p o l i c y ' s s u c c e s s . In t h i s c o ntext, moratoriums can be p r a c t i c a l though not o p t i m a l . S c e n a r i o 9 combines t r a d e and environmental p o l i c i e s . The moratorium on 1987 i n v e n t o r i e s i s s i m u l a t e d under f r e e t r a d e See the s e c t i o n on p o l i c y i m p l i c a t i o n s f o r more d e t a i l s . 30 c o n d i t i o n s t o take i n t o account p o t e n t i a l opposing e f f e c t s o f t r a d e and environmental p o l i c y on i n v e n t o r y changes. Design o f S c e n a r i o s 4 t o 7 Sc e n a r i o s 4 and 6, which are i d e n t i f i e d i n F i g u r e 1 as n u t r i e n t p l a n s , use EPIC s i m u l a t i o n r e s u l t s on the a b s o r p t i o n o f n u t r i e n t s . The o b j e c t i v e s of the n u t r i e n t p l a n s a re harmonized, but d i f f e r e n t p o l i c y instruments are implemented depending on whether farmers can expand the l a n d base f o r manure a p p l i c a t i o n s . Two types o f environmental instruments are a p p l i e d : 1) r e s t r i c t i o n s on i n v e n t o r i e s when the l a n d base i s i n s u f f i c i e n t , and 2) i n c r e a s e s i n t r a n s p o r t a t i o n c o s t s t o spread manure on l a r g e r areas. To determine which p o l i c y instrument i s a p p r o p r i a t e f o r each r e g i o n , the ecosystem support c a p a c i t y f o r hogs i . e . the maximum i n v e n t o r i e s must be estimated. The support c a p a c i t y i s assessed by c a l c u l a t i n g the maximum amounts of n u t r i e n t s which can be a p p l i e d on l a n d and i t s c o r r e s p o n d i n g hog i n v e n t o r y . F i r s t , the maximum amounts of n u t r i e n t s a re o b t a i n e d by m u l t i p l y i n g the consumption of n u t r i e n t per crop p e r h e c t a r e , by the number of h e c t a r e s owned or ren t e d by hog producers (Table 2) • 31 T a b l e 2 Kilograms o f N i t r o g e n and Phosphorus P e r m i s s i b l e under Two N u t r i e n t Management Plans i n the Southeast and i n Quebec Using EPIC Crop A b s o r p t i o n Rates Region and Crop Kilograms of N i t r o g e n under the N i t r o g e n P l a n Kilograms o f Phosphorus under the Phosphorus P l a n Per Hectare Per Region Per Hectare Per Region Kg M i l l i o n Kg Kg M i l l i o n Kg Southeast (Forage) 73 207.45 20 56.84 Quebec (Corn) 106 15 22 3.11 Quebec (Forage) 84 11.89 30 4.25 [1] S p e c i e s which compose forage i n North C a r o l i n a are d i f f e r e n t from those t h a t compose forage i n Quebec. To t r a n s l a t e r e g i o n a l amounts of n u t r i e n t s i n t o r e g i o n a l hog numbers (3b i n F i g u r e 1), the t o t a l q u a n t i t y o f a n u t r i e n t must be d i v i d e d by the q u a n t i t y of n u t r i e n t s produced by one animal. Choices f o r the c o n c e n t r a t i o n of n i t r o g e n and phosphorus i n manure i s of primary importance. One can c o n s i d e r the f e r t i l i z i n g v a l u e of manure a t d i f f e r e n t stages o f the manure treatment, which can be measured b e f o r e s t o r a g e or a f t e r s t o r a g e, but b e f o r e l a n d a p p l i c a t i o n . The v a l u e o f n u t r i e n t s a v a i l a b l e t o crops, a f t e r s o i l i n c o r p o r a t i o n l o s s e s , should a l s o be taken i n t o account. T h i s can be a s i g n i f i c a n t v a l u e s i n c e , i n North C a r o l i n a , 70% and 20% of the n i t r o g e n i s l o s t f o l l o w i n g a n a e r o b i c lagoon treatment and manure s t o r a g e r e s p e c t i v e l y ( p ersonal communication w i t h James C. Barker, P r o f e s s o r and E x t e n s i o n S p e c i a l i s t , B i o l o g i c a l and A g r i c u l t u r a l E n g i n e e r i n g , North C a r o l i n a S t a t e U n i v e r s i t y ) . In Quebec, the l o s s i s around 32 40% (Gouvernement du Quebec, 1995). Losses t o the atmosphere should not be i g n o r e d s i n c e ammonium emissions are converted i n t o n i t r a t e s c o n t r i b u t i n g t o a c i d r a i n which r e t u r n s n i t r o g e n t o the l a n d . One way t o account f o r a i r and water q u a l i t y i s t o measure n u t r i e n t content i n manure b e f o r e v o l a t i l i z a t i o n t o the atmosphere and s o i l i n c o r p o r a t i o n l o s s e s . The impact assessment o f environmental p o l i c y s c e n a r i o s 4 t o 7 on t r a d e p a t t e r n s and w e l f a r e (3a t o 3c i n F i g u r e 1) i s based on ecosystem a s s i m i l a t i v e c a p a c i t y r a t h e r than on s o i l a s s i m i l a t i v e c a p a c i t y . To analyze the impact of n u t r i e n t management p l a n s on water q u a l i t y (2b and 2c i n F i g u r e 1) the r a t i o of n i t r o g e n t o phosphorus i s not the same as the one used t o f i n d s u s t a i n a b l e i n v e n t o r y l e v e l s . The former r a t i o i s found a f t e r v o l a t i l i z a t i o n and treatment, f o l l o w i n g storage of manure, s i n c e the focus here i s o n l y on the impacts of l a n d a p p l i c a t i o n s on water q u a l i t y ; not on t o t a l a i r and water q u a l i t y . S i n c e the p r o p o r t i o n o f n i t r o g e n v o l a t i l i z e d which r e t u r n s from the atmosphere t o the l a n d , and the l o c a t i o n a t which n i t r o g e n r e t u r n s a f t e r b e i n g c a r r i e d by a i r c u r r e n t s are unknown, t h a t p o r t i o n of n i t r o g e n i s i g n o r e d when examining impacts o f n u t r i e n t management p l a n s on water q u a l i t y . S i n c e n u t r i e n t l e v e l s i n manure are f a i r l y comparable i n North America, a hog a t the f i n i s h i n g stage i s assumed t o produce 10.44 kg of n i t r o g e n and 5.22 kg of phosphorus a n n u a l l y , which i s the n u t r i e n t content b e f o r e l o s s e s (Gouvernement du 33 Quebec, 1995). 5 Maximum n i t r o g e n and phosphorus l e v e l s are d i v i d e d by 10.44 and 5.22 r e s p e c t i v e l y t o o b t a i n the maximum hog i n v e n t o r y l e v e l s . Maximum i n v e n t o r i e s a re conve r t e d t o percentages o f 1987 l e v e l s ; the year 1987 i s chosen s i n c e i t i s the s t a r t o f the s i m u l a t i o n p e r i o d . R e s u l t s i n Quebec and i n the Southeast are shown i n Table 3. Table 3 Hog Inventory P e r m i s s i b l e under Two N u t r i e n t Management Plans i n the Southeast and i n Quebec _ ^ Region and Crop N i t r o g e n P l a n Phosphorus P l a n Maximum Hogs Numbers [1] % 1987 Hog Numbers[2] Maximum Hog Numbers [1] % 1987 Hog Numbers [2] M i l l i o n Head % M i l l i o n Head % Southeast (Forage) 11.16 295 5.23 138 Quebec (Corn) 0.8 96.5 0.29 35 Quebec (Forage) 0.64 77.2 0.39 47 [1] Hogs a t the f i n i s h i n g stage [2] 1987 si m u l a t e d l e v e l s S i n c e Quebec i n v e n t o r i e s a l r e a d y exceed the l a n d c a p a c i t y , r e s t r i c t i o n s on i n v e n t o r i e s are imposed i n t h a t p r o v i n c e . A c c o r d i n g t o r e s u l t s shown i n Table 3, producers must reduce hog A boar and sow, w i t h p i g l e t s , produce 22.1 kg of n i t r o g e n and 15.14 kg of phosphorus and the herd i s assumed t o be composed of 48% p i g l e t s , 38% hogs a t the f i n i s h i n g stage and 14% sows and boars. 34 marketings t o 0.8 and 0.64 m i l l i o n head ( f o r c o r n and forage, r e s p e c t i v e l y ) t o r e s p e c t the n i t r o g e n p l a n , c o r r e s p o n d i n g t o 96.5% and 77.2% of the 1987 l e v e l s . The phosphorus p l a n i s more c o n s t r a i n i n g and r e q u i r e s r e d u c t i o n s t o 35% and 47% (corn and forage, r e s p e c t i v e l y ) of the 1987 l e v e l s . The environmental s c e n a r i o s chosen, are the l e a s t and the most r e s t r i c t i v e . S c e n a r i o s 4 and 6 c o n s t r a i n i n v e n t o r i e s t o 96.5% and 35% of 1987 l e v e l s ( i n b o l d type i n T a b l e 3). R e s u l t s from r e s t r i c t i n g i n v e n t o r y l e v e l s t o 77.2% and 47% o f 1987 i n v e n t o r y l e v e l s are expected t o f a l l i n between the most and l e a s t r e s t r i c t i v e i n v e n t o r y r e s t r i c t i o n s . C o n c l u s i o n s on s u s t a i n a b l e hog i n v e n t o r y l e v e l s depend on assumptions made concerning the number of h e c t a r e s a v a i l a b l e f o r l a n d a p p l i c a t i o n s of manure. In f a c t , i f l a n d on which wheat and s m a l l g r a i n s are c u l t i v a t e d i s added t o l a n d owned o r r e n t e d by Quebec hog producers, the number of h e c t a r e s jumps from 141,520 t o 443,24 0 without a need t o r e s t r i c t i n v e n t o r y . These areas, however, have t o be shared w i t h o t h e r l i v e s t o c k producers and i t i s beyond the scope of t h i s t h e s i s t o i n c l u d e manure p r o d u c t i o n from o t h e r s p e c i e s . N e v e r t h e l e s s , i n f o r m a t i o n from d i f f e r e n t sources c o n f i r m t h a t the l a n d base i n Quebec i s i n s u f f i c i e n t t o d i s p o s e o f a l l the manure produced. Each year, t h e r e i s an excess o f 3.6 m i l l i o n c u b i c meters of manure f o r which l a n d i s u n a v a i l a b l e c l o s e t o p r o d u c t i o n u n i t s (Gouvernement du Quebec, 1996). A l s o , the 1995-1996 r e p o r t from the A u d i t o r General s t a t e s t h a t t h e r e 35 i s a s u r p l u s of 7 m i l l i o n c u b i c meters of manure a p p l i e d on l a n d 6 . In the Southeast, however, l a n d c a p a c i t y i s s u f f i c i e n t and i n c r e a s e s i n c o s t s t o spread manure on l a r g e r areas are s i m u l a t e d . Increases i n c o s t s are a l s o i n c o r p o r a t e d i n the Midwest, i n Western Canada, i n O n t a r i o and i n the A t l a n t i c p r o v i n c e s . On average, 1,684 g a l l o n s of s l u r r y are assumed t o be produced per head per y e a r . 7 In Indiana, "a custom s e r v i c e h a u l s s l u r r y up t o t h r e e - q u a r t e r s of a m i l e f o r a p r i c e of one cent per g a l l o n (Jones; F o s t e r ) . I f s l u r r y i s spread i n a c o n c e n t r i c c i r c l e around the hog house, t h r e e - q u a r t e r s of a m i l e r e p r e s e n t s over one thousand a c r e s (1,130 a c ) . " (Roka, 1993). At one cent a g a l l o n , the annual c o s t i s US$16.84 or US$4.21 per q u a r t e r per head. T h i s c o s t i s entered i n s c e n a r i o s 4 and 6 s i m u l a t e d w i t h the economic model, which i s presented i n c h a p t e r IV. Rapport du V e r i f i c a t e u r g e n e r a l a l'Assemblee n a t i o n a l e pour l'annee 1995-1996. Tome I, C h a p i t r e 2, A i d e f i n a n c i e r e o f f e r t e aux p r o d u c t eur s a g r i c o l e s . Etude c o n d u i t e aupres du m i n i s t e r e de 1 ' A g r i c u l t u r e , des P e c h e r i e s e t de 1 ' A l i m e n t a t i o n , de l a Regie des assurances a g r i c o l e s du Quebec e t de l a S o c i e t e de financement a g r i c o l e . 7A market hog and sow w i t h p i g l e t s produce r e s p e c t i v e l y 2.9 and 8.5 m per year of s l u r r y (Gouvernement du Quebec, 1995). S p i n e l l i (1991), s t a t e s t h a t the i n v e n t o r y i s composed o f 38% market hogs and 62% sows and p i g l e t s . The weighted average of s l u r r y per head converted i n t o g a l l o n s per y e a r equals 1683.96. 36 CHAPTER IV - THE ECONOMIC MODEL The economic model i s an a d a p t a t i o n o f a s p a t i a l mathematical programming model of US and Canadian swine i n d u s t r i e s ( S p i n e l l i , 1991) . I t i s a m u l t i - s t a g e p a r t i a l e q u i l i b r i u m model which i s dynamic, r e g i o n a l and i n c o r p o r a t e s a r i s k v a r i a b l e ; f e a t u r e s d e s c r i b e d f o l l o w i n g the p r e s e n t a t i o n o f the o b j e c t i v e f u n c t i o n , feed c o s t s , pork demand and output v a r i a b l e s . Data v a l u e s and v a l i d a t i o n o f r e s u l t s a re shown t h e r e a f t e r . The model, i n c l u d i n g equations and the o b j e c t i v e f u n c t i o n , i s d e s c r i b e d i n appendix A. The O b j e c t i v e F u n c t i o n The model's o b j e c t i v e f u n c t i o n maximizes market w e l f a r e d e f i n e d as the M a r s h a l l i a n measures of producer and consumer s u r p l u s e s p l u s government payments. The demand f u n c t i o n i s uncompensated s i n c e pork i s a s m a l l p o r t i o n o f t o t a l consumer expendi t u r e s and major s h i f t s i n pork p r i c e s have s m a l l e f f e c t s on the c o s t o f l i v i n g . The o b j e c t i v e f u n c t i o n does not maximize s o c i a l w e l f a r e which i n c l u d e s the economic b e n e f i t s d e r i v e d from environmental q u a l i t y , because economic v a l u e s f o r decreased n i t r a t e and phosphate l e v e l s i n North America do not e x i s t . Hanley (1990) e x p l a i n s : "...economists seem t o have n e g l e c t e d b e n e f i t e s t i m a t i o n f o r n i t r a t e p o l l u t i o n c o n t r o l : much more work i s needed i n t h i s area. A l t e r n a t i v e l y , we might judge b e n e f i t e s t i m a t i o n 37 t o be too d i f f i c u l t , and seek e f f i c i e n t ways o f a c h i e v i n g p o l i t i c a l l y - d e t e r m i n e d t a r g e t n i t r a t e l e v e l s a t the lowest p o s s i b l e r e s o u r c e c o s t . " (Hanley, 1990). Hence, the approach chosen i n t h i s t h e s i s i s t o maximize market, r a t h e r than s o c i a l w e l f a r e . The o b j e c t i v e i s t o maximize the area under each r e g i o n ' s pork demand f u n c t i o n , adding government payments and s u b t r a c t i n g a l l c o s t s which a r e : a) f i x e d o r v a r i a b l e c o s t s f o r produc i n g p i g s and hogs, f o r each age c o h o r t and each p r o d u c t i o n r e g i o n ( i n c l u d i n g a c t u a l abatement c o s t s ) , b) t r a n s p o r t a t i o n c o s t s f o r moving fe e d e r p i g s between p r o d u c t i o n r e g i o n s , c) a l l s l a u g h t e r , p r o c e s s i n g , storage, and t r a n s p o r t a t i o n c o s t s i n c u r r e d w h i l e p r e p a r i n g and d i s t r i b u t i n g s l a u g h t e r e d and processed pork c a r c a s s e s , d) a w h o l e s a l e - r e t a i l marketing margin, e) c o u n t e r v a i l i n g d u t i e s which are t r a n s l a t e d i n t o an e q u i v a l e n t c o s t i n c r e a s e f o r t r a n s p o r t i n g products from Canada, and f) r i s k a s s o c i a t e d w i t h p r i c e v a r i a b i l i t y . Feed Costs and Pork Demand as D r i v i n g F o r c e s o f the Model Feed c o s t s and the demand f o r pork are the d r i v i n g f o r c e s of the model. Feed c o s t s i n f l u e n c e the s i z e o f r e g i o n a l hog herds whose dynamics are d r i v e n by the s i z e o f the b r e e d i n g herd. Feed p r i c e s are exogenous and hence do not a l l o w changes i n animal p r o d u c t i o n t o a f f e c t g r a i n demand o r p r i c e s . Demand f o r pork i s re p r e s e n t e d by an aggregate q u a r t e r l y r e t a i l demand f u n c t i o n f o r composite pork products c o m p r i s i n g d i f f e r e n t c u t s o f pork. For example, the US sea s o n a l r e t a i l pork 38 demand eq u a t i o n o b t a i n e d by S p i n e l l i (1991), f o r the f i r s t q u a r t e r , from a l i n e a r r e g r e s s i o n w i t h o r d i n a r y l e a s t squares (OLS) i s : PCPC t = 15.421 - 0.058 RPPt + 0.022 BRPt + 0.049 CRPt + 0.077 PINC t PCPC = per c a p i t a pork consumption RPP = pork r e t a i l p r i c e BRP = beef r e t a i l p r i c e CRP = c h i c k e n r e t a i l p r i c e PINC = p e r s o n a l per c a p i t a income t = q u a r t e r t Re g r e s s i o n parameters used by S p i n e l l i (1991) are used w i t h updated data f o r independent v a r i a b l e s . Parameters f o r the US seas o n a l r e t a i l pork demand equation are assumed t o apply t o a l l r e g i o n s . A l a c k o f c o n s i s t e n t d e f i n i t i o n s o f r e t a i l weight e q u i v a l e n t s f o r pork between Canada and the US makes t h i s assumption necessary. The US r e t a i l p r i c e s a re used f o r a l l r e g i o n s and r e g i o n a l data on p e r s o n a l p e r c a p i t a income d i f f e r e n t i a t e the demand f u n c t i o n s . Hence, each r e g i o n has i t s demand f u n c t i o n and p r i c e e l a s t i c i t y s i n c e the s l o p e parameter i s m u l t i p l i e d by r e g i o n a l average endogenous hog p r i c e s over r e g i o n a l average q u a n t i t i e s . As a p o i n t o f r e f e r e n c e , the pork p r i c e e l a s t i c i t y o b t a ined by S p i n e l l i (1991) u s i n g average US p r i c e and q u a n t i t y i s -0.768. Output V a r i a b l e s The output v a r i a b l e s a re: the number of animals i n the g s o l v e d by the model 39 herd, the a c t u a l c a p i t a l and incremental changes i n c a p i t a l a t the farm and SPS l e v e l s , the number o f hogs marketed, the weight of l i v e animals i n farm and SPS r e g i o n s , the amount o f meat produced and i n storage, and the demand f o r r e t a i l pork. The number o f b r e e d i n g animals t r a n s f e r r e d from one p r o d u c t i o n r e g i o n t o another, and the amount of meat shipped from the SPS r e g i o n s are a l s o simulated. Important Fea t u r e s o f the Model Dynamics Dynamics are important aspects o f the model's equ a t i o n s . The number of p i g l e t s i s a f u n c t i o n o f the b r e e d i n g herd from the p r e v i o u s p e r i o d , m u l t i p l i e d by the b i r t h r a t e , added t o the net t r a n s f e r o f p i g l e t s a c r o s s r e g i o n s . The number o f f i n i s h e r s depends on the p r e v i o u s p e r i o d , and i s a f u n c t i o n o f the number of p i g l e t s t h a t s u r v i v e the weaning stage combined w i t h the net t r a n s f e r o f p i g l e t s from o t h e r r e g i o n s . The number of animals i n the b r e e d i n g s t o c k a l s o depends on the p r e v i o u s p e r i o d , and i s a f u n c t i o n o f bree d i n g i n v e n t o r y and number o f s u r v i v i n g f i n i s h e r s , minus the number of marketed animals, p l u s net t r a n s f e r s a c r o s s r e g i o n s . The number o f animals c u l l e d from the bre e d i n g s t o c k i s a f i x e d p r o p o r t i o n o f the t o t a l number of animals e n t e r i n g the s t o c k i n the p r e v i o u s q u a r t e r . The model i s c o n s t r a i n e d such t h a t the q u a n t i t y o f pork produced i n a SPS r e g i o n , p l u s imports, minus q u a n t i t i e s shipped t o consumptive r e g i o n s , the m i l i t a r y s e c t o r , US t e r r i t o r i e s , and 40 export markets, must be l a r g e r than the q u a n t i t y added t o s t o r a g e from the l a s t q u a r t e r . Dynamics a l s o p l a y a r o l e i n the replacement o f d u r a b l e a s s e t s ( b u i l d i n g s and equipment) a t the farm and s l a u g h t e r i n g l e v e l s . The replacement of c a p i t a l , combined w i t h the u n d e p r e c i a t e d p o r t i o n of c a p i t a l from the l a s t q u a r t e r must be g r e a t e r o r equal t o the c a p i t a l a v a i l a b l e f o r p r o d u c t i o n . R e q i o n a l i t y Regional.ity i s a main f e a t u r e of the model. P r o d u c t i o n r e g i o n s are d e l i n e a t e d a c c o r d i n g t o p r e v a i l i n g c u l t u r a l p r a c t i c e s i n r a i s i n g hogs and by the amount of feeds produced i n each r e g i o n . Two producing r e g i o n s e x i s t i n the US: the Midwest and the Southeast (comprising North C a r o l i n a ) and f o u r US SPS r e g i o n s : E a s t , South, Midwest and Western US. The US demand r e g i o n s are the same as the SPS r e g i o n s . In Canada, f o u r p r o d u c t i o n , SPS and demand r e g i o n s e x i s t : Western Canada, O n t a r i o , Quebec, and the A t l a n t i c p r o v i n c e s . A c e n t r a l c i t y i s chosen f o r each r e g i o n (Table 4) t o c a l c u l a t e the d i s t a n c e s over which t r a d e d goods are t r a n s p o r t e d (with c o r r e s p o n d i n g c o s t s ) . The US r e g i o n a l breakdown i s c o n s i s t e n t w i t h i n f o r m a t i o n p r o v i d e d by the C o o p e r a t i v e E x t e n s i o n S e r v i c e of Iowa S t a t e U n i v e r s i t y (1992) w h i l e the Canadian r e g i o n a l breakdown i s based on d i s c u s s i o n s w i t h r e g i o n a l e x p e r t s . T a b l e 4 P r o d u c t i o n , S l a u g h t e r , Demand Regions and t h e i r Centers Regions C e n t r a l C i t y P r o v i n c e o r S t a t e Hog P r o d u c t i o n L e v e l Southeast C h a r l o t t e North C a r o l i n a Midwest Dubuque Iowa A t l a n t i c Edmunston New-Brunswick Quebec St-Hyacinthe Quebec O n t a r i o S t r a t f o r d O n t a r i o Western Canada Edmonton A l b e r t a Slauc j h t e r , P r o c e s s i n g , S1 :orage L e v e l E a s t P h i l a d e l p h i a P e n s y l v a n n i a South R a l e i g h North C a r o l i n a Midwest Des Moines Iowa West Los Angeles C a l i f o r n i a A t l a n t i c Moncton New Brunswick Quebec Montreal Quebec O n t a r i o B u r l i n g t o n O n t a r i o Western Canada Edmonton A l b e r t a Demand L e v e l E a s t New York C i t y New York South A t l a n t a Georgia Midwest Chicago I l l i n o i s West Sacramento C a l i f o r n i a A t l a n t i c H a l i f a x Nova S c o t i a Quebec Montreal Quebec O n t a r i o Toronto O n t a r i o Western Canada Edmonton A l b e r t a 42 The t h r e e types o f economic agents, farmers, p r o c e s s o r s and r e t a i l e r s , a c t i n two v e r t i c a l l y r e l a t e d s e c t o r s : hogs and pork. L i v e hogs from each p r o d u c t i o n r e g i o n can be d e l i v e r e d t o the l o c a l p r o c e s s i n g s e c t o r o r exported t o o t h e r s l a u g h t e r , p r o c e s s i n g , and storage (SPS) r e g i o n s d o m e s t i c a l l y o r abroad. US l i v e hogs, however, cannot be exported t o Canada under the b a s e l i n e because of the t h r e a t o f the spread o f pseudorabies. The SPS s e c t o r buys l i v e hogs from the primary s e c t o r and s e l l s pork t o r e t a i l e r s a t home or abroad. I n c o r p o r a t i o n o f R i s k R i s k i s a s i g n i f i c a n t a d d i t i o n t o S p i n e l l i * s model which assumed t h a t producers have a p e r f e c t f o r e s i g h t o f market p r i c e s . A f t e r c o n s i d e r i n g p r e v i o u s supply response s t u d i e s , an ad a p t i v e e x p e c t a t i o n s framework i s chosen, which i s seen as a 9 f i r s t attempt t o model e x p e c t a t i o n s . W i t h i n t h i s framework, economic agents base t h e i r e x p e c t a t i o n s on p r e v a i l i n g p r i c e s when they make t h e i r d e c i s i o n s . Farmers make d e c i s i o n s about hog bre e d i n g t h r e e q u a r t e r s b e f o r e the hogs are ready f o r s l a u g h t e r , s i n c e the g e s t a t i o n p e r i o d i s f o u r months and the f i n i s h i n g p r ocess takes f i v e t o s i x months. Agents a t the s l a u g h t e r , p r o c e s s i n g , storage and r e t a i l e r l e v e l s , make d e c i s i o n s i n the same q u a r t e r i n which the a c t i v i t y takes p l a c e . M a r t i n and Goddard (1987) d i s c u s s s p e c i f i c a t i o n s o f the e x p e c t a t i o n p r o c e s s . 43 In t h i s t h e s i s , hog producers are assumed t o be r i s k averse, based on f i n d i n g s o f L e g a u l t (1995), who showed t h a t 81% of Quebec hog producers are r i s k averse, 8% r i s k n e u t r a l and 11% r i s k l o v i n g , a t an investment l e v e l o f CDN$150,000. Furthermore, Wilson and Eidman ( c i t e d i n Le g a u l t , 1995) found t h a t 44% of US swine producers are r i s k averse, 34% are r i s k n e u t r a l and 22% are r i s k p r e f e r r i n g . A l s o , the assumption i s made t h a t market . . 10 r i s k has a ne g a t i v e impact on investment d e c i s i o n s . I n c o r p o r a t i n g r i s k i n t o dynamic programming models, c o n t r i b u t e s t o a r e s e a r c h area t h a t needs t o be expanded (Krautkraemer e t al. 1992) : "Most p r e v i o u s s t o c h a s t i c dynamic programming (DP) a p p l i c a t i o n s have assumed t h a t d e c i s i o n makers are r i s k n e u t r a l ; however, r i s k permeates both i n t r a - y e a r and i n t e r -y e a r r e l a t i o n s h i p s i n most DP problems... More r e s e a r c h on r i s k averse DP f o r m u l a t i o n s i s needed" (Krautkraemer e t al., 1992). In the l i t e r a t u r e , r i s k i s measured by revenue, p r i c e , o r y i e l d v a r i a b i l i t y ( v a r i a n c e , standard d e v i a t i o n o r c o e f f i c i e n t o f v a r i a t i o n ) . In t h i s study, the proxy f o r r i s k , a s s o c i a t e d w i t h p r i c e v a r i a b i l i t y o f hogs, i s the standard d e v i a t i o n o f the endogenous q u a r t e r l y market p r i c e s f o r the 1981-1986 p e r i o d . F i r s t , the model i s a p p l i e d t o the 1976-1980 p e r i o d t o I t i s common t o assume t h a t p r i c e u n c e r t a i n t y induces a decrease i n investment and output, although Robinson argues t h a t i t t r i g g e r s an i n c r e a s e ( c i t e d i n Sp r i g g s and van Kooten, 1988): "a s u b s t a n t i a l p a r t o f investment i n a g r i c u l t u r e occurs i n years of h i g h p r i c e s s i n c e such years p r o v i d e both the c a p a c i t y t o i n v e s t and the i n c e n t i v e , p a r t l y because farmers a re n o t o r i o u s t a x a v o i d e r s . " (Robinson c i t e d i n Spr i g g s and van Kooten, 1988) 44 e s t i m a t e the standard d e v i a t i o n of market p r i c e s , the proxy f o r the expected r i s k i n the f o l l o w i n g p e r i o d : 1981-1986. The model i s then v a l i d a t e d w i t h the 1981-1986 q u a r t e r l y data i n c l u d i n g the expected r i s k . The r i s k a v e r s i o n c o e f f i c i e n t and the response c o e f f i c i e n t t o s t a b i l i z a t i o n payments are estimated over the 1981-1986 p e r i o d . F i n a l l y , s c e n a r i o s are compared t o the b a s e l i n e over the s i m u l a t i o n p e r i o d : 1987-1992; t h i s h o r i z o n i s chosen t o i n c l u d e a f u l l p r o d u c t i o n c y c l e . 1 1 The i n t r o d u c t i o n of expected r i s k and Canadian s t a b i l i z a t i o n payments and the refinement of Canadian data are the main m o d i f i c a t i o n s used on the o r i g i n a l data t o improve the performance of the model f o r Canada. A d e t a i l e d d e s c r i p t i o n of 12 data and procedures i s a v a i l a b l e i n S p i n e l l i (1991). Data Values and Sources Expected R i s k and S t a b i l i z a t i o n Payments The p r i c i n g r u l e , based on p e r f e c t f o r e s i g h t , has been r e p l a c e d by an a d a p t i v e e x p e c t a t i o n s framework and a l l o w s the i n c o r p o r a t i o n of a proxy f o r r i s k . The proxy f o r the r i s k The hog p r o d u c t i o n c y c l e d e s c r i b e s the r e g u l a r f l u c t u a t i o n i n hog numbers due t o changes i n hog p r i c e s . A p e r i o d of d e c l i n i n g market p r i c e i s g e n e r a l l y f o l l o w e d by a r e d u c t i o n i n herds and b r e e d i n g c a p a c i t y . Reduced numbers r e s u l t i n p r i c e i n c r e a s e s a year t o e i g h t e e n months l a t e r encouraging farmers t o i n c r e a s e herds f o l l o w i n g t h i s p r i c e s t r e n g t h e n i n g . These f l u c t u a t i o n s c r e a t e a r e g u l a r c y c l e of t h r e e t o f o u r y ears (Churches, 1988). 12 . Data can be o b t a i n e d from the author. 45 a s s o c i a t e d w i t h p r i c e v a r i a b i l i t y of hogs i s the s t a n d a r d d e v i a t i o n of the endogenous market p r i c e s f o r the 1981-1986 p e r i o d . T h i s v a r i a b l e does not cause much v a r i a t i o n a c r o s s r e g i o n s (Table 5). P r i c e s i n Quebec, O n t a r i o and Western Canada v a r y s l i g h t l y l e s s than p r i c e s i n the Midwest but the d i f f e r e n c e i s l e s s than or equal t o 2%. To f i n d the r i s k a v e r s i o n c o e f f i c i e n t , the model i s run w i t h d i f f e r e n t c o e f f i c i e n t s . The r i s k a v e r s i o n c o e f f i c i e n t , 0.3, i s the parameter c r e a t i n g the b e s t f i t between s i m u l a t e d and a c t u a l d ata. The range of estimates used i n o t h e r s t u d i e s v a r i e s w i d e l y from 0.08 t o 7 depending on methodology and sample (Bouzaher e t a l . , 1995). Table 5 Standard D e v i a t i o n s 1981-1986 used i n the S i m u l a t i o n P e r i o d as a Proxy f o r R i s k Region S i m u l a t i o n p e r i o d 1987-1992 Southeast 12 . 67 Midwest 12.73 A t l a n t i c Canada 12.77 Quebec 12.64 O n t a r i o 12.56 Western Canada 12.47 Income s t a b i l i z a t i o n schemes, implemented t o a t t e n u a t e the impact of p r i c e v a r i a t i o n s , have been added t o S p i n e l l i ' s model. Q u a r t e r l y data f o r f e d e r a l s t a b i l i z a t i o n payments are a v a i l a b l e 4 6 from A g r i c u l t u r e Canada, but q u a r t e r l y data f o r the Quebec Farm Income S t a b i l i z a t i o n Insurance Program (QFISIP) are not a v a i l a b l e s i n c e i t i s an annual program. I t i s assumed here t h a t cash advances, which were p r o v i d e d t h r e e t o e i g h t times a n n u a l l y from 1987 t o 1992, p l a y a r o l e i n producers' e x p e c t a t i o n s . T h e r e f o r e , cash advances made when producers make d e c i s i o n s , i . e . t h r e e q u a r t e r s b e f o r e marketings, are used as p r o x i e s f o r expected s u b s i d i e s . L i k e the r i s k a v e r s i o n c o e f f i c i e n t , the response c o e f f i c i e n t t o payments (0.12), i s the parameter which p r o v i d e s the bes t f i t between s i m u l a t e d and a c t u a l data and though low, i s c o n s i s t e n t w i t h e s t i m a t e s found i n the l i t e r a t u r e . Most econometric e s t i m a t e s suggest t h a t Canadian hog p r o d u c t i o n s u b s i d i e s d i d not t r i g g e r an i n c r e a s e i n Canadian hog p r o d u c t i o n and expo r t s , o r i f they d i d , the impact was sm a l l (Savard and Romain, unpublished m a n u s c r i p t ) . Refinement of Canadian and US Trade Data In S p i n e l l i ' s 1991 t h e s i s , a l l t r a d e w i t h the US i s assumed t o be w i t h E a s t e r n Canada and t r a d e w i t h Western Canada i s ign o r e d . In t h i s t h e s i s , E a s t e r n Canada i s d i s a g g r e g a t e d i n t o O n t a r i o , Quebec and the A t l a n t i c p r o v i n c e s . Furthermore, data have been r e f i n e d t o r e c o r d imports and exports i n t o and out of the f o u r Canadian demand r e g i o n s , i n c l u d i n g Western Canada. Trade data from i n d i v i d u a l Canadian r e g i o n s i n t o o r out of US r e g i o n s are not c u r r e n t l y a v a i l a b l e because t r a d e w i t h the US i s r e p o r t e d by p o r t not r e g i o n of o r i g i n , o r d e s t i n a t i o n . I t i s not 47 p o s s i b l e , f o r example, t o d i s t i n g u i s h between Canadian e x p o r t s t o the Southeast or the E a s t i f they c r o s s a t the same p o r t . Trade i s thus r e p o r t e d from each of the Canadian r e g i o n s i n t o and out of the US as a whole. Refinement of Canadian and US Cost Data C a p i t a l c o s t s are not assumed t o be i d e n t i c a l a c r o s s r e g i o n s as they are i n S p i n e l l i (1991). F o r t i n and Salaun (1995) have c a l c u l a t e d amortizement and i n t e r e s t c o s t s i n Quebec, O n t a r i o , A l b e r t a and Iowa. Costs i n Quebec, O n t a r i o and A l b e r t a are 1.33, 1.5 and 1.54 times h i g h e r than i n Iowa. The c o n s e r v a t i v e v a l u e o f 1.3 i s chosen and m u l t i p l i e d by US$737, the c a p i t a l c o s t per p i g ( f o r a p r o d u c t i o n o f 780 p i g s per quarter) t o o b t a i n one-time, per p i g c a p i t a l c o s t s o f US$960 i n a l l r e g i o n s except Iowa. Costs are i n c u r r e d t o market hogs and pork. Canadian hog marketing c o s t s are obt a i n e d from p r o v i n c i a l Marketing Boards. S p i n e l l i * s (1991) estimated pork w h o l e s a l e - r e t a i l marketing margins are r e p l a c e d by a c t u a l data from the USDA and a l l r e g i o n s are assumed t o have the same margins. The same assumption i s made f o r s l a u g h t e r i n g and p r o c e s s i n g c o s t s . C o n s i d e r i n g the l a c k o f i n f o r m a t i o n f o r i n d i v i d u a l p l a n t s , s t a n d a r d i z a t i o n a c r o s s r e g i o n s i s chosen. K l e i n e t a l . (1995) p r o v i d e s l a u g h t e r i n g c a p a c i t i e s a t the p r o v i n c i a l l e v e l , which i s i n s u f f i c e n t l y d i s a g g r e g a t e d . I n f o r m a t i o n on p l a n t c a p a c i t y , on the age of the equipment, l a b o r c o n t r a c t s i n f o r c e , 48 and the p o t e n t i a l number of l a b o r s h i f t s a re necessary t o assess c o s t d i f f e r e n c e s ( B r e s s l e r and King, 1970). S p i n e l l i ' s s l a u g h t e r i n g and p r o c e s s i n g c o s t s o f US$22.88 per head f o r a l l r e g i o n s are kept s i n c e t h i s v a l u e i s reasonable based on Ward and Faminow's (1992) e s t i m a t e s . Those authors surveyed US meat packers and asked e x e c u t i v e s about the per head c o s t o f s l a u g h t e r i n g - p r o c e s s i n g f o r t h r e e s i z e s o f p l a n t s . Respondents estimated average c o s t s o f US$18.67, US$21.42 and US$23.5 per head f o r p l a n t s w i t h annual volumes o f 3.8, 2.7 and 1.6 m i l l i o n head, r e s p e c t i v e l y . A c c o r d i n g t o the authors, these c o s t s are "informed e s t i m a t e s " s i n c e the sample i s not s t a t i s t i c a l l y r e p r e s e n t a t i v e . Refinement of Canadian and US C o e f f i c i e n t s The percentage of p i g l e t s l o s t d u r i n g the weaning p e r i o d i s found i n Table 6. Data f o r Canada are taken from F o r t i n and Salaun (1995) w h i l e data f o r the Midwest and the Southeast are kept i d e n t i c a l as i n S p i n e l l i (1991). 49 Table 6 Quarterly Death Rates of P i g l e t s by Region Region Death Rate (%) Southeast 0.2 Midwest 0.2 A t l a n t i c Canada 0.15 Quebec 0.135 O n t a r i o 0.138 Western Canada 0.131 D r e s s i n g percentage from l i v e w e i g h t t o c a r c a s s weight i s s e t a t 71% i n the US and a t 68% i n Canada, Canadian pork being l e a n e r . T h i s i n f o r m a t i o n i s based on e l e c t r o n i c d a t a from the USDA (1976-1995) and v a r i o u s i s s u e s of L i v e s t o c k and Animal Products from S t a t i s t i c s Canada as shown i n T a b l e 7, which i d e n t i f i e s a l l sources of data. 50 Table 7 Sources o f Data f o r the Economic Model Data Source I n i t i a l Herd P o p u l a t i o n US USDA, NASS, Hogs and P i g s , v a r i o u s i s s u e s Canada CANSIM database, M a t r i x 9500-9510 Feed P r i c e s US corn USDA, NASS, Annual P r i c e Summary, p r i c e s r e c e i v e d US Soy Bean Meal(44% p r o t e i n ) USDA, NASS, Annual P r i c e Summary, p r i c e s p a i d Canada Wheat, Corn and B a r l e y A g r i c u l t u r e and A g r i - f o o d Canada, P o l i c y Branch, Economic and P o l i c y A n a l y s i s D i r e c t o r a t e Supplements F e e d s t u f f s , May 22, 1989 Non-feed V a r i a b l e Costs US and Canada USDA, ERS, Economic I n d i c a t o r s o f the Farm Sect o r , v a r i o u s i s s u e s Marketing Costs US USDA, ERS, Economic I n d i c a t o r s of the Farm Sect o r , v a r i o u s i s s u e s Canada V a r i o u s P r o v i n c i a l Hog Marketing Boards Consumer P r i c e I n d i c e s , Exchange Rates US and Canada A g r i c u l t u r e and A g r i - f o o d Canada, P o l i c y Branch, Economic and P o l i c y A n a l y s i s D i r e c t o r a t e Regional Nominal Income US US Department of Commerce, Bureau of Economic A n a l y s i s , L o c a l Area P e r s o n a l Income, M i c r o f i c h e 2708-49, v a r i o u s i s s u e s Canada A g r i c u l t u r e and A g r i - f o o d Canada Pork Trade, M i l i t a r y Shipments and Shipments t o T e r r i t o r i e s US USDA, ERS, L i v e s t o c k and Meat S t a t i s t i c s 51 Tab l e 7 , c o n t i n u e d . Data Source Canadian pork imports and exports A g r i c u l t u r e and A g r i - f o o d Canada Regional Human P o p u l a t i o n US US Department of Commerce, Census Bureau, Current P o p u l a t i o n Report, P u b l i c a t i o n 2542-1, v a r i o u s i s s u e s Canada A g r i c u l t u r e and A g r i - f o o d Canada R e t a i l Chicken and Beef P r i c e s US A g r i c u l t u r e and A g r i - f o o d Canada C o u n t e r v a i l i n g D u t i e s US c o u n t e r v a i l Canadian Pork C o u n c i l S t a b i l i z a t i o n Payments Canadian ( f e d e r a l ) A g r i c u l t u r e and A g r i - f o o d Canada Quebec Regie des Assurances A g r i c o l e s du Quebec Frozen Storage Q u a n t i t i e s US USDA, ERS, L i v e s t o c k and Meat S t a t i s t i c s Canada S t a t i s t i c s Canada, L i v e s t o c k and Animal Products, Catalogue 23-203 D i s t a n c e s between P r o d u c t i o n , SPS and Demand Centers US and Canada Rand McNally, US/Canada A t l a s Area Owned o r Rented by Hog Producers US Unpublished Farm Costs and Returns Survey data, 1994 Canada S t a t i s t i c s Canada, A g r i c u l t u r a l Census, A g r i c u l t u r a l D i v i s i o n , A g r i c u l t u r a l P r o f i l e o f Canada, Table 25 52 Tabl e 7, cont i n u e d Data Source V a l i d a t i o n Data Herd Inventory US USDA, NASS, Hogs and P i g s , v a r i o u s i s s u e s Canada S t a t i s t i c s Canada, L i v e s t o c k and Animal Products, Catalogue 23-203 Sl a u g h t e r US USDA, NASS, L i v e s t o c k S l a u g h t e r , E l e c t r o n i c data 1976-1995 Canada S t a t i s t i c s Canada, L i v e s t o c k and Animal Products, Catalogue 23-203 P r i c e s US USDA, NASS, A g r i c u l t u r a l P r i c e s Canada A g r i c u l t u r e and A g r i - f o o d Canada Farm L e v e l T e c h n i c a l C o e f f i c i e n t s , I n i t i a l and r e c u r r i n g f i x e d c o s t s a t the p r o d u c t i o n and SPS l e v e l s , t r a n s f o r m a t i o n and t r a n s p o r t a t i o n c o s t s and s l a u g h t e r house c o s t s a re g i v e n i n S p i n e l l i (1991) V a l i d a t i o n T o o l s and R e s u l t s The next s e c t i o n o u t l i n e s the e m p i r i c a l t o o l s used t o v a l i d a t e the economic model and p r e s e n t s the r e s u l t s i n Ta b l e s 8 and 9. E m p i r i c a l T o o l s Used f o r E v a l u a t i o n Comparisons between si m u l a t e d r e s u l t s and a c t u a l data are made u s i n g r o o t mean square e r r o r (RMSE), percentage RMSE (%RMSE) and T h e i l ' s i n e q u a l i t y c o e f f i c i e n t s (U., and U2) . The s e n s i t i v i t y t o d i s c o u n t r a t e s and the dynamic response o f the 53 model are a d d i t i o n n a l c r i t e r i a chosen t o e v a l u a t e the performance o f the model. The RMSE becomes the b a s i s f o r many "goodness o f f i t " measurements s i n c e i t measures the d e v i a t i o n o f t h e s i m u l a t e d v a r i a b l e from the a c t u a l time path. Because t h e magnitude o f e r r o r can be b e s t e v a l u a t e d by comparing i t w i t h the average s i z e o f the v a r i a b l e , t h e percentage RMSE i s a l s o p r e s e n t e d (Pindyck and R u b i n f e l d , 1991). Formula 1. RMSE where Y t and Y t are the s i m u l a t e d and a c t u a l v a l u e s f o r t h e v a r i a b l e s i n p e r i o d t and n i s the number o f p e r i o d s . The two T h e i l ' s i n e q u a l i t y c o e f f i c i e n t s , commonly c a l l e d and U 2 s t a t i s t i c s c o n t a i n the RMSE i n t h e i r numerators. The U 1 s t a t i s t i c i s m i s l e a d i n g , however, s i n c e i t s denominator depends on the a b s o l u t e v a l u e s o f p a s t p r e d i c t i o n s . The l e v e l s o f were shown t o be lowered by a d d i t i v e t r a n s f o r m a t i o n s o f p r e d i c t e d and Formula 2 . Percentage RMSE 54 a c t u a l v a l u e s o f v a r i a b l e s b e i n g t e s t e d ( L e u t h o l d , 1975). N e v e r t h e l e s s , the widespread acceptance o f t h e s e s t a t i s t i c s might be e x p l a i n e d by t h e i r ease of i n t e r p r e t a t i o n as they a r e bounded by 0 and 1. When U^O, the s t a t i s t i c s used i n the model p r e d i c t s v a l u e s which a c c u r a t e l y f i t the d a t a . I f U ^ l , however, the p r e d i c t i v e performance o f the model i s l e s s t han adequate. When 1^=1, si m u l a t e d v a l u e s a r e always 0, though a c t u a l v a l u e s a r e non-zero, and non-zero p r e d i c t i o n s have been made when a c t u a l v a l u e s are zero. Furthermore, s i m u l a t e d v a l u e s may be p o s i t i v e (or negative) when a c t u a l v a l u e s a r e n e g a t i v e (or p o s i t i v e ) (Pindyck and R u b i n f e l d , 1991). The b e s t use o f t h e U, s t a t i s t i c i s t o compare a l t e r n a t i v e v a r i a b l e s and r e g i o n s . Formula 3. T h e i l ' s U, S t a t i s t i c where Y s t and Y a t are the s i m u l a t e d and a c t u a l v a l u e s f o r t h e v a r i a b l e s i n p e r i o d t and n i s the number o f p e r i o d s . The U 2 s t a t i s t i c has the same numerator as the U 1 but a d i f f e r e n t denominator. The v a l u e o f the U 2 s t a t i s t i c i s s t i l l z e r o when s i m u l a t i o n s equal the a c t u a l data, but t h i s s t a t i s t i c has no upper boundary. I t ' s v a l u e i s 1 when the s i m u l a t i o n e q u a l s the n a i v e p r e d i c t i o n and has v a l u e s g r e a t e r than 1, when 55 p r e d i c t i o n s are l e s s a c c u r a t e . Formula 4. T h e i l ' s U 2 S t a t i s t i c where Y s t and Y a t are t h e s i m u l a t e d and a c t u a l v a l u e s f o r t h e v a r i a b l e s i n p e r i o d t and n i s the number o f p e r i o d s . Even i f a model has a s m a l l RMSE, and U 2, i t must respond t o s t i m u l i i n ways which a r e c o n s i s t e n t w i t h economic t h e o r y and e m p i r i c a l o b s e r v a t i o n . The dynamic response o f t h e model i s thus an important e v a l u a t i o n c r i t e r i o n . In a d d i t i o n , an important c r i t e r i o n o f model performance i s i t s s e n s i t i v i t y t o t h e s t a r t i n g date o f t h e s i m u l a t i o n p e r i o d , o r minor changes i n model parameters. T h i s i s e s p e c i a l l y t r u e f o r l a r g e mathematical programming models where o b t a i n i n g a c c u r a t e e s t i m a t e s i s more d i f f i c u l t . The s e n s i t i v i t y t o d i s c o u n t r a t e s i s a n a l y z e d a f t e r comparing a c t u a l and s i m u l a t e d d a t a . Comparison o f Simulated and A c t u a l Data Simulated and a c t u a l data are compared over t h e 1981-1986, and 1987-1992 p e r i o d s (Tables 8 and 9 r e s p e c t i v e l y ) . S i n c e parameters of the o r i g i n a l model were e s t i m a t e d u s i n g 56 econometric r e g r e s s i o n s w i t h data from 1976-1983, the f i r s t p e r i o d i n c l u d e s t h r e e years of out-of-sample data: 1984, 1985 and 1986. The second p e r i o d i n c l u d e s s i x y ears o f out-of-sample data: 1987-1992. Si n c e the 1987-1992 p e r i o d i s more r e c e n t , i t was used f o r s i m u l a t i o n s . Inventory, s l a u g h t e r and l i v e hog p r i c e s are v a r i a b l e s chosen t o v a l i d a t e the model. Inventory i s the most important output o f the economic model s i n c e i t i s the v a r i a b l e measuring the impact of changes i n the hog i n d u s t r y on water q u a l i t y . S l a u g h t e r i s v a l i d a t e d t o assess l i n k a g e s between the primary and SPS s e c t o r s . F i n a l l y , p r i c e s are v a l i d a t e d s i n c e p r i c e s and q u a n t i t i e s are the main components of w e l f a r e . 57 Tabl e 8 Hog Inventory and S l a u g h t e r V a l i d a t i o n S t a t i s t i c s f o r the 1981-1986 P e r i o d Root Mean Square E r r o r s T h e i l ' s U-S t a t i s t i c Mean Values P r e d i c t e d V a r i a b l e RMSE % RMSE u 2 Simu-l a t e d Value A c t u a l Value D i f -f e r e n -ce [1] Hog Inventory M i l l i o n Head % North America 10.73 0.17 0.08 0.77 71.55 63.21 11 U n i t e d S t a t e s 10. 44 0.2 0. 09 0.87 62.06 53.14 14.8 Southeast 2.2 0.28 0.13 1.15 7.62 8.36 -10.2 Midwest 10.28 0.23 0.1 1.01 54.45 44.79 19.4 Canada 1.98 0.2 0.1 0.97 9.09 10. 06 -9.5 A t l a n t i c 0.11 0.29 0.16 1.52 0.3 0.39 -23 Quebec 0.77 0.25 0.12 1.09 2.8 3.13 -12 O n t a r i o 0. 69 0.21 0.11 1. 05 2.75 3.28 -16.2 Western Canada 0.77 0.24 0.12 1.27 3.25 3.26 1.3 Hog P r i c e s Real US$/Cwt % Midwest 38.99 0.49 0.3 2.25 48.37 76.91 -37.1 A t l a n t i c 24.99 0.39 0.22 1.66 48.95 58.1 -15.74 Quebec 24.62 0.4 0.21 1.68 49.63 58.61 -15.32 O n t a r i o 26.07 0.42 0.23 1.83 49.44 58.18 -15.02 Western Canada 24.42 0.41 0.22 1.8 48.75 55.95 -12.86 58 Tabl e 8, con t i n u e d P r e d i c t e d V a r i a b l e RMSE % RMSE Ui u 2 Simu-l a t e d Value A c t u a l Value D i f f e -rence S l a u g h t e r M i l l i o n Cwt % North America 13 .1 0. 38 0.16 1.2 47.43 41.76 12.79 U n i t e d S t a t e s 7.24 0.2 0.09 0.81 41.67 36.26 13.9 Northeast 0.8 0. 27 0.14 1.02 2.94 2.82 2.87 South 0.68 0.1 0. 05 0.42 6.2 6.19 -2.4 Midwest 6.77 0.27 0.12 1.07 31.64 26.16 19.62 West 0. 28 0.24 0.14 0.98 0.88 1. 09 -21.21 Canada 2.01 0.35 0.17 1.73 5.77 5.49 4.26 A t l a n t i c 0. 05 0.21 0.12 1.15 0.19 .24 -17.8 Quebec 0.48 0.25 0.14 1.15 1. 55 1.91 -18.95 O n t a r i o 0.71 0.42 0.24 1.93 1.16 1.73 -32.49 Western Canada 1.9 1. 07 0.39 5.47 2.86 1.67 73.59 [1] Percentage d i f f e r e n c e s between average s i m u l a t e d and a c t u a l v a l u e s ; Cwt: 100 pounds. 59 Table 9 Hog Inventory and s l a u g h t e r V a l i d a t i o n S t a t i s t i c s f o r the 1987-1992 P e r i o d Root Mean Square E r r o r s T h e i l ' s U-S t a t i s t i c Measures Mean Values P r e d i c t e d V a r i a b l e RMSE % RMSE U1 U 2 Simu-l a t e d Value A c t u a l Value D i f f e -rence Hog Inventory M i l l i o n Head % North America 12.41 0.15 0.07 0.8 73.89 66.11 11.77 U n i t e d S t a t e s 10.87 0.2 0.09 1. 06 64.77 55.47 16.78 Southeast 0.98 0.11 0.06 0.6 8.05 8.6 -6.5 Midwest 11.21 0.24 0.11 1.3 56.72 46.87 21 Canada 1.85 0.17 0. 09 0.9 9.12 10.64 -14.2 A t l a n t i c 0.15 0.24 0.2 1.23 0.33 0.41 -20 Quebec 0.62 0.2 0.11 1.05 2.51 3 -16.1 O n t a r i o 0. 52 0.16 0.09 0.78 2.83 3.12 -9.3 Western Canada 0.75 0.18 0.1 1. 02 3.45 4.11 -16.06 Hog P r i c e s Real US$/Cwt % Midwest 38.67 0. 65 0.42 2.45 25.03 59.42 -57.87 A t l a n t i c 26.12 0.58 0.34 2 . 3 26.03 44.86 -41.97 Quebec 24.28 0. 55 0.32 1. 68 26.22 43.21 -39.32 O n t a r i o 25.92 0.58 0.36 2.31 25.85 44.18 -41.5 Western Canada 23.94 1.05 0.33 2.2 25.16 41.46 -39.32 60 Tabl e 9 , c o n t i n u e d P r e d i c t e d V a r i a b l e RMSE % RMSE Ui u 2 Simu-l a t e d Value A c t u a l Value D i f f e -rence S l a u g h t e r M i l l i o n Cwt % North America 10.47 0.28 0.12 1.07 46.44 45. 39 2.95 U n i t e d S t a t e s 6.69 0.17 0.08 0.87 40.54 39.27 4.08 Northeast 1.25 0.43 0.18 1.96 3.92 3 . 04 29.15 South 4.77 0.9 0.3 3.59 9.93 5.84 70.16 Midwest 4.39 0.15 0.08 0.74 25.69 27.9 -7.94 West 3.31 0. 37 0.64 1.82 1. 01 -59.58 Canada 1.16 0.19 0.1 0.91 5.9 6.12 -3.37 A t l a n t i c 0. 03 0.12 0. 06 0.56 0.22 0.24 -5. 05 Quebec 0.57 0.29 0.16 1.37 1. 68 1.95 -13.84 O n t a r i o 0.6 0. 32 0.17 1.52 1. 68 1.78 -5.69 Western Canada 0.27 0.13 0. 06 0. 63 2.32 2.15 7.65 V a l i d a t i o n r e s u l t s (Table 8) f o r the 1981-1986 p e r i o d a re c o n s i s t e n t a c r o s s the hog p r o d u c t i o n and s l a u g h t e r i n g s e c t o r , o v e r e s t i m a t i n g Midwest hog and pork p r o d u c t i o n by 19% which, i n t u r n , o v e r e s t i m a t e s US and North American p r o d u c t i o n . A c c o r d i n g t o U 1 s t a t i s t i c s , a l l hog and pork p r o d u c t i o n r e s u l t s a re comparable except f o r pork s l a u g h t e r i n g i n O n t a r i o and Western Canada. P r i c e p r e d i c t i o n s are l e a s t a c c u r a t e i n the Midwest and a l l p r i c e underestimates are r e l a t e d t o p r o d u c t i o n o v e r e s t i m a t e s i n the Midwest, the l a r g e s t p r o d u c t i o n r e g i o n where p r i c e s a re determined. P r e d i c t i o n s o f some v a r i a b l e s f o r c e r t a i n r e g i o n s 61 are e q u i v a l e n t t o p r e d i c t i o n s of a n a i v e , no-change e x t r a p o l a t i o n model, based on the U 2 s t a t i s t i c s i n T a b l e 9. Regardless, the r e s u l t s f o r Canada are b e t t e r than those o b t a i n e d by S p i n e l l i (1991). Canadian and US r e s u l t s a re adequate s i n c e the model does not f o r e c a s t , but compares s c e n a r i o s . As l o n g as the model i s s t a b l e , i t can es t i m a t e the e f f e c t s o f p o l i c i e s by comparing a c r o s s s c e n a r i o s . In North America, o v e r e s t i m a t i o n s of i n v e n t o r i e s (11.77%) and s l a u g h t e r (2.97%), occur d u r i n g the 1987-1992 p e r i o d (Table 9 ) . T h i s o v e r e s t i m a t i o n i s not e q u a l l y d i s t r i b u t e d a c r o s s r e g i o n s : the o v e r e s t i m a t i o n of 21% i n the Midwest i s balanced by an u n d e r e s t i m a t i o n i n other r e g i o n s . D i s c r e p a n c i e s between si m u l a t e d and a c t u a l d a t a on i n v e n t o r i e s and hence p r o d u c t i o n and p r i c e are i n e v i t a b l e s i n c e c e r t a i n c o s t s are d i f f i c u l t t o estimate and o t h e r s are c o n f i d e n t i a l . F u r t h e r evidence t h a t b e t t e r c o s t data c o u l d improve the supply f u n c t i o n i s t h a t North American and Midwest ov e r e s t i m a t e s are reduced t b 1.4% and 5.4%, r e s p e c t i v e l y , when a l l r e g i o n a l c o s t s are i n c r e a s e d by 20%; Canadian i n v e n t o r i e s remain underestimated. 1 3 The use of American data f o r c e r t a i n Canadian v a r i a b l e s (non-feed c o s t s , w h o l e s a l e - r e t a i l pork margins, c h i c k e n and beef r e t a i l p r i c e s , and t r a n s p o r t a t i o n c o s t s ) may be r e s p o n s i b l e f o r d i f f e r e n c e s between si m u l a t e d and a c t u a l data f o r Canada. 3 D e t a i l e d r e s u l t s are not r e p o r t e d . 62 Aggregate r e s u l t s a t the North American l e v e l are b e t t e r , over and underestimates t e n d i n g t o c a n c e l each o t h e r . Model p r e d i c t i o n s f o r the sum of l i v e hog e x p o r t s from Canada t o the US, over the whole p e r i o d , a re good. The model s i m u l a t e s e x p o r t s o f 4.01 m i l l i o n head w h i l e the a c t u a l v a l u e i s 3.92 m i l l i o n head. Q u a r t e r l y exports, however, are not as a c c u r a t e . In 1991, most hogs are exported i n the second q u a r t e r , when t h e r e i s no c o u n t e r v a i l i n g duty. P r e d i c t i o n s o f q u a r t e r l y pork exp o r t s , mainly from Western Canada t o Western US, are b e t t e r . Pork i s exported even when a c o u n t e r v a i l i n g duty i s a p p l i e d and these c o n c l u s i o n s do not change when the d i s c o u n t r a t e i s lowered t o t e s t the model's s e n s i t i v i t y . S e n s i t i v i t y A n a l y s i s The c h o i c e o f the d i s c o u n t r a t e i s somewhat a r b i t r a r y , and d e s p i t e the f a c t t h a t i t i s a s u b j e c t o f debate i n the l i t e r a t u r e , o f t e n i t i s chosen t o equal the i n t e r e s t r a t e . The s e n s i t i v i t y s c e n a r i o c o n s i s t s of measuring the impact of d i s c o u n t i n g , but a t a low r a t e . Lowering the d i s c o u n t r a t e i n c r e a s e s the l e v e l s o f i n v e n t o r y compared t o the b a s e l i n e , thus r a i s i n g average i n v e n t o r y l e v e l s i n most r e g i o n s (Table 10) . Lowering the l a t t e r r a t e from 8% t o 1%, i n c r e a s e s North American i n v e n t o r i e s by 4%, US i n v e n t o r i e s by 3% and Canadian i n v e n t o r i e s by 12%. North American s l a u g h t e r l e v e l s a re c o n s i s t e n t w i t h 63 i n v e n t o r y l e v e l s v a r y i n g by 5%. The percentage d i f f e r e n c e c o u l d be h i g h e r , f o l l o w i n g a decrease i n the d i s c o u n t r a t e , i f the base s c e n a r i o d i d not c o n t a i n a c o n s t r a i n t imposing a f i x e d l e v e l of i n v e n t o r y a t the North American l e v e l i n the l a s t q u a r t e r . The f i x e d l e v e l i s s e t t o prevent e a r l y l i q u i d a t i o n of the herd t h a t c o u l d be t r i g g e r e d by a h i g h d i s c o u n t r a t e . The model i s not s e n s i t i v e t o the s t a r t i n g date of the s i m u l a t i o n p e r i o d . S t a r t i n g the s i m u l a t i o n i n 1988 i n s t e a d of 1987, does not s i g n i f i c a n t l y change the r e s u l t s and hence these r e s u l t s are not presented. 64 Tabl e 10 S e n s i t i v i t y A n a l y s i s f o r the 1987-92 P e r i o d Regions B a s e l i n e Discount r a t e : 1% Percentage Change from Base Average Hog M i l l j I n v e n t o r i e s i n .on Head North America 73.89 76.93 4.11 US 64.77 66.73 3.03 Southeast 8.05 8.08 0.37 Midwest 56.72 58.65 3.4 Canada 9.12 10.2 11.84 A t l a n t i c 0.33 0.33 0 Quebec 2.51 2 . 51 0 O n t a r i o 2.83 3.88 37.1 Western Canada 3.45 3.49 1.16 Average S l a u g h t e r L e v e l s i n M i l l i o n Cwt North America 46.44 48.6 4.65 U n i t e d S t a t e s 40.54 42.46 4.74 Northeast 3.92 3.95 0.77 South 9.93 10.32 3.93 Midwest 25.69 27. 09 5.45 West 1.01 1.11 9.9 Canada 5.9 6.14 4.07 A t l a n t i c 0.22 0.23 4.55 Quebec 1.68 1.69 0.6 O n t a r i o 1.68 1.82 8.33 Western Canada 2.32 2.4 3.45 65 T a b l e 10/ c o n t i n u e d Region B a s e l i n e Discount r a t e : 1% Percentage Change from Base Sum of L i v e Hog Exports 1987-1992 i n M i l l i o n Head Canada t o US 4 . 01 4.65 15.96 US t o Canada 0 0 Sum o f Pork Exports from SPS to Demand S e c t o r 1987-1992 i n M i l l i o n Cwt Canada t o US 4.75 6.33 33.26 US t o Canada 30.6 29.12 -4.84 Dynamic Response of the Model R e s u l t s from the economic model pre s e n t e d i n c h a p t e r VI, are c o n s i s t e n t w i t h theory and an i n c r e a s e i n t r a d e and decrease i n p r i c e s i n the i m p o r t i n g country a f t e r removal of a c o u n t e r v a i l i n g duty i s one example of agreement w i t h t h e o r e t i c a l p r e d i c t i o n s . A second example i s the c o n s i s t e n c y of the s h o r t -run supply e l a s t i c i t y w i t h data found i n the l i t e r a t u r e . S h o r t -run supply e l a s t i c i t y i s not an i n p u t i n the model, but can be c a l c u l a t e d by measuring percentage changes of hog marketings over percentage farm p r i c e changes t h r e e q u a r t e r s e a r l i e r . The q u a n t i t y changes i n c l u d e both s h i f t s i n , and movements al o n g the supply curve. The c h o i c e of u s i n g f o u r q u a r t e r s f o r the s h o r t -66 term e l i m i n a t e s seasonal e f f e c t s on supply. The supply e l a s t i c i t y over f o u r q u a r t e r s i s 0.19 f o r the two US r e g i o n s , 0.06 f o r Quebec, 0.09 f o r O n t a r i o , 0.08 f o r Western Canada and 0.11 f o r the A t l a n t i c p r o v i n c e s w h i l e M o s c h i n i and M e i l k e (1993) r e p o r t a s h o r t - r u n hog supply e l a s t i c i t y of 0.042. P o s s i b l e M o d i f i c a t i o n s The impact of g r a i n programs which can i n f l u e n c e hog p r o d u c t i o n c o u l d be i n c o r p o r a t e d . For example, Canadian g r a i n 14 t r a n s p o r t p o l i c i e s have caused pork p r o d u c t i o n t o s h i f t from Western Canada where t h e r e was a g r a i n s u r p l u s t o E a s t e r n Canada, t r a d i t i o n a l l y f a c i n g a g r a i n d e f i c i t , by s u b s i d i z i n g the movement of feed g r a i n s t o d e f i c i t r e g i o n s . Adding Mexico as a t r a d i n g p a r t n e r would a l l o w the s i m u l a t i o n of environmental and economic impacts o f the North American Free Trade Agreement. F i n a l l y , i n c o r p o r a t i n g economies of s i z e i n p r o d u c t i v i t y -enhancing t e c h n o l o g i e s would improve the c o s t s t r u c t u r e o f the model. 1 5 To take advantage of economies of s i z e , the farm s t r u c t u r e i s e v o l v i n g i n t o fewer, l a r g e r f i r m s c l u s t e r i n g near 14 . . . . . T r a n s p o r t s u b s i d i z a t i o n ended i n 1996, but had an impact d u r i n g |^he s i m u l a t i o n p e r i o d . The manure-related c a p i t a l requirements per sow u n i t i n B r i t i s h Columbia decreased from CND$1,088 f o r a 100-sow u n i t t o CND$616 f o r a 400-sow u n i t ( F u l l e r t o n , 1990). Furthermore, i n 1990, p r o d u c t i o n c o s t s were US$60 per hundredweight on a 140-head farm compared w i t h l e s s than US$45 per hundredweight on a 10,000 head farm (Pagano and A b d a l l a , 1994). 67 p r o c e s s i n g f a c i l i t i e s w i t h s p e c i a l i z e d i n f r a s t r u c t u r e s (Pagano and A b d a l l a , 1994). Arkansas' Tyson Foods Inc., one of the companies t h a t e a r l i e r transformed p o u l t r y i n t o an automated conception-to-consumption b u s i n e s s , i s t u r n i n g t o pork... Pork i s where p o u l t r y was i n the 1970s, says John Tyson. Now the t r a i n i s l e a v i n g the s t a t i o n . (Globe and M a i l , A p r i l 1, 1994). L a r g e - s c a l e o p e r a t i o n s , c h a r a c t e r i s e d by lower c o s t s , i n c r e a s e d c o o r d i n a t i o n , and improved q u a l i t y , c o u l d be r e s p o n s i b l e f o r a 15% net growth of the i n d u s t r y over the next decade (Hurt, 1994) . Indeed, North C a r o l i n a and Quebec have e x p e r i e n c e d major i n c r e a s e s i n hog p r o d u c t i o n and c o n c e n t r a t i o n s o f farms. In North C a r o l i n a , pork p r o d u c t i o n i n c r e a s e d from 839 m i l l i o n pounds t o 1,473 m i l l i o n pounds per y e a r from 1984 t o 1991, an i n c r e a s e of over 75% (Roka, 1993). Farms of 1,000 head o r more, whose numbers i n c r e a s e d by 47% between 1987 and 1992, made a major c o n t r i b u t i o n t o the development o f the i n d u s t r y (Smith and Kuch, 1995). In Quebec, the l a r g e s t growth o f the hog i n d u s t r y o c c u r r e d between 1976 and 1980 w i t h an i n c r e a s e i n hog i n v e n t o r i e s from 1.5 m i l l i o n i n 1975 t o 3.5 m i l l i o n i n 1980. P r o d u c t i o n has s i n c e l e v e l l e d o f f , but the number of farms f e l l from 8,000 i n 1981 t o 3,614 i n 1991 through the c o n s o l i d a t i o n o f farms ( K a r a n t i n i n i s e t al., 1995). T h i s c o n c e n t r a t i o n i n c r e a s e s the burden on l o c a l environments even i f l a r g e - s c a l e swine p r o d u c t i o n u n i t s spend l e s s on f e r t i l i z e r , and u t i l i z e more manure n u t r i e n t v a l u e than s m a l l e r f i r m s (Van A r s d a l l and Nelson i n P u r v i s and Outlaw, 1995). 68 CHAPTER V - THE ENVIRONMENTAL MODEL The E r o s i o n P r o d u c t i v i t y Impact C a l c u l a t o r (EPIC) i s the environmental model which i s l i n k e d t o the economic model. D i f f e r e n t q u a n t i t i e s of manure, co r r e s p o n d i n g t o l i v e hog i n v e n t o r i e s under d i f f e r e n t p o l i c i e s are i n p u t s i n t o EPIC and measure the impact of a l t e r n a t i v e s c e n a r i o s on water q u a l i t y ( F i g u r e 1). EPIC was developed by the US Department o f A g r i c u l t u r e A g r i c u l t u r a l Research S t a t i o n (USDA-ARS) t o a s s e s s the p r o d u c t i v i t y and e r o s i o n problems r e l a t e d t o c u l t i v a t i o n p r a c t i c e s (Williams e t al. , 1984 c i t e d i n Lakshminarayan e t al. , 1996), but o f t e n i s used t o address water q u a l i t y i s s u e s . T h i s chapter p l a c e s EPIC w i t h i n the l a r g e ensemble of models. L a t e r , EPIC i s d e s c r i b e d and the r a t i o n a l e behind the c h o i c e of environmental i n d i c a t o r s , n i t r a t e s , and phosphates, i s g i v e n . EPIC i n p u t s and outputs are i d e n t i f i e d f o l l o w e d by v a l i d a t i o n r e s u l t s and proposed m o d i f i c a t i o n s t o the p r e s e n t methodology. D e s c r i p t i o n o f Chemical T r a n s p o r t Models Most chemical t r a n s p o r t models a d d r e s s i n g water q u a l i t y c o n t a i n standard components such as: s u r f a c e - r u n o f f , groundwater, and e r o s i o n components (An t l e and Capalbo, 1993). 69 In the s u r f a c e - r u n o f f g e n e r a t i o n component, which d e s c r i b e s the t r a n s f o r m a t i o n of p r e c i p i t a t i o n i n t o r u n o f f , the s o i l s u r f a c e and s o i l p r o f i l e are major c o n t r o l s f o r the response of the s u r f a c e water system. Land use p r a c t i c e s such as t i l l a g e , a f f e c t the i n f i l t r a t i o n , r u n o f f , and e r o s i o n p r o c e s s e s . The US Department of A g r i c u l t u r e S o i l C o n s e r v a t i o n S e r v i c e Curve Number model i s commonly used t o estimate r u n o f f . T h i s method r e l a t e s d i r e c t r u n o f f t o d a i l y r a i n f a l l as a f u n c t i o n o f a curve number r e p r e s e n t i n g s o i l type, s o i l drainage p r o p e r t i e s , crop type, and management p r a c t i c e . A second component of the t r a n s p o r t models i s the groundwater component which d e s c r i b e s chemical movement through the u n s a t u r a t e d s o i l zone and sometimes i n t o the s a t u r a t e d zone. These models estimate the p a r t i t i o n i n g o f a chemical between adsorbed p a r t i c l e s and d i s s o l v e d chemicals and determine the p o r t i o n of chemical t r a n s p o r t e d by s o i l sediment o r s o i l water. V o l a t i l i z a t i o n and decay of chemicals may a l s o be modelled. A t h i r d component of many t r a n s p o r t models i s the e r o s i o n component, which estimates s o i l l o s s . T h i s i s important s i n c e a n u t r i e n t t h a t i s t r a n s p o r t e d o f f the f i e l d v i a eroded s o i l i s not a v a i l a b l e f o r l e a c h i n g t o groundwater. The U n i v e r s a l S o i l Loss Equation, which accounts f o r r a i n f a l l , crop management, s l o p e c o n d i t i o n s , and e r o s i o n c o n t r o l p r a c t i c e s , i s a model t h a t has been used i n the p a s t t o c a l c u l a t e s o i l l o s s per a c r e . Chemical t r a n s p o r t models c o n t a i n i n g the t h r e e components 70 can be d i v i d e d i n t o t h r e e broad c a t e g o r i e s : r e s e a r c h , management, or s c r e e n i n g models. Research models p r o v i d e q u a n t i t a t i v e estimates of water and s o l u t e movement, but u s u a l l y have e x t e n s i v e data demands on the system t o be s i m u l a t e d (e.g. d a i l y o r h o u r l y c l i m a t e d a t a ) . Management models are l e s s d a t a -i n t e n s i v e , l e s s q u a n t i t a t i v e i n de s i g n , and l e s s r o b u s t a t p r e d i c t i n g water and s o l u t e movement under v a r i o u s environmental c o n d i t i o n s . The s c r e e n i n g models have r e l a t i v e l y low data demands, can e v a l u a t e and compare n u t r i e n t t r a n s p o r t and f a t e under a l t e r n a t i v e environmental c o n d i t i o n s , and are r e l a t i v e l y i n e x p e n s i v e t o use. One output o f these models i s the c a t e g o r i z a t i o n o f chemicals i n t o broad b e h a v i o r a l c l a s s e s . The performance and c h a r a c t e r i s t i c s o f twelve models d e s c r i b e d i n the l i t e r a t u r e and b e l o n g i n g t o the t h r e e d i f f e r e n t 16 c a t e g o r i e s are reviewed. Bingner e t al. (1987) compared the performance of CREAMS, SWRRB, EPIC, ANSWERS AND AGNPS i n e s t i m a t i n g r u n o f f and sediment y i e l d . No s i g n i f i c a n t d i f f e r e n c e Acronyms used i n t h i s chapter are d e f i n e d as f o l l o w s : AGNPS, A g r i c u l t u r a l Nonpoint S u r f a c e P o l l u t i o n model CREAMS, A f i e l d s c a l e model f o r Chemical, Runoff, and E r o s i o n f o r A g r i c u l t u r a l Management Systems SWRRB, Si m u l a t o r f o r Water Resources i n R u r a l Basins EPIC, E r o s i o n P r o d u c t i v i t y Impact C a l c u l a t o r ANIMO, A g r i c u l t u r a l N i t r o g e n Model DAISY, Danish S i m u l a t i o n model f o r t r a n s f o r m a t i o n and t r a n s p o r t of matter and energy i n the s o i l p l a n t atmosphere system RENLEM, Re g i o n a l N i t r o g e n Leaching Model SWATNIT, S o i l Water A c t u a l T r a n s p i r a t i o n and N i t r o g e n model ANIMO, A g r i c u l t u r a l N i t r o g e n Model LONFAS, Leaching o f N i t r a t e from A g r i c u l t u r a l S o i l s NMIN, M i n e r a l N i t r o g e n NTRM, N i t r o g e n T i l l a g e Residue Management SWATRE, S o i l Water A c t u a l T r a n s p i r a t i o n Rate Extended 71 was observed between the y e a r l y , measured and p r e d i c t e d v a l u e s of r u n o f f a t the 95% co n f i d e n c e l e v e l among the f i v e models f o r the F l a n n i g a n watershed. Vereecken e t al. (1991) compared n i t r o g e n l e a c h i n g and crop uptake by EPIC, RENLEM, ANIMO, DAISY and SWATNIT and the main f e a t u r e s o f t h e i r r e s u l t s are r e p o r t e d below. For a l l s i t e s , DAISY e x p l a i n s about 90% o f the measured v a r i a b i l i t y w i t h a r o o t mean square e r r o r (RMSE) o f 27.2%. ANIMO and EPIC have about the same performance e x p l a i n i n g 78% and 77%, r e s p e c t i v e l y , o f the v a r i a b i l i t y w i t h RMSE v a l u e s o f 36.2% and 37.1%, r e s p e c t i v e l y . The lowest performance i s o b t a i n e d by RENLEM and SWATNIT, e x p l a i n i n g o n l y 52% of the v a r i a b i l i t y w i t h a RMSE of 53%. Before d i s c u s s i n g the performance of the models i n p r e d i c t i n g the p l a n t uptake of n i t r o g e n , o n l y EPIC and DAISY si m u l a t e crop p r o d u c t i o n and the c o r r e s p o n d i n g demand f o r n i t r o g e n . SWATNIT and ANIMO use a p o t e n t i a l n i t r o g e n uptake f u n c t i o n which v a r i e s a c c o r d i n g t o the a v a i l a b i l i t y o f n i t r o g e n i n the s o i l p r o f i l e . In RENLEM, the p l a n t n i t r o g e n uptake i s an in p u t , and f o r a l l s i t e s , RMSE v a l u e s v a r y between 15.2% and 22.9%. R e s u l t s are overestimated w i t h DAISY and SWATNIT and underestimated w i t h ANIMO. EPIC overestimated uptake on one s i t e and underestimated i t on two oth e r s i t e s . S i n c e the r e l a t i v e performances of d i f f e r e n t models v a r i e s a c c o r d i n g t o s i t e s p e c i f i c i t i e s , the c h o i c e o f model i s based on the model c h a r a c t e r i s t i c s . Vereecken e t al. (1991) i n c l u d e s e v e r a l t a b l e s d e s c r i b i n g nine models: NTRM, EPIC, CREAMS, RENLEM, ANIMO, LONFAS, NMIN, DAISY and SWATNIT. Only f i v e o f the 72 models i n c l u d e animal manure as a source o f n i t r o g e n : NTRM, EPIC, RENLEM, ANIMO AND DAISY, and from these, EPIC, NTRM and DAISY are r e s e a r c h models as opposed t o management models f o r d e c i s i o n a n a l y s i s . F i n a l l y , a c c o r d i n g t o L e a v e s l e y e t al. (1990), EPIC p r o v i d e s the most d e t a i l e d and complete s i m u l a t i o n s of n i t r o g e n and phosphorus f r a c t i o n s and t r a n s f o r m a t i o n s . Hence, EPIC was s e l e c t e d as the most s u i t a b l e model f o r t h i s study. The model has been c a l i b r a t e d f o r North America, i s w e l l documented, and i n c l u d e s the d e s i r e d i n d i c a t o r s . The E r o s i o n P r o d u c t i v i t y Impact C a l c u l a t o r (EPIC) EPIC i s a comprehensive r e s e a r c h model, developed s p e c i f i c a l l y f o r a n a l y z i n g the e r o s i o n / p r o d u c t i v i t y problem. The drainage area i s g e n e r a l l y s m a l l ( i . e . around one h e c t a r e ) , because model parameters are assumed t o be s p a t i a l l y homogeneous; hence i t i s a f i e l d - s c a l e p h y s i c a l p r o c e s s model (Lakshminarayan e t al. , 1996). In v e r t i c a l d i r e c t i o n s , t he model can work w i t h any v a r i a t i o n i n s o i l p r o p e r t i e s (Sharpley and W i l l i a m s , 1990). I t has t e n components: weather, hydrology, e r o s i o n , n u t r i e n t s , s o i l temperature, crop growth, t i l l a g e , p l a n t environmental c o n t r o l , p e s t i c i d e f a t e , and economics (Table 11). T a b l e 11 Components o f the EPIC Model Component Weather D a i l y i n p u t s of p r e c i p i t a t i o n , maximum and minimum temperature, s o l a r r a d i a t i o n , wind, and r e l a t i v e humidity; c o l l e c t e d and/or generated i n p u t s can be used Hydrology Processes of s u r f a c e r u n o f f , p e r c o l a t i o n , l a t e r a l s ubsurface flow, e v a p o t r a n s p i r a t i o n , and snow melt E r o s i o n Wind and water e r o s i o n are s i m u l a t e d ; t h r e e o p t i o n s are a v a i l a b l e t o s i m u l a t e water e r o s i o n N u t r i e n t s Processes o f n i t r o g e n and phosphorus t r a n s f o r m a t i o n s , crop uptake, l e a c h i n g , and r u n o f f (both s o l u t i o n and eroded phases) S o i l temperature C a l c u l a t e d as a f u n c t i o n o f a i r temperature and ground cover Crop growth A g e n e r i c crop growth model i s used t h a t permits the s i m u l a t i o n o f complex r o t a t i o n s T i l l a g e D i f f e r e n t l e v e l s o f t i l l a g e can be s i m u l a t e d ; s p e c i f i c implements are accounted f o r P l a n t environment c o n t r o l D i f f e r e n t l e v e l s o f i r r i g a t i o n , f e r t i l i z e r , and lime ; drainage and furrow d i k i n g can be simulated P e s t i c i d e f a t e P e s t i c i d e r o u t i n e s from the GLEAMS (Groundwater Loading E f f e c t s o f A g r i c u l t u r a l Management Systems) model have been i n c o r p o r a t e d ; processes o f p e s t i c i d e d e g r a d a t i o n , l e a c h i n g , and r u n o f f (both s o l u t i o n and eroded phases) Economics Crop budgets and acc o u n t i n g subsystem keeping t r a c k o f the c o s t s o f produc i n g and marketing the crops and incomes generated from the a c t i v i t y Source: adapted from Bouzaher e t al. (1993a) An important f e a t u r e f o r t h i s study i s the n u t r i e n t component which comprises both the n i t r o g e n and phosphorus c y c l e s , environmental i n d i c a t o r s chosen f o r reasons e x p l a i n e d i n the f o l l o w i n g . 74 Environmental i n d i c a t o r s Water q u a l i t y i s a m u l t i d i m e n s i o n a l concept i n c l u d i n g p h y s i c a l , chemical and b i o l o g i c a l i n d i c a t o r s . Bouzaher e t a l . (199 3b) summarize ground and s u r f a c e water i n d i c a t o r s o f nonpoint source p o l l u t i o n from animal waste r u n o f f . They use n i t r i t e p l u s n i t r a t e n i t r o g e n , ammonium n i t r o g e n , K j e l d a h l n i t r o g e n , phosphate, c h l o r i d e and sodium f o r groundwater, t o t a l suspended s o l i d s and v a r i a b l y suspended s o l i d s , t o t a l n i t r o g e n , ammonium n i t r o g e n , n i t r a t e n i t r o g e n , t o t a l phosphorus, s o l u b l e phosphorus, c h l o r i d e , pH, B i o l o g i c a l Oxygen Demand, and c o l i f o r m b a c t e r i a l count f o r s u r f a c e water. T h i s study, i n c o n t r a s t t o an Environmental Impact Assessment which c o n s i d e r s a broad s e t of i n d i c a t o r s , and i n l i n e w i t h the t r a d i t i o n o f c o s t - b e n e f i t a n a l y s i s which uses one i n d i c a t o r , uses two environmental i n d i c a t o r s ; n i t r a t e s and phosphates. They are the most commonly r e g u l a t e d n u t r i e n t s i n l e g i s l a t i o n which p r o t e c t s water q u a l i t y . They are a l s o widespread, d e t e c t i b l e , and a s s o c i a t e d w i t h s p e c i f i c problems. P o l l u t i o n from copper, f o r example, i s s p e c i f i c t o farms where i t i s i n c l u d e d i n feed. N i t r a t e and phosphate l o s s e s a re widespread and d e t e c t i b l e b e f o r e they reach a s p e c i f i e d t h r e s h o l d . Even a t low c o n c e n t r a t i o n s , n i t r a t e s and phosphates are r e s p o n s i b l e f o r environmental and h e a l t h hazards i d e n t i f i e d i n the i n t r o d u c t i o n . Phosphates b e i n g l e s s s o l u b l e than n i t r a t e s , are l o s t mainly i n r u n o f f and e r o s i o n , and hence a f f e c t s u r f a c e water, w h i l e n i t r a t e s are l o s t i n r u n o f f and 75 l e a c h a t e contaminating s u r f a c e and groundwaters. The l e v e l s o f the two i n d i c a t o r s a re as s e s s e d under s p e c i f i c management p r a c t i c e s d e s c r i b e d i n the next s e c t i o n a f t e r t he o u t l i n e o f s e l e c t e d i n p u t s and outputs. Data Inputs The impact of d i f f e r e n t s c e n a r i o s on water q u a l i t y i s sim u l a t e d w i t h EPIC a t two s i t e s ; R a l e i g h , North C a r o l i n a and Pont-Rouge, Quebec. S i n c e the o b j e c t i v e o f t h i s study i s t o compare s c e n a r i o s r a t h e r than t o assess cumulative r e g i o n a l environmental impacts, s i m u l a t i o n s w i t h EPIC are done on s m a l l areas w i t h i n each r e g i o n . Important parameters used t o reach the o b j e c t i v e s o f t h i s t h e s i s are pres e n t e d i n Table 12. Input f i l e s , which can be obt a i n e d from the author, i n c l u d e the f o l l o w i n g monthly data on the weather: average monthly maximum and minimum a i r temperatures, monthly standard d e v i a t i o n o f the maximum and minimum d a i l y a i r temperatures, average monthly p r e c i p i t a t i o n , monthly standard d e v i a t i o n o f the d a i l y p r e c i p i t a t i o n , monthly skew c o e f f i c i e n t f o r d a i l y p r e c i p i t a t i o n , monthly p r o b a b i l i t y o f a wet day o c c u r r i n g a f t e r a dry day, monthly p r o b a b i l i t y o f a wet day o c c u r r i n g a f t e r a wet day, average number of days o f r a i n i n a month, and average monthly s o l a r r a d i a t i o n . D a i l y p r e c i p i t a t i o n , a i r temperature, and s o l a r r a d i a t i o n a re generated s t o c h a s t i c a l l y u s i n g the EPIC weather g e n e r a t o r and 76 i n f o r m a t i o n p r o v i d e d above. The i n p u t f i l e s a l s o i n c l u d e the f o l l o w i n g data f o r each s o i l l a y e r : depth of the s o i l l a y e r , b u l k d e n s i t y o f the s o i l l a y e r , w i l t i n g p o i n t , f i e l d c a p a c i t y , sand content, s i l t c ontent, o r g a n i c n i t r o g e n c o n c e n t r a t i o n , s o i l pH, o r g a n i c carbon content, coarse fragment content, n i t r a t e c o n c e n t r a t i o n , l a b i l e phosphorus c o n c e n t r a t i o n , and crop r e s i d u e c o n c e n t r a t i o n . Table 12 S e l e c t e d EPIC Inputs S p e c i f i e d by the User Input V a r i a b l e U n i t s Quebec North C a r o l i n a General Data Watershed drainage area h e c t a r e 15 1 7 1 Runoff curve number 65 69 Average channel s l o p e m/m 1 0 Channel roughness f a c t o r 0.1 0 Su r f a c e roughness f a c t o r 0.1 0.41 L a t i t u d e degrees 51 35. 65 Average watershed e l e v a t i o n m 100 100.6 Water content o f snow on ground a t s t a r t o f s i m u l a t i o n mm 67 NA Average c o n c e n t r a t i o n o f n i t r o g e n i n r a i n f a l l g/m3 0.9 0.8 C o n c e n t r a t i o n of carbon d i o x i d e i n atmosphere PPM 330 350 When the model i s run w i t h a drainage area o f 1 ha, the l e v e l of n i t r a t e s i n r u n o f f and groundwater are the same, and the l e v e l o f phosphates i n r u n o f f changes from 0.55 t o 0.51 kg/ha w i t h an i n p u t o f 60 kg of N per ha. T a b l e 12, continued Input V a r i a b l e U n i t s Quebec North C a r o l i n a Water E r o s i o n Data Slope l e n g t h m 140 10 Number b e f o r e decimal s p e c i f i e s water e r o s i o n e q u a t i o n (0=MUSLE l=AOF 2=USLE). Number a f t e r decimal i s s l o p e steepness 0.01 0.05 E r o s i o n c o n t r o l p r a c t i c e f a c t o r 1 1 Wind E r o s i o n Data F i e l d l e n g t h km 1 2 F i e l d width km 0.3 2 Clockwise angle of f i e l d l e n g t h from North degrees 0 90 Standing dead crop r e s i d u e t/ha 1 0 S o i l Data S o i l albedo 0.1 0.18 Maximum number of s o i l l a y e r s 5 10 Minimum t h i c k n e s s of maximum s o i l l a y e r m 0 0 I n i t i a l s o i l water c o n t e n t -f r a c t i o n o f f i e l d c a p a c i t y 0.8 0 Minimum depth t o water t a b l e m 0.5 [1] Maximum depth t o water t a b l e m 8 [1] 79 T a b l e 12, continued Input V a r i a b l e U n i t s Quebec North C a r o l i n a I n i t i a l depth t o water t a b l e m 2 [1] S o i l weathering code 2 [1] [1] not needed s i n c e l e a c h i n g i s not s i m u l a t e d ; NA: not a p p l i c a b l e Management p r a c t i c e s d i f f e r between the two r e g i o n s s i n c e they f o l l o w the g u i d e l i n e s f o r experiments used f o r v a l i d a t i o n . Rather than i n c l u d i n g management i n f o r m a t i o n data i n t a b l e 12, i t i s d e s c r i b e d i n separate s e c t i o n s f o r the two s i t e s s t u d i e d . Management Information f o r North C a r o l i n a In North C a r o l i n a , the experiment d e s c r i b e d by Burns e t a l . (1987) i s reproduced w i t h EPIC. E l e v a t i o n , l a t i t u d e , mean c l i m a t e norms, and mean wind speed and d i r e c t i o n aire from the R a l e i g h , US Department of A g r i c u l t u r e A g r i c u l t u r a l Research S t a t i o n (USDA-ARS). The s t a t i o n i s l o c a t e d approximately 8 km southeast o f the experimental p l o t s and i s assumed t o have mean c l i m a t e norms r e p r e s e n t a t i v e o f , i f not i d e n t i c a l t o , those which p r e v a i l over the experimental p l o t s . No s p e c i a l wind or water e r o s i o n c o n t r o l p r a c t i c e s a re i n s t a l l e d . The s o i l pedon d e s c r i p t i o n f o r the C e c i l sandy c l a y loam ( c l a y e y , k a o l i n i t i c , thermic T y p i c Hapludults) i s o b t a i n e d from the EPIC s o i l database. P r i o r t o the manure treatment, the s i m u l a t i o n a l l o w s f o r s i x years o f low f e r t i l i t y / l o w y i e l d when 80 the summer pa s t u r e i s e s t a b l i s h e d . Summer and w i n t e r p a s t u r e s , s i m u l a t e d by EPIC, are composed predominantly of t a l l f e scue as were p a s t u r e s from which the North C a r o l i n a experimental data were o b t a i n e d . The p l o t s are then i r r i g a t e d w i t h e f f l u e n t d u r i n g f o u r y e a r s . The e f f l u e n t i r r i g a t e d i s assumed t o c o n t a i n 0.1% s o l i d s and the frequency of a p p l i c a t i o n s f o r the study p e r i o d i s g i v e n i n T a b l e 13. T a b l e 13 Frequency o f E f f l u e n t I r r i g a t i o n s on the Experimental S i t e Month F i r s t Year Second Year T h i r d Year F o u r t h Year March 5 3 A p r i l 4 4 May 4 4 4 4 June 4 4 4 5 J u l y 5 5 4 4 August 4 4 4 4 September 4 4 4 5 October 5 5 4 5 November 2 2 2 2 Source: p e r s o n a l communication w i t h J.C. Burns, P r o f e s s o r , Department of Crop Science and Animal S c i e n c e , North C a r o l i n a S t a t e U n i v e r s i t y . P e r i o d i c g r a z i n g i s too d i f f i c u l t t o c o n t r o l on i n d i v i d u a l p l o t s , and i s thus s i m u l a t e d by u s i n g p e r i o d i c h a r v e s t i n g o f p l o t s w i t h a mechanized h a r v e s t e r . Harvests on the experimental p l o t are hence more frequent than h a r v e s t s t o s e l l the crop. The dates on which 95% of the s t a n d i n g p a s t u r e biomass are h a r v e s t e d are g i v e n i n Table 14. 81 T a b l e 14 Harvest Dates f o r the Experimental P e r i o d Month F i r s t Year Second Year T h i r d Year F o u r t h Year March 29 28 A p r i l 7 18 20 May 5 3,19 11, 31 12,31 June 5 8,30 22 J u l y 24 24 August 13 11,28 30 16,21 September 13,22 8,21 October 8 7,22 4 5 November 14 December 20 13 Source: p e r s o n a l communication w i t h J.C. Burns, P r o f e s s o r , Department of Crop Science and Animal S c i e n c e , North C a r o l i n a S t a t e U n i v e r s i t y . In the next s e c t i o n , management p r a c t i c e s f o r Pont-Rouge, Quebec are i d e n t i f i e d . Less data, f o r management p r a c t i c e s , are r e q u i r e d i n Quebec than i n North C a r o l i n a : due t o the s h o r t e r and c o o l e r summer season, forage i s h a r v e s t e d l e s s f r e q u e n t l y ( i n Quebec, forage i s h a r v e s t e d t h r e e times a y e a r compared t o seven t o e l e v e n times i n North C a r o l i n a ) and manure i s spread t w i c e a year i n Quebec w h i l e , i n North C a r o l i n a , f i e l d s are i r r i g a t e d w i t h s l u r r y once a week. Management Information f o r Quebec The database from the S o i l s Department a t L a v a l U n i v e r s i t y f o r Portneuf county i s used t o run EPIC i n Quebec. The c l i m a t e 82 i s based on t h a t of S a i n t e - C a t h e r i n e . Management p r a c t i c e s r e p o r t e d i n Gangbazo e t al. (1995) are performed on the Pont-Rouge s o i l , a Morin s o i l w i t h more than 10% g r a v e l a t depths below 60 cm. The sand content v a r i e s from 83% t o 99.5%, depending on s o i l depth and p l o t analyzed. C l a y and o r g a n i c matter content decrease w i t h depth. Wind speed and d i r e c t i o n are not i n c o r p o r a t e d . For f i v e y e a rs b e f o r e the experiment, the l a n d i s under summer p a s t u r e . A f t e r t h i s p e r i o d , two s i m u l a t i o n s e r i e s are run; one w i t h s i l a g e c o r n and the o t h e r w i t h f o r a g e . Crops are p l a n t e d b e f o r e any manure a p p l i c a t i o n , which averages 4.8% d r y matter. Forage i s h a r v e s t e d on June 21st, J u l y 10th and October 7th. S i n c e h a r v e s t i s not as frequent i n Quebec as i t i s i n North C a r o l i n a , n u t r i e n t a b s o r p t i o n by forage i s not as l a r g e i n Quebec as i n North C a r o l i n a . Output V a r i a b l e s As mentioned p r e v i o u s l y , n i t r a t e s and phosphates are the two environmental i n d i c a t o r s . Hence, from the 158 EPIC output v a r i a b l e s , v a r i a b l e s of g r e a t e s t i n t e r e s t a r e : 1) n i t r a t e l o s s through r u n o f f , 2) s o l u b l e phosphate l o s s through r u n o f f and 3) crop y i e l d . The m i n e r a l n i t r o g e n l o s s i n p e r c o l a t e i s an output v a r i a b l e f o r Quebec but not f o r North C a r o l i n a . The p e r c o l a t i o n of n i t r a t e s beyond the r o o t i n g zone i s l a r g e l y determined by the 83 depth and movement of groundwater and by the r o o t i n g depth. Experimental data from the North C a r o l i n a study are expressed i n terms o f n i t r a t e c o n c e n t r a t i o n as a f u n c t i o n o f s o i l depth, but g i v e s no i n f o r m a t i o n on the depth of the groundwater t a b l e , or the r o o t i n g depth. V a l i d a t i o n of the n u t r i e n t l o s s e s i n groundwater i n North C a r o l i n a i s t h e r e f o r e i m p o s s i b l e . Furthermore, the experiment i n Quebec i n c l u d e d both corn and forage w h i l e the North C a r o l i n a study was performed on forage o n l y . Simulated r e s u l t s w i t h corn c o u l d not be v a l i d a t e d f o r North C a r o l i n a . Three o p t i o n s are a v a i l a b l e r e g a r d i n g the c h o i c e of v a r i a b l e s f o r comparison: 1) r e p o r t s i m u l a t i o n r e s u l t s on corn, and the p e r c o l a t i o n of n i t r a t e s i n groundwater i n North C a r o l i n a , even though they are u n v a l i d a t e d , 2) focus upon v a r i a b l e s t h a t can be v a l i d a t e d i n both r e g i o n s , o r 3) r e p o r t more r e s u l t s of s i m u l a t i o n s i n Quebec than i n C a r o l i n a which c r e a t e s an unbalanced comparison d e s i g n . The t h i r d o p t i o n i s chosen, s i n c e the o b j e c t i v e i s t o assess the impact o f v a r i o u s p o l i c i e s on water q u a l i t y u s i n g two case s t u d i e s , not t o perform a s y s t e m a t i c comparison between two r e g i o n s . U n f o r t u n a t e l y , l e s s data are a v a i l a b l e f o r the environmental model and v a l i d a t i o n of r e s u l t s i s more d i f f i c u l t than f o r the economic model. Conducting f i e l d experiments t o o b t a i n data necessary t o perform a s t a t i s t i c a l a n a l y s i s was not f e a s i b l e due t o the resource demands needed t o run the economic model. 84 V a l i d a t i o n R e s u l t s R e s u l t s from experiments performed i n R a l e i g h , North C a r o l i n a and i n Pont-Rouge, Quebec, d e s c r i b e d i n the p r e v i o u s s e c t i o n , are compared t o the s i m u l a t e d r e s u l t s t o v a l i d a t e the model. Rather than annual data, averages are compared, which i s p r e f e r a b l e s i n c e the weather data are generated s t o c h a s t i c a l l y by EPIC. T h i s procedure i n t r o d u c e s a d d i t i o n n a l d i s c r e p a n c y between annual s i m u l a t e d and a c t u a l data. Two s i m u l a t i o n s , c o r r e s p o n d i n g t o two treatments, are used i n each r e g i o n f o r the v a l i d a t i o n s . R e s u l t s from North C a r o l i n a are f o l l o w e d by v a l i d a t i o n r e s u l t s from Quebec. A d d i t i o n n a l s i m u l a t i o n s are run t o e s t a b l i s h r e l a t i o n s h i p s between i n p u t s of manure f e r t i l i z e r and output v a r i a b l e s ( F i g u r e s 5 t o 7 i n chapter V I ) . 85 V a l i d a t i o n R e s u l t s f o r North C a r o l i n a In the experiment performed i n North C a r o l i n a (Westerman e t a l . , 1987) , two e f f l u e n t i r r i g a t i o n treatments were used f o r hog lagoon e f f l u e n t : 200 mm per year (about 600 kg N/ha/year) and 400 mm per year (about 1200 kg N/ha/year). Y i e l d and r u n o f f l e v e l s o f n i t r o g e n and phosphorus f o l l o w i n g these treatments are compared t o experimental data i n Tab l e 15. Average s i m u l a t e d l e v e l s o f n u t r i e n t s i n r u n o f f over f o u r y e a r s i s compared t o the experimental data c o l l e c t e d on the f i n a l sampling date. The t o t a l n i t r o g e n i n r u n o f f was recorded, w h i l e EPIC s i m u l a t e s the l e v e l o f n i t r a t e s , the p r i n c i p a l form of n i t r o g e n i n r u n o f f . T a b l e 15 Comparison between Simulated and Experimental North C a r o l i n a Data [1] F i r s t Treatment Second Treatment Sim. Exp. Sim. Exp. Runoff-N kg/ha N i t r a t e s T o t a l N N i t r a t e s T o t a l N 12.52 13 27.55 62 [2] (-3.69) [2] (-55.56) Runoff-P 2.35 2.4 7.35 19 [2] (-2.08) [2] (-61.32) Y i e l d t/ha 10.7 11.17 10.7 12.5 (-4.21) [3] (-14.4) [3] [1] Percentage d i f f e r e n c e s between a c t u a l and s i m u l a t e d v a l u e s are i n p a r e n t h e s i s [2] Source: T a b l e 4 (Westerman e t al.,1987) [3] Source: Table 4 (Burns e t al.,1987) Sim.:Simulated; E x p . E x p e r i m e n t a l ; kg/ha:kilogram p e r h e c t a r e ; t/ha:tonne per h e c t a r e ; T o t a l N: t o t a l n i t r o g e n c o n s i s t i n g o f ammonium n i t r o g e n and n i t r a t e s . 86 S i m u l a t i o n of the f i r s t treatment i s a c c u r a t e w h i l e s i m u l a t i o n of the second treatment i s not. Hence, the model i s not used i n the h i g h e r spectrum, r e p r e s e n t e d by the second treatment, t o e s t a b l i s h r e l a t i o n s h i p s between i n p u t s and outputs i n Chapter VI: the h i g h e s t s i m u l a t e d a p p l i c a t i o n i s 820 kg N/ha. An a p p l i c a t i o n of 684 kg of N/ha i s used as the base s c e n a r i o 18 f o r comparisons ( i d e n t i f i e d as common p r a c t i c e ) . I t i s h i g h e r than the f i r s t treatment but c o n s i d e r a b l y lower than the second treatment (1200 kg). Two treatments are a l s o used t o v a l i d a t e the r e s u l t s i n Quebec, both of which p r o v i d e i n s i g h t i n t o the r e l a t i o n s h i p between EPIC i n p u t and output v a r i a b l e s as d i s c u s s e d next. V a l i d a t i o n R e s u l t s f o r Quebec Simulated r e s u l t s f o r Pont-Rouge, Portneuf, are compared w i t h r e s u l t s from the experiment conducted i n L e n n o x v i l l e by Gangbazo e t al. (1995) t o determine i f they are w i t h i n a reasonable range. The f i r s t treatment c o n s i s t e d o f an a p p l i c a t i o n , i n the s p r i n g , of chemical f e r t i l i z e r a t the recommended r a t e , a c c o r d i n g t o the n i t r o g e n requirements: 180 kg Recommended n i t r o g e n a p p l i c a t i o n r a t e s range from 40 t o 50 l b s of n i t r o g e n per dry ton of bermudagrass hay (Zublena e t al. c i t e d i n Cox, 1993). An average of 45 l b s i s m u l t i p l i e d by the crop y i e l d o f 11.17 t/ha (Burns e t al., 1987) t o g i v e 228 kg/ha. Three times the recommended r a t e corresponds t o 684 kg/ha. 87 of N/ha on c o r n and 55 kg on forage without hog manure ( A s s o c i a t i o n des f a b r i c a n t s d ' e n g r a i s du Quebec c i t e d i n Ganbazo, 1995). With the second treatment, the recommended r a t e o f f e r t i l i z e r was a p p l i e d w i t h hog manure a t t w i c e t h i s r a t e : 180 and 55 kg of n i t r o g e n from manure were a p p l i e d i n the s p r i n g (May 21-25) and f a l l (October 1-30) on c o r n and forage, r e s p e c t i v e l y . Averages over the experimental p e r i o d a r e compared i n T a b l e 16. 88 Tabl e 16 Comparison between Simulated and Experimental Quebec Data [1] Crop V a r i a b l e F i r s t Treatment Second Treatment T 2 1 Corn:180-Forage:55 0-0 -0-0 Corn:180-Forage:55 180-180 -55-55 Sim. Exp. Sim. Exp. Corn Runoff-N kg / ha 3.17 (-2.16) 3.24 6.43 (46.8) 4.38 Runoff-P 0. 51 (-19.05) 0. 63 0.64 (30.61) 0.49 Leaching -N 15.5 (-69.18) 50.29 62.48 (-48.8) 122.03 Crop Uptake-N 145 (91.04) 75.9 150 (58.39) 94.7 Crop Uptake-P 20.7 (9.52) 18.9 21.15 (-15.74) 25.1 Y i e l d t / ha 8.3 (45.61) 5.7 8.46 (19.15) 7.1 Forage Runoff-N kg / ha 1.35 (84.93) 0.73 1.67 (234) 0.5 Runoff-P 0.20 (-65.52) 0.58 0.28 (-44) 0.5 Leaching -N 2.02 (-81.21) 10.75 3.81 (-73.71) 14.49 Crop Uptake-N 86 (-12.07) 97.8 102 (-5.99) 108.5 Crop Uptake-P 12.24 (17.69) 10.4 14.42 (33.52) 10.8 Y i e l d t / ha 3.71 (-15.68) 4.4 4.37 (-5) 4.6 [1] Percentage d i f f e r e n c e s between a c t u a l and s i m u l a t e d v a l u e s are i n p a r e n t h e s i s [2] M i n e r a l f e r t i l i z e r - S p r i n g manure-Fall manure (kg/ha) Sim.:Simulated; Exp.:Experimental; kg/ha:kilogram per h e c t a r e ; t/ha:tonne per h e c t a r e . 89 R e s u l t s f o r l e v e l s of n u t r i e n t s i n r u n o f f are reasonable, w h i l e s i m u l a t e d r e s u l t s f o r l e a c h i n g are lower than the experimental data. The l e v e l of phosphates i n r u n o f f i s a l s o underestimated by the s i m u l a t i o n s . U n d e r e s t i m a t i o n o f n i t r a t e l e a c h i n g and phosphorus r u n o f f can be e x p l a i n e d p a r t l y by the f a c t t h a t d u r i n g the second year of the experiment, w i n t e r p r e c i p i t a t i o n was more than twice the 29 y e a r average. A l s o , each o f the t h r e e w i n t e r seasons had a l a r g e number of days w i t h temperatures t h a t were m i l d enough t o i n i t i a t e snowmelt r u n o f f and s u b s u r f a c e drainage. Even i f the t o t a l annual p r e c i p i t a t i o n f o r each of the t h r e e years was comparable t o the average, s i n g l e events c o u l d s i g n i f i c a n t l y i n c r e a s e n u t r i e n t l o s s e s i n the f i e l d . T h i s i s p a r t i c u l a r l y t r u e f o r phosphorus, which accumulates i n the s o i l (being l e s s s o l u b l e than n i t r o g e n ) and i s , i n p a r t , washed away d u r i n g storms. U n f o r t u n a t e l y EPIC does not s i m u l a t e l o s s e s due t o unusual events such as major storms. Furthermore, n i t r a t e l e a c h i n g might be underestimated because the s i m u l a t i o n p e r i o d i s e i g h t y ears w h i l e i t can take up t o f o r t y y e ars f o r n i t r a t e s t o l e a c h t o groundwater (Hanley, 1990). Thus, f o r t h i s reason environmental impacts are expected t o be worse than what i s shown by s i m u l a t e d r e s u l t s . Simulated n i t r o g e n crop uptakes by forage are 12% and 6% lower than the experimental r e s u l t s f o r the f i r s t and second treatments. These r e s u l t s are b e t t e r than those o b t a i n e d by Engelke and Fabrewitz (1991), who underestimated N-uptake by g r a s s by 28% t o 56%. 90 S e n s i t i v i t y A n a l y s i s S e n s i t i v i t y t o incremental changes i n manure a p p l i c a t i o n s can v a r y w i t h a p p l i c a t i o n l e v e l s . A p p l i c a t i o n s of manure are i n c r e a s e d t o reach l e a c h i n g l e v e l s s i m i l a r t o experimental r e s u l t s r e p o r t e d i n Table 16. The base s c e n a r i o c o n s i s t i n g of a p p l i c a t i o n s of 540 and 165 kg o f N i s r e p l a c e d by a p p l i c a t i o n s o f 720 and 385 kg N on corn and forage r e s p e c t i v e l y . S c e n a r i o 2 s i m u l a t i n g the removal of the pork and hog c o u n t e r v a i l i n g d u t i e s and s t a b i l i z a t i o n payments does not induce any s i g n i f i c a n t change i n the l e v e l s o f n i t r a t e s i n drainage w i t h e i t h e r base s c e n a r i o . S c e n a r i o 3, which adds the removal of the ban on US imports of l i v e hog i n t o Canada t o s c e n a r i o 2, t r i g g e r s a decrease of 1.73% and 4.98% i n the l e v e l s o f n i t r a t e s i n d r a i nage under corn and forage cover r e s p e c t i v e l y . These r e s u l t s a r e d i f f e r e n t from the ones r e p o r t e d i n T a b l e 21 where the n i t r a t e l e v e l decreases by 2.58% and 1.3% on c o r n and forage r e s p e c t i v e l y showing t h a t r e l a t i o n s h i p s between n u t r i e n t s i n p u t s and outputs are not l i n e a r . However, these d i f f e r e n c e s do not change the q u a l i t a t i v e nature of the c o n c l u s i o n s . S c e n a r i o 2 has no impact on water q u a l i t y w h i l e s c e n a r i o 3 improves groundwater q u a l i t y . 91 P o s s i b l e M o d i f i c a t i o n s An a l t e r n a t i v e approach would be t o use a metamodel, a s t a t i s t i c a l l y based, s p a t i a l sampling design, t o o b t a i n r e s u l t s f o r the p h y s i c a l model a t a l a r g e r s c a l e i . e . f o r a watershed, a p r o v i n c e , o r n a t i o n (Lakshminarayan e t al. 1996). Secondly, an e x t e n s i o n t o the presen t methodology would i n c o r p o r a t e an a q u i f e r model aggrega t i n g d i f f e r e n t p o l l u t i o n flows t o estimate the s t o c k o f p o l l u t i o n . T h i s would g i v e the n i t r a t e c o n c e n t r a t i o n i n the a q u i f e r which c o u l d be compared w i t h the Canadian standard o f 10 mg/L. T h i s standard i s not, however, s e t f o r flows o f p o l l u t a n t i n r u n o f f or l e a c h a t e . Environmental i n d i c a t o r s i n t h i s t h e s i s estimate flows r a t h e r than s t o c k s o f p o l l u t a n t s . The o r g a n i c n i t r o g e n and the phosphorus l o s s e s w i t h sediment are sim u l a t e d w i t h EPIC and c o u l d be a d d i t i o n n a l i n d i c a t o r s s i n c e s o i l l o s s e s can be c a r r i e d t o s u r f a c e waters. F i n a l l y , EPIC c o u l d be m o d i f i e d t o s i m u l a t e t h e water contamination by ammonium n i t r o g e n . In the EPIC n i t r o g e n c y c l e , a f t e r ammonium n i t r o g e n i s a p p l i e d as a component o f manure, i t i s assumed t o be immediately l o s t v i a v o l a t i l i z a t i o n , o r transformed i n t o n i t r a t e s by n i t r i f i c a t i o n . T h i s assumption i s based on the f a c t t h a t ammonium n i t r o g e n i s r a p i d l y n i t r i f i e d i n w e l l a e r a t e d s o i l a t temperatures between 10 and 30 °C. Ammonium n i t r o g e n can cause t h r e e types o f problems, however, even a t ve r y low c o n c e n t r a t i o n s . For example, c o n c e n t r a t i o n s o f <0.02 92 mg/L may i n c r e a s e the r i s k o f f i s h asphyxia (McNeely e t al. c i t e d i n Ganbazo, 1995). During water treatment, ammonium n i t r o g e n r e a c t s w i t h c h l o r i n e and produces chloramines which are l e s s e f f e c t i v e as d i s i n f e c t a n t s . F i n a l l y , ammonium n i t r o g e n may cause problems w i t h t a s t e and s m e l l , even a t c o n c e n t r a t i o n s as low as 0.1 mg/L (Boucher c i t e d i n Ganbazo, 1995). CHAPTER VI - ANALYSIS AND EMPIRICAL RESULTS As s t a t e d i n the i n t r o d u c t i o n , the f i r s t o b j e c t i v e o f t h i s study i s t o d e s i g n a framework t o measure the impact o f t r a d e , a g r i c u l t u r a l and environmental p o l i c i e s on water q u a l i t y . The second o b j e c t i v e i s t o assess the impacts o f t r a d e and market w e l f a r e under v a r i o u s combinations of a g r i c u l t u r a l , environmental, and t r a d e p o l i c i e s . To reach the f i r s t o b j e c t i v e , the q u a n t i t y of manure n i t r o g e n t o i n s e r t i n t o EPIC must f i r s t be determined. The q u a n t i t y of manure being a f u n c t i o n of l i v e hog i n v e n t o r i e s , the impact of t r a d e s c e n a r i o s on hog i n v e n t o r i e s i s d i s c u s s e d i n the next s e c t i o n . The q u a n t i t y of manure n i t r o g e n used i n EPIC, under n u t r i e n t management p l a n s , i s the t o p i c of the second s e c t i o n . F i n a l l y , the e f f e c t of r e g u l a t i o n s on hog management and water q u a l i t y are d i s c u s s e d . Manure N i t r o g e n I n s e r t e d i n t o EPIC under Two Trade P o l i c i e s To measure the impact of t r a d e and a g r i c u l t u r a l p o l i c i e s on water q u a l i t y u s i n g EPIC, the percentage change i n l i v e hog i n v e n t o r i e s (and hence, i n manure), o b t a i n e d by running the economic model under two t r a d e s c e n a r i o s (2 and 3) , must f i r s t 94 19 be found, s i n c e the q u a n t i t y of manure i s an i n p u t i n EPIC. S c e n a r i o 2 i n v o l v e s the e l i m i n a t i o n of the hog c o u n t e r v a i l i n g duty and s t a b i l i z a t i o n programs w h i l e s c e n a r i o 3 s i m u l a t e s a f r e e t r a d e environment by adding t o the measures i n s c e n a r i o 2, the e l i m i n a t i o n of the ban on l i v e US hog imports i n Canada ( n o n t a r i f f b a r r i e r ) . Percentage changes i n the Southeast and i n Quebec are r e p o r t e d i n Table 17. T a b l e 17 Impact o f Trade S c e n a r i o s on Hog Inventory Percentage Changes Compared t o the B a s e l i n e Regions S c e n a r i o 2 S c e n a r i o 3 % Inventory Change from B a s e l i n e Southeast -0.13 -0.02 Quebec -0.08 -2.96 Both i n v e n t o r i e s i n Quebec and i n the Southeast decrease, f o l l o w i n g the removal of c o u n t e r v a i l i n g d u t i e s ( s c e n a r i o 2) . Removal of the n o n t a r i f f b a r r i e r ( s c e n a r i o 3) induces a decrease o f i n v e n t o r i e s i n Quebec o f 2.96% and i n the Southeast o f 0.02%. As d e s c r i b e d i n Chapter I I I , the kilograms o f n u t r i e n t s a p p l i e d t o f i e l d s under the common p r a c t i c e i n c r e a s e or decrease a c c o r d i n g t o percentage changes i n T a b l e 17. For example, the S c e n a r i o 1 s i m u l a t e s the removal of the pork c o u n t e r v a i l i n g duty. S i n c e i t has a l r e a d y been removed, i t i s l e s s r e l e v a n t than s c e n a r i o s 2 and 3. Furthermore, the percentage d i f f e r e n c e i n hog i n v e n t o r i e s between s c e n a r i o 1 and the b a s e l i n e i s o n l y -0.06 i n the Southeast and -0.001 i n Quebec. 95 common p r a c t i c e i n Quebec i s t o apply 165 kg N/ha (55 kg from f e r t i l i z e r and 110 kg from manure) on forage and 540 kg on c o r n (180 kg from f e r t i l i z e r and 360 kg from manure). Removal of the n o n t a r i f f b a r r i e r t r i g g e r s a decrease o f i n v e n t o r i e s i n Quebec by 2.96%, hence the kilograms of n i t r o g e n are decreased by 2.96% from 165 t o 160 kg on forage and from 540 t o 524 kg on c o r n . The number o f kilograms of manure n i t r o g e n used as an i n p u t i n EPIC under the t r a d e and environmental s c e n a r i o s , i s summarized i n T a b l e 18. The procedure t o determine the number of kilograms of n u t r i e n t a p p l i e d , t o comply w i t h n u t r i e n t management p l a n s , i s d e s c r i b e d i n the next s e c t i o n . T a b l e 18 Impact o f Trade and Environmental S c e n a r i o s on Kilograms o f N i t r o g e n (N) and Phosphorus (P) A p p l i e d p e r Hectare i n North C a r o l i n a and Quebec Common P r a c t i c e Trade S c e n a r i o s Environmental S c e n a r i o s S c e n a r i o 2 S c e n a r i o 3 N i t r o g e n P l a n Phos-phorus P l a n Kg per ha C a r o l i n a (Forage) 684 N 683.11 N 683.86 N 73 N 20 P Quebec (Forage) 165 N 164.87 N 160.12 N 84 N 22 P Quebec (Corn) 540 N 539.56 N 524.02 N 106 N [1] 30 P [2] [1] S c e n a r i o 4; [2] S c e n a r i o 6 96 Manure N i t r o g e n I n s e r t e d i n t o EPIC under Two N u t r i e n t Management Plans With n u t r i e n t management p l a n s , manure a p p l i c a t i o n s are l i m i t e d t o the n u t r i e n t content t h a t can be absorbed by the crop under c u l t i v a t i o n . S i n c e n u t r i e n t a b s o r p t i o n by crops v a r i e s w i t h n u t r i e n t i n p u t , the r e l a t i o n s h i p between n u t r i e n t i n p u t and uptake by r e g i o n and crop grown, i s found w i t h EPIC. The l e v e l t o which crop requirements are r e s p e c t e d ( i . e . the q u a n t i t y of n u t r i e n t s a p p l i e d per ha) i s a l s o o b t a i n e d . F i g u r e 2 r e p o r t s the r e s u l t s f o r n i t r o g e n uptake by forage i n both North C a r o l i n a and Quebec. The s i m u l a t e d r e l a t i o n s h i p f i n d s n u t r i e n t uptake as a f u n c t i o n of n u t r i e n t i n p u t , g i v e n the agronomic c o n d i t i o n s f o r the r e g i o n i n c l u d e d i n EPIC. In F i g u r e 2, the range o f i n p u t s f o r Quebec i s l e s s than f o r North C a r o l i n a because experimental data are u n a v a i l a b l e t o v a l i d a t e the Quebec r e s u l t s a t h i g h e r i n p u t l e v e l s . In both r e g i o n s , forage does not use more than 200 kg N/ha, w i t h North C a r o l i n a having a h i g h e r a b s o r p t i v e c a p a c i t y f o r i n p u t s g r e a t e r than 100 kg/ha. The s o l i d l i n e , a t 45° ( r a t i o o f 1) i n d i c a t e s where the n u t r i e n t i n p u t equals uptake. Inputs beyond the i n t e r s e c t i o n p o i n t of the two l i n e s are assumed t o exceed the agronomic requirements of the crop. At the i n t e r s e c t i o n o f the s i m u l a t e d and o ptimal crop uptakes, North C a r o l i n a and Quebec have approximately the same a s s i m i l a t i v e c a p a c i t y f o r n i t r o g e n . F i g u r e 3 shows s i m u l a t i o n r e s u l t s f o r phosphorus 97 a p p l i c a t i o n per ha of forage i n North C a r o l i n a and Quebec. As i n the case o f a b s o r p t i o n of n i t r o g e n , c o n d i t i o n s i n North C a r o l i n a r e s u l t i n h i g h e r crop uptake of n u t r i e n t s , but, where s i m u l a t e d and optimal uptake are equal, the a b s o r p t i o n i n the two r e g i o n s i s s i m i l a r (20 kg f o r North C a r o l i n a v s . 22 kg f o r Quebec). The type of crop p l a n t e d , i s an important determinant of n u t r i e n t uptake. F i g u r e 4 p r e s e n t s the o p t i m a l and s i m u l a t e d r e l a t i o n s h i p between i n p u t s and a b s o r p t i o n f o r n i t r o g e n and phosphorus per ha of corn i n Quebec. R e c a l l t h a t experimental data f o r Quebec i n c l u d e more crops and measures of water q u a l i t y than i n North C a r o l i n a . Data on the impact of a p p l y i n g manure on corn i n North C a r o l i n a are not a v a i l a b l e f o r the area s t u d i e d . Note t h a t the model assumes a c o n s t a n t a b s o r p t i o n r a t e m u l t i p l i e d by the y i e l d . (ayvio3H/9M) awidn douo 9 9 o o C M 0 ) C O n 1 8 Q. T> M - C O CO C CO o c O <B co O < t: •o o c z w c Q. c CO o i-3 o .o Q O 3 z O a> cs TO E 3 pti E LUI 0 1 CO r CO T o C O o C O o o C M LU UL u LU o o * o 3 0. O - 3 0 0 < O C O o o C M O O C M O CO O CO O O C M O O O CO O co o o C M (3HV103H/9*) BWldn dOUO 100 101 E f f e c t o f Two Trade S c e n a r i o s and two Environmental S c e n a r i o s on Hog Management Standards f o r n i t r o g e n and phosphorus, expressed as the 20 number of market hogs per ha of l a n d a v a i l a b l e f o r manure a p p l i c a t i o n s , are shown i n Tab l e 19. N i t r o g e n and phosphorus l e v e l s i n Tab l e 18 are d i v i d e d by 10.44 kg and 5.22 kg r e s p e c t i v e l y which are the n u t r i e n t s produced a n n u a l l y by one hog a t the f i n i s h i n g stage t o o b t a i n the number o f hogs per h e c t a r e . For North C a r o l i n a , the n u t r i e n t management f o r n i t r o g e n would l i m i t farmers t o 7 market hogs per ha. Adding the recommendations f o r phosphates ( a l l o w i n g 3.83 hogs/ha) would i n t r o d u c e more s t r i n g e n t c o n s t r a i n t s on producers. T h i s c o n t r a s t s w i t h commonly used l e v e l s o f 65.52 hogs/ha o f l a n d used f o r manure a p p l i c a t i o n s . S i n c e enough l a n d i s owned or re n t e d by hog producers (1 hog/ha i n the So u t h e a s t ) , these p l a n s should c r e a t e an i n c e n t i v e t o spread manure on l a r g e r areas, i n c r e a s i n g p r o d u c t i o n c o s t s . In Quebec, manure from 34.48 market hogs i s a p p l i e d on each ha of corn, which would have t o be decreased t o 10.15 based on the n i t r o g e n p l a n without chemical f e r t i l i z a t i o n . A p p l i c a t i o n s on forage are c l o s e r t o optimal v a l u e s , r e q u i r i n g decreases from 10.53 t o 8.04 market hogs. S i n c e the area o f l a n d owned or r e n t e d by hog producers i s i n s u f f i c i e n t , the environmental Hogs a t the f i n i s h i n g stage e q u a l l i n g 0.2 animal u n i t s . 102 p o l i c y c o u l d n e c e s s i t a t e the i n t r o d u c t i o n o f manure treatment f a c i l i t i e s o r a r e d u c t i o n o f hog i n v e n t o r i e s . L e g i s l a t i o n i n Quebec (Gouvernement du Quebec, 1996) i n c l u d e s an appendix which s p e c i f i e s the maximum number of animal u n i t s per ha f o r d i f f e r e n t c u l t u r e s . Maximum v a l u e s correspond t o 13.75 and 20.65 market hogs, when manure i s a p p l i e d on forage o r corn r e s p e c t i v e l y . T h i s requirement i s not as s t r i c t as a compulsory i n t e g r a t e d f e r t i l i z a t i o n p l a n which i s s i m i l a r t o the si m u l a t e d n i t r o g e n and phosphorus p l a n s (Table 19) . Tabl e 19 Impact o f Trade and Environmental S c e n a r i o s on Market Hogs Numbers per Hectare i n North C a r o l i n a and Quebec [1] Trade S c e n a r i o s Environmental S c e n a r i o s Region Common P r a c t i c e 2 3 N i t r o g e n P l a n Phosphorus P l a n chem. f e r t . No chem. f e r t . chem. f e r t . No chem f e r t North C a r o l i n a (Forage) 65.52 65.47 65.52 0 7 0 3.83 Quebec (Forage) 10.53 [2] 10.52 10.53 2.78 8.04 0 4.21 Quebec (Corn) 34.48 [2] 34.45 33.46 0 10.15 [3] 0 5.74 [4] [1] number of h e c t a r e s used f o r manure a p p l i c a t i o n s , assuming t h a t the t o t a l l a n d base i s not used [2] based on 2 p a r t s of manure f o r 1 p a r t of recommended chemical (chem.) f e r t i l i z e r ( f e r t . ) [3] S c e n a r i o 4; [4] S c e n a r i o 6 103 E f f e c t o f Two Trade S c e n a r i o s and Two Environmental S c e n a r i o s on Water Q u a l i t y F i g u r e s 5, 6 and 7 show the mass t r a n s p o r t o f n u t r i e n t s as a f u n c t i o n o f i n p u t s f o r North C a r o l i n a and Quebec. The r e s u l t s permit a comparison of the amount of n u t r i e n t s i n r u n o f f and/or l e a c h a t e , r e s u l t i n g from 1) commonly a p p l i e d i n p u t s and 2) the i n p u t s under n u t r i e n t p l a n s w i t h 3) i n p u t s f o l l o w i n g t r a d e l i b e r a l i z a t i o n . These t h r e e f i g u r e s show t h a t r e l e a s e s o f n u t r i e n t s a re not equal t o zero a t optimal i n p u t l e v e l s where i n p u t equals average crop uptake. D i f f e r e n t f a c t o r s , l i k e c l i m a t e and accumulation o f n u t r i e n t s i n the s o i l , a f f e c t the crop uptake and make i t d e v i a t e from the uptake estimated f o r average c o n d i t i o n s i n d u c i n g n u t r i e n t l o s s e s i n the environment. For example, i f the temperature i s c o l d e r than u s u a l and i f phosphorus i s b e i n g accumulated a t a h i g h r a t e i n the s o i l , the uptake i s l e s s than the uptake estimated f o r average c o n d i t i o n s . Furthermore, t h e r e are n u t r i e n t l o s s e s i n the environment even without any human i n t e r v e n t i o n . Losses of phosphates are s i g n i f i c a n t l y more important i n North C a r o l i n a than i n Quebec (F i g u r e 5 ) . Q u a n t i t i e s o f phosphates i n r u n o f f , move up and down when more than 100 kg P/ha i s a p p l i e d , s i n c e a p p l i c a t i o n s beyond a c r i t i c a l p o i n t can cause imbalances i n the ecosystem. Impacts o f output changes on water q u a l i t y cannot be p r e d i c t e d i n t h a t range. In Quebec, more 104 phosphates are p r e s e n t i n r u n o f f when corn i s c u l t i v a t e d than when forage p r o v i d e s a f u l l cover t o the s o i l . L i k e l o s s e s of phosphates, l o s s e s of n i t r a t e s i n r u n o f f are l a r g e r i n North C a r o l i n a than i n Quebec ( F i g u r e 6) . The r e l a t i o n s h i p between the amount of n i t r o g e n a p p l i e d , t o the n i t r a t e s i n r u n o f f , i n c r e a s e s a t every i n p u t l e v e l (except f o r a b r i e f pause a t 600 kg/ha). The r u n o f f curve f o r Quebec i s almost f l a t u n t i l a p p l i c a t i o n s of 165 kg/ha begin, where the curve r i s e s s l i g h t l y , compared t o more pronounced changes i n output observed i n the l e a c h i n g curve. The forage l e a c h i n g curve i s n o n l i n e a r . The l e v e l of n i t r a t e s i s lower, with 84 kg/ha d e r i v e d from manure than w i t h 55 kg/ha from m i n e r a l f e r t i l i z e r , s i n c e o n l y 60% of the manure n i t r o g e n (50.4 kg/ha) i s a v a i l a b l e d u r i n g the f i r s t y ear (Gouvernement du Quebec, 1995). The curve k i n k s upward when the i n p u t i s h i g h e r than 165 kg/ha, the amount which i s commonly a p p l i e d . Changes c o u l d appear l e s s abrupt i f more data p o i n t s were used; n e v e r t h e l e s s , any i n v e n t o r y i n c r e a s e s due t o t r a d e l i b e r a l i z a t i o n would have n o t i c e a b l e e f f e c t s on n i t r a t e s i n d r a i nage when manure i s a p p l i e d on forage. The l e v e l of n i t r a t e s i n r u n o f f and l e a c h i n g i n Quebec, when corn i s c u l t i v a t e d i s shown on F i g u r e 7. The phenomena i n these s i t u a t i o n s are s i m i l a r t o those observed i n forage cover, but a t a d i f f e r e n t s c a l e . The l e a c h i n g of n i t r a t e s range from 12 t o 100 as opposed t o 0.09 t o 5 kg/ha (on f o r a g e ) . Again, the 105 q u a n t i t y of n i t r a t e s i n l e a c h i n g r i s e s n o t i c e a b l y a f t e r the a p p l i c a t i o n o f 180 kg N/ha, and the r u n o f f curve i s f l a t t e r than the l e a c h i n g curve. CO L f ) CO C N i - o (3UV10aH/0>0 S31VHdSOHd 107 c O CD E .2 E £ o 2 O Q. CO cn .ti ro Z o. 3 Q. </) _ O = Q. Q. • o o <r> u n S o o o g> z u _ t*^ O o O f= CO «= 5 a> I T t CO 3 or 96"9€Z Z6"W9 89*1.69 uT 60009 5 3 Q. C M (3UV103H/9>-) S 3 1 V U 1 I N 108 c o o o J> C 0 ) O 3 © . E UJ Z c o 0 CO J3 -E J g ° i IS +* D_ (0 Q_ 1 -1 o K - O O Q. 4 - . CO o c CO (0 — <n • Cfl r>- co 3 C Dl O (3HVlO3H/9>0 S31VH1IN 109 R e s u l t s f o r l e v e l s of n u t r i e n t s c o r r e s p o n d i n g t o d i f f e r e n t s c e n a r i o s are summarized i n T a b l e 20 f o r North C a r o l i n a and i n Table 21 f o r Quebec. F i r s t , these r e s u l t s compare environmental s c e n a r i o s among themselves and these comparisons a v o i d the u n c e r t a i n t y r e l a t e d t o the c h o i c e of a b a s e l i n e . Second, comparisons between the n i t r o g e n and phosphorus p l a n s , and the b a s e l i n e , are used t o assess the impact of environmental s c e n a r i o s . Regarding North C a r o l i n a , Table 2 0 shows t h a t the phosphorus p l a n recommends manure a p p l i c a t i o n s a c c o r d i n g t o crop agronomic requirements which b r i n g the l e v e l s of phosphates and n i t r a t e s t o h i g h e r l e v e l s than w i t h the n i t r o g e n p l a n . T h i s c o n c l u s i o n depends on the assumption adopted f o r the n i t r o g e n -phosphorus r a t i o . The nitrogen-phosphorus r a t i o , which i s observed i n the s l u r r y sprayed on the f i e l d a f t e r lagoon treatment and v o l a t i l i z a t i o n (Burns e t al., 1987), ranges from 5:1 t o 8:1. Hence, the i d e a l crop i n p u t of 2 0 kg o f phosphorus, a c c o r d i n g t o the phosphorus p l a n , corresponds t o a t l e a s t 100 kg of n i t r o g e n , which i s more than t h a t recommended under the n i t r o g e n p l a n (73 kg of n i t r o g e n ) . A nitrogen-phosphorus r a t i o o f 5:1 i s chosen s i n c e the focus i n t h i s s e c t i o n i s on the dose of n u t r i e n t s a p p l i e d t o s o i l h aving impacts on water q u a l i t y ; not on the t o t a l amount of n u t r i e n t s r e l e a s e d i n the environment h a v i n g impacts on a i r and water q u a l i t y . Both p l a n s decrease the l e v e l s of n i t r a t e s and phosphates i n r u n o f f by a t l e a s t 80% compared t o the a c t u a l r u n o f f . In 110 North C a r o l i n a , the e f f e c t o f t r a d e l i b e r a l i z a t i o n on i n v e n t o r i e s i s too smal l t o have any impact on water q u a l i t y , and hence does not change the net e f f e c t o f t r a d e and environmental p o l i c i e s (Table 20). Table 20 Impact of Trade and Environmental Scenarios on Water Quality i n North Carolina [1] N u t r i e n t s i n Runoff Common P r a c t i c e S c e n a r i o 2 Sc e n a r i o 3 N i t r o g e n P l a n Phospho-rus P l a n Kg/Ha of N u t r i e n t s i n Runoff Phosphates (forage) 4.34 4.34 (0) 4.34 (0) 0. 51 (-80.25) 0.73 (-83.18) N i t r a t e s (forage) 13.64 13.64 (0) 13.64 (0) 1.66 (-87.83) 2.11 (-84.53) [1] Percentage changes from the common p r a c t i c e a re i n p a r e n t h e s i s . As opposed t o the f i n d i n g s i n North C a r o l i n a , the phosphorus p l a n i n Quebec i s more s t r i n g e n t than the n i t r o g e n p l a n , but the impacts of the phosphorus and n i t r o g e n p l a n s d i f f e r by no more than 5%. F o l l o w i n g the implementation of these p o l i c i e s , improvements i n groundwater q u a l i t y s h o u l d be more obvious than improvements i n s u r f a c e water q u a l i t y . Decreases i n the l e v e l o f n i t r a t e s i n l e a c h a t e v a r y from 79% t o 88%, w h i l e l e v e l s o f n i t r a t e s i n r u n o f f drop by 6% t o 35%. S i m i l a r l y the l e v e l s o f phosphates i n r u n o f f drop by 31 t o 39% when both p l a n s are i n f o r c e . I l l In Quebec, removal of the hog c o u n t e r v a i l i n g duty and s t a b i l i z a t i o n payments have no impact on water q u a l i t y , but withdrawal of the n o n t a r i f f b a r r i e r ( s c e n a r i o 3) improves water q u a l i t y . Through changes i n hog i n v e n t o r i e s , the n o n t a r i f f b a r r i e r decreases the l e v e l o f n i t r a t e s w h i l e l e a v i n g the l e v e l of phosphates unchanged. Removal of the hog c o u n t e r v a i l i n g duty c o u l d worsen the environmental c o n d i t i o n s i n O n t a r i o and Western Canada s i n c e t h i s t r a d e p o l i c y t r i g g e r s a s m a l l i n c r e a s e i n i n v e n t o r i e s of 0.22% and 0.7%, r e s p e c t i v e l y (Table 22). I n c r e a s e s i n ^ i n v e n t o r i e s w i t h i n these r e g i o n s , r a t h e r than i n Quebec o r the A t l a n t i c p r o v i n c e s , are not s u r p r i s i n g s i n c e O n t a r i o and Western Canada exported 97.9% of a l l Canadian l i v e hog e x p o r t s d u r i n g the study p e r i o d . Even i f i n t e r n a t i o n a l t r a d e i s expected t o be a minor c o n t r i b u t o r t o water q u a l i t y d e t e r i o r a t i o n i n O n t a r i o and Western Canada and does not appear t o c o n t r i b u t e t o p o l l u t i o n i n the two cases s t u d i e d i n Quebec and North C a r o l i n a , s u r f a c e water f l o w i n g through some Quebec a g r i c u l t u r a l areas i s of mediocre q u a l i t y (Primeau and Grimard c i t e d i n Ganbazo, 1995) and North C a r o l i n a i s the seventh most s e n s i t i v e US s t a t e t o n i t r o g e n f e r t i l i z e r l e a c h i n g ( K e l l o g g e t al., 1994). To improve water q u a l i t y , proper environmental p o l i c y l i k e the n u t r i e n t p l a n s d i s c u s s e d e a r l i e r , are more a p p r o p r i a t e than t r a d e p r o t e c t i o n . 112 The t i m i n g of l a n d a p p l i c a t i o n s has no q u a l i t a t i v e e f f e c t on c o n c l u s i o n s , but has an impact on the a b s o l u t e l e v e l s of n u t r i e n t l o s s . In the data r e p o r t e d above, o p t i m a l i n p u t s are a p p l i e d o n l y i n the s p r i n g . D i v i d i n g q u a n t i t i e s between s p r i n g and f a l l a p p l i c a t i o n s i n c r e a s e s a l l n u t r i e n t l o s s e s except the l e v e l of n i t r a t e s i n drainage under the n i t r o g e n p l a n . N i t r a t e s i n r u n o f f r i s e from 2.85 t o 2.99 kg/ha and the l e v e l s of n i t r a t e s i n l e a c h a t e r i s e from 13.42 t o 14.38 kg/ha when c o r n i s c u l t i v a t e d . 113 Tab l e 21 Impact of Trade and Environmental S c e n a r i o s on Water Q u a l i t y i n Quebec [1] Trade S c e n a r i o s Environmental S c e n a r i o s N u t r i e n t s i n Runoff and i n Drainage Common P r a c t i c e 2 3 N i t r o g e n P l a n Phosphorus P l a n Kg/Ha of N u t r i e n t s Phosphates i n Runoff (forage) 0.31 0.31 0.31 0.21 (-32.26) 0.19 (-38.71) Phosphates i n Runoff (corn) 0.81 0.81 0.81 0.56 (-30.86) [2] 0.56 (-30.86) [3] N i t r a t e s i n Runoff (forage) 1 1 0.99 (-1) 0.94 (-6) 0.93 (-7) N i t r a t e s i n Runoff (corn) 4.35 4.35 4.32 (-0.69) 2.85 (-34.48) [2] 2.79 (-35.86) [3] N i t r a t e s i n Drainage (forage) 0.77 0.77 0.76 (-1.3) 0.13 (-83.12) 0.09 (-88.31) N i t r a t e s i n Drainage (corn) 63.99 63.9 9 62.34 (-2.58) 13.42 (-79.03) [2] 12.59 (-80.33) [3] [1] Percentage changes from the common p r a c t i c e a re i n p a r e n t h e s i s [2] Sc e n a r i o 4 [3] Sc e n a r i o 6 T y p i c a l l y , North American t r a d e l i b e r a l i z a t i o n schemes w i t h i n US and Canadian a g r i c u l t u r a l i n d u s t r i e s cause s m a l l e f f e c t s on p r i c e and output. A l t e r n a t i v e t r a d e l i b e r a l i z a t i o n s c e n a r i o s , l i k e i n c r e a s e s i n exports t o Mexico, f o l l o w i n g 114 phasing-out a 20% t a r i f f under the North American Free Trade Agreement (NAFTA), c o u l d have a g r e a t e r impact than the e l i m i n a t i o n of c o u n t e r v a i l i n g d u t i e s . E f f e c t o f Nine Trade and Environmental S c e n a r i o s on Welfare, Trade, Hog I n v e n t o r i e s and S l a u g h t e r Amounts E f f e c t s on w e l f a r e , hog i n v e n t o r i e s and s l a u g h t e r amounts, ob t a i n e d from the economic model, are presented i n T a b l e 22, f o r t r a d e l i b e r a l i z a t i o n s c e n a r i o s , and i n T a b l e 23 f o r environmental s c e n a r i o s . For a l l s c e n a r i o s , w e l f a r e i s r e p o r t e d f o r a s i x - y e a r p e r i o d f o r two US r e g i o n s , c o r r e s p o n d i n g t o the two US-producing r e g i o n s arid f o u r Canadian r e g i o n s . R e g i o n a l w e l f a r e i n the Southeast i s the area under the demand curves f o r the E a s t and South, minus the c o s t s i n the N o r t h e a s t and South SPS minus farm c o s t s i n the Southeast. R e g i o n a l w e l f a r e i n the Midwest and Western US i s the area under the demand curves o f the Midwest and West, minus c o s t s i n the Midwest and Western SPS, minus farm c o s t s i n the Midwest. The c o s t s of pork, s l a u g h t e r e d i n the Midwest and exported t o the Southern demand market, are i n c o r p o r a t e d i n the Midwest and Western US w e l f a r e . S i n c e Canadian r e g i o n s are the same a t the demand, SPS, and p r o d u c t i o n l e v e l s , the w e l f a r e c a l c u l a t i o n i s the area under each r e g i o n ' s demand curve, minus a l l c o s t s . 115 Tabl e 22 Market Welfare, Hog I n v e n t o r i e s , S l a u g h t e r Amounts, L i v e Hog and Pork Exports and Percentage D i f f e r e n c e from the B a s e l i n e f o r Three Trade Sc e n a r i o s [1] Regions S c e n a r i o s B a s e l i n e 1 2 3 T o t a l Welfare 1987-1992 i n US$ M i l l i o n North America 54747.06 54746.84 (0) 54747.03 (0) 54810.88 (0.12) U n i t e d S t a t e s 38728.07 38730.86 (0.01) 38731.5 (0.01) 38921.43 (0.5) E a s t & South US 25938.08 25939.86 (0.01) 25942.96 (0.02) 25962.94 (0.1) Midwest & West US 12789.08 12791.01 (0.02) 12788.54 (0) 12958.49 (1.32) Canada 16018.99 16015.98 (-0.02) 16015.53 (-0.02) 15889.45 (-0.81) A t l a n t i c 1586.53 1586.82 (0.02) 1587.23 (0.04) 1589.5 (0.19) Quebec 4161.49 4161.57 (0) 4171.33 (0.24) 4135.32 (-0.63) O n t a r i o 5764.1 5765.48 (0.02) 5754.95 (-0.16) 5662.53 (-1.76) Western Canada 4506.88 4502.1 (-0.11) 4502.01 (-0.11) 4502.11 (-0.11) Average Hog I n v e n t o r i e s i n M i l l i o n Head North America 73.89 73.89 (0) 73.89 (0) 73.71 (-0.24) US 64.772 64.75 (-0.03) 64.75 (-0.03) 64.71 (-0.1) Southeast 8.05 8.05 (0) 8.04 (-0.12) 8.05 (0) Midwest 56.72 56.71 (-0.02) 56.71 (-0.02) 56.66 (-0.11) Canada 9.12 9.14 (0.22) 9.15 (0.33) 9 (-1.32) 116 Tabl e 2 2 , c o n t i n u e d Regions S c e n a r i o s B a s e l i n e 1 2 3 A t l a n t i c 0.33 0.33 0.33 0.32 (0) (0) (3.03) Quebec 2 . 51 2.51 2.51 2.44 (0) (0) (-2.79) O n t a r i o 2.83 2.83 2.84 2.77 (0) (0.35) (-2.12) Western 3.45 3.47 3.47 3.47 Canada (0.58) (0.58) (0.58) Average S l a u g h t e r L e v e l s i n M i l l i o n Cwt North 46.44 46.44 46.47 46.39 America (0) (0.06) (-0.11) US 40.54 40.55 40.56 39.21 (0.02) (0.05) (-3.28) Northeast 3.92 3.91 3.9 3.92 (-0.26) (-0.51) (0) South 9.93 9.93 9.94 9.83 (0) (0.1) (-1.01) Midwest 25.69 25.7 25.71 24.45 (0.04) (0.08) (-4.83) West 1.01 1 1.01 1.02 (-0.99) (0) (0.99) Canada 5.9 5.89 5.89 7.18 (-0.17) (-0.17) (21.69) A t l a n t i c 0.22 0.22 0.22 0.22 (0) (0) (0) Quebec 1.68 1.68 1.59 1.98 (0) (-5.36) (17.86) O n t a r i o 1. 68 1.67 1.75 2.67 (-0.6) (4.17) (58.93) Western 2.32 2.33 2.33 2.31 Canada (0.43) (0.43) (-0.43) 117 Tabl e 22, con t i n u e d Regions S c e n a r i o s B a s e l i n e 1 2 3 T o t a l L i v e Hog Exports 1987-1992 i n M i l l i o n Head US t o Canada 0 0 0 91.5 Canada t o US 4.01 4.04 (0.75) 4.71 (17.46) 1.5 (-62.62) T o t a l Pork Exports from SPS t o Demand S e c t o r , 1987-1992 i n M i l l i o n Cwt US t o Canada 30.6 30.8 (0.92) 30.88 (0.92) 8.45 (-72.39) Canada t o US 4.75 4.90 (3.16) 4.89 (2.95) 6.19 (30.32) [1] Percentage d i f f e r e n c e s from b a s e l i n e are i n p a r e n t h e s i s 118 Tabl e 23 Market Welfare, Hog I n v e n t o r i e s , S l a u g h t e r Amounts, L i v e Hog and Pork Exports and Percentage D i f f e r e n c e from the B a s e l i n e f o r S i x Environmental S c e n a r i o s [1] Reaions S c e n a r i o s 4 5 6 T o t a l Welfare 1987-1992 i n US$ M i l l i o n North America 53992.78 (-1.38) 54761.68 (0.03) 53517.73 (-2.25) U n i t e d S t a t e s 37976.58 (-1.94) 38661.67 (-0.17) 37556.5 (-3.03) Ea s t & South 25768.96 (-0.65) 26014.41 (-0.29) 25560.95 (-1.45) Midwest & West 12207.63 (-4.55) 12647.26 (-1.11) 11995.55 (-6.2) Canada 16016.2 (-0.02) 16100.01 (0.51) 15961.24 (-0.36) A t l a n t i c 1581.47 (-0.32) 1585.03 (-0.09) 1583.34 (-0.2) Quebec 4240.22 (1.89) 4242.37 (1.94) 4369.06 (4.99) O n t a r i o 5720.79 (-0.75) 5755.84 (-0.14) 5543.30 (-3.83) Western Canada 4472.72 (-0.76) 4516.77 (0.22) 4465.53 (-0.92) Average Hog Inveni t o r i e s i n M i l l i o n Head North America 73.36 (-0.72) 74.13 (0.32) 72.87 (-1.38) US 64.86 (0.14) 65.62 (1.31) 64.96 (0.3) Southeast 8.03 (-0.25) 8.15 (1.24) 8.01 (-0.5) Midwest 56.83 (0.19) 57.47 (1.32) 56.95 (0.41) Canada 8.5 (-6.8) 8.51 (-6.69) 7.91 (-13.27) A t l a n t i c 0.33 (0) 0.33 (0) 0.33 (0) 119 Tab l e 23, con t i n u e d Regions S c e n a r i o s 4 5 6 Average Hog Invenl bories i n M i l l i o n Head Quebec 1.87 (-25.5) 1.87 (-25.5) 0.68 (-72.91) O n t a r i o 2.85 (0.71) 2.86 (1.06) 3.46 (22.26) Western Canada 3.44 (-0.29) 3.44 (-0.29) 3.45 (0) Average S l a u g h t e r L e v e l s i n M i l l i o n Cwt North America 46.03 (-0.88) 46.51 (0.15) 45.61 (-1.79) US 40.32 (-0.55) 40. 85 (0.76) 40.18 (-0.89) Northeast 3.9 (-0.43) 3.88 (-1.02) 3.89 (-0.77) South 9.87 (-0.65) 9.82 (-1.14) 9.8 (-1.31) Midwest 25.57 (-0.46) 26.16 (1.86) 25.51 (-0.68) West 0.98 (-2.53) 0.99 (-1.87) 0.98 (-2.69) Canada 5.71 (-3.24) 5. 66 (-3.99) 5.43 (-8) A t l a n t i c 0.23 (0.93) 0.23 (1.41) 0.22 (0) Quebec 1.56 (-7.3) 1. 56 (-6.8) 1.37 (-18.45) O n t a r i o 1. 64 (-2.27) 1.62 (-3.19) 1.53 (-8.93) Western Canada 2.29 (-1.4) 2.25 (-3.05) 2.31 (-0.43) 120 T a b l e 23, con t i n u e d Regions S c e n a r i o s 4 5 6 Total L L i v e Hog Exports 1987-1992 i n M i l l i o n Head u s t o Canada 0 0 0 Canada t o US 3 . 3 5 ( - 1 6 . 4 6 ) 2 . 9 6 ( - 2 6 . 1 8 ) 3 . 2 6 ( - 1 8 . 7 ) T o t a l Fork Exports from SPS to Demand S e c t o r , 1987-1992 i n M i l l i o n Cwt US t o Canada 3 2 . 4 3 ( 5 . 9 8 ) 3 3 . 4 1 ( 9 . 1 8 ) 3 6 . 7 4 ( 2 0 . 0 7 ) Canada t o US 4 . 7 1 ( - 0 . 8 4 ) 4 . 6 9 ( - 1 . 2 6 ) 4 . 7 1 ( - 0 . 8 4 ) [ 1 ] Percentage d i f f e r e n c e s from b a s e l i n e are i n p a r e n t h e s i s 121 Tabl e 23, con t i n u e d Regions S c e n a r i o s 7 8 9 T o t a l Welfare 1987-1992 i n US$ M i l l i o n North America 54294.59 (-0.83) 46058.78 (-15.87) 48022.59 (-12.28) U n i t e d S t a t e s 38252.46 (-1.23) 31034.78 (-19.86) 33094.53 (-14.55) Ea s t & South 25817.99 (-0.46) 21655.21 (-16.51) 22479.21 (-13.34) Midwest & West 12434.46 (-2.77) 9379.56 (-26.66) 10615.32 (-17) Canada 16042.13 (0.14) 15024 (-6.21) 14928.07 (-6.81) A t l a n t i c 1587.2 (0.04) 1568.59 (-1.13) 1571.52 (-0.95) Quebec 4370.97 (5.03) 3948.67 (-5.11) 3937.3 (-5.39) O n t a r i o 5577.81 (-3.23) 5516.85 (-4.29) 5261.09 (-8.73) Western Canada 4506.14 (-0.02) 3989.89 (-11.47) 4158.15 (-7.74) Average Hog Invenl b o r i e s i n M i l l i o n Head North America 73.65 (-0.32) 56.55 (-23.47) 52.81 (-28.52) US 65.73 (1.48) 48.37 (-25.32) 45.32 (-30.03) Southeast 8.07 (0.25) 6.67 (-17.14) 6.03 (-25.06) Midwest 57.66 (1.66) 41.7 (-26.48) 39.29 (-30.73) Canada 7.93 (-13.05) 8.17 (-10.35) 7.49 (-17.82) A t l a n t i c 0.33 (0) 0.19 (-40.48) 0.19 (-41.14) 122 Tabl e 23, con t i n u e d Regions S c e n a r i o s 7 8 9 Average Hog Invenl : o r i e s i n M i l l i o n Head Quebec 0. 68 (-72.91) 2 .13 (-15.37) 2.11 (-15.9) O n t a r i o 3 .48 (22.98) 2.45 (-13.5) 2.29 (-19.14) Western Canada 3.45 (0) 3.41 (-1.26) 2.9 (-15.94) Average S l a u g h t e r L e v e l s i n M i l l i o n Cwt North America 46.1 (-0.74) 35.01 (-24.62) 36.47 (-21.47) US 40.65 (0.27) 30. 38 (-25.06) 29.56 (-27.84) Northeast 3 . 88 (-0.94) 3.2 (-18.45) 3.33 (-15.16) South 9.74 (-1.93) 4.36 (-56.11) 4.36 (-56.11) Midwest 26. 05 (1.4) 22.73 (-11.53) 21.47 (-16.4) West 0.98 (-2.39) 0.11 (-89.71) 0.1 (-90.26) Canada 5.45 (-7.63) 4.62 (-21.63) 7.22 (22.37) A t l a n t i c 0.22 (-3.67) 0.15 (-32.88) 0.18 (-19.15) Quebec 1.38 (-17.71) 1.23 (-26.77) 1.54 (-8.03) O n t a r i o 1.55 (-7.61) 0.67 (-59.99) 2.77 (65.23) Western Canada 2.3 (-0.73) 2.57 (10.91) 2.72 (17.35) 123 Tabl e 23, continued Regions S c e n a r i o s 7 8 9 Tota] L L i v e Hog Exports 1987-1992 i n M i l l i o n Head US t o Canada 0 0 64.78 Canada t o US 3.24 (-19.2) 0.21 (-94.76) 0.32 (-92.02) T o t a l Pork Exports from SPS t o Demand S e c t o r , 1987-1992 i n M i l l i o n Cwt US t o Canada 36. 64 (19.74) 46.44 (51.76) 10.53 (-65.59) Canada t o US 4 . 68 (-1.47) 10. 69 (125) 17.81 (275) [1] Percentage d i f f e r e n c e s from b a s e l i n e are i n p a r e n t h e s i s 124 R e s u l t s i n Table 22 are d i s c u s s e d s e p a r a t e l y f o r s c e n a r i o s s i m u l a t i n g the a b o l i t i o n of c o u n t e r v a i l i n g d u t i e s ( s c e n a r i o s 1 and 2) and f o r the e l i m i n a t i o n of the ban on US l i v e hog exports t o Canada ( s c e n a r i o 3) . Likewise, r e s u l t s i n T a b l e 2 3 are d i s c u s s e d s e p a r a t e l y f o r the m u l t i l a t e r a l implementation of n u t r i e n t management pl a n s ( s c e n a r i o s 4 and 6) , the u n i l a t e r a l implementation of n u t r i e n t p l a n s i n Quebec ( s c e n a r i o s 5 and 7) and the m u l t i l a t e r a l implementation of a moratorium under a c t u a l and f r e e t r a d e c o n d i t i o n s ( s c e n a r i o s 8 and 9 ) . S c e n a r i o s 1 and 2 Canadian exports of pork i n c r e a s e by 3.16% f o l l o w i n g the removal o f the pork c o u n t e r v a i l i n g duty ( s c e n a r i o 1, T a b l e 22). These i n c r e a s e s can be a t t r i b u t e d t o i n c r e a s e d pork e x p o r t s from Western Canada t o the Western US (4.46%). I n v e n t o r i e s and average s l a u g h t e r l e v e l s i n c r e a s e by 0.58% and 0.43% i n Western Canada and p r i c e s i n the Midwest decrease by 0.01%. Increased t r a d e and decreased p r i c e s i n the i m p o r t i n g c o u n t r y are i n accordance wi t h t h e o r y . In s c e n a r i o 2, the removal of the hog c o u n t e r v a i l i n g duty and the s t a b i l i z a t i o n payments (once the pork c o u n t e r v a i l i n g duty i s removed) b r i n g s Canadian hog exports t o 4.71 m i l l i o n head, a 17.46% i n c r e a s e from the b a s e l i n e . Exports from O n t a r i o i n c r e a s e by 42%, w h i l e exports from Western Canada i n c r e a s e by 8%. I f the c o u n t e r v a i l i n g duty were o f f s e t t i n g p r o d u c t i o n s u b s i d i e s , the net e f f e c t of removing both the duty and the 125 s u b s i d i e s should be n e g l i g i b l e . E i t h e r c o u n t e r v a i l i n g d u t i e s are h i g h e r than the optimal d u t i e s and/or the impact of s t a b i l i z a t i o n payments on p r o d u c t i o n d e c i s i o n s are improperly modelled. A c c o r d i n g t o M o s c h i n i and M e i l k e (1993), the former i s t r u e : the estimated c o u n t e r v a i l i n g d u t i e s t o r e s t o r e e q u i l i b r i u m are p o s i t i v e but s i g n i f i c a n t l y l e s s than the u n i t p r o d u c t i o n s u b s i d y on hogs and pork. To date, the a c t u a l hog c o u n t e r v a i l i n g duty, which i s an i n p u t i n the model, has been equal t o the u n i t p r o d u c t i o n subsidy. Welfare impacts from t r a d e flow m o d i f i c a t i o n s are s m a l l and l o c a l : North American w e l f a r e does not change. S c e n a r i o 3 A c c o r d i n g t o the t h i r d s c e n a r i o where the n o n t a r i f f b a r r i e r i s removed, l i v e hog exports from the Midwest t o Quebec and O n t a r i o , p r e s e n t l y f o r b i d d e n , f l o o d the market. US e x p o r t s t o Canada over the s i x - y e a r p e r i o d reach 91 m i l l i o n head w h i l e exports of pork decrease from 3 0.88 t o 8.45 m i l l i o n cwt. L i v e hog exports from Canada t o the US decrease by 63%, from 4.01 t o 1.5 m i l l i o n head. As a consequence, s l a u g h t e r i n c r e a s e s by 21.7% i n Canada and decreases by 3.28% i n the US. North American market w e l f a r e i n c r e a s e s by 0.12% f o l l o w i n g the removal of the n o n t a r i f f b a r r i e r which i s the t r a d e p o l i c y s c e n a r i o w i t h the most s i g n i f i c a n t impact. R e g i o n a l w e l f a r e percentage d i f f e r e n c e s are a t the most 1.76%, i n the f i r s t t h r e e s c e n a r i o s . Decreases i n i n v e n t o r i e s are p a r t l y compensated by 126 pork p r i c e i n c r e a s e s and consumer and producer e f f e c t s o f f s e t each o t h e r . S c e n a r i o s 4 and 6 The f o u r t h and s i x t h s c e n a r i o s r e s t r i c t Quebec i n v e n t o r i e s t o 96% and 35% of 1987 i n v e n t o r i e s , and i n c r e a s e c o s t s i n o t h e r r e g i o n s i n accordance w i t h the n i t r o g e n and phosphorus p l a n s . These p l a n s cause r e d u c t i o n s of 25% and 73% of Quebec i n v e n t o r i e s . To f i l l the gap between p r o d u c t i o n and demand, O n t a r i o i n v e n t o r i e s i n c r e a s e by 0.71% and 22% i n s c e n a r i o s 4 and 6. D e s p i t e t h i s adjustment, Canadian pork p r o d u c t i o n decreases by 3% and 8%. Quebec i s the o n l y r e g i o n where w e l f a r e i n c r e a s e s ; hog p r i c e s i n c r e a s e by 0.74% and 5.43% ( s c e n a r i o s 4 and 6 r e s p e c t i v e l y ) f o l l o w i n g i n v e n t o r y r e s t r i c t i o n s . S c e n a r i o s 5 and 7 S c e n a r i o s 5 and 7 s i m u l a t e u n i l a t e r a l environmental p o l i c i e s i n Quebec. These s c e n a r i o s are e q u i v a l e n t t o s c e n a r i o s 4 and 6, but without i n c r e a s e d c o s t s i n r e g i o n s o u t s i d e o f Quebec. L e n i e n t environmental p o l i c i e s i n o t h e r r e g i o n s c o u l d be i n t e r p r e t e d as a d i s g u i s e d s u b s i d y t r i g g e r i n g an i n c r e a s e i n p r o d u c t i o n . I f t h i s were the case, r e p r e s e n t a t i v e s from the Quebec hog/pork i n d u s t r y c o u l d argue i n f a v o r o f a compensation from the Quebec Government. 127 Comparisons Between S c e n a r i o s 4 and 5. and 6 and 7 As expected, i n v e n t o r i e s i n r e g i o n s o u t s i d e of Quebec are i n c r e a s e d (by about 1%) by the e l i m i n a t i o n o f a d d i t i o n a l c o s t s r e l a t e d t o manure a p p l i c a t i o n s on l a r g e r areas ( s c e n a r i o s 5 and 7 v s . s c e n a r i o s 4 and 6) . The r e s u l t s show t h a t i n c r e a s e d p r o d u c t i o n c o s t s due t o environmental r e g u l a t i o n s i n one r e g i o n reduce c o m p e t i t i v e n e s s . In the long run, and not i n c l u d e d i n the model, f i r m s can s u c c e s s f u l l y adopt a l t e r n a t i v e t e c h n o l o g i e s which may o f f s e t e a r l y c o s t disadvantages. S c e n a r i o s 8 and 9 S c e n a r i o s 8 and 9 s i m u l a t e implementing a moratorium a c r o s s North America on 1987 i n v e n t o r y l e v e l s under a c t u a l and f r e e t r a d e c o n d i t i o n s . In s c e n a r i o 8, North American i n v e n t o r i e s decrease by 23% and w e l f a r e decreases by 16% t o the lowest v a l u e measured among the 9 s c e n a r i o s . The decrease i n i n v e n t o r i e s f o r Quebec i s l e s s than i n s c e n a r i o 4 which i s c o n s i s t e n t , s i n c e the r e s t r i c t i o n s i n s c e n a r i o 8 are not as s t r i n g e n t as i n s c e n a r i o 4. In s c e n a r i o 9, US pork exports are p a r t l y s u b s t i t u t e d by l i v e hog exports as i n the t h i r d s c e n a r i o . These l i v e hogs are processed mainly i n O n t a r i o and Western Canada. 128 Trade P a t t e r n s Across S c e n a r i o s In the p r e v i o u s s e c t i o n , t r a d e p a t t e r n s were d i s c u s s e d w i t h w e l f a r e , i n v e n t o r y , and s l a u g h t e r changes. F i g u r e s 8 and 9 compare l i v e hog and pork t r a d e p a t t e r n s a c r o s s the nine s c e n a r i o s . As can be seen i n the b a s e l i n e i n F i g u r e 9, pork flows both ways a c r o s s the Canada/US border s i n c e t r a d e i s r e g i o n a l . Pork i s t r a d e d s i m u l t a n e o u s l y between Western Canada and the Midwest and between E a s t e r n Canada and the E a s t e r n US. In s c e n a r i o s 3 and 9, where the ban on US l i v e hog e x p o r t s t o Canada i s l i f t e d , US l i v e hog exports i n c r e a s e a t the expense of US pork e x p o r t s . Canadian l i v e hog e x p o r t s t o the US a l s o decrease s i g n i f i c a n t l y (63% and 95% i n s c e n a r i o s 3 and 9, r e s p e c t i v e l y ) . In s c e n a r i o 8 (moratorium), l i v e hog t r a d e v i r t u a l l y d i s a p p e a r s (to 0.21 m i l l i o n head), w h i l e US pork ex p o r t s t o Canada i n c r e a s e by 52%, and Canadian pork e x p o r t s t o the US i n c r e a s e by 125%. Furthermore, i n s c e n a r i o s 4 t o 7, r e s t r i c t i o n s on Quebec i n v e n t o r i e s have a s i g n i f i c a n t impact on t r a d e p a t t e r n s . L i v e hog t r a d e from Canada t o the US decreases between 16% and 26%. In the f o u r s c e n a r i o s , exports o f 487,000 hogs from Quebec t o the E a s t e r n US, come t o an end, and exports from O n t a r i o decrease by up t o 41%. Exports from Western Canada t o the Western US i n c r e a s e by up t o 24% which does not compensate f o r the l o s s e s from O n t a r i o and Quebec t o the US. Net e x p o r t s of l i v e hogs from O n t a r i o t o Quebec i n c r e a s e from 338,000 head t o more than 5.5 m i l l i o n head. 129 In the f o u r s c e n a r i o s , US pork exports t o Canada i n c r e a s e by 6% t o 20%. In s c e n a r i o s 4 and 5, US pork e x p o r t s t o Canada i n c r e a s e by 6% and 9% w h i l e exports t o O n t a r i o i n c r e a s e by 10%. Exports from the Midwest t o Western Canada, which i n c r e a s e from 29% t o 76%, are r e s p o n s i b l e f o r the d i f f e r e n c e between s c e n a r i o s 4 and 5. In s c e n a r i o s 6 and 7, US pork e x p o r t s t o Canada i n c r e a s e by about 20% w h i l e exports t o O n t a r i o are 18% h i g h e r than the b a s e l i n e . Exports t o Quebec jump by 75% and 82% from the b a s e l i n e . T h i s i s understandable s i n c e Quebec i n v e n t o r i e s are 73% lower than the b a s e l i n e due t o r e s t r i c t i o n s on i n v e n t o r i e s . 130 co TJ CO TJ = c w co O o o 9-* Q - Q . S "5 TJ TJ co e o o cu a> - Q c z (A O C .2 CD 9  S = r- r- a> — " co a j? ^ 0 0 0 5 C J= J= ~ o o o 00 • • co co co £ > > > £ o o o o o io £ £ E = C CD <D (D 2 Q3 cr cr rr. -0 o . . . CO T - C M CO 3 co a c c c c z TO JO n. 0. tz C cu cu O ) O ) o o 3 CO c e c e C O C O a. n. CO CO E 2 o o £ sz CL CL CO CO o o J= JZ: 0- Q. O >. "5 0 Q . ' 0 CU CL 73 CU CO TJ CO CO < 3 cu Tj cu co « 1— 0) CU TJ TJ CZ CZ 3 3 E E 3 3 •c *c 0 0 "co CO 1— l _ 0 0 00 3 TJ D ) CZ 'co CU (Z 3 o o TJ > o I (0 g a: < z 111 o (0 co CO TJ CO 3 c O CO 0 co TJ 0 •*—' CO c z (0 CO 0 • DD H h sujiaseg o o o CT> O CO o O co o 10 o o CO 0 0 0 C M T -QV3H Nomiw ro CO •o ro ZD c o CO O CO 7 3 o CO c CO CO ZD O m mi CO * T J T J (0 o S ° •a "> CO o D ) X O <U c o o c a) -a ° "g 2 5 a $ °-co a> > > o — E co cu -j or <u a c _ c ° -co <= -S ro ^  ZD E 3 CM C o c CO .a T J C CO * T J > o o -c o co 2 o Z E 2 Lr i r- a. 2 8 o « Q. (0 10 c o g 5) g £ cn = a> ro o "5 Q. a> T J ro o o o C L JZ O O Q_ c 0-ro m 3 CO 3 >> -*—1 O 3 CO T J <5 J ? T J . = 11 « 5 o £ o CO (0 > > o o E E a> a> or or T-" CO — h 2 8 Z 0-CD CO o Iii o 0 0 « 3Uj|3seg H h o LO CO o CO LO O C M C M (•J.M0) saNnod N o m i w 132 North American Welfare Changes Across S c e n a r i o s While t r a d e l i b e r a l i z a t i o n s c e n a r i o s have l i t t l e impact on North American w e l f a r e ( F i g u r e 10) , environmental s c e n a r i o s t r i g g e r decreases i n market w e l f a r e . As expected, decreases are l e s s important when environmental p o l i c y i s a p p l i e d u n i l a t e r a l l y i n Quebec than when p o l i c i e s are a p p l i e d i n a l l r e g i o n s because lower c o s t s are entered i n the o b j e c t i v e f u n c t i o n ( s c e n a r i o s 7 vs. 6) . A moratorium a c r o s s North America b r i n g s about a decrease o f almost 16%, North American i n v e n t o r i e s b e i n g 2 3% below the b a s e l i n e l e v e l ( s c e n a r i o 8 ) . The impact on w e l f a r e o f a moratorium i s tempered under f r e e t r a d e c o n d i t i o n s s i n c e t r a d e flows are op t i m a l when un c o n s t r a i n e d ( s c e n a r i o 9 ) . 133 ro c T3 C (0 o c a> (0 ro CQ o V "O c 3 CM cn o> O . 2 * - "C ro co c o> o i- o E w o c ro o 'iZ E < o 3 (0 o DC < z LU O CO savrioa sn Nomia 134 R e g i o n a l Market Welfare Versus Environmental Impacts S i n c e w e l f a r e measures are c a l c u l a t e d a t the r e g i o n a l l e v e l , and water q u a l i t y occurs a t the l o c a l l e v e l , the t r e n d s r a t h e r than the magnitudes of water q u a l i t y and w e l f a r e changes, are compared t o determine i f economic and environmental o b j e c t i v e s c o n f l i c t . Increases and decreases i n market w e l f a r e and water q u a l i t y are i n d i c a t e d as + and -, r e s p e c t i v e l y (Table 24) f o r the f o u r s c e n a r i o s s i m u l a t e d w i t h the economic and environmental models. Tab l e 24 Water Q u a l i t y and Market Welfare Changes i n North C a r o l i n a and Quebec = = ^ ^ ^ = = = = L o c a t i o n S c e n a r i o s 2 3 4 6 Southeast Market Welfare + + - -R a l e i g h , North C a r o l i n a Water Q u a l i t y n i l n i l + + Quebec Market Welfare + - + + Pont-Rouge, Quebec Water Q u a l i t y n i l + + + Of the f o u r s c e n a r i o s f o r the two r e g i o n s , t h r e e cases occur w i t h t r a d e - o f f s between market w e l f a r e and water q u a l i t y : s c e n a r i o s 4 and 6 i n North C a r o l i n a , and s c e n a r i o 3 i n Quebec. Changes i n v o l v i n g t r a d e - o f f s are i d e n t i f i e d i n b o l d type i n T a b l e 24. 135 In the Southeast, i n c l u d i n g North C a r o l i n a , r e g i o n a l w e l f a r e decreases caused by i n c r e a s e d c o s t s imposed under s c e n a r i o s 4 and 6 are compensated t o some degree by decreases of n i t r a t e s and phosphates i n r u n o f f . Decreases i n market w e l f a r e , a f t e r implementing environmental p o l i c i e s , can i n d i c a t e minimum monetary v a l u e s a t t r i b u t e d t o environmental q u a l i t y , f o r s o c i a l w e l f a r e t o i n c r e a s e or remain unchanged. In s c e n a r i o s 4 and 6, aggregate b e n e f i t s d e r i v e d from environmental q u a l i t y from 1987-1992 would have t o be a t l e a s t US$169 m i l l i o n and US$377 m i l l i o n , r e s p e c t i v e l y , t o prevent a decrease i n s o c i a l w e l f a r e . On a per c a p i t a b a s i s , minimum b e n e f i t s are n e g l i g i b l e , c o r r e s p o n d i n g t o US$0.32 and US$0.71 per year f o r s c e n a r i o s 4 and 6, r e s p e c t i v e l y . In Quebec, a t r a d e - o f f e x i s t s between market w e l f a r e and water q u a l i t y w i t h s c e n a r i o 3: the w e l f a r e change i s n e g a t i v e and the change i n water q u a l i t y w i t h r e s p e c t t o n i t r o g e n i s p o s i t i v e . E l i m i n a t i n g the ban on US l i v e hog imports i n Canada a l l o w s imports of hogs from the Midwest i n t o Quebec which accompanies a decrease o f hog i n v e n t o r i e s i n Quebec. Other s c e n a r i o s elude the t r a d e - o f f i s s u e because of i n c r e a s e s i n w e l f a r e . In Quebec, both n i t r o g e n and phosphorus p l a n s ( s c e n a r i o s 4 and 6) induce i n c r e a s e s i n both market w e l f a r e (as d i s c u s s e d e a r l i e r ) and environmental q u a l i t y . Free t r a d e , modelled by s c e n a r i o s 1 and 2, has no d i r e c t impacts on water q u a l i t y i n North C a r o l i n a o r Quebec because i n v e n t o r i e s change n e g l i g i b l y . Net t r a d e and environmental 136 impacts are p o s i t i v e f o r the Southeast and Quebec s i n c e w e l f a r e changes are p o s i t i v e . The net e f f e c t t o s c e n a r i o 3, f o r the Southeast, i s a l s o p o s i t i v e . 137 CHAPTER VII - CONCLUSIONS AND POLICY IMPLICATIONS Co n c l u s i o n s Trade l i b e r a l i z a t i o n does not appear t o c o n t r i b u t e t o environmental d e g r a d a t i o n i n R a l e i g h , North C a r o l i n a o r Pont-Rouge, Quebec g i v e n the assumptions used i n t h i s study. In f a c t , l e a c h i n g of n i t r a t e s decreases i n Quebec and hence, the c o n t e n t i o n t h a t i n t e r n a t i o n a l t r a d e i s a primary c o n t r i b u t o r t o environmental d e g r a d a t i o n (Shrybman, 1990) does not h o l d t r u e f o r these cases. Environmental c o n d i t i o n s c o u l d d e t e r i o r a t e i n O n t a r i o and Western Canada f o l l o w i n g the removal of the hog c o u n t e r v a i l i n g duty s i n c e t h i s t r a d e p o l i c y t r i g g e r s s m a l l i n c r e a s e s i n hog i n v e n t o r i e s . S i n c e the a n t i c i p a t e d e f f e c t i s minor or n i l though, b a r r i e r s t o i n t e r n a t i o n a l t r a d e are not expected t o p r o v i d e a s i g n i f i c a n t p r o t e c t i o n t o environmental endowments. Even i f i n t e r n a t i o n a l t r a d e appears t o be a minor o r an i n s i g n i f i c a n t c o n t r i b u t o r t o water q u a l i t y d e t e r i o r a t i o n i n the North American hog/pork s e c t o r , water q u a l i t y i s mediocre i n some of the r e g i o n s s t u d i e d . P r o p e r l y e n f o r c e d environmental p o l i c y t a k i n g i n t o account the ecosystem's a s s i m i l a t i v e c a p a c i t y i s b e t t e r than t r a d e p r o t e c t i o n measures t o improve water q u a l i t y . Both s u r f a c e and groundwater q u a l i t y i n c r e a s e when n u t r i e n t management p l a n s are implemented. Although t h i s outcome was expected, s i n c e n u t r i e n t i n p u t s are lowered, the magnitude of 138 impacts, d i s c u s s e d i n chapter V I I , was measured t o e v a l u a t e the impacts of environmental p o l i c i e s on water q u a l i t y ( p a r t of the f i r s t o b j e c t i v e ) . Other c o n c l u s i o n s stem from the v a r i o u s q u e s t i o n s a r i s i n g from t h e second o b j e c t i v e : assessment o f t r a d e p a t t e r n s and market w e l f a r e under v a r i o u s a g r i c u l t u r a l , environmental and t r a d e p o l i c i e s . The e f f e c t s of environmental, t r a d e and a g r i c u l t u r a l p o l i c i e s on t r a d e are summarized f i r s t , f o l l o w e d by the e f f e c t s on w e l f a r e . Environmental p o l i c i e s have a c l e a r impact on t r a d e p a t t e r n s . The r e d u c t i o n i n Quebec i n v e n t o r i e s t r i g g e r s a decrease of Canadian l i v e hog exports t o the US and an i n c r e a s e of US pork exports t o Canada. Trade and a g r i c u l t u r a l p o l i c y s c e n a r i o s have a l a r g e r impact on t r a d e p a t t e r n s than on w e l f a r e and water q u a l i t y . When the ban on US l i v e hog exports t o Canada i s l i f t e d , US l i v e hog e x p o r t s t o Canada i n c r e a s e a t the expense of US pork e x p o r t s and Canadian l i v e hog exports t o the US. The t r e n d s and magnitude of impacts from t r a d e p o l i c i e s on w e l f a r e are d i f f e r e n t from impacts induced by environmental p o l i c i e s . Trade p o l i c y s c e n a r i o s t r i g g e r i n c r e a s e s i n North American w e l f a r e w h i l e environmental p o l i c i e s are r e s p o n s i b l e f o r decreases i n w e l f a r e which c o u l d c e r t a i n l y be expected a f t e r the c o s t t o spread manure on l a r g e r areas i n c r e a s e s . The decrease i n w e l f a r e i s the l a r g e s t when a moratorium i n North America i s s i m u l a t e d . Since t r a d e l i b e r a l i z a t i o n has a p o s i t i v e 139 impact on w e l f a r e , the w e l f a r e decrease from a moratorium i s somewhat at t e n u a t e d under f r e e t r a d e c o n d i t i o n s . The magnitude of impacts of environmental and t r a d e p o l i c y s c e n a r i o s on r e g i o n a l market w e l f a r e a l s o d i f f e r markedly. F o l l o w i n g t r a d e l i b e r a l i z a t i o n , the maximum r e g i o n a l w e l f a r e change from the b a s e l i n e i s 1.76%, w h i l e under the moratorium on hog i n v e n t o r i e s , the maximum change i s 27%. P o l i c y i m p l i c a t i o n s New p o l i c y recommendations must take i n t o account e x i s t i n g i n s t i t u t i o n s and hence, the l e g i s l a t i v e s t r u c t u r e i n Canada and the US i s d e s c r i b e d . Smith and Kuch (1995) p r o v i d e a comprehensive overview o f US l e g i s l a t i o n . Two f e d e r a l s t a t u t e s , the Clean Water Act (CWA) and the C o a s t a l Zone A c t Re-a u t h o r i z a t i o n Amendments of 1990 (CZARA) impose r e g u l a t i o n s on l i v e s t o c k o p e r a t i o n s . Under the CWA, c o n c e n t r a t e d animal f e e d i n g o p e r a t i o n s (CAFOs) must o b t a i n a N a t i o n a l P o l l u t i o n Discharge E l i m i n a t i o n System (NPDES) permit, which focuses on waste s t o r a g e . P e r m i t t e d CAFOs must meet the f e d e r a l s t a n d a r d o f no-d i s c h a r g e i n t o US s u r f a c e waters, except i n the case o f a t w e n t y - f i v e - y e a r , twenty-four-hour storm. The NPDES program i s d e l e g a t e d t o f o r t y s t a t e s , whose agencies implement f e d e r a l performance standards a t t h e i r d i s c r e t i o n . The CZARA r e q u i r e s the twenty-nine c o a s t a l , and Great Lakes s t a t e s t o develop and implement e n f o r c e a b l e " C o a s t a l Nonpoint C o n t r o l P r o t e c t i o n Programs" t h a t meet s p e c i f i c , f e d e r a l 140 performance standards f o r l i v e s t o c k o p e r a t i o n s . CAFOs down t o 300 animal u n i t s must meet the same, no-discharge s t a n d a r d as r e q u i r e d by the CWA f o r l a r g e r o p e r a t i o n s . S m a l l e r CAFOs, down t o 50 animal u n i t s , must minimize d i s c h a r g e a c c o r d i n g t o standards a t the s t a t e l e v e l . In a d d i t i o n , many s t a t e s r e q u i r e t h a t l i v e s t o c k e n t e r p r i s e s a p p l y i n g animal waste on c r o p l a n d have a n u t r i e n t management p l a n f o l l o w i n g p r e s c r i b e d management p r a c t i c e s . As w i t h the CWA, d e c e n t r a l i z a t i o n o f CZARA implementation i s meant t o a l l o w f o r s t a t e s ' accommodation of weather, geography and l i v e s t o c k technology i n t r a n s l a t i n g f e d e r a l standards i n t o s t a t e - l e v e l programs. . . Current p a t t e r n s of i n t e r s t a t e r e g u l a t o r y v a r i a t i o n and CAFO d i s t r i b u t i o n appear t o r e f l e c t t he p o l i t i c a l economy much more than they mimic an e c o n o m i c a l l y e f f i c i e n t s o l u t i o n t o environmental p r o t e c t i o n . . . S t a t e s d i f f e r i n t h e i r i n t e r p r e t a t i o n s of when or i f a NPDES permit i s r e q u i r e d , i n how they t r a n s l a t e n o -discharge performance standards i n t o requirements f o r f a c i l i t i e s , i n the extent t o which they exceed f e d e r a l g u i d e l i n e s , and i n how r i g o r o u s l y they e n f o r c e implementation... Regulatory r i g o r does not seem t o c o r r e l a t e w e l l w i t h degree of environmental s e n s i t i v i t y t o t h r e a t from c o n c e n t r a t e d l i v e s t o c k p r o d u c t i o n (Smith and Kuch, 1995). Kenyon, Hurt and Z e a r i n g ( c i t e d i n A b d a l l a e t a l . , 1995) suggest t h a t l e s s s t r i n g e n t water q u a l i t y r e g u l a t i o n s i n North C a r o l i n a were an important f a c t o r i n f l u e n c i n g the movement of hog farms i n t o t h a t s t a t e i n the e a r l y 1990s. However, new l e g i s l a t i o n i s b e i n g implemented; f o r example, n u t r i e n t management p l a n s were implemented J u l y 1, 1997 w i t h a maximum mass l o a d f o r t o t a l n i t r o g e n , i f the a s s i m i l a t i v e c a p a c i t y f o r 141 n i t r o g e n i n a n u t r i e n t - s e n s i t i v e water body i s o v e r - a l l o c a t e d . The maximum l o a d s h a l l not exceed the d i s c h a r g e a l l o c a t i o n , or 6.0 mg N/L, whichever i s l e s s . S i m i l a r l y , a Senate B i l l proposes, among o t h e r a r t i c l e s , the i n s t a l l a t i o n of a t l e a s t one u p - g r a d i e n t and two down-g r a d i e n t m o n i t o r i n g w e l l s t e s t e d semi-annually f o r contaminants a s s o c i a t e d w i t h the p r o d u c t i o n of l i v e s t o c k , i n c l u d i n g n i t r o g e n , copper, z i n c , phosphorus, and f e c a l c o l i f o r m . A temporary one-year moratorium a l s o became e f f e c t i v e January 1 1997. In Canada, r e g u l a t i o n of e x t e r n a l i t i e s from a g r i c u l t u r e i s l a r g e l y conducted on a p r o v i n c i a l b a s i s . R e g u l a t i o n s i n Quebec are d e s c r i b e d t o i n d i c a t e one approach t o r e g u l a t i o n . I n f o r m a t i o n on l i v e s t o c k waste management p r a c t i c e s and l e g i s l a t i o n i n d i f f e r e n t c o u n t r i e s or Canadian p r o v i n c e s have been compiled by Runka (1995). In Quebec, r e g u l a t i o n s enacted i n 1981 r e q u i r e c e r t i f i c a t i o n of any expansion o f animal housing or r e l a t e d f a c i l i t i e s . A minimum l a n d area r a n g i n g from 0.24 t o 2 ha, depending on the crop grown, must be a v a i l a b l e f o r each animal u n i t of l i v e s t o c k . One animal u n i t i s d e f i n e d as f i v e market hogs weighing between 20-100 kg. Manure a p p l i c a t i o n s t o snow-covered or f r o z e n ground are f o r b i d d e n u n l e s s a p p l i e d d i r e c t l y t o the ground, as are a p p l i c a t i o n s w i t h i n 30 m o f a water source. A l s o , an e n t e r p r i s e must be l o c a t e d a t l e a s t 150 m (depending on farm s i z e ) from r e s i d e n t i a l a r e a s . Expansion o f c o n f i n e d o p e r a t i o n s was p r o h i b i t e d i n the Chaudiere, Yamaska and l'Assomption R i v e r b a s i n s , but moratoriums have been l i f t e d . 142 S i n c e the requirement f o r a f e r t i l i z a t i o n p l a n was r e c e n t l y i n c l u d e d i n the l e g i s l a t i o n , the p r e s s u r e t o l i m i t i n v e n t o r i e s i s now l i n k e d t o a s s i m i l a t i v e c a p a c i t y . R e s u l t s from t h i s t h e s i s show t h a t i n v e n t o r i e s i n Quebec should decrease f o l l o w i n g the a p p l i c a t i o n o f n u t r i e n t management p l a n s , u n l e s s treatment f a c i l i t i e s a re i n s t a l l e d . To summarize, moratoriums are important p o l i c y instruments used i n the hog s e c t o r . The Government o f Quebec has l i f t e d i t s moratoriums w h i l e North C a r o l i n a j u s t implemented a one-year moratorium on January 1, 1997. A moratorium i s not o p t i m a l from an economic p e r s p e c t i v e because i t does not a l l o w supply t o respond t o market p r i c e s and changes i n technology. I t i s not o p t i m a l from an environmental p e r s p e c t i v e because i t i s not n e c e s s a r i l y designed a c c o r d i n g t o a s s i m i l a t i v e c a p a c i t y . I t i s p o s s i b l e t h a t the l e v e l of p r o d u c t i o n a t the time a moratorium i s imposed i s e i t h e r above or below the optimal l e v e l determined by environmental c o n d i t i o n s and p u b l i c demand f o r environmental q u a l i t y . Both Quebec and North C a r o l i n a have now implemented n u t r i e n t management p l a n s based on crop agronomic requirements. R e s u l t s presented i n t h i s t h e s i s , h i g h l i g h t the environmental advantages of e n f o r c i n g these p l a n s , s i n c e s u r f a c e water q u a l i t y improves by roughly 80% i n R a l e i g h , North C a r o l i n a and by 6% t o 39% i n Quebec, compared wi t h the b a s e l i n e . The o v e r a l l impact o f these p l a n s and any environmental p o l i c y depends, of course, on t h e i r enforcement. R e c e n t l y , a 143 group o f 18 non-governmental o r g a n i z a t i o n s r e g i s t e r e d a complaint w i t h the Environmental Co-operation Commission o f NAFTA a l l e g i n g t h a t the Government of Quebec n e g l e c t e d t o adhere t o environmental norms r e l a t e d t o a g r i c u l t u r a l p o l l u t i o n o r i g i n a t i n g from animal, e s p e c i a l l y hog, p r o d u c t i o n . T h i s i s an example o f the growing importance of environmental i s s u e s i n i n t e r n a t i o n a l forums. 144 BIBLIOGRAPHY A b d a l l a , C h a r l e s W. , Les E. Lanyon, and M i l t o n C. H a l l b e r g . 1995. What We Know About H i s t o r i c a l Trends i n Firm L o c a t i o n D e c i s i o n s and Regiona l S h i f t s : P o l i c y I ssues f o r an I n d u s t r i a l i z i n g Animal S e c t o r . American Journal of Agricultural Economics, 77:1229-1236. Abrams, Lawrence W., and James L. Barr. 1974. C o r r e c t i v e Taxes f o r P o l l u t i o n C o n t r o l . Journal of Environmental Economics and Management, 1:296-318. A g r i c u l t u r e Canada. 1988. Aujeszky's Disease (Pseudorabies) -Outbreak A l e r t . P u b l i c a t i o n 1791/E. Anderson, Kym, and Sherry Stephenson. 1991. S e l e c t e d B i b l i o g r a p h y on Trade and the Environment. Economic Research and A n a l y s i s . GATT S e c r e t a r i a t . Geneva, S w i t z e r l a n d . A n t l e , John M., and Susan M. Capalbo. 1993. I n t e g r a t i n g Economic & P h y s i c a l Models f o r A n a l y z i n g Environmental E f f e c t s of A g r i c u l t u r a l P o l i c y on NonPoint-Source P o l l u t i o n i n R u s s e l l , C l i f f o r d S., and Jason F. Shogren. Theory, Modeling and Experience i n the Management of NonPoint-Source P o l l u t i o n by Kluwer Academic P u b l i s h e r s . Beghin, John, David Roland-Hoist, and Dominique van der Mensbrugghe. 1995. Trade L i b e r a l i z a t i o n and the Environment i n the P a c i f i c B a s i n : Coordinated Approaches t o Mexican Trade and Environment P o l i c y . American Journal of Agricultural Economics, 11(3):778-785. Bingner, R.L., C.E. Murphree, and C.K. Mutch l e r . June 28-July 1, 1987. Comparison o f Sediment Y i e l d Models on V a r i o u s Watersheds i n M i s s i s s i p i . 1987 Summer Meeting o f the American S o c i e t y o f A g r i c u l t u r a l E n g i neers. B a l t i m o r e Convention Center. B a l t i m o r e , MD. Bohman, Mary, and P a t r i c i a J . Lindsey. March 1997. Dive r g e n t Environmental R e g u l a t i o n s and Trade L i b e r a l i z a t i o n . Canadian Journal of Agricultural Economics. 45(1):17-38. Bouzaher, A z i z , R.R. Johnson, S. Neibergs, R. Jones, L. Beran, L. F r a r e y , and L. Hauck. 1993c. The Conceptual Framework f o r the N a t i o n a l P i l o t P r o j e c t on L i v e s t o c k and the Environment. L i v e s t o c k S e r i e s Report 2. Centre f o r A g r i c u l t u r a l and R u r a l Development. Bouzaher, A z i z , P.G. Lakshminarayan, S.R. Johnson, T. Jones, and R. Jones. 1993b. The Economic and Environmental I n d i c a t o r s f o r E v a l u a t i n g the N a t i o n a l P i l o t P r o j e c t on L i v e s t o c k and the Environment. L i v e s t o c k S e r i e s Report 1. Centre f o r A g r i c u l t u r a l 145 and R u r a l Development. Bouzaher, A z i z , Jason F. Shogren, D e r a l d Holtkamp, P h i l i p Gassman, David Archer, A l i c i a C a r r i q u i r y , R a n d a l l Reese, W i l l i a m H. Furtan, R. Cesar I z a u r r a l d e , and Jim K i n i r y . 1993a. A g r i c u l t u r a l P o l i c i e s and S o i l Degradation i n Western Canada: An A g r o - E c o l o g i c a l Economic Assessment. A g r i c u l t u r e Canada. P o l i c y Branch. T e c h n i c a l Report 2/93. Bouzaher, A z i z , Jason F. Shogren, D e r a l d Holtkamp, P h i l i p Gassman, David Archer, P. Lakshminarayan, A l i c i a C a r r i q u i r y , R a n d a l l Reese, Dharmaraju Kakani, W i l l i a m H. F u r t a n , R. Cesar I z a u r r a l d e , and Jim K i n i r y . 1995. A g r i c u l t u r a l P o l i c i e s and S o i l Degradation i n Western Canada: An A g r o - E c o l o g i c a l Economic Assessment. A g r i c u l t u r e Canada. P o l i c y Branch. T e c h n i c a l Report 1/95. B r e s s l e r , Raymond, and R i c h a r d King. 1970. Markets, P r i c e s , and I n t e r - r e g i o n a l Trade. Wiley Books. New York. Burns, J.C., P.W. Westerman, L.D. King, M.R. Overcash, and G.A. Cummings. 1987. Swine Manure and Lagoon E f f l u e n t A p p l i e d t o a Temperate Forage Mixture: I. P e r s i s t e n c e , Y i e l d , Q u a l i t y , and Elemental Removal. Journal of Environmental Quality, 16(2):99-105. Churches, Malcolm C. 1988. Region a l Hog Supply Response t o S t a b i l i z a t i o n Programmes i n Canada. M.Sc. T h e s i s . M c G i l l U n i v e r s i t y . Copeland, B r i a n R., and M. S c o t t T a y l o r . 1995. Trade and the Environment: A P a r t i a l S y n t h e s i s . American Journal of Agricultural Economics, 77(3):765-771. Cox, Vernon Neal. 1993. A Cost A n a l y s i s of I r r i g a t i n g Swine Waste E f f l u e n t . M.Sc. T h e s i s . North C a r o l i n a S t a t e U n i v e r s i t y . Dean, J.M.. 1992. Trade and the Environment: A Survey of the L i t e r a t u r e . P o l i c y Research Working Papers. World Development Report. Engelke, Rudolf and S t e f a n Fabrewitz. 1991. S i m u l a t i o n runs w i t h the EPIC model f o r d i f f e r e n t data s e t s . S e c t i o n 8.1.3 of S o i l and Groundwater Research Report I I , N i t r a t e s i n S o i l s . Commission of the European Communities. Es p i n o s a , Andres, and V. Kerry Smith. 1995. Measuring the Environmental Consequences of Trade P o l i c y : A Nonmarket CGE A n a l y s i s . American Journal of Agricultural Economics, 77 (3) -.112-111. F o r t i n , E s t h e r , and Yvbn Salaun. 1995. P o s i t i o n 146 c o n c u r r e n t i e l l e en p r o d u c t i o n p o r c i n e : s t r u c t u r e s , p r o d u c t i v i t e s e t couts compares Amerique de Nord-Europe. Centre de developpement du pore du Quebec i n c . F u l l e r t o n , Dan J . . 1990. Economic Comparison o f Swine Manure Handling and Treatment Systems. Dobbin & Page I n t e r n a t i o n a l . Gangbazo, G., A.R. Pesant, and G.M. B a r n e t t . 1996. E f f e t s de l'Epandage des E n g r a i s Mineraux e t de Grandes Q u a n t i t e s de l i s i e r de Pore sur l'Eau, l e S o l e t l e s C u l t u r e s . Rapport d*experience sur l a contamination de l ' e a u par l e l i s i e r . M i n i s t e r e de 1 1Environnement e t de l a Faune. Gouvernement du Quebec. Gangbazo, G., A.R. Pesant, G.M. Barnet t , J.P. Charuest, and D. C l u i s . 1995. Water Contamination by Ammonium N i t r o g e n F o l l o w i n g the Spreading o f Hog Manure and M i n e r a l F e r t i l i z e r s . Journal of Environmental Quality, 24:420-425 Gouvernement du Quebec. 1996. Reglement s u r l a p r e v e n t i o n de l a p o l l u t i o n des eaux par l e s e t a b l i s s e m e n t s de p r o d u c t i o n animale. E d i t e u r o f f i c i e l du Quebec. Gouvernement du Quebec. M i n i s t e r e de 1 ' A g r i c u l t u r e , des P e c h e r i e s e t de 1'Alimentation. 1995. Hypotheses e t I n d i c e s de C a l c u l des B i l a n s de G e s t i o n de l a F e r t i l i s a t i o n a l ' E c h e l l e de l ' E n t r e p r i s e A g r i c o l e . D i r e c t i o n de 1'environnement e t du developpement d u r a b l e . Quebec. Gouvernement du Quebec. M i n i s t e r e de 1'Environnement e t de l a Faune. 1996. V i s i o n s t r a t e g i q u e 1. Les grands enjeux, 1996-2001. G u n j a l , K i s a n , and Benoit L e g a u l t . 1995. R i s k P r e f e r e n c e s of D a i r y and Hog Producers i n Quebec. Canadian Journal of Agricultural Economics, 43(l):23-3 5. Hahn, W i l l i a m F.. 1993. North American Trade Model f o r Animal Products. USDA. ERS. T e c h n i c a l B u l l e t i n Number 1830. Hanley, Nick. 1990. The economics of n i t r a t e p o l l u t i o n . European Review of Agricultural Economics, 17:129-151. Hartman, Monika. 1993. The Impact of EC N i t r o g e n Taxes on A g r i c u l t u r a l Competitiveness and Welfare - S i m u l a t i o n s w i t h the World Trade Model TEPSIM. Paper Prepared f o r t h e 22nd I n t e r n a t i o n a l Conference of A g r i c u l t u r a l Economists. August 22-29 1994 i n Harare, Zimbabwe. Heady, E a r l 0. , and Gary F. Vocke. 1992. Economic Models of A g r i c u l t u r a l Land C o n s e r v a t i o n and Environmental Improvement. Iowa S t a t e U n i v e r s i t y Press. Ames. 147 Hester, Susan, Don Gunasekera, and N e i l Andrews. 1993. World Market Impacts of EC R e s t r a i n t s on Cropland and L i v e s t o c k D e n s i t y . Agriculture and Resources Quarterly, 5 ( l ) : 7 1 - 8 4 . Hurt, C h r i s . 1994. I n d u s t r i a l i z a t i o n i n the Pork I n d u s t r y . Choices. Iowa S t a t e U n i v e r s i t y . 1992. A g r i c u l t u r e and Home Economics Experiment S t a t i o n . C ooperative E x t e n s i o n S e r v i c e . A g r i c u l t u r a l Input and P r o c e s s i n g I n d u s t r i e s , RD-05. J a f f e , A., S. Peterson, and P. Portney. 1995. Environmental R e g u l a t i o n and the Competitiveness of US Manufacturing: What Does the Evidence T e l l Us? Journal of Economic Literature, 33:132-163. K a r a n t i n i n i s , Kostas, Remy Lambert, and Robert S a i n t - L o u i s . 1995. Quebec Hog/Pork Ind u s t r y : Making New Moves o r Simply Marking Time? American Journal of Agricultural Economics, 77:1207-1212. K e l l o g g Robert L., Margaret S. M a i z e l , and Don W. Goss. 1994. The P o t e n t i a l f o r Leaching of A g r i c h e m i c a l s Used i n Crop P r o d u c t i o n : A N a t i o n a l P e r s p e c t i v e . Journal of Soil and Water Conservation. 49(3): 294-298. K l e i n , K.K., M.D. Faminow, K. F o s t e r , B. Larue, R. Romain, and A.M. Walburger. 1995. An E v a l u a t i o n of Hog Marketing Systems i n Canada. Working Paper 4/95. P o l i c y Branch. A g r i c u l t u r e and A g r i - F o o d Canada. Ottawa. Kilman, S c o t t . A p r i l 1, 1994. Animal farm's brave new world. The Globe and Mail. Krauthkraemer, J e f f r e y A., G. C. van Kooten, and Douglas L. Young. 1992. I n c o r p o r a t i n g R i s k A v e r s i o n i n t o Dynamic Programming Models. American Journal of Agricultural Economics, 74(4):870-878. K r i s s o f f , Barry, N i c o l e B a l l e n g e r , John Dunmore, and Denice Gray. 1996. E x p l o r i n g Linkages Among A g r i c u l t u r e , Trade, and the Environment: Issues f o r the Next Century. N a t u r a l Resources and Environment D i v i s i o n , USDA, ERS. A g r i c u l t u r a l Economic Report No. 738. K r u t i l l a , K. . 1991. Environmental R e g u l a t i o n i n an Open Economy. Journal of Environmental Economics and Management, 20:127-142. Lakshminarayan, P.G., P.W. Gassman, A Bouzaher, and R. C. I z a u r r a l d e . 1996. A Metamodeling Approach t o E v a l u a t e A g r i c u l t u r a l P o l i c y Impact on S o i l Degradation i n Western 148 Canada. Canadian Journal of Agricultural Economics, 44(2):277-294. Leavesley, G.H., D.B. Beasley, H.B. Pionke, and R.A. Leonard. June, 1990. Modeling of a g r i c u l t u r a l nonpoint source s u r f a c e r u n o f f and sediment y i e l d , a review from the modeler's p e r s p e c t i v e . ARS-USDA-Agric. Res. Serv.. B e l t s v i l l e , Md, 81:171-194. L e u t h o l d , Raymond M.. 1975. On the Use of T h e i l ' s I n e q u a l i t y C o e f f i c i e n t s . American Journal of Agricultural Economics, 57(2): 344-346. Mapp, H.P., D.J. Bernardo, G.J. Sabbagh, S. G e l e t a , and K.B. Watkins. 1994. Economic and Environmental Impacts of L i m i t i n g N i t r o g e n Use t o P r o t e c t Water Q u a l i t y : A S t o c h a s t i c R e g i o n a l A n a l y s i s . American Journal of Agricultural Economics, 76(4):889-903. M a r t i n , L . J . , and E l l e n W. Goddard. 1987. The Economics of Canadian Hog S t a b i l i z a t i o n Programs and US C o u n t e r v a i l i n g Import D u t i e s . Department of A g r i c u l t u r a l Economics and Business. O n t a r i o A g r i c u l t u r a l C o l l e g e . U n i v e r s i t y o f Guelph. Guelph. AEB/87/3. Moon, D.E., S. Ulansky, and S.C. Jeck. 1994. A b b o t s f o r d A q u i f e r A g r i c u l t u r e I nformation System P i l o t Study. A g r i c u l t u r e Canada. M o s c h i n i , G. , and K.D. M e i l k e . 1993. P r o d u c t i o n Subsidy and C o u n t e r v a i l i n g D u t i e s i n V e r t i c a l l y R e l a t e d Markets: The Hog-Pork Case Between Canada and the U n i t e d S t a t e s . American Journal of Agricultural Economics, 74(4):951-962. O s e i , Edward, P.G. Lakshminarayan, Shannon Neibergs, A z i z Bouzaher, and S.R. Johnson. 1995. L i v e s t o c k and the Environment: A N a t i o n a l P i l o t P r o j e c t . The P o l i c y Space, Economic Model, and Environmental Model Linkages. L i v e s t o c k S e r i e s Report 4. Centre f o r A g r i c u l t u r a l and R u r a l Development. S t a f f Report 95-SR 78. Pagano, Amy P., and C h a r l e s W. A b d a l l a . 1994. B a l a n c i n g animal p r o d u c t i o n and the environment: proceedings of the 1994 conference, Denver, Colorado. P e r r o n i , C a r l o , and R a n d a l l M. Wigle. 1994. I n t e r n a t i o n a l Trade and Environmental Q u a l i t y : How Important are the Linkages? Canadian Journal of Economics, 27(3):551-567. Pindyck, Robert S., and D a n i e l L. R u b i n f e l d . 1991. Econometric Models and Economic F o r e c a s t s . T h i r d E d i t i o n . McGraw-Hill Book Company. 149 P u r v i s , Amy and Joe Outlaw. 1995. What We Know About T e c h n o l o g i c a l Innovation t o Achieve Environmental Compliance: P o l i c y Issues f o r an I n d u s t r i a l i z i n g Animal A g r i c u l t u r e S e c t o r . American Journal of Agricultural Economics, 77:1237-1243 Robinson, K.L.. 1975. Unstable Farm P r i c e s : Economic Consequences and P o l i c y Options. American Journal of Agricultural Economics, 57:769-77 i n S p r i g g s , J . , and G.C. van Kooten. 1988. R a t i o n a l e f o r Government I n t e r v e n t i o n i n Canadian A g r i c u l t u r e : A Review o f S t a b i l i z a t i o n Programs. Canadian Journal of Agricultural Economics, 36(1). Roka, F r i t z M.. 1993. An Economic A n a l y s i s o f J o i n t P r o d u c t i o n R e l a t i o n s h i p s between Pork and Swine Manure: Should Manure be Flushed or B o t t l e d ? Ph.D. D i s s e r t a t i o n . North C a r o l i n a S t a t e U n i v e r s i t y . Runka, G. Gary. 1995. L i v e s t o c k Waste Management P r a c t i c e s and L e g i s l a t i o n Outside B r i t i s h Columbia. G.G. Runka Land Sense L t d . Shagam, Shayle D. . 1990. The World Pork Market - Government I n t e r v e n t i o n and M u l t i l a t e r a l P o l i c y Reform. USDA ERS Commodity Economics D i v i s i o n . Sharpley, A.N., and J.R. W i l l i a m s , E d i t o r s . 1990. EPIC -E r o s i o n P r o d u c t i v i t y Impact C a l c u l a t o r : 1. Model Documentation. USDA T e c h n i c a l B u l l e t i n No. 1768, 235 pp. Sharpley, Andrew N., S.C. Chapra, R. Wedepohl, J.T. Sims, T.C. D a n i e l , and K.R. Reddy. 1994. Managing A g r i c u l t u r a l Phosphorus f o r P r o t e c t i o n of Su r f a c e Waters: Issues and Options. Journal of Environmental Quality, 23:437-451. Shrybman, Steven. 1990. I n t e r n a t i o n a l Trade and the Environment: An Environmental Assessment of the General Agreement on T a r i f f s and Trade. The Ecologist, 20(l):30-34. Smith, K a t h e r i n e R. and P e t e r J . Kuch. 1995. What We Know About O p p o r t u n i t i e s f o r Intergovernmental I n s t i t u t i o n a l I n n o v a t i o n : P o l i c y Issues f o r an I n d u s t r i a l i z i n g Animal A g r i c u l t u r e S e c t o r . American Journal of Agricultural Economics, 77:1244-1249. S p a l d i n g , R.F., and M.E. Exner. 1993. Occurrence o f N i t r a t e i n Groundwater - A Review. Journal of Environmental Quality, 22:392-402. S p i n e l l i , F e l i x . 1991. A Dynamic, Q u a r t e r l y M u l t i - s t a g e P a r t i a l E q u i l i b r i u m Model of the US and Canadian Swine I n d u s t r i e s . Ph.D. T h e s i s . Purdue U n i v e r s i t y . 150 Vereecken, H., M. Swerts, M.J.D. Hack-ten Broeke, E . J . Jansen, J.F. Kragt, R. Engelke, S. Fabrewitz, and S. Hansen. 1991. Systematic Comparison of Model Requirements and T r a n s f o r m a t i o n Processes. Chapter 7 and 8 o f S o i l and Groundwater Research Report I I , N i t r a t e s i n S o i l s . Commission of the European Communities. Wahl, Thomas I . , Dermot J . Hayes, and S.R. Johnson. 1992. Impacts o f l i b e r a l i z i n g the Japanese Pork Market. Journal of Agricultural and Resource Economics, 17(1):121-137. Ward, Clement E., and Merle D. Faminow. 1992. Competitiveness i n L i v e s t o c k S l a u g h t e r i n g and Meat P r o c e s s i n g . Manitoba Red Meat Forum. Winnipeg, Manitoba. Westerman, P.W., L a r r y D. King, J.C. Burns, G.A. Cummings, and M.R. Overcash. 1987. Swine Manure and Lagoon E f f l u e n t A p p l i e d t o a Temperate Forage M i x t u r e : I I . R a i n f a l l Runoff and S o i l Chemical P r o p e r t i e s . Journal of Environmental Quality, 16(2):106-112. Wilson, P. N. and V. R. Eidman. 1983. An E m p i r i c a l T e s t o f the I n t e r v a l Approach f o r E s t i m a t i n g R i s k P r e f e r e n c e s . Western Journal of Agricultural Economics, 8:1070-82. APPENDIX - THE ECONOMIC MODEL 151 The p r e s e n t a t i o n o f the model based on S p i n e l l i ' s t h e s i s (1991) s t a r t s w i t h the i d e n t i f i c a t i o n o f the s u b s c r i p t i n d i c e s . The l i s t o f endogenous v a r i a b l e s , the predetermined v a r i a b l e s and c o e f f i c i e n t s used i n the model are then l i s t e d . The equations o f the model f o l l o w . S u b s c r i p t s a s s o c i a t e d w i t h the v a r i a b l e s a r e : i , j = p r o d u c t i o n r e g i o n (j o n l y i f you need more than one) ( i and j = 1, 2,..., 6), k = s l a u g h t e r r e g i o n (k = 1, 2,..., 8) 1 = consumption r e g i o n (1 = 1, 2,..., 8) f = feed type (f = corn, soybean meal, m i n e r a l / v i t a m i n supplement, b a r l e y , wheat, p r o t e i n supplement), a = age co h o r t o f animal (a = 1, 2, or 3), t = q u a r t e r t The o r d e r i n g f o r s u b s c r i p t s w i l l be: age coh o r t , r e g i o n ( p r o d u c t i o n then s l a u g h t e r then consumption), and time p e r i o d . The s u b s c r i p t T denotes the f i n a l time p e r i o d . 21 The Endogenous V a r i a b l e s The f o l l o w i n g v a r i a b l e s (denoted by c a p i t a l l e t t e r s ) d e s c r i b e the farm p r o d u c t i o n - f e e d i n g subsystem: A b b r e v i a t i o n s used: d o l = d o l l a r s ; cwt = hundred weight; lwt = l i v e w e i g h t ; hce = head c a p a c i t y e q u i v a l e n t ; hd = head; c a r = c a r c a s s ; r e t = r e t a i l ; m i l = m i l l i o n ; and, l b = pound. 152 N a i t = number of p i g s and hogs of age co h o r t a, i n p r o d u c t i o n r e g i o n i , d u r i n g p e r i o d t (mil hd); Mait = marketings f o r s l a u g h t e r o f hogs of age c o h o r t a, produced i n p r o d u c t i o n r e g i o n i and a v a i l a b l e f o r shipment t o s l a u g h t e r r e g i o n s d u r i n g p e r i o d t (mil hd); TR a i J t = number of p i g s and hogs of age co h o r t a, t r a n s f e r r e d from p r o d u c t i o n r e g i o n i t o p r o d u c t i o n r e g i o n j , d u r i n g p e r i o d t ( m i l hd); BARQLt = q u a n t i t y o f b a r l e y used i n swine p r o d u c t i o n i n Western Canada i n p e r i o d t (mil l b s ) ; HOGEND = the t o t a l number of animals remaining a t time p e r i o d T (mil hd); SLAUEND = the p r o d u c t i v e c a p a c i t y i n s l a u g h t e r and p r o c e s s i n g f a c i l i t i e s remaining a t time p e r i o d T ( m il cwt c a r ) ; CAPFARMINGlt = the incremental change i n the q u a n t i t y o f farm b u i l d i n g s and equipment which can be used i n p i g p r o d u c t i o n i n p e r i o d t i n p r o d u c t i o n r e g i o n i (mil h c e ) ; CAPFARMjt = p h y s i c a l q u a n t i t y (e.g., b u i l d i n g s and equipment) a v a i l a b l e f o r use i n the p r o d u c t i o n o f p i g s and hogs i n p r o d u c t i o n r e g i o n i , i n time p e r i o d t ( m il h c e ) ; CAPSLAUINC k t = the incremental change i n the q u a n t i t y o f s l a u g h t e r and p r o c e s s i n g c a p a c i t y i n p e r i o d t i n s l a u g h t e r -p r o c e s s i n g - s t o r a g e (SPS) r e g i o n k (mil cwt c a r ) ; CAPSLAU k t = the p h y s i c a l q u a n t i t y o f s l a u g h t e r and p r o c e s s i n g c a p a c i t y a v a i l a b l e f o r use i n SPS r e g i o n k i n time p e r i o d t ( m i l cwt car) ; 153 CULLS i t = number of c u l l e d animals from the b r e e d i n g s t o c k i n p r o d u c t i o n r e g i o n i d u r i n g time p e r i o d t ( m il hd); LWTajt = weight of animals i n age cohort a produced i n p r o d u c t i o n r e g i o n i and a v a i l a b l e f o r shipment t o SPS r e g i o n s , d u r i n g time p e r i o d t (mil cwt l w t ) ; and, SLWT a i k t = weight of animals i n age co h o r t a produced i n p r o d u c t i o n r e g i o n i and a c t u a l l y shipped t o SPS r e g i o n k d u r i n g time p e r i o d t (car c a s s weight b a s i s ) . The f o l l o w i n g v a r i a b l e s are determined a t the SPS-consumption sub-system l e v e l : P k t = c u r r e n t p r o d u c t i o n (mil cwt car) of wholesale pork c u t s (primal cuts) produced i n r e g i o n k d u r i n g p e r i o d t ; S0 k l t = q u a n t i t y o f wholesale pork c u t s s t o r e d ( m i l cwt car) i n SPS r e g i o n k a t the end of p e r i o d t ( t h i s q u a n t i t y w i l l be c a r r y - i n s t o c k s f o r p e r i o d t+1); °-kit = q u a n t i t y o f wholesale pork c u t s (mil cwt car) s u p p l i e d from s l a u g h t e r r e g i o n k t o consumption r e g i o n 1 d u r i n g p e r i o d t ( t h i s q u a n t i t y can o r i g i n a t e from c u r r e n t s l a u g h t e r o r from s t o r e d pork i n r e g i o n k ) ; and, Dlt = q u a n t i t y o f r e t a i l p o r t c u t s (mil cwt r e t ) demanded i n consumption r e g i o n 1 d u r i n g p e r i o d t . C o e f f i c i e n t s and Pre-Determined V a r i a b l e s b i r = number of p i g s born per i n d i v i d u a l i n age co h o r t 3 per q u a r t e r ( p i g s / h d ) ; 154 dea a = death r a t e of p i g s and hogs of age c o h o r t a (%); a w c u l l = average market weight of a c u l l from age c o h o r t 3 (cwt/hd); awbreeder = average market weight of an animal which had been r e t a i n e d i n age c o h o r t 3 throughout i t s l i f e (cwt/hd); f p r i c e f i t = average p r i c e of feed by type f i n p r o d u c t i o n r e g i o n i d u r i n g p e r i o d t (US$/lb); n f c o s t a i t = non-feed v a r i a b l e c o s t a s s o c i a t e d w i t h t h e p r o d u c t i o n of p i g s and hogs of age c o h o r t a i n p r o d u c t i o n r e g i o n i d u r i n g p e r i o d t (US$/hd); shrhog = l o s s e s (shrinkage and deaths) i n c u r r e d i n t r a n s i t f o r hogs, t r a v e l i n g from p r o d u c t i o n r e g i o n i t o s l a u g h t e r r e g i o n k (%); tcpigp a i j- = t r a n s p o r t a t i o n c o s t f o r moving p i g s and hogs o f age a between p r o d u c t i o n r e g i o n s i and j (US$/hd); t c h o g j k = t r a n s p o r t a t i o n c o s t per u n i t of moving s l a u g h t e r hogs from p r o d u c t i o n r e g i o n i t o s l a u g h t e r r e g i o n k (US$/cwt lwt) ; mcpig l t = average handling-commission charges t o market a hog f o r s l a u g h t e r (US$/hd); ecap a i t = expected average d a i l y feed i n t a k e f o r animals o f age c o h o r t a i n p r o d u c t i o n r e g i o n i d u r i n g time p e r i o d t ( l b s / h d / d a y ) ; wt a = average t e r m i n a l weight of animals o f age c o h o r t a (cwt/hd); t v a l h o g = t e r m i n a l v a l u e of animals a t the end of time p e r i o d T 155 (US$/hd); t v a l s l a u = t e r m i n a l v a l u e of s l a u g h t e r and p r o c e s s i n g c a p a c i t y a t the end of time p e r i o d T (US$/hce); deprecfarm = d e p r e c i a t i o n r a t e on farm b u i l d i n g s and equipment per q u a r t e r (%); s u r v i v f a r m = s u r v i v a l r a t e on farm b u i l d i n g s and equipment per q u a r t e r (%); d e p r e c s l a u = d e p r e c i a t i o n r a t e of s l a u g h t e r and p r o c e s s i n g c a p a c i t y per q u a r t e r (%); s u r v i v s l a u = s u r v i v a l r a t e of s l a u g h t e r and p r o c e s s i n g c a p a c i t y per q u a r t e r (%); c u l l r a t e = p r o p o r t i o n of new b r e e d i n g s t o c k which i s c u l l e d from the b r e e d i n g herd a f t e r one q u a r t e r i n t h e age c o h o r t 3 (%) ; d i e h a r d s = p r o p o r t i o n of e n t r i e s i n t o age c o h o r t 3 which s u r v i v e u n t i l the l a s t q u a r t e r o f the e n t i r e assumed l i f e expectancy o f a hog (%); p d i f f t = a c o n s t a n t d o l l a r p r i c e p e n a l t y on the s a l e o f hogs from age c o h o r t 3 (US$/cwt l w t ) ; space a = minimum space requirement f o r a hog i n age c o h o r t a (sq. f t . / h c e ) ; r = s o c i a l w e l f a r e d i s c o u n t r a t e (%); /0t = (1 + r/4) * = q u a r t e r l y s o c i a l w e l f a r e d i s c o u n t (%) ; c a p c o s t f = c a p i t a l c o s t i n v o l v e d i n e s t a b l i s h i n g new farm b u i l d i n g s and equipment (US$/hce); r e c o s t f a r m = r e c u r r i n g c o s t s r e l a t e d t o m a i n t a i n i n g f i x e d farm 156 c a p i t a l , i . e . taxes and i n s u r a n c e (US$/hce); c a p c o s t s = c a p i t a l c o s t i n v o l v e d i n e s t a b l i s h i n g new s l a u g h t e r -p r o c e s s i n g c a p a c i t y (US$/hce); r e c o s t s l a u = r e c u r r i n g c o s t s r e l a t e d t o m a i n t a i n i n g f i x e d s l a u g h t e r p r o c e s s i n g f a c i l i t i e s , i . e . taxes and i n s u r a n c e (US$/hce); f f o r m f a i = d a i l y amount of feed requirement f f e d t o animals of age c o h o r t a i n o r d e r t o meet minimum d a i l y n u t r i t i o n a l requirements i n p r o d u c t i o n r e g i o n i , i . e . f f o r m f a i equals 69 p e r c e n t when f = corn and a = 1 f o r p r o d u c t i o n r e g i o n i which means t h a t 69 p e r c e n t of the d a i l y r a t i o n f o r growing p i g s must c o n s i s t of corn ( l b s / h d / d a y ) ; ninit,- = i n i t i a l number of p i g s and hogs i n r e g i o n i (mil hd) ; a d i s t a = the p r o p o r t i o n of the p o p u l a t i o n t h a t must be of age a c o h o r t a t o m a i n t a i n a "steady s t a t e " p o p u l a t i o n (%); dayqu = number of days i n a q u a r t e r (90 d a y s ) ; k i l l a k = s l a u g h t e r c o s t s f o r hogs of age c o h o r t a i n SPS r e g i o n k (US$/cwt l w t ) ; 6 a = d r e s s out percentage f o r hogs of age c o h o r t a (% of cwt of c a r per cwt of lwt = c a r / l w t ) ; p r o c e s s k t = p r o c e s s i n g c o s t s i n SPS r e g i o n k (US$/cwt); c u t t o e a t = pounds of wholesale c u t s needed t o make one pound of r e t a i l c u t s (1.06 cwt of c a r per cwt of r e t = c a r / r e t ) ; t c p o r k k l = t r a n s p o r t a t i o n c o s t of moving pork from SPS r e g i o n k t o consumption r e g i o n 1 (US$/cwt c a r ) ; s t o r c o s t = q u a r t e r l y storage c o s t f o r pork (US$/cwt c a r ) ; 157 i m p o r t s ^ = exogenously s p e c i f i e d q u a n t i t y o f imports o f f r o z e n pork t o SPS r e g i o n k i n time p e r i o d t ( m il cwt c a r ) ; e x p o r t s k t = exogenously s p e c i f i e d q u a n t i t y o f e x p o r t s o f f r o z e n pork t o SPS r e g i o n k i n time p e r i o d t ( m il cwt c a r ) ; m i l i t a r y k t = exogenously s p e c i f i e d q u a n t i t y o f f r o z e n pork used by m i l i t a r y s e c t o r from SPS r e g i o n k d u r i n g time p e r i o d t (mil c a r cwt); t o t e r r i t o r k t = exogenously s p e c i f i e d q u a n t i t y o f f r o z e n pork shipped t o US t e r r i t o r i e s from SPS r e g i o n k d u r i n g time p e r i o d t (mil cwt c a r ) ; c a l f a c t = c a l i b r a t i o n f a c t o r t o a d j u s t e c o n o m e t r i c a l l y e s t imated demand c o e f f i c i e n t s w i t h a c t u a l demand q u a n t i t i e s and p r i c e s d u r i n g the e s t i m a t i o n p e r i o d ( r e a l US$/cwt on r e t a i l b a s i s ) ; i n t e r l t = i n t e r c e p t term of demand f u n c t i o n f o r pork i n r e g i o n 1 i n time p e r i o d t (cwt r e t ) ; p o r k s l l t = p a r t i a l d e r i v a t i v e o f q u a n t i t y o f pork demanded w i t h r e s p e c t t o pork p r i c e i n r e g i o n 1 i n time p e r i o d t (US$/cwt r e t ) ; b e e f s l t = p a r t i a l d e r i v a t i v e o f q u a n t i t y o f pork demanded w i t h r e s p e c t t o beef p r i c e i n r e g i o n 1 i n time p e r i o d t (US$/cwt r e t ) ; c h i c k s l l t = p a r t i a l d e r i v a t i v e o f q u a n t i t y o f pork demanded w i t h r e s p e c t t o c h i c k e n p r i c e i n r e g i o n 1 i n time p e r i o d t (US$/cwt r e t ) ; p e r i n c s l l t = p a r t i a l d e r i v a t i v e of q u a n t i t y o f pork demanded w i t h 158 r e s p e c t t o p e r s o n a l income i n r e g i o n 1 i n time p e r i o d t (US$/cwt r e t ) ; b r p l t = r e t a i l beef p r i c e i n r e g i o n 1 i n time p e r i o d t (US$/cwt r e t ) ; c r p l t = r e t a i l c h i c k e n p r i c e i n r e g i o n 1 i n time p e r i o d t (US$/cwt r e t ) ; p e r i n c l t = p e r s o n a l income i n r e g i o n 1 i n time p e r i o d t (thousands of d o l l a r s ) ; pop l t = average p o p u l a t i o n i n r e g i o n 1 i n time p e r i o d t (mil hd) ; c p i t = the consumer p r i c e index of e i t h e r the US o r Canada i n time p e r i o d t (1984-86 = 1); rwps t = r e a l w h o l e s a l e - r e t a i l p r i c e spread by q u a r t e r ( r e a l US$/cwt r e t ) ; c h t a r i f f 1 k t = Canadian hog t a r i f f (CND$ per cwt lwt) ; c p t a r i f f k l t = Canadian pork t a r i f f (CND$ per cwt car) ; ex r t = Canadian - U n i t e d S t a t e s d o l l a r exchange r a t e (CND$/US$); Four v a r i a b l e s are c o n s t r u c t e d from parameters t o s i m p l i f y p r e s e n t a t i o n . They are: a h a t f l t = - ( i n t e r l t + c a l f a c t + b e e f s l l t * r b r p l t + c h i c k s l l t * r c r p l t + p e r i n c s l l t * r p e r i n c l t ) ; p o r k s l f l t = ( l / ( p o r k s l l t * pop t t)) ; r n f c o s t a a j t = r n f c o s t i t * space a; and, rexpe n f e e d a i t = dayqu * fform f a i- * ecap a i t * r f p r i c e f l t . 159 Equ a t i o n S p e c i f i c a t i o n The eq u a t i o n s e t i s composed of seventeen c o n s t r a i n t s and of the o b j e c t i v e f u n c t i o n . The model a l s o c o n t a i n s s e v e r a l bounds on the i n i t i a l and f i n a l l e v e l s f o r the endogenous v a r i a b l e s . The c o n s t r a i n t s are s o l v e d w i t h the Modular Incore N o n - l i n e a r O p t i m i z a t i o n System (MINOS) a l g o r i t h m of GAMS. There are e l e v e n c o n s t r a i n t s a t the farm l e v e l . B i r t h and i n v e n t address the b i r t h and aging of the herd and t e r m d i s t the p o p u l a t i o n l e v e l a t the f i n a l p e r i o d . Two c o n s t r a i n t s are p l a c e d on farm p r o d u c t i o n t o ensure the replacement o f farm b u i l d i n g s and equipment ( i n c f a r m and p i g c a p ) . One c o n s t r a i n t i s needed t o model the a v a i l a b i l i t y o f b a r l e y i n Western Canada ( b a r l e y ) . F i v e c o n s t r a i n t s are r e l a t e d t o herd p o p u l a t i o n dynamics ( c u l l e q , c u l l m a r t , o l d d i e s , l i v e w t and l v t c u l l ) . Termqhog determines the t e r m i n a l v a l u e of a hog. The remaining c o n s t r a i n t s apply t o the SPS and r e t a i l demand l e v e l s . I n c s l a and meatcap d e a l w i t h the slaughterhouse replacement d e c i s i o n ; shippedlw and ats p s model the p h y s i c a l l o s s e s i n c u r r e d i n the p r o c e s s i n g and marketing o f pork from the SPS s i t e t o the f i n a l consumer use; Dem and sds handle pork demand and u t i l i z a t i o n ; Termqs determines the t e r m i n a l v a l u e of s l a u g h t e r i n g f a c i l i t i e s . The P r o d u c t i o n - Feeding Sub-System The d r i v i n g f o r c e of the model i s the farm p r o d u c t i o n of hogs which i s a f u n c t i o n of the s i z e and composition of the 160 herd. The l a t t e r v a r i e s w i t h i n p u t and output p r i c e changes. Input p r i c e s are exogenous w h i l e output p r i c e s are endogenous, be i n g the marginal v a l u e a s s o c i a t e d w i t h q u a n t i t y b e i n g p r i c e d . i . ) Herd S i z e S i z e r e f e r s t o the a b s o l u t e number of animals i n the herd. The c u r r e n t p e r i o d ' s number of animals i n the swine p o p u l a t i o n of a r e g i o n i s a f u n c t i o n o f the pas p e r i o d ' s farrowings, deaths, net i n t e r - r e g i o n a l movements of p i g s , c u l l s from the age coh o r t 3 and marketings f o r s l a u g h t e r from age c o h o r t s 2 and 3. i.a) Number of P i g s Born ( b i r t h i t ) The c u r r e n t p e r i o d ' s number of p i g s i n age c o h o r t 1 i n p r o d u c t i o n r e g i o n i i s a f u n c t i o n o f t h a t r e g i o n ' s number of br e e d i n g s t o c k i n the herd and t h e i r b i r t h r a t e from l a s t p e r i o d p l u s the net t r a n s f e r o f i n d i v i d u a l s i n c o h o r t 1 i n t+1: N i , , , t + i = b i r * N3 ,it -E T R l , i j , t + l T R l . j i f f l 1 1/2/••#6/ t 112 f •••T• l.b.) M a t u r a t i o n of the P o p u l a t i o n ( i n v e n t a i t ) Animals p r e s e n t a t the be g i n n i n g o f p e r i o d t must e i t h e r 1) remain i n the herd and age one p e r i o d , 2) be marketed f o r s l a u g h t e r as a market hog 3) be marketed i n t e r - r e g i o n a l l l y f o r bre e d i n g o r f e e d i n g purposes, o r 4) d i e a n a t u r a l death. No hog i s allowed t o l i v e more than 12 q u a r t e r s . 161 N - i . i . f i = d-dea a ) * N a i t - M,,t - E TR a i j t + E TRajl-t i f a = 1; i = 1,2,...6; t = 1,2,...T. N 3 , i , t + l = (l"dea 3) * N3fl.t - M 3 # i t - E TR3,.jt + E TR3|jl-t + (l-dea 2) * N2fl-t - M2l.t - E TR 2 i j t + E TR 2 j i t j 3 when a = 2,3 ; i = 1,2,...6; t = 1,2,...T. i i . ) Composition o f the Herd The composition o f the herd i s the d i s t r i b u t i o n o f the herd a c r o s s the t h r e e age c o h o r t s . Any c o n t r a c t i o n o r expansion o f the herd depends on the s i z e o f cohort 3, the b r e e d i n g herd. The r e t a i n e d b r e e d i n g herd numbers are the r e s i d u a l from marketings and death l o s s e s . i i . a ) Number of C u l l s Marketed ( c u l l e q j t + 1) The number of animals c u l l e d from age co h o r t 3 a r e a f i x e d p r o p o r t i o n o f the number of animals e n t e r i n g t he co h o r t i n the pr e v i o u s q u a r t e r : CULLS i i t + l = (N2fl.t - M 2 ( i t - E TR 2 i j t + E TR 2 j i t) * (l-dea 2) * ( c u l l r a t e ) . j j i i . b ) Minimum Number Marketed from Age Cohort 3 ( c u l l m a r t j t ) The f o l l o w i n g c o n s t r a i n t ensures t h a t a t l e a s t the c u l l s ( d e f i n e d i n i i . a ) are marketed from age coh o r t 3 each q u a r t e r : CULLS j t < M 3 f i t i i . c ) Forced Marketings o f Three Year O l d Hogs (olddies,- t + 9) Hogs of cohort 3 must be marketed a f t e r n ine q u a r t e r s : 162 ( N 2 , i t " M 2 , i t ) * (diehards) * ( l - d e a 3 ) 1 0 < M 3 f i f t + 9 i i . d ) Liveweight o f C u l l s i n Marketings ( l v t c u l l j t ) C u l l s from c o h o r t 3 w i l l be l i g h t e r than mature b r e e d i n g animals from t h i s age coh o r t : LWT3fit < awcu l l * CULLS,-,. + awbreeder * (M 3 < l t - CULLS 3 l t) i i . e) Liveweight o f Others Marketed ( l i v e w t a ) t ) T h i s c o n s t r a i n t accounts f o r t o t a l c a r c a s s weight o f the marketed animals i n age coh o r t s 1 and 2: LWTait < wt a * Mai-t i i i ) C a p i t a l Formation Dynamics i n hog p r o d u c t i o n does not o n l y i n v o l v e the p h y s i c a l p r o d u c t i o n l i n k a g e s between q u a r t e r s and the p o r t f o l i o c h o i c e o f producers o f marketing c u r r e n t s t o c k o r r e t a i n i n g i t t o produce f u t u r e revenues as shown i n the p r e v i o u s equations, but a l s o the replacement o f durab l e p r o d u c t i o n a s s e t s a t the farm and SPS l e v e l s . The c a p i t a l c o s t e n t e r s each l e v e l as a f i x e d o u t l a y i n the q u a r t e r the a s s e t s are a c q u i r e d and as a r e c u r r i n g expenditure based upon the c o s t s o f insu r a n c e and taxes. i i i . a) Farm C a p i t a l i n Pl a c e ( p i g cap i t) Farm p r o d u c t i o n f a c i l i t i e s are a f u n c t i o n o f the hog in v e n t o r y : E space a * N a j t < CAPFARMit a i i i . b ) Farm C a p i t a l Dynamics (incfarm j t) The a c t u a l farm c a p i t a l i s a f u n c t i o n o f d e p r e c i a t i o n and 163 i n c r e m e n t a l changes i n c a p i t a l : CAPFARMit - s u r v i v f a r m * CAPFARM,^., < CAPFARMINClt i i i . c ) SPS C a p i t a l In P l a c e (meatcap k t) 1. 5 2 2 * P k t < CAPSLAU k t i i i . d) SPS C a p i t a l Dynamics ( i n c s l a u k t ) CAPSLAU k t - s u r v i v s l a u * CAPSLAU^^ < CAPSLAUINC k t i v . ) I n i t i a l . "Steady S t a t e " , and Terminal C o n d i t i o n s f o r Stock V a r i a b l e s i n Farm P r o d u c t i o n The i n i t i a l hog i n v e n t o r y , which i s f i x e d , i n c r e a s e s or decreases a c c o r d i n g t o economic i n c e n t i v e s g i v e n the b i o l o g i c a l c o n s t r a i n t s . These c o n s t r a i n t s (e.g. number of p i g l e t s weaned per sow) a f f e c t the d i s t r i b u t i o n of the hog i n v e n t o r y between the 3 c o h o r t s . iv. a ) I n i t i a l P o p u l a t i o n D i s t r i b u t i o n The i n i t i a l r e g i o n a l hog i n v e n t o r y i s e n t e r e d as a f i x e d bound on each c o h o r t . iv.b) Terminal "Steady S t a t e " P o p u l a t i o n D i s t r i b u t i o n (tremdist a i- T) E ( ( - d i s t a * N b b # M ) i f a*bb + ( l - d i s t a ) * i f a = bb) = 0 bb i v . c ) Terminal C o n d i t i o n on Number of Hogs (termqhog) Terminal q u a n t i t i e s must be imposed a t both the farm and SPS l e v e l s otherwise the maximization problem w i l l t r i g g e r the marketing of a l l hogs t o be consumed as pork without t a k i n g i n t o M u l t i p l i c a t i o n by 1.5 a l l o w s f o r any i n t r a - s e a s o n a l v a r i a t i o n i n p r o c e s s i n g . 164 account the v a l u e t h a t f u t u r e g e n e r a t i o n s p l a c e o f hog p r o d u c t i o n c a p a c i t y . HOGEND < E E Nai- T a 1 i v . d) Terminal C o n d i t i o n on SPS S l a u g h t e r C a p a c i t y ( t e r m s l a u ) : SLAUEND < E CAPSLAU. T k v. ) B a r l e y Supply ( b a r l e y i t ) : A st e p supply f u n c t i o n i s c o n s t r u c t e d t o r e f l e c t t he f a c t t h a t a v a i l a b i l i t i e s r a t h e r than p r i c e s have an e f f e c t on l i v e s t o c k p r o d u c t i o n : y L q f e e d U S e b a r t e y a j U e s t C a n a d a t * Na,West Canada,t a < BARQLt + BARQMlt + BARQM2t + BARQM3t + BARQM41 + BARQHt The SPS - Consumption Sub-System L e v e l Pork p r o d u c t i o n on a c a r c a s s weight b a s i s i s the sum of the t o t a l l i v e weight marketings a d j u s t e d f o r t r a n s p o r t and d r e s s -out l o s s e s shipped from p r o d u c t i o n r e g i o n s t o each SPS s i t e . v i . a) L i v e Hog Shipments t o SPS S i t e s (shippedlw a i t) E SLWT a j k t < LWT a i t*(l-shrhog) k v i . b ) Wholesale Primal Cut P r o d u c t i o n a t SPS S i t e ( a t s p s k t ) P k t < E E 5 a * SLWT a i k t i a P k t i s expressed i n t o t a l weight on a c a r c a s s weight b a s i s 165 a v a i l a b l e f o r sto r a g e o r shipment t o demand r e g i o n s . v i . c ) Pork U t i l i t i z a t i o n Row (sds k t) : The f o l l o w i n g equation i s an a c c o u n t i n g e q u a t i o n o f pork flows and use a c r o s s time p e r i o d . The q u a n t i t y o f pork h e l d i n st o r a g e i n p e r i o d t+1 i n s l a u g h t e r r e g i o n k i s the amount of pork remaining from the a c t i v i t i e s i n p e r i o d t : s t o r a g e c a r r i e d i n t o p e r i o d t , pork p r o d u c t i o n d u r i n g p e r i o d t , imports, e x p o r t s , m i l i t a r y use and q u a n t i t i e s sent t o demand r e g i o n s : S 0k.t + 1 + E Qki.fi - Pk,t +1 " imports, t + 1 1 + e x p o r t s k t + 1 + m i l i t a r y k t + 1 + t o t e r r i t o r k t + 1 < S 0 k t v i . d) Pork Demand (demlt) T o t a l demand can not exceed the t o t a l weight of c a r c a s s shipped i n from s l a u g h t e r r e g i o n s a d j u s t e d f o r "cut t o e a t " trimming l o s s e s a t the r e t a i l marketing l e v e l : Dlt * E Skit k cuttoeat v i i . ) The O b j e c t i v e F u n c t i o n The model's o b j e c t i v e f u n c t i o n i s t o maximize the area under each r e g i o n ' s pork demand f u n c t i o n i n each q u a r t e r minus a l l c o s t s i n p r o d u c t i o n , marketing, s l a u g h t e r , p r o c e s s i n g , and d i s t r i b u t i o n . Hence t h e r e i s a revenue component and a c o s t component. 166 v i i . a ) The Revenue Component Revenue from the s a l e of the f i n a l composite pork product takes the f o l l o w i n g form: E Bt* E ( a h a t f t * D l t + 0. 5 * p o r k s l f l t*D 2 l t ) t 1 v i i . b . ) The Cost Component: Costs a t each l e v e l (farm, SPS, and consumption) are presented, v i i . b . 1 ) Feed Costs Feed requirements are m u l t i p l i e d by f e e d p r i c e s . For each animal of age c o h o r t a, an average d a i l y feed i n t a k e (ecap a i t) t o p r o v i d e the n u t r i t i o n a l requirements i s s p e c i f i e d f o r each r e g i o n . P o t e n t i a l feeds i n c l u d e corn, soybean meal, m i n e r a l / v i t a m i n supplement, b a r l e y , wheat, and p r o t e i n supplement. Each r e g i o n ' s s p e c i f i e d feed s e t i s c o n t a i n e d i n the parameter f f o r m f a j . Q u a r t e r l y feed c o s t s c o n s i s t of t h i s average d a i l y r a t i o n m u l t i p l i e d by the number of days i n a q u a r t e r (dayqu) times the p r i c e of each feed type ( r f p r i c e f i t ) times the number of l i v e s t o c k i n each age c o h o r t : -E * Bt * E E E dayqu * r f p r i c e f j t t a i f * f f o r m f a j * ecap a i t * Na,t ; or, -E Bt * E E rexpenfeed a i t * N a 1 t t a i v i i . b . 2 ) Non-Feed V a r i a b l e Costs Non-feed v a r i a b l e c o s t s are v e t e r i n a r i a n expenses, f u e l , 167 e l e c t r i c i t y , and breed i n g c o s t s on a per head b a s i s : -E fit * E E r n f c o s t a i t * N a i t t a i v i i . b . 3 ) F i x e d Costs Farm c a p i t a l c o s t s e n t e r i n t o the model as l a r g e i n i t i a l c o s t o u t l a y a t the time of a c q u i s i t i o n and r e c u r r i n g q u a r t e r l y expense o u t l a y s u n t i l the f a c i l i t y i s completely d e p r e c i a t e d : -E /3t * E r c a p c o s t f t * CAPFARMINC)t t i -E flt * E r r e c o s t f t * CAPFARMit t i v i i . b . 4 ) Hog Marketing Costs Handling and commission charges are l e v i e d on each hog when they a re marketed: -E fl. * E E f t * L L rmcpig i t * Mai-t t a i v i i . b . 5 ) Feeder P i g T r a n s f e r Costs P i g s which are r a i s e d on one farm t o fe e d e r p i g s i z e and then shipped a c r o s s p r o d u c t i o n r e g i o n s t o another farm i n c u r t r a n s p o r t a t i o n charges: -E fit * E E E r t c p i g p i j t * TRai-jt t a i j * l v i i . b . 6 ) T r a n s p o r t a t i o n Cost t o S l a u g h t e r P l a n t T r a n s p o r t c o s t s o f market hogs t o s l a u g h t e r p l a n t s are charged on a l i v e weight b a s i s : -E flt * E E E r t c h o g i k t * ( 1 ) * SLWT a i k t t a i k 1 - shrhog v i i . b . 7 ) S l a u g h t e r Cost 168 Costs r e l a t e d t o the s l a u g h t e r o f hogs are as f o l l o w s : -E Bt * E E E * r k i l l a k t * SLWT a j k t t a i k v i i . b . 8 ) P r o c e s s i n g and Storage Costs A l l p r o d u c t i o n must be c u t i n t o p r i m a l c u t s f o r f r e s h meat, and processed i n the case o f prepared meats. Once processed, wholesale meat may go d i r e c t l y t o r e t a i l s i t e s o r t s t o r a g e f o r l a t e r shipment. P r o c e s s i n g and storage c o s t s a r e : -E Bt * E ( r p r o c e s s k t * P k t + r s t o r c o s t t * S0 k t) t k v i i . b . 9 ) F i x e d Costs on SPS Ca p a c i t y As w i t h farm c a p i t a l c o s t s , SPS c a p a c i t y c o s t s e n t e r i n t o the model as a l a r g e i n i t i a l c o s t o u t l a y and r e c u r r i n g q u a r t e r l y expense o u t l a y s : -E j9t * E r e c a p c o s t s t * CAPSLAUINC k t t k -E Bt * E r r e c o s t s t * CAPSLAU k t t k v i i . b . 1 0 ) Pork T r a n s p o r t a t i o n Costs T r a n s p o r t a t i o n c o s t s of wholesale meat l e a v i n g the SPS s i t e f o r the r e t a i l demand c e n t e r s e n t e r the o b j e c t i v e as: -E Bt * E E r t c p o r k k l t * Q k l t t k 1 v i i . b . 1 1 ) P r i c e Discounts on Fat Hogs Fat hogs are marketed a t a d i s c o u n t e d p r i c e compared t o market hogs. The p r i c e p e n a l t y i s modelled as f o l l o w s : -E Bt * E E p d i f f t * ( 1 ) * SLWT 3 J k t t i k 1 - shrhog 169 v i i . b . 1 2 ) Marketing Margins The w h o l e s a l e - r e t a i l p r i c e spread i s sea s o n a l and e n t e r s i n t h i s way: - E Bt * E rwps t * Dlt t 1 v i i . b . 1 3 ) Terminal Values The salvage v a l u e s f o r the t e r m i n a l p e r i o d herd and t e r m i n a l p e r i o d s l a u g h t e r f a c i l i t i e s are added t o the revenue component: + (TVALHOG*HOGEND) + (TVALS LAU* SLAUEND) v i i . b . 1 4 ) US C o u n t e r v a i l i n g Duties T a r i f f s on Canadian hogs and pork exported t o the US are modelled as c o s t s : - E Bt * E E E r c h t a r i f f l k t * SLWT a j k t t a i k i f i = A t l a n t i c p r o v i n c e s , Quebec, O n t a r i o o r Western Canada p r o d u c t i o n r e g i o n and k = US SPS s i t e : -E )0t * E E r c p t a r i f f k j t * Q k l t t k i i f k = Canadian SPS s i t e and 1 = US demand s i t e 170 v i i . b . 1 5 ) West Canadian B a r l e y Supply A s t e p supply f u n c t i o n f o r Western Canadian b a r l e y i s c r e a t e d by s e t t i n g bounds oh separate q u a n t i t i e s o f b a r l e y i n Western Canada, each subsequent q u a n t i t y h a ving a h i g h e r p r i c e ( r e a l U S$/lb): -E Bt * ( 0.02*BARQLt + 0.03*BARQMlt + t 0.04*BARQM2t + 0.08*BARQM3t + 0.09*BARQM4t + 0. l*BARQHt) v i i . b . 1 6 ) R i s k from Hog P r i c e V a r i a b i l i t y The standard d e v i a t i o n o f endogenous hog p r i c e s i s used as a proxy f o r r i s k : -E Bt * 0.3 RISK t t v i i . b . 1 7 ) S t a b i l i z a t i o n Payments: Expected s t a b i l i z a t i o n payments are government s u b s i d i e s p r o v i d e d 3 q u a r t e r s b e f o r e the hogs are marketed: -E Bt * 0.12 RSTABt t 

Cite

Citation Scheme:

        

Citations by CSL (citeproc-js)

Usage Statistics

Share

Embed

Customize your widget with the following options, then copy and paste the code below into the HTML of your page to embed this item in your website.
                        
                            <div id="ubcOpenCollectionsWidgetDisplay">
                            <script id="ubcOpenCollectionsWidget"
                            src="{[{embed.src}]}"
                            data-item="{[{embed.item}]}"
                            data-collection="{[{embed.collection}]}"
                            data-metadata="{[{embed.showMetadata}]}"
                            data-width="{[{embed.width}]}"
                            async >
                            </script>
                            </div>
                        
                    
IIIF logo Our image viewer uses the IIIF 2.0 standard. To load this item in other compatible viewers, use this url:
http://iiif.library.ubc.ca/presentation/dsp.831.1-0088316/manifest

Comment

Related Items