New York study analyzes financial impact of CAFO compliancePrint
Cobleskill, N.Y. — Farm Credit East, in conjunction with Cornell PRO-DAIRY, has released a summary report comparing the financial implications of dairy farm expansion in relation to costs associated with New York environmental regulatory compliance.
The report evaluates the financial impact on a hypothetical family dairy farm expanding from 190 to 290 cows. One factor affecting growth of the New York herd is the state’s concentrated animal feeding operation (CAFO) permit threshold, which requires significant capital and managerial investment when a farm reaches 200 cows. The report developed a typical scenario and examined the financial impact of expansion from 190 to 290 cows both with and without the added expense of New York CAFO compliance.
“At 200 cows, New York CAFO regulations kick in at a critical pinch point in the life cycle of a family dairy farm. The additional costs and management demands associated with New York’s medium CAFO compliance program is a big decision point for farms considering an expansion,” said Mike Haycook, branch manager of the Farm Credit East Potsdam office.
Karl Czymmek, senior extension associate with Cornell’s PRO-DAIRY Program adds, “Over time, I have talked to farmers that want to grow to CAFO size, but have concerns about the expense (and paperwork). Also, managers operating CAFO size farms tell me that they have had to add cows to pay for CAFO costs. This analysis provides some initial insight into both of these issues and we hope it will contribute constructively to CAFO discussions as NY prepares for the next CAFO permit expected in 2014.”
CAFO compliance can add significantly to the cost of a typical dairy expansion. The report constructed a reasonable expansion and CAFO compliance scenario where CAFO added $142,000 in capital costs, as well as $15,000 for an initial Comprehensive Nutrient Management Plan, and $5,000 per year for annual updates. In addition, ongoing compliance (records, etc.) adds significant management responsibilities to a farmer who already has a full plate of responsibility and limited financial flexibility to hire additional management resources.
The study found that without cost-sharing, borrowing to cover modest capital and operational costs of CAFO regulations make expansion difficult for a 190-cow New York dairy farm in average financial condition. Top line revenue grew substantially in both the CAFO and non-CAFO examples, but expenses grew as well. With the existing debt load that an average dairy farm is carrying, the future cash flow from an expansion is simply insufficient to cover the additional costs of the CAFO-compliant expansion.
The full study, Financial Implications of a Dairy Farm Expansion, is available on FarmCreditEast.com.