Economies of Scale in Swine Manure Utilization
Raymond E. Massey
John A. Lory
John Hoehne
Charles Fulhage Introduction Modern swine finishing facilities seek to maximize profits by achieving economies of scale, which minimize costs of production. Larger facilities allow producers to spread fixed costs over more animals and to take advantage of technologies that increase production efficiency. Manure storage and handling systems associated with large production units often emphasize minimizing the cost of storage and handling with little regard for the crop nutrient value of the manure. Regulations are often the primary factor influencing land application rates. Many producers do not take credit for the manure nutrients applied and fertilize as if the land had not received manure. The selection of manure storage facility and land application method affects the land requirements and the time required for land application. Increasing spreading area requires producers to cover more land and travel greater distances for access to land suitable for land application. Lagoons require less land for manure spreading than earthen pits or concrete or glass-lined steel tanks because lagoons promote volatilization of nitrogen (N), reducing the nutrients available for land application. Surface application of manure with a traveling gun or tank spreader further reduces land requirements by promoting the loss of N by ammonia volatilization after application. Surface application of lagoon effluent results in the lowest land requirements; injection of slurry from a tank system results in the greatest land requirements. Concentrating swine finishing facilities at a single site reduces overhead costs such as feed storage, manure storage and infrastructure costs such as roads. However, concentration can increase the time and monetary costs associated with transporting manure from the storage site to the land application site. We examined the effects of concentrating facilities on the time required and cost of distributing manure, and the value of the manure as a crop nutrient. Scale economy was modeled for six 1,000-head finishing facilities located on 1, 2, 3 or 6 sites. Methodology We developed a computer model that integrated many of the time and monetary costs associated with manure storage and handling and the value of the manure nutrients for crop production. Costs included the fixed and variable costs of manure storage facilities and of manure transportation/distribution equipment. Manure production was estimated for six 1000-head buildings used to finish market hogs. Four scenarios representing scale economies were modeled: 1) I site with six buildings, 2) 2 sites with 3 buildings each, 3) 3 sites with 2 buildings each and 4) 6 sites with I building each. Each site required its own manure storage facilities. Our objective was to understand the effect of scale economies on manure costs and returns. We did not include infrastructure costs for such items as roads, feed storage facilities and utility hookups that might be necessary for dispersed locations but are not directly related to manure management. Three manure storage systems were considered for each building distribution scenario:
Lagoon storage capacity was 365 days; tank and pit storage capacities were 185 days. Storage volumes were based on Missouri Department of Natural Resources guidelines. Lagoons were not agitated prior to land application of effluent; tanks and earthen pits were agitated. Manure storage construction costs were amortized over 15 years. Construction costs are highly site specific so all sites were assumed identical. Three land application strategies were modeled:
The tractor-pulled tank wagon included the costs of a tractor and agitator, tractor and tankwagon, road time to the field, and application time in the field. The costs for the drag-hose injection system included equipment and set-up costs for the pump and piping to bring manure to the field, the tractor and injectors, and the application time in the field. The costs for the traveling gun system included equipment and set-up costs for the pump and piping to bring manure to the field, the traveling gun, and the application time in the field including set-up time for each pull of the gun. Manure handling equipment costs were amortized over 10 years; pw-nps, 7 years. Tractors used for manure distribution were considered available for activities in addition to manure application. Depreciation was computed using Cross and Perry (1995). All other fixed and variable costs were computed using engineering factors published by the ASAE (1996). Nitrogen retention (calculated from animal excretion) in manure storage was assumed to be 9% for lagoons, 50% for pits, and 60% for tanks. Nitrogen availability of land applied manure was estimated using Missouri Department of Natural Resources formula: Available nitrogen = organic N x k + ammonia N x k, Where k, = 0.7 and k, = 0.6 for surface applications and 1.0 for injected manure. All manure sources were assumed to be 80% ammonia-N. Lagoon effluent was assumed to have a N:P ratio of 4.875 and a N:K ratio of 0.94; earthen pit and tank slurries were assumed to have a N:P ratio of 2.5 and a N:K ratio of 1.59. Manure was applied to continuous corn to meet nitrogen needs. Manure nutrients needed for crop production were given a fertilizer equivalent value. Nitrogen was valued at $.22/lb., PO, $.295/lb. and KO at $.125/lb. Nitrogen need of corn was 150 lbs. N/acre based on University of Missouri recommendations for a yield goal of 13 5 bushels and a soil organic matter content of 2.5%. Crop P and K needs were based on nutrient removal. Manure nutrients applied in excess of crop need were given neither economic value nor environmental cost. Manure was applied to land in 40-acre tracts. Application costs included transportation from the manure storage facility to the 40-acre tracts and the cost of spreading manure on the 40 acre tract. Manure was spread on the nearest available land. All land surrounding the manure storage facility was assumed able to receive manure. Results Land needed for land application of manure was independent of the distribution of the six buildings. Six finishing buildings required 74 acres for surface application of lagoon effluent, 1 13 acres for injection of lagoon effluent, 620 acres of land for injection of pit slurry, and 744 acres for injection of tank slurry. Manure had to be transported (hauled or pumped) over 0.5 miles from six finishing houses on one site when injecting earthen pit slurry and 0.74 miles when injecting concrete tank slurry. Manure from the six-site scenario required no road transportation of manure. Manure storage and application costs exceeded manure value for all lagoon systems (Table 1). The traveling gun had the lowest manure application costs for lagoon systems. Injecting manure from a lagoon with a draghose injection system increased manure costs by about $ 1.00 per pig space compared to traveling gun (Table 1). Injecting lagoon effluent increased the fertilizer value of the manure by about $2000 by retaining more N and improving the N:P and N:K ratio of the manure as a fertilizer source. These benefits were outweighed by the increased costs for injection equipment and increased time necessary for injecting manure. Injecting lagoon effluent with a draghose system increased application time over 40 hours per year. Concentrating the six buildings reduced manure costs for both lagoon application systems (Table 1). The value of the earthen pit slurry exceeded the cost of injecting it for all siting options (Table 1). Using draghose injection, fertilizer value of the manure exceeded application and storage costs by $1.66/pig space for 6 buildings at 6 sites to $1.45/pig space for 6 buildings at one site. Using a tractor-pulled 3600-gallon tank, fertilizer value of the manure exceeded application and storage costs by $2.48/pig space for 6 buildings at 3 sites to $2.30/pig space for 6 buildings at one site. The use of a tractor-pulled tank was more profitable than the use of draghose injection because of lower capital costs. However the tractor-pulled tank system also required at least 50 more hours per year for land application of pit slurry. Larger tanks may reduce the time required but would increase fixed costs and soil compaction costs (not considered in our analysis) may increase. Diseconomies of scale exist for use of pit manure. Spreading out production facilities so they have adequate land immediately available for manure use offsets the increased cost of constructing more earthen pits. All tractor pulled tankers are more profitable than draghose injection, they also require more time. The high cost of concrete tanks created a significant economy of scale for manure management. The expense of constructing 6 concrete tanks at 6 sites overwhelmed the fertilizer value of the manure (Table 1). Value/pig space ranged from -$4.41 to $2. 1. The apparent value of injected manure slurry should be interpreted with caution. This analysis assumes all the manure can be applied in a timely fashion to assure its full nitrogen value for a corn crop. Most locations will not have 150 to 250 hours of appropriate spring weather for spreading manure on corn ground. Fall or previous summer application will lower the dependability manure as a nitrogen source. This analysis also assumes there is some P and K value to the manure. Repeated applications of swine slurry on a single piece of land will raise soil test levels to a point where the manure P and K will have no value. Conclusion When using lagoon storage for swine finishing facilities, manure fertilizer value never exceeded storage and application costs. Concentrating the facilities on a single site and using sprinkler application of the effluent minimized net manure cost. Scale economies exist. When injecting earthen pit slurry, manure fertilizer value exceeds storage and application costs under all siting assumptions. Slight diseconomies of scale exist with the dispersed siting option yielding the greatest net value of manure. Draghose injection of the manure is less economical but requires fewer hours than tank application. Significant scale economies exist with concrete tanks. However, in no instance, did concrete tank storage provide a higher net value from manure than earthen pit storage. This study indicates that using earthen pit storage and scattered production facilities may offer benefits to hog producers. The use of pit storage with injection of the manure allows the fertilizer value of the manure to exceed the cost of storing and applying the manure. Scattered production facilities allows the application of manure to land more closely situated to the pits and cuts down on application costs and hours needed for application. Further research needs to be done to determine if the diseconomies of scale for pit manure utilization might be overcome by production economies of scale such as decreased roads and feed storage costs. Other assumptions that warrant further investigation include: Considering the impact of only a portion of the land surrounding the site being available for manure use. This should create further diseconomies of scale. Considering the impact of P based application. Considering the implications of any P and K buildup from N based application. Considering different crops and cropping patterns. Table 1. Net value ($/pig space) of manure from 6000 finishing hogs.
American Society of Agricultural Engineers. 1996. ASAE Standards, Engineering Practices and Data. Cross, Timothy L. and Gregory M. Perry. 1995. Depreciation Pattern for Agricultural Machinery. American Journal of Agricultural Economics 77:194-204.
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