Effects of a Local Air Quality Regulation on Dairy Farms in the San Joaquin Valley

• Agricultural Economics Workshop

Date and Location

Tuesday, November 5, 2013, 12:10 PM - 1:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

California dairy farms have experienced hard times in the past few years. In addition to changes in market conditions in both input and output markets, the burden of environmental and other regulations has been mentioned as a culprit. This research examines the effects of a local air quality regulation on dairy farms in the San Joaquin Valley in California, in terms of both their production practices and costs of operation. Different from previous analysis of the effects of environmental regulations on agricultural production, I identify the realized operational changes associated with abiding by the regulation. Estimated adoption rates of different pollution-mitigation practices reveal that the air quality regulation led to the adoption of labor-intensive production practices. Further, using farm-level cost data on a panel of dairy farms, I estimate the effects of the regulation on the costs of milk production. Estimation results indicate that the air quality regulation has not affected the total costs of milk production. The regulation reduced feed costs during some periods, perhaps because some pollution-mitigation practices can reduce feed fermentation. The regulation led to statistically significant increases in the costs of hired labor: for example, in 2011, the regulation increased hired labor costs by $0.19 per hundredweight of milk, which is equivalent to a 13% increase in hired labor costs for dairy farms facing the regulation.