J APPL POULT RES 2006. 15:502-510
© 2006 Poultry Science Association
The Economic Power of Poultry in the Ozarks
N. P. Kemper*,
J. S. Popp*,1,
H. L. Goodwin, Jr.*,
,
W. P. Miller
and
G. A. Doeksen
* Department of Agricultural Economics and Agribusiness and
Department of Poultry Science and The Center of Excellence for Poultry Science, University of Arkansas, Fayetteville 72701;
Cooperative Extension Service, University of Arkansas, Little Rock 72203; and
Department of Agricultural Economics, Oklahoma State University, Stillwater 74078
Correspondence: 1 Corresponding author: jhpopp{at}uark.edu
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SUMMARY
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The poultry industry is an essential part of the regions economy in western Arkansas and eastern Oklahoma. With poultry production has come large amounts of poultry litter to the region. Some suggest excess nutrients from poultry litter have negatively affected water, lowering its usefulness for recreational purposes. This conflict has put the poultry industry at the heart of environmental litigation in the region. The purpose of this paper was to examine, first, the economic contributions of the poultry industry in the region and, second, the potential economic costs associated with meeting water quality standards by reducing the amount of poultry litter produced. Results show that the poultry industry as a whole supports over 34,000 jobs in the northern economic region of the study area and nearly 15,500 jobs in the central region. Results also indicate that the economic activity in the northern region could decrease by around 2% and by over 3% in the central region due to regulations on the use of poultry litter. These results are useful for those interested in the economic contribution of the poultry industry to the region, including poultry integrators and producers as well as to policymakers looking to balance environmental quality and economic development.
Key Words: input-output analysis poultry industry economic impact policy analysis
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DESCRIPTION OF PROBLEM
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The poultry industry has played a primary role in growing the regions economy, which, in turn, has contributed to tremendous population growth. Northwest Arkansas had a population growth of 48% from 1990 to 2000; it grew an additional 22% over the last 5 yr [1]. This higher growth has placed greater demands for more and high quality water, which is used for human consumption and recreational purposes. Municipalities have made great strides in treating their waste water [2]; for instance, measured P in the Illinois River has fallen 39.3% since 1999 [3]. However, there are many sources of the nutrients found in water other than municipal wastewater discharge, including runoff from concentrated poultry production and processing [4]. Recently, the focus has turned to the highly visible poultry industry for its potential contribution to water quality degradation [5, 6]. When making policy decisions, it is important to consider both the costs and benefits. The poultry industry has helped to create many of the jobs that attract new people to the area [7]; therefore, the historical contributions of the poultry industry to the regional economy must be taken into account.
The US poultry industry is a success story in American agriculture. The industry got its start in the 1920s after World War I and rapidly grew during World War II to fill the void left by meat rationing. By the mid-1950s, the poultry industry had moved to a mass market for home meals. One measure of the poultry industry is its economic contributions over time. For example, from 1924 to 1963, the cash receipts (in 2004 dollars) of the US poultry production sector rose by 106% [8]. Then, from 1964 to 2004, the cash receipts of the US poultry production sector increased by another 43%. Additionally, the poultry sector became a larger contributor to the livestock sector, making up 17% of the US livestock cash receipts in 1964 to 24% in 2004. One region that has experienced tremendous growth of the poultry industry is Arkansas and Oklahoma. In 1924, the cash receipts of Arkansas poultry production were 90.93 million dollars (2004 dollars), but by 1964 had increased to 1,290.32 million dollars [8]. In Oklahoma during that same period, the cash receipts actually decreased from 234.78 to 147.90 million dollars. Growth in both Arkansas and Oklahoma soared over the next 4 decades, and by 2004, the cash receipts for poultry growers increased to 3,339.65 million dollars in Arkansas and 633.95 million dollars in Oklahoma.
During this time of poultry industry integration, the number of birds produced under contracts greatly increased, as did the concentration of production and processing in the northwest Arkansas and northeast Oklahoma area. Because the quantity of litter is increasing and most is applied on pasture and crop land in the area, increasing volumes of P-rich poultry litter are applied on a limited land area [9, 10]. In 2002, there was approximately 1.07 million tons of poultry litter produced in the study area, with 5.02 million acres of crop and pasture land available for application of the litter [11]. However, much of the litter production in the study area was concentrated in watersheds, where water quality concerns are significant and available land for application is insufficient; for instance, the poultry litter produced in the Eucha-Spavinaw watershed in Benton county in Arkansas and Delaware and Mayes counties in Oklahoma totals 257,000 tons, with 789,000 acres of crop and pasture land in the counties [11]. Because increased inputs of P in agricultural runoff can accelerate freshwater eutrophication [12], some believe that the increased concentration of poultry litter on pasture land has led to runoff of P into surface waters that has degraded water [4, 13] to the point that it is no longer fit for recreational purposes or for human consumption.
Legal counsel for stakeholders with differing interests debate over the cause, source, and potential damages (economic, environmental, and others) associated with degraded water quality. Excess P found in poultry litter has been identified as being a contributor to water quality degradation, and, as a result, the poultry industry has been scrutinized for its litter management practices [14, 15]. Historically, poultry feed management has been based on the nutrient requirements of the different types of birds, but not all of the nutrients in feed are absorbed by the birds; thus, the excess nutrients, including P and N, are found in poultry litter [16]. Because P was considered to be virtually immobile in runoff, nutrient management plans for the application of litter were based on N, which led to the repeated application of poultry litter and the accumulation of P in the soil [10]. As a result, there is now too much poultry litter to spread on the pasture and crop lands without adding more P to the streams in the region. Scientists are currently searching for technically and economically efficient ways to remove this litter from the region. In the meantime, the only proven way to dramatically reduce litter applied to farm land in the region is to reduce poultry production [17, 18, 19]. This loss of activity, even if only for a short time, could greatly impact the regional economy, because the poultry industry is an important economic engine of the entire region.
The objective of this paper was to examine the economic contribution of the poultry industry in the study area and the potential economic losses that could occur if poultry production declined due to legal entanglements and impaired water quality. The specific objectives of this study were as follows: 1) to assess the economic impacts of the poultry industry in a 22-county poultry production region in Arkansas and Oklahoma, and 2) to examine the economic impacts of potential changes in poultry production in the region resulting from proposed P limits for surface waters. When used properly, economic impact analysis can be a very powerful tool in examining the economic effects of various stimuli on an economic system.
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MATERIALS AND METHODS
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Economic impact analysis is a tool often used to assess the contribution of an industry to an economy as well as the potential benefits and costs of a change in that economic activity. Within an economy, one sector impacts other businesses and sectors in different ways [20, 21]. Input-output analysis uses the historical relationships among sectors and characterizes the economic impact of an industry or event in dollar terms. The economic impacts of expansion or contraction in these sectors can be analyzed within the framework of input-output analysis by evaluating specific sectors affected by policies aimed at increasing water quality. Economic impacts are measured here in 3 ways: 1) direct impacts, associated with the jobs, wages, and value added attributable to poultry production and processing sectors; 2) indirect impacts, which occur when the poultry sectors purchase goods and services from local businesses; and 3) induced impacts, which are measured by increases in economic activity to satisfy the personal consumption by employees of the poultry industry and businesses that supply goods and services to the poultry industry. The sum of these 3 impacts represents total economic impacts. The analysis of this study, which used the software Impact Analysis for Planning (IMPLAN), was accomplished in 2 parts: 1) examining the total economic impacts of the poultry industry, and 2) estimating the total economic impacts of 2 hypothetical reductions in the poultry industry associated with regulations on the use of poultry litter. Only jobs (in full-time equivalents) and labor income (employees compensation and proprietors income) are reported in the text; however, valued added is discussed in the notes, and results are shown in Tables 2
and 4
.
The study area included 22 counties: 10 in Arkansas and 12 in Oklahoma and was divided into 2 regions. The "northern" region was made up of 5 counties in Arkansas (Benton, Carroll, Boone, Washington, and Madison) and 9 in Oklahoma (Ottawa, Craig, Nowata, Rogers, Mayes, Delaware, Tulsa, Adair, and Cherokee). The "central" region was composed of 5 counties in Arkansas (Crawford, Franklin, Sebastian, Scott, and Logan) and 3 in Oklahoma (Sequoyah, Haskell, and Le Flore). The northern and central region divisions were made based primarily upon regional trade patterns that exist among the counties in each economic region [22, 23]. Additionally, the study regions also contain areas of surface waters in high demand for multiple purposesagricultural, industrial, municipal, and recreational; consequently, water quality disputes exist in these areas.
The economic impacts of the poultry industry in this study were estimated in 2 steps. First, data were gathered from 4 sources: 1) the Minnesota IMPLAN Group [24, 25], 2) the 2002 US Census of Agriculture [26], 3) the National Agricultural Statistics Service [27, 28, 29, 30], and the Economic Research Service (ERS) [31]. Economic contributions of the poultry industry were then estimated by IMPLAN using the previously mentioned data.
Once the poultry industry impacts were estimated, the study estimated the impacts of reducing poultry production in the area. This analysis was conducted in 3 steps. First, following the methods of 2 previous studies [17, 32], the reduction to total poultry production output resulting from 2 debated P limits of 0.10 and 0.037 mg/L was estimated (Table 1
). These limits refer to the amount of dissolved P contained in the surface water at sampling; higher limits necessarily infer more litter would be allowed in land application. Second, the reductions to poultry processing output resulting from a decrease in poultry production were calculated. Third, these reductions in output in the 2 poultry sectors were entered into IMPLAN to estimate the impacts of these reductions to the regions economy.
We begin with the P limit discussion. The 0.10 mg/L limit is generally recommended for prevention of nuisance aquatic growth in streams [33] and is currently used in the area primarily as a standard for municipal waste discharges. No such limit has been imposed on other types of existing or potential P contributors. The 0.037 mg/L standard was approved in 2002 by the Oklahoma Water Resources Board and in 2003 by the US Environmental Protection AgencyRegion VI; Arkansas and Oklahoma municipalities, industries, and agricultural producers have 10 yr to ensure that P movement into water bodies that begin or enter into Oklahoma do not exceed this limit. The standard was based on results of the Clark Study [34]. The Clark Study used national stream water quality data to evaluate concentrations and yields of selected nutrients (including total P) in streams draining relatively undeveloped basins across the nation, and no single defined regions concentrations and yields were described. The Clark Study states in the introduction: "Attempting to meet criteria in parts of the nation where they may not be attainable is technically and economically unrealistic" [35, 36]. Thus, for some stakeholders, this new limit remains controversial, because it was based on data that are not representative of the characteristics of the region. It is important to note that a key assumption of this analysis is that a reduction in poultry production, even if only temporary, is the only feasible way to reduce P and meet the aforementioned P limits. To date, no economically feasible approaches to addressing the problem of excess litter have been identified for this particular region, primarily because there is no market for the litter. Crop-producing areas, potential heavy users of raw poultry litter as fertilizer, have other sources of litter (the eastern Arkansas River Valley and central Arkansas) located closer than those in the nutrient-challenged watersheds in the study area [23]. The higher transportation costs associated with the litter from the study area make it unrealistic to export litter to these markets. Successful programs for transporting raw litter have been operated in other areas where excess litter is in closer proximity to final markets [18, 19]. The presence of large state and private subsidies, renewable energy mandates, and deregulated power rates have precipitated successful energy solutions in the Delmarva region and Minnesota [37, 38, 39]. These options are not available for Arkansas at this time. Attempts to use the litter on-farm or in other small-scale applications as a source for generating electricity or for heating chicken houses and for composting have not been commercially successful. The success of a recent business effort to utilize alternative litter management approaches is still unknown [40]. Possibly the most promising option is a regional litter bank that would collect the poultry litter and distribute it in an efficient manner to producers outside the production region in baled form or directly to regional steam or electrical generation facilities within the poultry production area. However, until an option that provides some economic value for the litter and that is politically feasible becomes evident, the only way to reduce the litter is to cut poultry production. Production cuts may be only short term, but even short-term cuts can result in large, long-term economic and structural impacts.
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RESULTS AND DISCUSSION
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Poultry Industry Impacts
Results of the impact analysis indicate that the poultry industry is responsible for the creation of 34,180 jobs (full time equivalent jobs) and 964.13 million dollars in labor income (employee wages and proprietors income) in the northern region (Table 2
). This is the total impact, which includes the direct, indirect, and induced effects of the poultry industry (see the Materials and Methods section for more information on what is included in direct, indirect, and induced effects). These impacts represent 4.25% of all jobs and 3.40% of all labor income in the northern region. In the central region, the poultry industry is responsible for the creation of 15,424 jobs and 387.26 million dollars in labor income; that is 8.95% of all jobs and 8.23% of all labor income in the central region (Table 2
).
The portion of the economic activity attributable to the poultry industry may appear small; however, when compared with other large industries in the region, it becomes apparent that the poultry industry is an important piece of the economy. The poultry industry ranks 14th and 8th in terms of employment in the northern and central regions, respectively. The nearly 20,500 jobs in the poultry industry alone in the northern region represent 2.54% of the regions jobs. In the central region, jobs in the poultry industry alone total 9,668, which represent 5.61% of the regions employment.
The poultry industry has a greater total impact on the economy of the northern region than on the central region in terms of the number of jobs and dollar values of income generated. However, the poultry industry makes up a larger portion of the economic activity in the central region. The poultry industry generated about 4% of jobs in the northern region, whereas it generated 9% of the jobs in the central region. Results indicate that the poultry industry is important to the economy of both regions.
The largest beneficiaries of the poultry industry are the wholesale and retail trade sectors, in which 2,761 jobs are attributable to the poultry industry in the northern region and 1,034 jobs in the central region through indirect and induced impacts (Table 3
). The poultry industry also generates many service-sector jobs. The health and social services sector gains 1,329 jobs in the northern region and 603 in the central region as a result of the poultry production and processing activities. In total, the service sector gains 6,681 jobs in the northern region and 2,886 jobs in the central region (Table 3
) due to the presence of the poultry industry. Other top industries realizing impacts of the poultry industry include the following: transportation and warehousing, finance and insurance, real estate and rental, and manufacturing. These results are comparable to those from a similar study by Vukina et al. in 1995 [41] that examined the economic impact of the poultry industry in North Carolina. Their results also indicated that the trade and service sectors experienced the largest impacts from the poultry industry [42]. However, their results showed a different allocation of the poultry industrys impacts. Vukina et al. [41] showed that 18% of the total impacts from the poultry industry were in the trade sectors and 10% in the service sectors. This study found that only 8% of the total impacts were in the trade sector in the northern region and 7% in the central region. The impacts in the service sectors (when summed) represented 20% of the total impacts in the northern region and 19% in the central region. The results of Vukina et al. [41] additionally showed that the direct impacts in the poultry industry represented almost 50% of the total employment impacts of the industry. Our study results show that the poultry industry direct impacts represent almost 60% of the total impacts generated by activity in the poultry sectors.
Reduction Scenario Impacts
Scenario I.
Scenario I examines the impacts of reducing poultry production by 13% to meet the P limit of 0.10 mg/L, which is the limit used primarily as a guide for wastewater treatment facilities in the region. Again, the P limit measures the amount of P present in the water at the time of the sample. When the poultry industry is taken into account as a nutrient contributor, poultry production levels would need to decrease to reduce litter applied to crop and pasture land, which would reduce P runoff to comply with the P limit in streams. Under scenario I in the northern region, 3,793 jobs and 106.43 million dollars in income were lost (Table 4
). Overall, the percentage impact on the economy appeared to be very smallwith losses representing less than 1% of all jobs (0.47%) and income (0.38%). Given the relatively low unemployment rate in the northern region (4.5%, 2004 average), such a loss in jobs would cause the rate to increase to 5.1%, representing an increase of over 11% in regional unemployment [43, 44]. The poultry industry (both production and processing sectors) experienced the greatest decreases as the 13% reduction in poultry production led to a total industry loss of 11.05% (2,259) of jobs and 10.96% (56.21 million dollars) in wages.
In the central region under scenario I, poultry production was reduced by 13%. This resulted in the loss of 1,312 jobs and 31.66 million dollars in income (Table 4
). Again, the percentage impact on the economy appeared smallless than 1% of all jobs (0.76%) and income (0.67%). The unemployment rate in the central region stands at 5.2%, but when these impacts are accounted for, they represent an increase of over 14% in unemployment [43]. The percentage losses to the entire poultry industry were much larger, because the poultry production reductions led to 8.47% (819) fewer jobs and 7.97% (17.82 million dollars) less income in the industry.
Scenario II.
The P limit 0.037 mg/L was examined in scenario II. In this case, poultry production was reduced by 58% in the northern region to reach the desired P limits. This reduction resulted in a loss of 19,241 jobs and 542.85 million dollars in income to the regional economy (Table 4
). The percentage that these total losses represented in the economy was around 2% of all jobs (2.39%) and income (1.91%). These losses would represent an increase in the regional unemployment rate of nearly 40%, pushing it from 4.5% to 7.5% [43]. The job and income losses would be concentrated in the poultry industry, in which 56.30% (11,512) of jobs and 56.32% (288.75 million dollars) in wages would be lost.
Poultry production was decreased by 47% in the central region under this scenario, which resulted in losses of 5,973 jobs and 148.84 million dollars in income to the regional economy (Table 4
). The percentage impact on the overall economy was < 4% of all jobs (3.47%) and income (3.16%). The job losses would represent an increase of over 40% in the unemployment in the central region, pushing the unemployment rate to 9.1% [43]. The poultry industry itself experienced great losses, because 38.69% (3,741) of jobs and 38.25% (85.55 million dollars) in income in the industry were estimated lost.
Reduction scenario II was shown to have a greater total impact in the northern region, in which over 19,000 jobs were estimated lost compared with almost 6,000 in the central region. However, the total impacts of scenario II, as a portion of the regions economic base, were greater in the central region than in the northern region. The direct impact on the northern region was greater on the poultry industry itself, where 11,512 jobs, representing 56% of all poultry industry jobs, were estimated to be lost.
The results of this study showed that the poultry industry generates jobs and income in many sectors throughout the economy, not just in the poultry sectors. This study also demonstrated that contractions in the poultry industry brought on by litigation, legislation, or regulation could have far-reaching negative effects on the regional economy that would not be limited to the poultry industry.
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CONCLUSIONS AND APPLICATIONS
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- The economic impacts of the poultry industry are shown to be much more that just the direct impacts of the poultry production and processing sectors. Through total impacts, the poultry industry generates 34,180 jobs, 964.13 million dollars in income and 1,405.46 million dollars in value added in the northern region, and 15,424 jobs, 387.26 million dollars in income, and 545.93 million dollars in value added in the central region.
- The results indicate that policy aimed at the poultry industry could severely impact the poultry sectors as well as many other sectors of the economy. Under the proposed P limit of 0.037 mg/L, this study estimated total losses of 19,241 jobs in the northern region and 5,973 jobs in the central region. These losses would represent an increase in the regional unemployment rate of around 40% in both regions. Poultry industry jobs lost would be 56% in the northern region and 39% in the central region.
- The poultry industry has played an important role in the economic development of the region. The economic landscape of the region has blossomed, in part because of the poultry industry, and this studys results demonstrate how decreasing activity in the industry could cause this landscape to wither.
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REFERENCES AND NOTES
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- One result of the study was that the median flow-weighted concentration of total P in the relatively undeveloped basins were 0.022 mg/L, about 5 times less than the concentration threshold, 0.10 mg/L. This was a key piece of information used by the Oklahoma Water Resources Board in constructing the 0.037 mg/L limit. However, the Clark Study also concluded that 70% of 97 basins in areas dominated by agricultural and urban residential land had a flow-weighted concentration of total P exceeding 0.10 mg/L, using data from the US Geological Survey, Denver, CO.
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- Although the comparison between these 2 studies is desirable, there are difficulties in making such a comparison due to changes in industry definitions made from 1995 to 2001. The IMPLAN sectors used to be based on Standard Industrialized Classification definitions, but as of the 2001, data sets are based on North American Industry Classification System. The 2 definitions are not perfectly bridged, and direct comparisons are not desirable. For a full discussion on both the Standard Industrialized Classification and North American Industry Classification System and difficulties in comparison, visit http://www.bea.gov. Additionally, industry impacts are influenced by many factors such as geographic size and isolation, economic structure of the region, and socioeconomic attributes.
- United States Department of Labor, Bureau of Labor Statistics (BLS). 2005. Labor force data by county, 2004 annual averages. ftp://ftp.bls.gov/pub/special.requests/la/laucnty04.txt Accessed Jan. 2006.
- The change in unemployment rate was calculated as an immediate, short-term change in unemployment, assuming that the employees losing their jobs would be considered unemployed. In reality, workers would likely have the skills to obtain jobs currently open in the area and have the ability to move to other areas to seek employment. This shock to the unemployment rate is for purpose of illustration, not a forecast of the impact on long-term unemployment in the region.