Dairy Confined Animal Feeding Permits on Public Notice as a Leading Indicator of Milk Supply

Abstract

Trends toward larger dairy farms and stricter environmental regulations imply that an increasing percentage of United States milk cows will be located on farms regulated by Confined Animal Feeding Operation (CAFO) permits. The objective of this research is to test whether a change in the aggregate state dairy cow herd size can be predicted by a respective change in the number of cows permitted under the CAFO, i.e. if CAFO permits can serve as a leading indicator for dairy herd changes. A model of Texas is used to test if cows on CAFO permit public notice can help predict change in aggregate state dairy herd size. Some CAFO permit data, like facility capacity, are available through public notices that must be published to inform the community of facility changes. Individual permit data on changes in animal capacity for facilities were collected from public notices published from January 2005 to December 2018. Data from CAFO permits are transformed into six-month sums and run as a lagged variable against year-over-year change in United States Department of Agriculture (USDA) number of Texas milk cows. A variable for USDA Margin Protection Program estimation of milk margin above feed costs is used as a control variable. Results suggest that a six-month lagged and summed variable of the number of cows on CAFO permit public notice is statistically significant to the year-over-year change in milk cows in Texas. Economic significance and feasibility of industry implementation are less certain.