Impact of Texas Water Quality Laws on Dairy Income and Viability

¹ Department of Agricultural Economics, Texas A&M University, College Station 77843-2124
² Cooperative Extension Service, University of Kentucky, Mayfield 42066
³ Texas Agricultural Extension Service, Texas A&M University, Stephenville 76401

A dairy waste management spreadsheet was developed and applied along with partial budgets and whole firm, Monte Carlo simulations for Texas dairies to evaluate the impact that Texas water quality laws have on dairy profitability and survival. Results showed that representative 300- and 720-cow dairies will incur additional annual costs of $60 and $81 per cow, respectively. Compliance with water quality laws reduces net farm income by 27 and 63% for 720-cow dairies with low and high debt positions, respectively. The probability of survival of the dairies with low debt was not affected by compliance. The probability of survival of firms with high debt positions decreased by 47 percentage points. Under the conditions modeled, net farm income for representative 300-cow dairies would be negative after compliance with water quality laws.

Key Words: water quality • dairy income

Submitted on January 31, 1991
Accepted on June 1, 1992