CAFOs and Surface Water Quality: Evidence from the Proliferation of Large Farms in Wisconsin

The presence of Concentrated Animal Feeding Operations (CAFOs) – large farms with over 1000 animal units – in the United States has consistently increased over the past 30 years. CAFOs provide significant cost savings to operators, but higher concentrations of animals at farms increases the likelihood of external costs associated with farming operations, e.g., non-point source water pollution. In this study we are the first to identify a causal linkage between growth in large farming operations and surface water quality. We use panel data from 1995-2017 that link CAFO presence and intensity with nearby surface water quality readings for the state of Wisconsin. Leveraging variation in CAFO intensity within hydrological regions over time, we find that increasing CAFO intensity leads to significantly higher levels of total phosphorus in surface water readings. Specifically, we find that adding one CAFO to a Hydrologic Unit Code (HUC) 8 region leads to a 1.5% increase in total phosphorus levels relative to sample mean levels. This implies that the average total phosphorus reading in our sample is 10% higher than it would be in a counterfactual world without CAFOs. In a second empirical strategy, we use freeway access as an instrumental variable to address potential endogenous location decisions of CAFOs and find consistent results. These results quantify an important external cost of production that should be included in the decision-making processes of regulatory agencies and policymakers.