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Cattle Waste Feeds New Profits for Dairy Farmer

Doug Young is betting $1.8 million that he can make money from the waste produced by his 1,800-dairy-cow farm near Union Springs, New York.

That’s the price tag for a “digester,” which converts cattle waste into fertilizer, enables the sale of carbon credits and yields energy he can sell back to the grid. Those products should bring in about $800,000 in annual profit opportunities through new revenue streams. The fertilizer alone will cut costs growing the more than 3,000 acres of corn, alfalfa and wheat he uses to feed his herd, the 56-year-old farmer said in an interview.

Young, with other dairy farmers, and the U.S. Department of Agriculture today will renew a pledge made in 2009 to promote environmentally friendly -- and money-making -- practices. “This is a key driver of our long-term sustainability” in the dairy industry, which could use steady energy revenue as insulation from the booms and busts of milk prices, he said. “Anything that can make me more efficient keeps my costs down and adds to my opportunities.”

The initial agreement was part of a pledge by the dairy industry to reduce its greenhouse gas emissions by one-quarter over the next decade. It came at a time when some on Capitol Hill still had hope for a nationwide environmental cap-and-trade system to reduce carbon pollution. It also came when natural gas, a main ingredient in fertilizers, was 15 percent more expensive than now, before the fracking boom gathered full steam.

Yet carbon-trading and a high price for gas gas were never motivators for his farm’s plans to adopt the technology, Young said. Mainly, he wanted to use cattle manure to save on fertilizer costs.

The financing took some time. The first digesters he looked at cost $4 million. As capital costs fall further, products from the digesters, currently a $120 million industry, should generate $3 billion in revenues and savings, according to a study by Informa Economics. That’s based on 2,600 larger dairy farms adopting the technology out of about 50,000 nationwide.

The USDA, which offers grants for projects, met its goal of funding one project a week last year. Regardless of the political climate, the initiative is a long-term one, said Agriculture Secretary Tom Vilsack in an interview.

“This is two years, four years, eight years,” he said. “Our job is to help farmers embrace it.”

Correction: The original story incorrectly reported the name of the dairy farmer. He is Doug Young, not Dean.

Analysis and commentary on The Grid blog are the views of the author and don't necessarily reflect the views of Bloomberg News.

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