Tuesday, April 28, 2015

The economics of Veterinaty Herd Health and Management Programs

I have written about Veterinary Herd Health and Management (VHHM) more often, many times based upon results of the research of Marjolein Derks. Recently, the last two papers of her PhD thesis have been published so time for another episode about interesting topic.

The first paper was written by Isioma Ifende as part of her MSc education in Veterinary Epidemiology and Economics (a specialisation of the Epidemiology MSc of Utrecht University). The paper was published in Veterinary Record and comprised a normative study on the economics of VHHM. For each of the farms on which we pubsliehd earlier, Isioma estimated the costs for Veterinary Herd Health Management, based on the questionnaire results, farm seize and norms for the time involved and price of the veterinarian. Moreover, the effects of VHHM were similarly calculated using normative modelling based on MPR data. Participants in VHHM had a better performance with regard to production, but not with regard to reproduction and culling. The benefits (net returns) and costs (net costs) of these differences were estimated normatively as well. There was, on average, a benefit to cost ratio of about five per cow per year for VHHM participants, and a mean difference in net returns of €30 per cow per year after adjusting for the cost of the programme. So, assuming everything else on the farms is the same.

In the second paper, published in Preventive Veterinary Medicine, the overall economics based on available accountancy data of farms with and without VHHM could be calculated, thanks to a collaboration with Alfa Accountants and Advisors. In total. 572 farmers of Alfa Accountants received a questionnaire on VHHM and these questionnaire data were combined with accountancy data. The data were analyzed using Stochastic Frontier Analysis (SFA). Models were run with as output the total revenues of the farm and as input the feed costs, land costs, cattle costs and non-operational costs. As explanatory variables number of FTE, total kg milk delivered (farm seize), price of concentrates, milk per hectare, cows per FTE and nutritional yield per hectare were inserted in the efficiency component. The frequency distributions of the efficiency scores for the VHHM dairies and the non-VHHM dairies were plotted in a kernel density plot.

Although dairy farms with VHHM had higher total revenues per cow, there was no difference in efficiency between farms with VHHM and farms without VHHM. So, overall, VHHM is not related to farm efficiency. And now we have an interesting observation. We do see better performance (more milk per cow, lower somatic cell counts) of farms in VHHM. We calculated a net advantage of € 30 per cow per year because of that. However, in a total farm economic efficiency, this cannot be found back.

There are a couple of explanations: one explanation is that farms that are in VHHM might have other additional costs as well (for instance we did correct for the additional feed necessary to produce more milk, but maybe the farmers in VHHM buy also more expensive feed). This brings noise to the real farm data analysis. We would need more data to correct for such factors and find the real effect of VHHM. Another reason might be that the difference due to VHHM is relatively small compared to the overall turnover of a farm. A difference of €30 per cow per year, makes up for € 3,000 for a 100 cow farm. That amount is approximately 1% of the total turnover of a 100 cow farm. Also in this case, we need more data to find significant differences.

The question we have to ask ourselves is a marginal question: what would happen if a farm does start VHHM (or end VHHM) with the farm technical results and consequently the economic results. With our associative studies, we can give a clue about that but not a definitive answer. I still believe that VHHM can be very beneficial for a large number of our dairy farms. And the good thing is, there is not one study out that it costs money. Farmers can meet expectations of their customers (consumers) to have high quality milk, produced by health cows, without any additional costs and even some benefit.

Thursday, April 9, 2015

Animal welfare, society's opinion and economics

It has been too long that I posted something on this blog. Ideas enough, but the time is lacking a bit (scarse resources). But this time a little different topic. It is about the pig sector.
At the end of december Tamara Bergstra defended her thesis on “welfare nd economics. The origin of this thesis lies in a discussion some 5 years ago on piglet mortality. It became general knowledge that piglet mortality in the Dutch pig farms was a little more than 12%. Questions were asked I n parliament about this and a program was initiated to improve the piglet mortality on Dutch pig farms. With better breeding and management it was expected that piglet mortality could be improved. At the same time, however, there were doubts whether these meausurements would improve the image of the Dutch pig sector with the general public.These doubts were fed by a fact that was (and probably still is) quite peculiar. At the time of the discussions, piglet mortality on organic sow farms was approximately 20%. But the public did nott worry about the organic pig farms. There is some kind of understanding: There is soething more than only the absolute figure of piglet mortality. We (prof. Elsbeth Stassen and myself) think it has to do with “trust”. Trust that farmers do their best to take good care about their animals. Our working hypothesis was that the general public does trust the organic farmers taking good care of their animals while there is a distrust towards conventional pig farmers:”they just want to produce as cheap as possible”.
The aim of the project was: 1. To find out the view of citizens towards the pig sector and to compare the view of citizens with the view of (organic) farmers and others involved in pig farming. Moreover, we wanted to make this work deeper than “just a questionnaire about viewpoints”. We wanted to work from a decent framework and link the viewpoints of the respondents with their “basic values”. This is typically the expertise of Elsbeth and I had the pleasure to discuss along and learn a lot about ethics and values.

2. To make a cost-utility analysis. What are the most efficient measures to improve the image of pig farming for the general public and how does this cost-utility link when comparing it to improved animal welfare. We hypothesized that the improvement of animal welfare is not linearly related to the improvement of image.
This was a totally novel approach. There is quite some effort to improve animal welfare, especially in north-western European countries and there is a very limited number of papers on the economics of welfare improvement (yet another field that is unexplored) but nobody looked at the image of production. And especially in the Netherlands, where the political power of farmers is very limited, there is such a thing as the “license to produce”. The society kind of has to grant the farmers the right to produce and farmers seem to have to earn this right more and more. So animal production is not only about producing something that your customers want to pay for (the economic licesense to produce) but also have to work on their public relations: citizens might vote against you. Some do by not buying your products, but more do by supporting animal right ngo’s or voting for a party that wants to regulate animal welfare more strictly or wants to decrease the amount of animal production.

Interestingly, NRC, one of the leading Dutch newspapers, showed interest in the work of Tamara. In a double interview (Eva Gocsik defended her PhD thesis on the economics of animal welfare in the same week) NRC published a nice article about the work of these two young researchers. It is a pity that the editors have a bad choice in pictures.
Scientific publishing of the work of Tamara seems to be difficult. In my opinion, Tamara did great research, but it is all interdisciplinary and some papers did not even get the chance in journals. The first paper is recently published and others are the process of revision. We will make sure that papers will be published and will share the results with you.