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.

2 comments:

  1. Hey, very nice site. I came across this on Google, and I am stoked that I did. I will definitely be coming back here more often. Wish I could add to the conversation and bring a bit more to the table, but am just taking in as much info as I can at the moment. Thanks for sharing.
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  2. Hey, very nice site. I came across this on Google, and I am stoked that I did. I will definitely be coming back here more often. Wish I could add to the conversation and bring a bit more to the table, but am just taking in as much info as I can at the moment. Thanks for sharing.
    Karma KM 2500 Wheelchair

    Keep Posting:)

    ReplyDelete