Farm Level Economics of Johnes Disease Control

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Farm Level Economics of Johnes Disease Control

• Geoff Benson, Ph.D
• Dept. of Agricultural Resource Economics
• N C State University
• St. Louis, MO. Oct. 18, 2002

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Overview

• Economic Incentives
• Beef Dairy
• Industry Structure Disease management
• Farm Level Economics
• Implications

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Economic Incentives

• When there are no public health policies in
  effect, farmers must look at costs benefits to
  them
  
• Regulation, or compensation, changes the
  incentives
  
• Industry concerns need industry wide programs for
  reasons of effectiveness and fairness

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Focus on Farm Profit
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JD Control

• Benefits to farmer
• Reduction in number of cows affected losses
  caused by the disease
  
• Collateral benefits from other, non-JD, diseases
  because of changes implemented

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Beef

• 900,000 farms have beef cattle, of which 800,000
  have cows
  
• 33 mil. beef cows
• 625,000 of farms with cows have less than 50
• 175,000 have 50 cows

Source USDA, NASS, Cattle, 2/01/02
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Beef Farm JD Costs

• The productive life of a cow in the herd is
  reduced
  
• Reduced cow cull value
• Calf weaning rate may be reduced
• Breeding stock sales are lost

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JD Control in Beef Herds

• Cow-calf producers buy bulls on a regular basis
• Handling facilities may be poor
• Practical management or control plans are
  difficult in pasture based systems

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JD Control in Beef Herds

• Many small herds are run by part-time farmers or
  as a sideline
  
• Commercial sized cow-calf herds are low profit
• Seed stock producers have the most to lose or gain

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Breeding Stock Producers

• Clean breeding stock may sell at a premium
• But, US market is not well developed yet --Timing
  issue
  
• Testing a herd of unknown JD status may show
  infection loss of sales
  
• Applies to beef dairy

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Dairy

• 97,000 farms, 9.2 mil. cows, specialized
• Mostly commercial, rely on milk sales, some
  breeding stock purchases
  
• Some registered herds sell breeding stock
• Facilities vary but control is feasible on most
  farms

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Dairy Farm JD Losses

• Lost milk income
• Increased herd turnover culling death losses
• Reduced value of cull cow
• Reduced breeding stock sales
• Indirect opportunity costs

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Farm Level Losses - NAHMS
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Farm Level Impacts - NAHMS

• Herd impact depended mostly on percentage of
  cows that were culled, possibly with clinical
  symptoms
  
• Sub-clinical losses per cow were much smaller

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Farm Level Impacts

• Wide variation in economic loss - NAHMS reports
  estimates of
  
• 389 to 959 per clinical cow
• 123 to 696 per non-clinical cow
• Management decisions affect the size of these
  losses somewhat
  

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Losses - Infected Herd

• Economic losses will grow if the disease is left
  untreated and spreads in a herd
  
• For JD positive herds the higher the current
  level of infection the more the farmer can afford
  to spend to control it

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Losses in Negative Herd

• Infectious status is unknown
• If infected, losses will increase as the disease
  progresses
  
• If clean, there are potential losses if disease
  is introduced
  
• If clean and would stay clean then control
  measures yield no return

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Losses Negative Herds
Are we here?
Or are we here?
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Time Value of Money -- PV
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Control Strategies - Neg. Herds

• Expected Profit
• (Probability herd is infected Future JD Losses
  Prevented)
  
• (Probability herd is free but will become
  infected Losses Prev.)
  
• (Probability herd is free would not become
  infected 0)
  
• - Control Program Costs

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Designing Control Strategies

• Herds that appear to be JD negative cannot
  justify spending much money up front unless they
  are high risk
  
• Have a veterinarian perform a broad based
  assessment of health status, bio-security risk
  of JD
  
• Test higher risk herds

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JD Control Strategies

• Types of control measures
• Improved hygiene/manure management
• Separate calves at birth
• Feed clean colostrum
• Feed milk replacer not pooled discarded milk

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JD Control Strategies

• Control measures, continued
• Change heifer raising practices, possibly raise
  heifers on contract
  
• Buy animals from clean sources
• Improve biosecurity program
• Test
• Cull

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JD Control Strategies

• Groenendaal Galligan -- Impact of alternative
  control strategies in an infected herd
  
• Good management stabilized the number of cows
  infected
  
• Good management plus testing culling reduced
  the number of infected cows

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JD Control Costs Benefits

• Too many farm specific variables to generalize
• Ideally we need an economic assessment for each
  farm to identify likely benefits and costs
  associated with the control plan developed for
  that farm

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JD Control Program Costs

• Types of Costs
• Vet. services, testing
• Control measures
• Out-of-pocket costs
• Additional investment costs
• Opportunity cost of a managers time -- priorities

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Designing a Profitable Plan

• Status -- Positive or negative
• If positive
• Severity of infection
• Feasible control strategies
• Cost of control measures
• Length of planning horizon
• Interest/Discount rate

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Designing a Profitable Plan

• Status -- Positive or negative
• If negative
• Risk level
• Feasible control strategies
• Cost of control measures
• Length of planning horizon
• Interest/Discount rate
• Priority relationship to other problems

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Present Value Simulation

• For a JD negative herd, PV range was 54,254 to
  -33,448 per 100 cows depending on infection
  risk, planning horizon, discount rate, costs, and
  assumed size and timing of potential economic
  losses from JD
• Spreadsheet is available at
• http//www.ag-econ.ncsu.edu/faculty/benson/PubsBen
  son.htm

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Designing a Profitable Plan

• Consider a farms financial status and
  performance
  
• Varies widely from farm to farm
• May affect the control strategy adopted,
  particularly if new investment is proposed

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US Dairy Farms Cows, 1993-2001
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294 New York Dairy Farms, 2000

• Range of performance status
• NFI/Cow -436 to 939
• RROA -8 to 15
• Percent Equity 21 to 96
• Debt Coverage Ratio -1.59 to 6.60
• Items are ranked independently
• Source Cornell University

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Conclusions Implications

• Practical JD control strategies are lacking for
  cow-calf producers
  
• Main economic incentives for a JD control program
  relate to seed stock farms

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Conclusions Implications

• Dairy farm losses are large for infected herds
  but cost of alternative control strategies and
  other factors must be considered
  
• Potential losses are large for JD Negative herds
  but risk, cost and the timing of potential
  benefits are important issues
  

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Conclusions Implications

• JD should not be considered in isolation
• Evaluate herd health status, bio-security and JD
  risk
  
• Develop a farm specific herd health program and
  evaluate the costs and benefits -- If Plan A
  isnt profitable, develop another plan

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Geoff Benson

• Phone [phone]
• Fax [phone]
• E-mail Geoff_Benson_at_ncsu.edu
• Web page
• http//www.ag-econ.ncsu.edu/ faculty/benson/bens
  on.html

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Remember the Economics