Animal ID: Costs and Benefits.

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Animal ID Costs and Benefits.
Gary Brester and Vince Smith MSU Department of
Agricultural Economics and Economics FPCC May
21, 2009 Poplar, MT
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OUTLINE

• Animal ID Issues
• Animal ID Systems
• NAIS Project Objectives
• Research Strategy
• Findings
• Questions

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OUTLINE

• Animal ID Issues
• Animal ID Systems
• NAIS Project Objectives
• Research Strategy
• Findings
• Questions

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Animal ID Issues

• What are the benefits of a National Animal
  Identification System (NAIS)?
• What technology and data management system should
  be utilized?
• What are the costs of an NAIS?
• Does an AIS need to be a national AIS
• If the key benefit of an NAIS is improved access
  to export markets, what NAIS technologies and
  data management systems are acceptable to those
  markets?

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OUTLINE

• Animal ID Issues
• Animal ID Systems
• NAIS Project Objectives
• Research Strategy
• Findings
• Questions

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Animal ID Systems

• Premises Registration a first step that
  provides little information other than who is a
  producer.
• Bookend System identifies the animal (or, in
  the case of hogs, poultry and sheep, a group or
  lot of animals) at place of birth and place of
  slaughter. Estimated cost per cow for a ranch in
  the U.S. is 3.92. (Dairy cows are less
  expensive)
• Full Tracing System records places of birth and
  slaughter and also recording animal movements
  through their lifetime as they change ownership
  (and, in Europe, place). Estimated cost per cow
  in the U.S. is 4.22.

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OUTLINE

• Animal ID Issues
• Animal ID Systems
• NAIS Project Objectives
• Research Strategy
• Findings
• Questions

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NAIS Project Objectives

• . Comprehensive economic assessment of the
  benefits and costs of the National Animal
  Identification System (NAIS)
• . Determine benefits/costs of NAIS by species
• . Determine benefits/costs of NAIS by sector
  and scale
• . Determine societal benefits of NAIS among
  producers, intermediaries, consumers, and
  government

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OUTLINE

• Animal ID Issues
• Animal ID Systems
• NAIS Project Objectives
• Research Strategy
• Findings
• Questions

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NAIS Research Strategy

• . Determine benefits and costs of NAIS by
  adoption scenarios
• a. Premise registration
• b. Bookend identification
• ID at birth and record at animal termination
• c. Full traceability
• Animal/group movement
• . Varying adoption rates of each
• a. 30, 50, 70, 90

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NAIS Research Process

• 1. Literature review
• Synthesized more than 250 benefit/cost
  publications
• Industry stakeholder meetings
• More than 50 meetings
• Over 100 stakeholders
• Elicited a variety of information
• Anticipated costs
• Perceived benefits
• Challenges
• Opportunities

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NAIS Research Process

• d. Partial list of groups included in the
  stakeholder interviews
• National Cattlemens Beef Assoc.
• Livestock Marketing Assoc.
• U.S. Meat Export Federation
• Superior Lamb
• National Livestock Producers
• R-CALF U.S.A
• Pro Rodeo Cowboys Assoc.

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NAIS Research Process

• Direct cost estimation
• a. Developed methodologies to measure
  direct industry costs
• 4. Evaluate governmental costs and
  benefits
• Estimate the benefits that would have to occur
  to offset the direct costs
• Allocate benefits across
• Species
• Consumers
• Producers

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Schematic of Research Process

• Literature
• Expert opinions
• - Industry meetings
• - Private and public data
• - Statistical analyses

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Schematic of Research Process
Direct Cost Estimates

• Literature
• Expert opinions
• - Industry meetings
• - Private and public data
• - Statistical analyses

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Schematic of Research Process
Direct Cost Estimates

• Literature
• Expert opinions
• - Industry meetings
• - Private and public data
• - Statistical analyses

Economic Model
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Schematic of Research Process
Direct Cost Estimates

• Literature
• Expert opinions
• - Industry meetings
• - Private and public data
• - Statistical analyses

Economic Model
Net Benefit/Costs

• Producers
• Wholesale
• Retail
• Consumers

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Direct Cost Estimates

• 1. Estimate annual costs of NAIS
• a. Bovine (individual RFID tags)
• b. Porcine (group hogs tag culls)
• Poultry (group)
• Ovine (group lambs tag culls)
• Equine (individual microchip)
• 2. Estimate costs across
• Production sectors
• By size of operation
• By various adoption rates

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Direct Costs Cattle Sectors

• 1. Cattle sectors considered
• a. Breeding herd operations
• b. Backgrounding operations
• Finishing operations
• Auction markets
• Slaughtering operations
• 2. Estimate costs across
• Identification system
• By size of operation
• By various adoption rates

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Direct Costs Cattle Sectors

• 3. Cost categories
• Tagging-related costs
• Tags and applicators
• Labor/chute costs
• Shrink
• Injury (human and animal)
• Tag reading costs
• Capital investments
• Labor/chute
• Shrink/injury
• Premise registration
• Management time

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Direct Costs Cattle Sectors

• 4. Direct cost depreciation and interest
• a. Capital equipment with more than one
  year of useful life
• b. Annual interest costs for portion of year
  that costs are incurred
• c. Annual premise registration costs include
  initial cost and 3-year renewal costs
• d. Assumed interest rate of 7.75

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Direct Costs Cattle Sectors

• 5. Direct cost RFID components
• Five categories
• Electronic reader
• Data accumulator
• Software
• Data storage
• Other (labor, internet, etc.)
• b. Custom reading charges based on brand
  inspection fees
• c. Assumed that custom reading would be used
  if it were less expensive than owning equipment

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Costs/Productivity/Interactions

• 1. Use an economic model of the meat
  industry to allocate costs, changes in
  productivity, and interactions across sectors
• Four species
• Beef
• Pork
• Lamb
• Poultry
• b. Consider multiple sectors for each
  species
• c. Include import and export sectors

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Inclusion Of Benefits

• 1. Multiple benefits could occur
• Better animal health
• Export market access
• Facilitate MCOOL requirements
• Increase product branding
• Improve food safety assurance
• Faster response to disease issues
• Reduce costs of disease mitigation
• Improve cattle production efficiency
• Ownership verification

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Inclusion Of Benefits

• Difficult to quantify all of these
• a. The major issues seem to center on export
  markets and domestic demand
• So, we asked two questions
• a. How much improvement in export access
  would we need to completely offset these
  additional costs?
• b. How much improvement in domestic demand
  would we need to completely offset these costs?
• 4. We used our economic model of the meat
  industry to answer these questions

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OUTLINE

• Animal ID Issues
• Animal ID Systems
• NAIS Project Objectives
• Research Strategy
• Findings
• Questions

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Cattle/Beef Industry Drives The Results

• Cattle/Beef sector has the largest costs
• 2. The Cattle/Beef industry has the most to
  gain in terms of market access
• 3. Increased export/domestic demand raises
  beef/cattle prices
• Pork and poultry are beef substitutes
• Higher beef prices increases the demand for both
• Pork and poultry prices rise enough to offset
  their relatively small NAIS costs quickly

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Cattle/Beef Industry Costs

• Full Tracing/90 Adoption
• a. Cow/Calf 4.91/head
• b. Background 0.70/head
• c. Feedlot 0.51/head
• d. Auctions 0.23/head
• e. Packers 0.10/head
• 2. Total beef industry 6.46/head

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Export Market Access
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Domestic Demand
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Summary

• Comprehensive NAIS benefit/cost study
• Stakeholders
• Detail cost breakdowns
• Productivity impacts
• Governmental costs
• Benefits are difficult to quantify
• a. Estimate export/domestic demand increases
  that offset producer costs
• 3. If we re-acquire export markets to
  pre-2003 levels because of NAIS
• a. Producer economic well-being will be
  improved

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Summary

• 4. APHIS has released the NAIS study
• 500 page document
• b. APHIS produced media products
• 5. http//animalid.aphis.usda.gov/nais/
  naislibrary/factsheets.shtml
• An overview of the project
• Targeted Fact Sheets
• A dozen brochures
• d. Documents that are hot linked to the
  major report

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QUESTIONS?
Picture Courtesy of Clint Peck