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
1. Animal ID Issues
2. Animal ID Systems
3. NAIS Project Objectives
4. Research Strategy
5. Findings
6. Questions
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OUTLINE
1. Animal ID Issues
2. Animal ID Systems
3. NAIS Project Objectives
4. Research Strategy
5. Findings
6. Questions
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Animal ID Issues
1. What are the benefits of a National Animal
Identification System (NAIS)?
2. What technology and data management
system should be utilized?
3. What are the costs of an NAIS?
4. Does an AIS need to be a national AIS
5. If the key benefit of an NAIS is improved
access to export markets, what NAIS
technologies and data management systems
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are acceptable to those markets?
OUTLINE
1. Animal ID Issues
2. Animal ID Systems
3. NAIS Project Objectives
4. Research Strategy
5. Findings
6. Questions
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Animal ID Systems
1. Premises Registration: a first step that provides
little information other than who is a producer.
2. 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)
3. 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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ID System (estimated cost
per animal)
Animal\Stage of production
Bookend
Full Tracing
Dairy Cow (on the farm)
$2.47
$3.43
Beef Cow (on the ranch)
$3.92
$4.22
Backgrounding
$0.23
$0.71
Feedlot
$0.20
$0.51
Auction Markets
$0.00
$0.23
Beef Packers
$0.10
$0.10
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OUTLINE
1. Animal ID Issues
2. Animal ID Systems
3. NAIS Project Objectives
4. Research Strategy
5. Findings
6. Questions
8
NAIS Project Objectives
1.
Comprehensive economic
assessment of the benefits and costs
of the National Animal Identification
System (NAIS)
2.
Determine benefits/costs of NAIS
by species
3.
Determine benefits/costs of NAIS by
sector and scale
4.
Determine societal benefits of NAIS
among producers, intermediaries,
consumers, and government
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OUTLINE
1. Animal ID Issues
2. Animal ID Systems
3. NAIS Project Objectives
4. Research Strategy
5. Findings
6. Questions
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NAIS Research Strategy
1.
Determine benefits and costs of NAIS
by adoption scenarios
a.
Premise registration
b.
“Bookend” identification

c.
Full traceability

2.
ID at birth and record at
animal termination
Animal/group movement
Varying adoption rates of each
a.
30%, 50%, 70%, 90%
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NAIS Research Process
1.
2.
Literature review
a. Synthesized more than 250
benefit/cost publications
Industry stakeholder meetings
a. More than 50 meetings
b. Over 100 stakeholders
c. Elicited a variety of information
 Anticipated costs
 Perceived benefits
 Challenges
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 Opportunities
NAIS Research Process
d. Partial list of groups included in the
stakeholder interviews

National Cattlemen’s 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
3. Direct cost estimation
a. Developed methodologies to
measure direct industry costs
4. Evaluate governmental costs
and benefits
5. Estimate the benefits that would have
to occur to offset the direct costs
6. Allocate benefits across
a. Species
b. Consumers
c. 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
- Literature
- Expert opinions
- Industry meetings
- Private and public data
- Statistical analyses
Direct Cost Estimates
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Schematic of Research Process
- Literature
- Expert opinions
- Industry meetings
- Private and public data
- Statistical analyses
Direct Cost Estimates
Economic Model
Sr "
Price
Sr
Pr "
Pr
Sf "
B
Sf
Pf "
Pf
α1
α0
0
Dr
Df
A
D f'
Q2
Q0
Quantity
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Schematic of Research Process
- Literature
- Expert opinions
- Industry meetings
- Private and public data
- Statistical analyses
Economic Model
Direct Cost Estimates
Net Benefit/Costs:
Sr "
Price
- Producers
Sr
Pr "
Pr
B
Sf
Pf "
Pf
α1
α0
0
- Wholesale
Sf "
Dr
- Retail
Df
A
D f'
Q2
Q0
Quantity
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- Consumers
Direct Cost Estimates
1.
2.
Estimate annual costs of NAIS
a. Bovine (individual RFID tags)
b. Porcine (group hogs; tag culls)
c. Poultry (group)
d. Ovine (group lambs; tag culls)
e. Equine (individual microchip)
Estimate costs across
a. Production sectors
b. By size of operation
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c. By various adoption rates
Direct Costs: Cattle Sectors
1.
2.
Cattle sectors considered
a. Breeding herd operations
b. Backgrounding operations
c. Finishing operations
d. Auction markets
e. Slaughtering operations
Estimate costs across
a. Identification system
b. By size of operation
c. By various adoption rates
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Direct Costs: Cattle Sectors
3. Cost categories
a. Tagging-related costs
 Tags and applicators
 Labor/chute costs
 Shrink
 Injury (human and animal)
b. Tag reading costs
 Capital investments
 Labor/chute
 Shrink/injury
c. 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
a. 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 23
expensive than owning equipment
Costs/Productivity/Interactions
1. Use an economic model of the meat
industry to allocate costs, changes
in productivity, and interactions
across sectors
a. Four species
 Beef
 Pork
 Lamb
 Poultry
b. Consider multiple sectors for
each species
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c. Include import and export sectors
Inclusion Of Benefits
1. Multiple benefits could occur
a.
Better animal health
b.
Export market access
c.
Facilitate MCOOL requirements
d.
Increase product branding
e.
Improve food safety assurance
f.
g.
h.
i.
Faster response to disease issues
Reduce costs of disease mitigation
Improve cattle production efficiency
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Ownership verification
Inclusion Of Benefits
2. Difficult to quantify all of these
a. The major issues seem to center on
export markets and domestic demand
3. 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
1. Animal ID Issues
2. Animal ID Systems
3. NAIS Project Objectives
4. Research Strategy
5. Findings
6. Questions
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Cattle/Beef Industry Drives The Results
1. 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
a.
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
1. 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
Change in Beef Export Demand That
Offsets Producer Costs
Export Demand Increase
40%
34.9%
35%
30%
23.7%
25%
20%
14.9%
15%
10%
8.0%
5%
0%
30%
50%
70%
90%
NAIS Full Traceability Adoption Rate
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Domestic Demand
Change in Domestic Beef Demand That
Offsets Producer Costs
Domestic Demand
Increase
1%
0.98%
1%
1%
0.69%
1%
0%
0.44%
0.25%
0%
0%
30%
50%
70%
90%
NAIS Full Traceability Adoption Rate
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Summary
1. Comprehensive NAIS benefit/cost study
a. Stakeholders
b. Detail cost breakdowns
c. Productivity impacts
d. Governmental costs
2. 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
a. 500 page document
b. APHIS produced media products
5. http://animalid.aphis.usda.gov/nais/
naislibrary/factsheets.shtml
a. An overview of the project
b. Targeted Fact Sheets
c. A dozen brochures
d. Documents that are “hot linked” to
the major report
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QUESTIONS?
Picture Courtesy of Clint Peck
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