Recipient Organization
PURDUE UNIVERSITY
(N/A)
WEST LAFAYETTE,IN 47907
Performing Department
AGRICULTURAL ECONOMICS
Non Technical Summary
The routine feeding of subtherapeutic antibiotics to livestock has raised considerable controversy as consumers are becoming increasingly aware and concerned about this issue, primarily as it relates to the development of antibiotic resistant bacteria. This research will assess the economic impacts of a ban on subtherapeutic feeding of antibiotics in the pork sector.
Animal Health Component
80%
Research Effort Categories
Basic
15%
Applied
80%
Developmental
5%
Goals / Objectives
The purpose of this research is to assess the economic impact of a ban on subtherapeutic feeding of antibiotics in pork production. To determine the overall impact of the proposed ban, this research will analyze four specific objectives. First, the effect of a ban on pork production costs will be determined. Following previous studies, suggested changes in feed conversion and mortality rates will be used to derive these estimates. Second, this study will measure the direct benefits of a ban on antibiotics that would likely result from consumer preferences for "residue free" and "natural" meat. Third, this study will determine the indirect benefits (the positive externality) from a ban on antibiotics, which would result from a reduction in the likelihood of development of antibiotic resistant bacteria. The direct and indirect benefits of the ban will be assessed using in-store valuation experiments. Finally, this study will combine results from the three previous
objectives to assess the overall consequences of banning subtherapeutic use of antibiotics in pork production. A model will be developed to incorporate changes in domestic demand, production costs, and benefits from the positive externality.
Project Methods
To accomplish the stated objectives a three phase research approach will be used: a) in-store experiments that that use real food and real money, c) estimation of effects of a ban on antibiotic use on producer supply and market prices and quantities, and c) determination of overall welfare effects of ban on subtherapeutic feeding of antibiotics in livestock production. In-Store Experiments In-store experiments will be conducted with approximately 200 consumers in grocery stores. The experiments will be conducted in several Winn-Dixie grocery stores in the southeast U.S. Subjects will be offered a free pork cut in exchange for their participation in a laboratory valuation exercise. The following outlines the specific procedures that will be used in the experiments: 1) As shoppers pass by the meat counter, they will be asked to participate in a research study in exchange for a pork cut (e.g., a pork chop). Subjects will be given a very brief survey to assess their prior
knowledge about livestock production practices and to elicit socioeconomic and demographic information. 2) Subjects will be given information about the use of antibiotics in livestock production as well as information about the potential for development of antibiotic resistant bacteria. This information will closely follow the information put forth by the National Research Council Committee on Drug Use in Food Animals 3) Subjects will be asked to bid in an incentive compatible auction to exchange their endowed meat for otherwise identical meat cuts from animals that were not fed antibiotics. The auction will use real money and real meat products. Estimation of Market Impacts Market impacts of a ban on subtherapeutic drug use will be estimated using a general equilibrium displacement model of the pork. This study will utilize the model outlined by Leumix and Wholganant and Metcalfe (2000) but update parameter values based on more recent information, and include more information about
expected domestic consumer reaction to a ban, which will be determined in phase 1 of the study. The model will consist of simultaneous equations that link the (1) retail pork demand (2) export pork demand (3) market clearing condition for pork (4) relationship between retail and farm prices and quantities (5) inverse hog demand (6) domestic hog supply (7) import supply of hogs and (8) market clearing condition for hogs. The model will be parameterized using econometrics, expert judgment, experimental studies (on hogs and consumers), and previous studies. After identifying and calibrating the model parameters to the current equilibrium, the model will be disturbed by a full and/or partial ban on subtherapeutic antibiotic use. Welfare Analysis To determine whether a ban on subtherapeutic drug use in U.S. is desirable, the expected change in societal welfare should be examined. Welfare in this economic model is divided into three parts (1) meat producer surplus (2) meat consumer surplus
and (3) increased welfare from mitigating microbial resistance (the positive externality). Welfare effects will be determine using auction bids from the first study and results from the simulation model.