An industry-level economic conceptual model of the effects of improved animal health

Livestock disease reduces production efficiency leading to producer, industry-level, and societal economic losses. To date, economic analyses of animal health strategies have focused largely at the producer level. However, consumers can experience economic losses or decreases in welfare through higher food prices. The objective of this paper is to suggest an expanded basis for economic analyses which incorporates industry-level and consumer interests. Data needs for broadening the analysis of animal-health programs to support industry-level analysis also will be addressed. Producers adopting production-enhancing health-management practices receive short-run increased profits. These increased profits lead to increased industry supply and price adjustments which return profit levels to an equilibrium rate. In the longer run, consumers benefit from reduced product prices and a more-wholesome food supply. Additionally, subsectors within the livestock industry may achieve advantages relative to other sectors. Total industry profits will typically increase since the equilibrium rate is for a larger total supply or production level. Analyses of industry-level economic impacts require information on production and cost changes at the farm level, and then aggregation to the industry level. The supply side of the industry model must be structured according to the inherent biological process of livestock production. Economic variables which affect the producers' production decisions also must be included. Consumers are the source of primary demand for the product and the second component of the equation determining market prices. In addition, use of complete livestock-industry models with pork, beef and poultry subsectors allows for analysis of cross-commodity effects, market-share implications and benefit distribution among producers and consumers.