Economic Evaluation of Investment in the Chicken Meat R&D Program. RIRDC Publication No. 09/144. RIRDCInnovation for rural Australia

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1 Economic Evaluation of Investment in the Chicken Meat R&D Program RIRDC Publication No. 09/144 RIRDCInnovation for rural Australia

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3 Economic Evaluation of Investment in the Chicken Meat R&D Program by Sarah Simpson and Peter Chudleigh September 2009 RIRDC Publication No 09/144 RIRDC Project No. PRJ

4 2009 Rural Industries Research and Development Corporation. All rights reserved. ISBN ISSN Economic Evaluation of Investment in the Chicken Meat R&D Program Publication No. 09/144 Project No. PRJ The information contained in this publication is intended for general use to assist public knowledge and discussion and to help improve the development of sustainable regions. You must not rely on any information contained in this publication without taking specialist advice relevant to your particular circumstances. While reasonable care has been taken in preparing this publication to ensure that information is true and correct, the Commonwealth of Australia gives no assurance as to the accuracy of any information in this publication. The Commonwealth of Australia, the Rural Industries Research and Development Corporation (RIRDC), the authors or contributors expressly disclaim, to the maximum extent permitted by law, all responsibility and liability to any person, arising directly or indirectly from any act or omission, or for any consequences of any such act or omission, made in reliance on the contents of this publication, whether or not caused by any negligence on the part of the Commonwealth of Australia, RIRDC, the authors or contributors. The Commonwealth of Australia does not necessarily endorse the views in this publication. This publication is copyright. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved. However, wide dissemination is encouraged. Requests and inquiries concerning reproduction and rights should be addressed to the RIRDC Publications Manager on phone Researcher Contact Details Sarah Simpson and Peter Chudleigh Agtrans Research PO Box 385 Toowong Qld 4171 Phone: Fax: info@agtrans.com.au In submitting this report, the researcher has agreed to RIRDC publishing this material in its edited form. RIRDC Contact Details Rural Industries Research and Development Corporation Level 2, 15 National Circuit BARTON ACT 2600 PO Box 4776 KINGSTON ACT 2604 Phone: Fax: rirdc@rirdc.gov.au. Web: Electronically published by RIRDC in September 2009 Print-on-demand by Union Offset Printing, Canberra at or phone ii

5 Foreword The Chicken Meat R&D Program supports increased sustainability and profitability in the chicken meat industry. The Program is funded by statutory levies paid by industry participants and matching funding provided by the Australian Government (up to 0.5 per cent of the industry's gross value of farm production). The investments made by the Program follow the R&D Plan for the Chicken Meat Program In May 2008 an Evaluation Framework for RIRDC was finalised. This framework, among other things, sets out a process for reviewing each of RIRDC s programs in the final year of its five year plan. One of the three programs selected for assessment in 2009 was the Chicken Meat Program. A part of each specific program review is to randomly select three independent investments within the program for an impact evaluation through cost benefit analysis. The three economic analyses provide specific case studies that will demonstrate the extent and distribution of benefits that have been, are being, or will be, captured in future. Such information is valuable to not only RIRDC management, but also to the members of the industry (or industries) at which the investment has been targeted. Another purpose of the economic analyses is to contribute to a process being undertaken for the Council of Rural Research & Development Corporation Chairs that aims to demonstrate through examples the outcomes and benefits that have emerged or are likely to emerge from the 15 Rural Research and Development Corporations (RDCs). Valuation of these benefits, along with identification of investment expenditure, is required in order to demonstrate their contribution to Australian rural industry as well as environmental and social benefits to Australia. The projects evaluated demonstrated a wide range of predominantly economic benefits, a number of which were quantified in value terms. Funding for the three projects analysed totalled $2.67 million (present value terms) and produced aggregate total benefits of $9.38 million (present value terms). The RIRDC share of the total investment was 45%. The analyses found all three investments provided positive returns with Benefit-Cost Ratios ranging from 1.5:1 to 103:1. The impact assessments should be considered together with the recent performance review completed for the Chicken Meat R&D Program as part of the RIRDC Evaluation Framework. The impact assessments therefore serve the main purpose of providing accountability to government and industry/community stakeholders that research funds have been managed appropriately and are producing positive impacts and benefits to Australia. This report is an addition to RIRDC s diverse range of over 1900 research publications and it forms part of our Chicken Meat R&D program, which aims to support increased sustainability and profitability in the chicken meat industry through focused research and development. Most of RIRDC s publications are available for viewing, free downloading or purchasing online at Purchases can also be made by phoning Peter O Brien Managing Director Rural Industries Research and Development Corporation iii

6 Contents Foreword... ii Executive Summary... v 1. Introduction Methods Results Findings and Conclusions Appendix 1: Impact Assessment of Investment in Humane Destruction of Poultry in an Emergency Disease Response Use of Carbon Dioxide Appendix 2: Impact Assessment of Investment in New Diagnostic Assays to Improve Control of Coccidiosis in Poultry Appendix 3: Impact Assessment of Investment in Understanding and Reducing Dust, Odour and Pathogen Emissions in Poultry iv

7 Executive Summary What the report is about This report presents the results of economic analyses of three investments within the Chicken Meat R&D Program. The Program is funded by statutory levies paid by industry participants, with matching funding provided by the Australian Government up to 0.5 per cent of the industry's gross value of farm production. Who is the report targeted at? The information contained in the report is targeted at Program and RIRDC management, those within the chicken meat industry, and the wider community. Another target audience is the Australian Government and Council of Rural Research and Development Corporations Chairs (CRRDCC). Background In May 2008 an Evaluation Framework for RIRDC was finalised. This framework, among other things, sets out a process for reviewing each of RIRDC s programs in the final year of its five year plan. In the year ending June 2009, three RIRDC programs have been evaluated, and this report addresses the economic evaluation component for the Chicken Meat Program. The Framework contains two major components, a performance review and an impact assessment. This report is the impact assessment and addresses the economic evaluation requirement under the Framework. This report also addresses the reporting requirements for RIRDC under the joint initiative of the CRRDCC. Aims/objectives The primary purpose of the report is to support the performance review of the Program and to demonstrate that benefits have accrued from specific investments. Another purpose of the economic analyses is to contribute to a process being undertaken for the CRRDCC that aims to demonstrate through examples the outcomes and benefits that have emerged or are likely to emerge from the 15 Rural Research and Development Corporations. Valuation of these benefits, along with identification of investment expenditure, is required in order to demonstrate their contribution to Australian rural industry as well as environmental and social benefits to Australia. The Australian Government is particularly interested in such contributions in order to be assured that public funding of R&D is being used to produce public benefits. Beneficiaries The beneficiaries of the report will be RIRDC management, the Australian Government, the CRRDCC, the wider Australian community, and those specifically involved with Australian chicken meat industry. Methods used The methods used in the economic analyses followed the instructions in the RIRDC Evaluation Framework, both in terms of project selection and in terms of the analysis process and reporting. The selection process satisfied the random selection process of the CRRDCC as well as the evaluation requirements of RIRDC. This entailed the definition of the population of projects in the program, a random sampling process and a filtering process. Each investment was evaluated by assembling information from the three project groups from original project proposals, final reports, and any progress reports or other relevant publications. Assistance was v

8 rendered by Program personnel, project principal investigators, industry personnel and others. The potential benefits from each investment were identified and described in a triple bottom line context. Some of these benefits were then valued. The Present Value of Benefits (PVB) and Present Value of Costs (PVC) were used to estimate investment criteria of Net Present Value and Benefit-Cost Ratio at a discount rate of 5%. The Internal Rate of Return was also estimated from the annual net cash flows. The PVB and PVC are the sums of the discounted streams of benefits and costs. All dollar costs and benefits were expressed in 2008/09 dollar terms and discounted to the first year of the investment being analysed. A 40 year time frame was used in all analyses, with the first year being the initial year of investment in the R&D project. Costs for the R&D project included the cash contributions of the Program, as well as any other resources contributed by third parties (e.g. researchers or industry). Analyses were undertaken for total benefits that included future expected benefits. A degree of conservatism was used when finalising assumptions. Sensitivity analyses were undertaken in most cases for those variables where there was greatest uncertainty or for those that were thought to be key drivers of the investment criteria. Results/key findings There was a wide range of expected benefits, predominantly economic in nature, identified in the projects, and a number of these benefits were valued. Funding for the three project groups analysed totalled $2.67 million (present value terms) and produced aggregate total expected benefits of $9.38 million (present value terms). The Program share of the total investment was 45%. The analyses found all three investments provided positive returns with individual Benefit-Cost Ratios ranging from 1.5:1 to 103:1. As only three project groups out of a population of 38 project groups were analysed, these results can not be used to infer anything about the likely range of results for the population of projects as a whole. Implications for relevant stakeholders The positive results in terms of both the number and range of benefits identified and valued demonstrate that the Program is delivering significant impacts and is providing a healthy return on investment. The overall result should be heartening for RIRDC, the chicken meat industry, and policy personnel responsible for allocation of public funds. Recommendations There were no recommendations made. vi

9 1. Introduction In May 2008 an Evaluation Framework for RIRDC was finalised. This framework, among other things, sets out a process for reviewing each of RIRDC s programs in the final year of its five year plan. These reviews are aimed at serving two broad purposes: providing accountability to government and industry/community stakeholders that research funds have been managed appropriately and are producing positive impacts and benefits to Australia identifying research areas and processes that may prove fruitful in terms of future investment and ongoing program management More specific purposes are: reporting against the program s five year plan identifying lessons learnt from past investment reporting to the Council of Rural Research & Development Corporation Chairs (CRRDCC) on impacts as part of the overall reporting framework of the Research and Development Corporations (RDCs) In broad terms the Evaluation Framework encompasses a cohesive framework for evaluating research investment at project, program and portfolio levels for both accountability and future investment planning purposes. The Framework contains two major components, a performance review and an impact assessment. The scope of this report is the impact assessment (or economic evaluation) requirements under the Framework, and the reporting requirements for the CRRDCC. In the year ending June 2009, three RIRDC programs have been evaluated, and this report is the economic evaluation component for the Chicken Meat R&D Program. The impact assessments provide specific case studies that will demonstrate examples of the extent and distribution of benefits that have been, are being, or will be, captured in future. Such information is valuable to not only RIRDC management, but also to the members of the industry (or industries) at which the investment has been targeted. Section 2 of this report describes the methods used to select the projects for analysis, and how the analyses were undertaken. Section 3 summarises the results of the analyses, and Section 4 presents some findings and conclusions. Details of the three individual analyses are presented in Appendices 1 to 3. 1

10 2. Methods 2.1 Project Selection The RIRDC Evaluation Framework has clear instructions for how projects to be economically evaluated should be selected. The following excerpt from the guidelines explains the process. The selection of projects for impact assessment must be random to satisfy the requirements for the CRRDCC. However, as it is important for successful projects to also be chosen the approach to random selection is as follows: i. List all projects that have been completed in the period of the Five Year Plan (FYP). ii. Identify projects that have formed part of a set of projects that collectively have contributed to an output or outcome. These can include projects completed prior to the current FYP. Projects that together contributed to achieving an outcome are assessed as a set to avoid attributing the outcome to only a sub-set of the projects. iii. iv. Number these sets of projects and draw three projects out randomly from the set. In consultation with the Advisory Committee and Program Manager the reviewer will discuss the impact of this project and the availability of information for undertaking an impact assessment. This assessment should classify each set as: 1. too early: the projects have follow-on R&D that has yet to come to fruition 2. low: there is little or no indication of outputs being adopted or likely to be adopted, or the project(s) failed to deliver the outputs expected, or other output that was serendipitous 3. medium: there is evidence of adoption but uncertainty about how big the benefits are 4. high: there is evidence of adoption and conviction that the benefits have been high and/or good spillovers have been identified. v. The previous two steps should be repeated until there is at least one high project in the full sample, and three that meet the medium/high level. These will be proposed for impact assessment. vi. The results of the full sample drawn should be reported in terms of number of project sets sampled out of total project sets, share in each category by number and by total expenditure of all projects in the sample. The first step involved defining the population of projects that were completed during the term of the five year plan (1 July 2004 and 30 June 2009) as defined in the RIRDC Clarity project database. The population therefore included projects starting earlier than this time period. Projects involving travel grants, general communications and reviews, conference support, program planning and support and special events were excluded in order to ensure that the population only included R&D projects. Projects with a value less than $5,000 were also excluded, as were any projects finishing after 30 June This process resulted in a population of 51 projects. There were a number of projects that had outcomes similar to other projects so that they were grouped together. This meant the final population included 38 projects or project groups after this grouping had taken place. Agtrans assigned a random number between 0 and 1 to each of the 38 projects or project groups using the Excel random number generator. The three projects or project groups with the highest random numbers were then identified as the initial sample and sent to the Program Manager for rating as either too early, high, medium or low as per the RIRDC evaluation guidelines. Nine projects or project groups were considered and rated before the final sample was determined. Tabled 2.1 presents the project codes, titles and costs for those projects/project groups sampled, and the ratings and comments on each of them that led to the final sample of three projects or project groups being selected. 2

11 Table 2.1 Projects/Project Groups Randomly Selected for Analysis No. Project Codes and Titles Cost (Program only) Rating/comments 1 DAV-234A: Quality aspects of antimicrobial interventions used in chicken processing 2 CSA-26J: Use of cytokines to enhance vaccine efficacy in poultry 3 DAQ-318A: Evaluating risks posed by pathogen emissions from meat chicken sheds $51,453 Low project was terminated due to inability to adequately assess products in processing plant trials. $173,320 Too early the project was very hi-tech and requires development of a delivery mechanism before any adoption by industry would be possible. $895,058 Medium (SELECTED) FSE-3A: Literature review and risk assessment for the safe and sustainable utilisation of spent litter from meat chicken sheds DAV-213A: Trials of odour control technologies on broiler farms DAQ-321A: Efficacy of windbreak walls for odour reduction 4 US-142A: Potassium diformate evaluation in Necrotic Enteritis challenge model UNE-75A: Effects of organic acids, prebiotics, and enzymes on control of necrotic enteritis 5 DAQ-316A: New diagnostic assays to improve control of coccidiosis in poultry 6 DAQ-337A: Broiler performance on pearl millet based diets 7 DAQ-323A: Managing litter re-use for minimal nutrient runoff to surface water 8 PRJ : Development and validation of Campylobacter microarrays for virulence detection $77,274 Low The model failed to convincingly demonstrate the product such that the project would not encourage significant adoption of the product. $247,924 Medium (SELECTED) $31,381 Medium however adoption is dependent on the grains industry s willingness to grow pearl millet which it does not do at this time. Excluded from sample on the basis that one high rating project was required. $187,460 Low no evidence of adoption $281,484 Low no evidence of adoption 3

12 No. Project Codes and Titles Cost (Program only) Rating/comments 9 AHA-2A: Field exercise - use of carbon dioxide for euthanasia of poultry $18,000 High (SELECTED) In summary, the final three projects/project groups selected for analysis were: 1. DAQ-318A: Evaluating risks posed by pathogen emissions from meat chicken sheds FSE-3A: Literature review and risk assessment for the safe and sustainable utilisation of spent litter from meat chicken sheds DAV-213A: Trials of odour control technologies on broiler farms DAQ-321A: Efficacy of windbreak walls for odour reduction 2. DAQ-316A: New diagnostic assays to improve control of coccidiosis in poultry 3. AHA-2A: Field exercise - use of carbon dioxide for euthanasia of poultry The three selected investments making up the final sample analysed had a total nominal value of $1.16 million. The total nominal value of the nine investments randomly selected in order to have a final sample with the required number of medium and high rated projects was $1.93 million. The total value of the population (38 project groups) was $7.93 million (nominal terms). Therefore, the sample of three projects represents 14.6% of the population in value terms, and 24.3% of the population was considered before reaching the final sample meeting the high/medium requirements. 2.2 Individual Analyses Each investment was evaluated through the following steps: 1. Information from the original project proposals, final reports, and any progress reports or other relevant reports and material was assembled with assistance from Program personnel, Principal Investigators and others. 2. An initial description of the project background, objectives, activities, costs, outputs, and outcomes and benefits was drafted. Additional information needs were identified. 3. Telephone contact was made with Principal Investigators and the draft sent to that person or persons for perusal and comment, together with specific information requests. 4. Further information was assembled where appropriate from industry personnel and others associated with the industry, and the quantitative analysis undertaken. 5. Drafts were passed by Program Managers and Principal Investigators for comment. The potential benefits from each investment were identified and described in a triple bottom line context. Some of these benefits were then valued. 4

13 The factors that drive the investment criteria for R&D include: C K Q D T 1 T 2 A P The cost of the R&D. The magnitude of the net benefit per unit of production affected; this net benefit per unit also takes into account the costs of implementation. The quantity of production affected by the R&D, in turn a function of the size of the target audience or area, and the level of initial and maximum adoption ultimately expected, and level of adoption in the intervening years. The discount rate. The time elapsed between the R&D investment and commencement of the accrual of benefits. The time taken from first adoption to maximum adoption. An attribution factor can apply when the specific project or investment being considered is only one of several pieces of research or activity that have contributed to the outcome being valued. Probability of an R&D output, commercialisation etc. occurring. Can be applied when the research is not complete or when some further investment is required before the outputs of the research are translated into adoptable outcomes and extended to the industry. Defining the without R&D scenario to assist with defining and quantifying benefits is often one of the more difficult assumptions to make in investment analyses. The without scenario (referred to here as counterfactual) usually lies somewhere between the status quo or business as usual case and the more extreme positions that the research would have happened anyway but at a later time; or the benefit would have been delivered anyway through another mechanism. The important issue is that the definition of the counterfactual scenario is made as consistently as possible between analyses. The Present Value of Benefits (PVB) and Present Value of Costs (PVC) were used to estimate investment criteria of Net Present Value and Benefit-Cost Ratio at a discount rate of 5%. The Internal Rate of Return was also estimated from the annual net cash flows. The PVB and PVC are the sums of the discounted streams of benefits and costs. The discounting is used to allow for the time value of money. All dollar costs and benefits were expressed in 2008/09 dollar terms and discounted to the first year of the investment being analysed. A 40 year time frame was used in all analyses, with the first year being the initial year of investment in the R&D project. Costs for the R&D project included the cash contributions of the Program, as well as any other resources contributed by third parties (e.g. researchers or industry). Analyses were undertaken for total benefits that included future expected benefits. A degree of conservatism was used when finalising assumptions. Sensitivity analyses were undertaken in most cases for those variables where there was greatest uncertainty or for those that were thought to be key drivers of the investment criteria. Some identified benefits were not quantified mainly due to: A suspected, weak or uncertain relationship between the research investment and the identified R&D outcomes and associated benefits. The magnitude of the value of the benefit was thought to be only minor. 5

14 3. Results The results for each of the three project evaluations are reported in Appendices 1 to 3. The following provides a summary of results of the three evaluations. 3.1 Qualitative Results Table 3.1 identifies the benefits from each of the three case studies. Each benefit is categorised as economic, environmental or social. Not all of the case studies demonstrated benefits from each category. Table 3.1 Summary of Benefits for Three Investments Project Benefits Humane destruction of poultry Economic Reduced cost of euthanasia compared to next best method Reduced likelihood of disease spreading from a small to a larger outbreak due to improved timeliness of application of an in situ method (and therefore reduced potential impact) Environmental Reduced likelihood of disease spreading to native birds Social Reduced animal welfare impact on birds to be slaughtered compared to next best alternative method Reduced likelihood of human contamination from disease or treatment method compared to next best alternative method Reduced costs to governments from their contribution to eradication (under cost sharing arrangements) Coccidiosis diagnostic assays Economic Reduced production losses, particularly in breeder flocks, due to more effective vaccination programs Potential reduced costs of vaccination and diagnostic programs Potential reduced disease and management costs when using chemical coccidiostats Environmental Reduced risk of chemical residues in the environment Social Reduced risk of chemical residues in food Increased animal welfare due to avoided disease Dust, odour and pathogens Economic Avoided costs of adoption of non-effective technologies Avoided costs of not being able to expand (or having to relocate) due to planning decisions made in the absence of quality and appropriate data 6

15 Project Benefits Environmental Reduced risk of negative impacts from nutrient run-off from the use of litter from meat chicken farms Social Reduced risk of health impacts from pathogens in chicken meat litter (noting that existing risk was already low) Potential contribution to reduced dust and odour emissions in the future Data and information to alleviate community concerns regarding the risks of pathogen emissions from meat chicken sheds 3.2 Quantitative Results The investment criteria calculated for each research area were the Net Present Value (NPV), the Benefit-Cost Ratio (B/C Ratio) and the Internal Rate of Return (IRR). The NPV is the difference between the Present Value of Benefits (PVB) and the Present Value of Costs (PVC). Present values are the sum of discounted streams of benefits and/or costs. The B/C Ratio is the ratio of the PVB to the PVC. The IRR is the discount rate that would equate the PVB and the PVC, thus making the NPV zero and the B/C Ratio 1:1. Investment criteria were estimated for both the total investment and for the Program investment. Table 3.2 presents the investment criteria for the total investments in each of the three case studies analysed at a 5% discount rate. Table 3.2 Investment Criteria for Total Investments for Three Case Studies (discount rate = 5%) Investment PVB ($m) PVC ($m) NPV ($m) B/C Ratio IRR (%) Humane destruction of poultry Coccidiosis diagnostic assays Dust, odour and pathogens Table 3.3 presents the investment criteria for only the cash investment by the Chicken Meat R&D Program only in each of the three case studies (at a 5% discount rate). 7

16 Table 3.3 Investment Criteria for Program Investment for Three Case Studies (discount rate = 5%) Investment PVB ($m) PVC ($m) NPV ($m) B/C Ratio IRR (%) Humane destruction of poultry Coccidiosis diagnostic assays Dust, odour and pathogens Funding for the three projects analysed was $2.67 million (present value terms) and produced aggregate total expected benefits of $9.38 million (present value terms). The Program share of the total investment was 45%. The analyses found all three investments provided positive returns with individual benefit cost ratios ranging from 1.5:1 to 103 to 1. The results produced are highly dependent on the assumptions made in each analysis, many of which are uncertain. There are two factors that warrant recognition. The first factor is the coverage of benefits. Where there are multiple types of benefits it is often not possible to quantify all the benefits that may be linked to the investment. The second factor involves uncertainty regarding the assumptions made, including the linkage between the research and the assumed outcomes A confidence rating based on these two factors has been given to the results of each investment analysis (Table 3.4). The rating categories used are High, Medium and Low, where: High: Medium: Low: Table 3.4 denotes a good coverage of benefits or reasonable confidence in the assumptions made denotes only a reasonable coverage of benefits or some significant uncertainties in assumptions made denotes a poor coverage of benefits or many uncertainties in assumptions made Confidence in Analysis for Three Case Studies Case Study Coverage of Benefits Confidence in Assumptions Humane destruction of poultry High Low Coccidiosis diagnostic assays Dust, odour and pathogens Low Low Medium Medium 8

17 3.3 Previous Economic Evaluations of Investments in the Chicken Meat Program Two chicken meat program investments were previously analysed and included in Evaluation of RIRDC s Established Industries Program (Gordon and Davis, 1999). Table 3.5 presents the results of these analyses. All dollar costs and benefits were expressed in 1997/98 dollar terms and discounted to the year1997/98 using a discount rate of 5%. A 30 year time frame was used in all analyses, with the first year being the initial year of investment in the R&D project. Costs for the R&D project included the cash and in-kind contributions of RIRDC and the research organisations. Table 3.5 Investment Criteria for Two Investments Analysed in 1999 Investment PVB ($m) PVC ($m) NPV ($m) B/C Ratio IRR (%) Estimation of digestible amino acid content of feeds for poultry diets Chicken meat and egg industries investigating an Eimeria species for vaccine development to to 1 30 Source: Gordon and Davis, 1999 Economic evaluations were also undertaken for the Australian Poultry Cooperative Research Centre (CRC), of which RIRDC is a core partner. The evaluations were undertaken by Agtrans Research and esys Development in 2008, and considered six research investments carried out by the CRC. It is important to note that the Poultry CRC investments were selected as those anticipated to be successful investments, while the three investments analysed in this 2009 evaluation were selected randomly (with some qualifications). The results of the evaluations undertaken for the Poultry CRC are shown in Table 3.6. All dollar costs and benefits were expressed in 2006/07 dollar terms and discounted to the year 2006/07 using a discount rate of 5%. A 30 year time frame was used in all analyses, with the first year being the initial year of investment in the R&D project. Costs for the R&D project included the cash and in-kind contributions of the CRC. Table 3.6 Investment Criteria for Six Investments made by the Australian Poultry CRC Investment PVB ($m) PVC ($m) NPV ($m) B/C Ratio IRR (%) 03:27: Dustbath materials :33: Bronchitis :6: Coccidiosis vaccines :15: Eimeria vaccines :17: Diagnostic technologies :45: Odour and dust Source: Agtrans Research and esys Development, 2008 The investment criteria for the two investments carried out in 1999 and the six Poultry CRC investments are wide ranging, with Benefit-Cost Ratios ranging from 2.3:1 to 825:1 and Net Present 9

18 Values ranging from $1.0m to $67m. The current 2009 evaluation results show investment criteria that are also wide ranging. However, it is not appropriate to compare the results of the current 2009 evaluations with those of the earlier analyses, due to the former being selected as successful investments, and the current evaluations being selected randomly. It is also important to note that as RIRDC was a core investor in the Poultry CRC, part of the CRC benefits would be attributable to RIRDC. 10

19 4. Findings and Conclusions 4.1 Summary of Findings Humane destruction of poultry The research project successfully demonstrated a method to euthanase poultry in-shed using CO 2 in the event of an EAD outbreak. The value of having conducted the trial is in preparedness for an EAD outbreak, in terms of being able to quickly and efficiently instigate procedures to destroy infected birds and contain the outbreak. Without carrying out the trial, and developing a procedures manual, it is likely there would have been delays being able to use the method while protocols were developed and approvals were sought from animal welfare authorities. Valuing the benefits required the use of several uncertain assumptions relating to the probability of disease outbreaks, their likelihood of spreading to humans, and spreading beyond the initial outbreak. Sensitivity analyses were carried out to demonstrate how changes in these probabilities reflect the investment criteria. Despite the uncertainties surrounding some assumptions, the analysis has shown that with respect to potential EAD outbreaks, even small improvements in preparedness and containment can result in large benefits, due to the potential large impact of these diseases. Based on the assumptions, the project investment of less than $50,000 (present value) has been estimated to have a Net Present Value of $4.54 million and a Benefit-Cost Ratio of 103 to 1 over an analysis period of 40 years (5% discount rate). Coccidiosis diagnostic assays This research project was successful in developing a PCR diagnostic assay that can clearly identify which of the seven strains of Eimeria are present in a shed, and in what volume. Given the strategic nature of the research, the potential uses of such an assay are wide ranging, however the most likely short-term use of the assay will be in the broiler breeder industry to assist with vaccine management, and as an aid in identifying when vaccination has not been successful. This analysis has demonstrated that given the assumptions made regarding adoption and impact, that the research will provide a Benefit-Cost Ratio of 3 to 1 (at a 5% discount rate, over 40 years). The investment criteria may be underestimates, given that in the future the assay may be used by other sectors of the poultry industry for other purposes related to coccidiosis prevention and management. Dust, odour and pathogens This group of projects analysed all had the intended objectives of improving understanding, data and data collection methods in relation to potential adverse impacts from meat chicken production, including dust, odour and pathogen emissions. Generally, the group of projects is unlikely to result in any actual reductions in such emissions in the short-term. However, the increased understanding and availability of defendable data provides the industry with the opportunity to utilise such information when communicating with regulators and community. The valuation method used in the analysis is a surrogate for demonstrating the potential scale of impact from general research in this area. The reports for two of the four projects have not yet been published, and therefore the ability of the industry to utilise the data is limited at this time. Given the 11

20 assumptions made, the investment criteria are positive at a 5% discount rate, with a Benefit-Cost Ratio of 1.5 to 1, and a Net Present Value of $0.9 million. Public versus Private Benefits All three projects have captured both public and private benefits. There will be private benefits to the chicken meat industry through a less costly response to containing an emergency disease outbreak; a reduced impact of an emergency animal disease due to the reduced likelihood of spread; reduced costs and reduced impacts of coccidiosis; and saved costs in terms of avoiding technology that does not deliver genuine odour, dust or pathogen reductions. There is also the potential private benefit to farmers having the data and data collection methods available to assist with improved planning and dispute resolution, which may result in saved costs in the future. Potential public benefits identified from the investments include human health benefits, animal welfare benefits and environmental benefits (through reduced negative off-site impacts of chicken litter use) and the reduced costs to governments from their contribution to eradication (under cost sharing arrangements). The only public benefits that were valued were the reduced likelihood of the spread of a disease such as avian influenza to humans and partly, the reduced costs of eradication to governments. Distribution of benefits along the supply chain For all three projects, benefits to the chicken meat industry will be distributed along the supply chain, which is predominantly vertically integrated. While the diagnostic assay for coccidiosis has the potential to benefit all sectors of the poultry industry, the current adoption of the assays has largely been with respect to the breeder industry as they are the sector of the industry that has principally adopted the use of vaccines for controlling coccidiosis. Benefits to other primary industries The industry benefits from all three projects are mostly restricted to the poultry industry, in particular the chicken meat component of the poultry industry. For example, the in-situ gassing method is not always suitable to use for caged birds (layers). The benefits of using the diagnostic assays for coccidiosis in the short-term mostly relate to the breeder sector of the Australian poultry industry, however there is also the potential for benefits to accrue to a number of other sectors within the industry including broilers, barn system and free-range layers, and floor-reared replacement pullets. However, for all three projects, there may be some benefits to other primary industries. For example in relation to the in-situ gassing method, there may be benefits to other industries where the disease being controlled is one that may also affect other animal industries, and where expedition of the slaughter of the infected animals reduces the likelihood of disease spreading to other industries (e.g. AI spreading to the pork industry). The basic scientific knowledge developed as part of the coccidiosis assay project has the potential to be of benefit to a number of other primary industries, as coccidiosis is a disease affecting many other agricultural animals, including cows, sheep and goats. Coccidiosis is one of the five most economically important diseases of the cattle industry and continues to be a major health problem internationally. There may be some benefits to other primary industries with respect to the use of the guidelines for the use of chicken litter on pasture and cropping enterprises. The use of the guidelines may contribute to improved effectiveness of the use of this source of nutrients, and may also reduce the risk of negative impacts from its use. There may also be some lessons in terms of the data and methods relating to dust, odour and pathogen emissions for other intensive agriculture industries such as pork and dairy. 12

21 Match with national priorities The Australian Government s national and rural R&D priorities are reproduced in Table 4.1. Table 4.1 National and Rural R&D Research Priorities Australian Government National Research Priorities Rural Research Priorities 1. An environmentally sustainable Australia 2. Promoting and maintaining good health 3. Frontier technologies for building and transforming Australian industries 4. Safeguarding Australia 1. Productivity and adding value 2. Supply chain and markets 3. Natural resource management 4. Climate variability and climate change 5. Biosecurity Supporting the priorities: 1. Innovation skills 2. Technology All three projects address National Priority 2. The dust, odour and pathogen projects also address National Priority 1, and the coccidiosis diagnostic assays project contributes to National Priority 3. The coccidiosis and in-situ gassing projects both contribute to National Priority 4 All three projects address Rural Research Priority 1, and the dust, odour and pathogen group of projects addresses Rural Priority 3. The coccidiosis and in-situ gassing projects both contribute to Rural Priority 5. Additionality If the government s contribution to the Chicken Meat R&D Program was reduced by half, then it is likely that the euthanasia and coccidiosis projects would still have been funded due to the high priority issues they were addressing. However, for the coccidiosis project, it may have been funded at a reduced level or over a longer period. Research into dust, odour and pathogen emissions would still have been undertaken by the Program, but the nature of the research projects funded may have been different to those evaluated here. If the Program did not exist at all, then the euthanasia trial would most likely still have been undertaken by industry and others, but its timing may have been delayed while additional funding was sought. The coccidiosis project is unlikely to have been funded by industry alone, due to the strategic nature of the research. However, another public research funder such as a state government may have undertaken the research. Once again, the project may have been delayed in time. The dust, noise and odour projects as designed would be unlikely to have been funded by industry alone. 4.2 Conclusions The current analyses of three Chicken Meat Program investments have resulted in Benefit-Cost Ratios in a wide range of 1.5:1 to 103:1. However, as only three investments out of a population of 38 projects/project groups were analysed, these results can not be used to infer anything about the likely range of results for the population of projects as a whole. The principal benefits identified were economic and social in nature with some limited environmental benefits. Of the subset of benefits identified that were valued, most were economic in nature and all 13

22 economic benefits accrued to the chicken meat industry and government. Chicken meat producers would benefit in the main but some benefits would be passed along the supply chain. The social benefit quantified related to reducing the likelihood of human disease. Both the qualitative and quantitative results for the impact evaluations demonstrate that, at least for these three randomly selected project groups, the investments have provided confidence in the investments that are being made by the Chicken Meat Program. References Agtrans Research and esys Development (2008) Economic Assessments of Selected Investments of the Australian Poultry Cooperative Research Centre Final report submitted 5 March 2008, unpublished. Gordon, J and Davis, L. (1999) Impact evaluation of RIRDC s established industries program: specific project evaluations stage 2 RIRDC Publication No. 99/91. 14

23 Appendix 1: Impact Assessment of Investment in Humane Destruction of Poultry in an Emergency Disease Response Use of Carbon Dioxide Project description Background The poultry industry is threatened by the risk of the introduction or re-introduction of a number of emergency animal diseases (EADs). The presence of such an EAD would require implementation of control and eradication programs that often include slaughtering large numbers of birds. The slaughter of the birds is required to be quick and humane, and the method also needs to be reliable in order to contain the spread of the disease. The method should involve minimal exposure of personnel to the EAD, and maximum containment of the infectious agent. For these reasons, killing large numbers of birds in situ in sheds is preferable where feasible. Examples of EADs where large-scale slaughter of birds is recommended are avian influenza (AI) and Newcastle disease (ND). The AUSVETPLAN strategies for these diseases both indicate that there is no effective or appropriate treatment for the diseases, and that birds should instead be slaughtered onsite. Both plans also place emphasis on ensuring human health and animal welfare risks are minimised. The AUSVETPLAN disease strategies for both of these diseases recommend that gassing with carbon dioxide (CO 2 ) is an appropriate method of slaughter (Animal Health Australia, 2004 and 2008). In previous disease outbreaks in Australia where large-scale slaughter of poultry was required (e.g. Newcastle disease) birds were transferred into large bins or waste disposal skips to be gassed (with CO 2 ). Injection of CO 2 gas directly into sheds from a bulk source (e.g. tanker) has been used as the preferred method for such large-scale slaughtering overseas. The method has never been used in Australia and a field trial was required to assess its likely effectiveness and cost in Australian poultry systems, as well as assess practical issues involved in implementing the technique. This trial was planned by a steering committee with representatives from Animal Health Australia, the Australian Government s Department of Agriculture, Forestry and Fisheries (DAFF), State Departments of Primary Industries (or equivalent) of NSW, Victoria, South Australia and Queensland, the Chicken Meat Federation of Australia and BOC Ltd. This group approached the Chicken Meat R&D Program for funding to assist with undertaking the trial. Project objectives The objectives of the project were: 1. To assess the practical issues involved in using carbon dioxide gas for the mass destruction of poultry in an emergency animal disease (EAD) response 2. To measure gas levels, delivery/dispersion times etc to evaluate the likely effectiveness of these methods 15

24 3. To make a photographic record for training purposes 4. To review the relevant standard operating procedures in light of this trial Project activities Two sheds were selected for the trial on an Ingham s Enterprises contract broiler farm on the NSW Central Coast. One of the sheds was an older style shed with external metal horizontal side blinds, while the other was a 3-4 year old tunnel shed operating under negative pressure. These sheds were representative of most Australian poultry sheds. A communications strategy for the trial was developed in order to minimise the risk of an adverse reaction in the local community as a result of misinterpretation or misreporting. This was seen as especially important as the community had previously experienced a Newcastle disease incident. The key activities in the communication strategy included briefing of key spokespeople and politicians, distribution of community awareness flyers, distribution of media releases both before and after the trial, and the provision of information on the AHA website. Prior to the start of the trial, the weather in the area was monitored in order to ensure suitable weather conditions during the trial that would ensure health and safety of the on-site personnel and residents. The trial itself was conducted over three days. The first day of the trial involved: preparation of the site and sheds installation of the measurement apparatus completion of the OH&S risk assessments briefing of the participants For the older of the sheds, preparation was effected by closing the sides and far end of the shed with plastic (200 micron thickness) to a height of approximately 3 metres. For the purposes of this exercise the shed was sealed from the inside to avoid damage to outside wires controlling the side vents. The preparation of the newer tunnel shed was less intensive, and involved the closure of openings for the extraction vans and taping over mini-vents. Air flow through the evaporative coolers was also blocked by closing the curtains associated with the coolers. The second day of the trial involved actually carrying out the gassing operation. No birds were used in the actual trial, although animal welfare considerations were still a key component of the trial and two members of the NSW branch of the RSPCA attended the trial as observers and a representative from the NSW DPI animal welfare branch participated in the exercise. The animal welfare considerations that were taken into account were: Rapid preparation of sheds just before gas infusion to avoid unacceptable increases in temperature just inside the shed Sudden, high noise levels associated with the CO 2 infusion Rapid decrease in temperature during the CO 2 infusion Time taken to reach 20% CO 2 a concentration known to render birds unconscious Time taken to reach 40% CO 2 the concentration required to ensure death of the birds 16

25 Human health and safety considerations were also taken into account as CO 2 levels greater than 3% are harmful to humans. Personal CO 2 -level alarms were used. Also, contact of humans with potentially infected birds to be euthanased were minimised. Other safety considerations for humans also included noise levels and low temperatures associated with the dispersion of the liquid CO 2. Liquid CO 2 was used as it is a low cost option when compared to using gaseous CO 2. The liquid CO 2 was sourced from a road tanker positioned adjacent to the shed, and was injected using a lance inserted through the doors at one end of each shed. In both cases the lance was positioned at the highest end of the shed, approximately 1.1 metres above the floor of the shed, in order to enable gravity to assist with the gas distribution to the far end. It was planned that each shed was to be filled to a height of about 0.9 metres from the floor with CO 2 concentrations of between 40% and 70% reached within 30 minutes, and that concentration was to be maintained for 30 minutes. It was estimated that 4 tonnes of liquid CO 2 per shed would be required for these concentrations to be achieved. Five CO 2 monitors were positioned at about 0.8 m above the floor, and six temperature monitors were positioned at various levels throughout each shed. Portable CO 2 detectors were also used to identify gas leakage from the sheds and distribution of gas from the sheds. The third day of the trial involved a de-brief for those involved with the exercise. Cost of investment Estimates of the total investment by the Program and others are provided in Table 1 for the year ending June Table 1 Estimate of Investment in Project AHA-2A (nominal $) Year ending June Chicken Meat R&D Program Other investors 1 Total ,827 27,653 41,480 Total 13,827 27,653 41,480 Source: RIRDC, Other investors included Australian Chicken Meat Federation, Australian Egg Industry Council, Inghams Pty Ltd, NSW DPI, DAFF, BOC Gases P/L Outputs and outcomes Outputs The principal findings from the project were: The wrapping of the older shed took less than 60 minutes and required around 6-8 people. It is noted however that the older shed was wrapped from the inside and no birds were present. It is noted therefore that this may be an underestimate of the time required as in a real outbreak situation the shed would be wrapped from the outside, and louvre wires removed. The preparation of the newer style shed took less than 30 minutes using 4 to 5 people. It took 17 minutes to inject 4 tonnes of CO 2 into the older shed. At this time the concentration of CO 2 was greater than 40% at more than one sensor. At this time the sensors at the far end of the shed indicated concentrations of greater than 33%. The levels of CO 2 remained high and steady until the shed doors were opened 30 minutes later. The injecting of gas was stopped 17

26 before 40% was reached throughout the shed in order to ensure enough gas remained in the tanker for the second shed. The remaining liquid CO 2 (5.7 tonnes) was pumped into the newer (and larger) shed over 18 minutes. At that time the sensor closest to the lance recorded 45% CO 2, and the sensors elsewhere in the shed all recorded greater than or equal to 33%. These concentrations remained steady until the shed doors were opened 15 minutes later. At bird level the concentration at which narcolepsy occurs (20% CO 2 ) was reached after 2 to 5 minutes at the lance end of the shed, and at about 12 minutes at the far end of the shed (in both sheds). While the target concentrations of 40% were not reached in this exercise, this was due to the volume of CO 2 delivered in the tanker rather than the inability to reach the target. The data from the trial has been used to estimate the volume of liquid CO 2 required to ensure that the 40% concentration is met throughout the sheds, and the time that it would take to ensure this is reached. It was found that a road tanker would be likely to be able to discharge sufficient gas into two sheds in the event of an outbreak. The data was used to develop an understanding of the volume of gas required for particular sizes and styles of shed to meet the 40% level, and such volume requirements will be able to be quickly calculated in an emergency situation. There are currently no requirements for poultry sheds to have calculated the volume of gas required, or have in place a plan for how the gassing would be undertaken (e.g. wrapping/sealing preparation) prior to an outbreak. However this might be a requirement in the future. The mobile CO 2 detectors detected leaks primarily around the older shed, and low levels of CO 2 were detected in the environment after ventilation. Temperatures at maximum CO 2 levels (at bird level) ranged from -2.5 C to -40 C. At 20% CO 2 the temperatures ranged from 8 C to -5 C in the older shed, and 4 C to 17 C in the newer shed. It was concluded that even though extremely low temperatures were recorded in the older shed, these temperatures did not occur until after the 20% concentration (when narcolepsy occurs) was reached. In addition the heat load created by the presence of birds in the shed is substantial and should contribute to increasing the temperature. The most extreme temperatures were recorded closest to the lance, and it is recommended that birds be moved back about metres from the lance. There were some residual levels of CO 2 up to 30 metres around the shed, which fluctuated greatly throughout the post injection phase. When the supply of gas was shut off the level of gas escaping close to the injection site rose significantly. It was therefore recommended that all personnel close to the gas delivery site have personal CO 2 gas monitors. The communications strategy and its implementation were a success. A final report was produced that described the trial method and its results. A summary of recommendations made in the report is: o o Staff associated with any CO 2 activity should wear personal CO 2 alarms and ear protection. Loud noise needs to be introduced gradually so as not to startle poultry. 18

27 o o o To ensure temperature is not too low for the birds before they become unconscious, poultry should be moved back from the injection site. In an emergency scenario, sheds should be wrapped from the outside wherever possible to minimise human exposure to virus. In the case of older style louvred sheds, this would mean removing the wires that operate the louvres. Drain water from drinking systems to ensure there is no damage to pipes caused by freezing water. Outcomes AUSVETPLAN is a series of documents and linked plans that together make up Australian s national response plan in the event of an EAD. One of the documents within the plan is the Destruction of Animals Manual (Animal Health Australia, 2006). This manual includes a section on birds, and gassing with CO 2 is identified as the preferred method for disposing of large numbers of birds in commercial poultry units. The body of the document provides a description of how birds might be caught and transferred to skips or crates and the gassing carried out in those skips rather than in the shed. There is an appendix to the document that provides more detailed guidelines on the gassing of birds in the shed itself, however these guidelines were written before the trial and based on preexisting information from overseas uses of the methods. The results of the trial will be used for the next review of this manual, together with results of subsequent overseas trials. The AUSVETPLAN for Newcastle disease (Animal Health Australia, 2004) indicates that there is no effective or appropriate treatment of infected birds, and that they should be destroyed on-site. The strategy notes that several gases can be used to kill large numbers of birds, including cyanide, methyl bromide, carbon dioxide, exhaust gas and nitrogen. It recommends that carbon dioxide and nitrogen are the preferred methods because of their relative lack of toxicity to humans. The AUSVETPLAN Disease Strategy for Avian Influenza (Animal Health Australia, 2008) notes that gassing with carbon dioxide was used in a 2003 outbreak in the Netherlands. Neither the ND or AI strategies make specific reference to the CO 2 trial analysed here, or to protocols for using the CO 2 method, however, both documents make reference to the Destruction of Animals Manual (Animal Health Australia, 2006) described earlier. Information on the trial and subsequent guidelines is available on the Animal Health Australia website, and information on the success of the trial was distributed to the industry and media following its completion. Since the Australian trial, there have been no EAD situations in the poultry industry requiring slaughter of animals, and therefore the method trialled in the project has not had to be used in a reallife EAD situation to date. Even though the results of the trial and it s recommendations have not yet been incorporated into AUSVETPLAN documentation, it is assumed that Animal Health Australia s involvement in the response to any EAD outbreak will ensure that the guidelines are distributed and followed. Measuring impacts and benefits The without R&D scenario Without the trial there would be some significant lead up time in being able to use in-shed liquid CO 2 gassing as the preferred slaughter method during an EAD event. This delay would have been due to uncertainties about its effectiveness and the best logistical way to carry it out. There would also have been delays being able to use the method because of animal welfare concerns due to correct protocols not having been developed and tested. 19

28 For example the Office of the Chief Veterinary Officer outlines the animal welfare aims in response to an EAD (Rubira, 2009). In an EAD response, decisions about animal welfare should be informed by scientific evidence. The animal welfare aims are to ensure: the destruction of the minimum number of animals necessary to rapidly control the disease the maintenance of acceptable animal welfare outcomes for all livestock species, without compromising disease control and eradication efforts the effective management of animals within restricted areas and elsewhere, based on sound risk assessment, to avoid later welfare problems the best use of available resources (personnel, infrastructure, feed and water) Rubira (2009) also notes that during an EAD, the following requirements must be met: Current animal welfare legislation in the jurisdiction must be complied with. The Australian Model Codes of Practice for the Welfare of Animals (under the sponsorship of the Primary Industries Ministerial Council) describe acceptable levels of animal care that inform what is acceptable under current Animal Welfare legislation. There are 22 current model codes in existence. Industry quality assurance programs complementing the regulatory programs. The Model Code of Practice for the Welfare of Animals: Domestic Poultry (4 th edition) (Primary Industries Standing Committee, 2002) makes no mention of specific methods of euthanasing large sheds of animals, and simply states that Sick and injured birds should be humanely destroyed, unless suitable isolation and treatment facilities are available, there is a good chance of recovery without unreasonable pain, and where the health of the overall flock is not compromised. If the trial had not taken place, there would likely have been a delay of several weeks in obtaining approval to go ahead with the gassing, on the basis that it is not clear if such standards could be maintained (Mike Bond, pers. comm., 2009). The most likely possible scenario if the trial had not been undertaken would have been that a different method of slaughter would have had to be used in the initial stages of the outbreak, such as the method used in the previous Newcastle disease outbreaks which was gassing in skips rather than in-situ. Such a method is more labour intensive, more stressful to the animals and exposes humans to infectious diseases to a greater degree due to a higher level of bird handling. This alternative method would have been used at least for the first few weeks of the outbreak as there would have been urgency in slaughtering the birds. The in-situ gas method couldn t have been used as there would have been delays of up to several weeks while protocols were sought from overseas, logistics were worked out (e.g. building sealing, CO 2 requirements) and animal welfare approvals were sought from the animal welfare authority in the appropriate jurisdiction. Assuming that these issues were eventually addressed, and the in-situ method was approved for use, it is possible the protocols would have been developed in haste and their use may not have been as effective in the short-term as with the trial, or might have wasted resources. For example too much or not enough gas may have been used, or the buildings may not have been appropriately sealed, or there may have been greater animal discomfort. Impacts of the R&D The benefits of the project include far greater certainty with regard to the following aspects: 20

29 The immediate availability of a quicker and lower cost methodology for slaughtering birds for the purpose of containing an EAD Reduced risk of disease spreading beyond an initial outbreak, and associated reduced impact of disease. Improved animal welfare associated with the euthanasia method Reduced risk of harm or contamination from zoonoses and other pathogens such as avian influenza for those staff participating in carrying out the euthanasia Reduced risk of spread of diseases such as AI to native bird populations Reduced costs to governments from their contribution to eradication (under cost sharing arrangements) A summary of the principal types of benefits and related costs associated with the outcomes of the project is shown in Table 2. Table 2 Categories of Benefits from the Investment Benefits Productivity and Profitability Reduced cost of euthanasia compared to next best method Reduced likelihood of disease spreading from a small to a larger outbreak due to improved timeliness of application of an in situ method (and therefore reduced potential impact) Environmental Reduced likelihood of disease spreading to native birds Social Reduced animal welfare impact on birds to be slaughtered compared to next best alternative method Reduced likelihood of human contamination from disease or treatment method compared to next best alternative method Reduced costs to governments from their contribution to eradication (under cost sharing arrangements) Public versus private benefits The benefits will be both public and private in nature. There will be private benefits to the chicken meat industry through a less costly response to containing an emergency disease outbreak, as well as the reduced impact of the disease due to the reduced likelihood of spread. There is also the potential for public benefits through the use of this method over other methods in terms of human health benefits, animal welfare benefits and environmental benefits. The public will also benefit from reduced costs to governments from their contribution to eradication (under cost sharing arrangements). Distribution of benefits along the supply chain Any benefits to the chicken meat industry in terms of reduced costs of disease control will be distributed along the supply chain, which is predominantly vertically integrated. 21

30 Benefits to other primary industries The industry benefits are mostly restricted to the poultry industry, in particular the chicken meat component of the poultry industry as the in-situ method is not always suitable to use for caged birds (layers). The only benefit to other primary industries may be where the disease being controlled is one that may also affect other animal industries, and where expediting the slaughter of the infected animals reduces the likelihood of disease spreading to other industries (e.g. AI spreading to the pork industry). Match with national priorities The Australian Government s national and rural R&D priorities are reproduced in Table 3. Table 3 National and Rural R&D Research Priorities Australian Government National Research Priorities Rural Research Priorities 1. An environmentally sustainable Australia 2. Promoting and maintaining good health 3. Frontier technologies for building and transforming Australian industries 4. Safeguarding Australia 1. Productivity and adding value 2. Supply chain and markets 3. Natural resource management 4. Climate variability and climate change 5. Biosecurity Supporting the priorities: 1. Innovation skills 2. Technology This project makes some contribution to National Research Priorities 2 and 4 and to Rural Research Priorities 1 and 5. Additionality If the government s contribution to the Chicken Meat R&D Program was reduced by half, then this project would probably still have been funded by the program, as it was only a small investment, but one that could have significant implications for EAD management. If the Chicken Meat R&D Program did not exist at all, this project would probably still have been funded as there was already significant funding from industry and other groups (e.g. AHA), and any shortfall may have been able to be sought elsewhere. However, seeking this additional funding may have resulted in some delay in the trial proceeding. Estimates of benefits An example of an EAD where euthanasia of birds would be required is Newcastle disease. Newcastle disease is a viral disease of both domestic poultry and wild birds which is characterised by gastrointestinal, respiratory and nervous signs. There are both virulent and avirulent strains of the disease. There have been outbreaks of virulent strains of the disease in Australia in 1930 and 1932, and a number of outbreaks during the years Genetic sequencing has been used to conduct a national survey for Newcastle disease virus distribution and vaccination of high risk areas has been undertaken since There is a National Newcastle Disease Management Plan that is in place for the disease that seeks to remove the need for vaccination by the end of 2012 (Animal Health Australia, 2009). The AUSVETPLAN disease strategy for the control and eradication of Newcastle 22

31 disease was applied in the 2002 outbreaks, and would be applied again in the event of any future outbreak. Non-virulent forms of Newcastle disease are always present in Australia, and the outbreaks in Australia have come from the mutation of these into virulent strains. The outbreaks are not due to the disease entering from overseas sources. Therefore, given the number of past outbreaks, the risk of a virulent outbreak of Newcastle disease is considered relatively high when compared with some other EADs. However, it is also noted that the vaccination program would have reduced the risk of an outbreak of the disease becoming widespread compared to the past situation. The 1999 outbreak of the disease in NSW resulted in the slaughter of 1.9 million meat chickens, 13,000 laying hens, 5,000 ducks, 3,000 meat pigeons, 60,000 pullets, 17 ostriches and more than 2,000 domestic birds. The outbreak cost almost $24 million to eradicate (AQIS, 2007). ABARE has estimated the short-term total loss to Australian society from a significant outbreak would amount to about $50 million, made up of losses to producers and costs to consumers due to higher prices (AQIS, 2007). There are 16 sub-types of AI virus, and only some of these are highly pathogenic and cause severe mortality in birds. There have been five outbreaks of highly pathogenic avian influenza in commercial poultry flocks in Australia which were all successfully eradicated (the last in 1997). The H5N1 virus is the particular strain that has caused great concern in recent years as it has infected and killed humans who have had close contact with sick poultry. The virus has not been known to spread from human to human. This strain has not ever been present in Australia. The annual gross value of the Australian poultry industry has averaged $1.8 billion over the last five years. An outbreak of AI (H5N1) in Vietnam in the period resulted in the economic cost of lost stock at around 15% of the gross value of output in that country (World Bank, 2006). This estimate does likely not include the full impact of short-term loss of markets due to consumer fears. In order to estimate the potential benefits from this research investment, a scenario is assumed where there is an outbreak of an EAD in a poultry region of New South Wales. ND and AI are the two potential EADs considered in the analysis. The outbreak requires the slaughter of the infected chickens and possibly the slaughter of non-infected chickens in the immediate vicinity in order to further prevent spread. It is assumed that to effectively prevent the outbreak from spreading beyond the initial small outbreak, slaughter is required for 18 sheds, across 3 farms, and that this would have to be carried out in the first two weeks of the outbreak (preferably during the first week). It is during these two weeks that the in-situ gas method would not have been available if the trial had not been undertaken. As stated earlier, given the number of past outbreaks, the risk of a virulent outbreak of ND is considered relatively high when compared with some other EADs, however the recent vaccination program would have reduced the risk. For the purposes of this analysis, the annual probability of a well contained but virulent outbreak of ND is assumed to be 10% per annum. For the purposes of this analysis it is assumed that the annual probability of a well contained outbreak of H5N1 in Australia, that does not spread beyond the initial sheds/farm, is 3% (a probability of 2% for an outbreak leading to a loss of 15% of gross value of output was previously assumed in an analysis for the Australian Biosecurity CRC). Without scenario Without the research, it is assumed that for first two weeks of the outbreak, slaughter of animals within only 8 sheds would have been undertaken by gassing in skips, which is the method used during previous ND outbreaks. Sixteen sheds instead of the 18 required are gassed due to the additional time taken using the gassing in skip method. It is known that the cost of carrying out the in-situ method requires approximately $6,000 worth of gas and $4,250 worth of other materials per shed. It is assumed that the cost of such materials would be approximately the same when gassing in skips. The 23

32 labour costs for the gassing in skips method are assumed to be based on requiring 12 persons per shed for 16 hours at a cost of $19 per hour per person (approximate award casual rate for poultry farm and hatchery employees (Australian Government Workplace Authority, 2008)). The cost of carrying out such a process is therefore $13,898 per shed. Also, the use of this method in the event of a H5N1 avian influenza outbreak would increase the risk of those handling the birds contracting the virus. It is assumed that using this method of slaughter, the risk of a human contracting the virus is 3% per shed treated, assuming that appropriate occupational health and safety precautions are undertaken. Further, the probability of those who are infected dying from the H5N1 virus is assumed to be 10%. The World Health Organisation reports that more than half of the laboratory-confirmed cases of H5N1 in humans have been fatal (World Health Organisation, 2009). However, the probability of death in a controlled situation in a developed country is anticipated to be significantly lower. The value of a human life is sourced from Abelson (2003), who undertook a study to measure the Australian willingness to pay for avoiding an immediate death of a healthy individual in middle age ($2.5 million). The Abelson figure of $2.5 million has been accepted as an appropriate figure to use for Australian public policy decisions. Morbidity costs for those who might recover have not been valued here. With the use of the gassing in skips method, it is assumed that the probability of the small initial outbreak of either AI or ND spreading into a medium sized outbreak is 25% (resulting in a 2.5% probability of a medium sized outbreak of ND and a 0.75% probability of a medium sized outbreak of AI). This probability of 50% is an assumption only for the purposes of this analysis. The additional potential cost of a medium sized of outbreak of ND is estimated at $50 million, while the additional potential cost of a medium sized AI outbreak is estimated at $270 million. This is a conservative estimate as it does not fully take into account the potential impact of market loss due to loss of consumer confidence in the safety of chicken meat. However, it is further noted that the bulk of such market losses are likely to be sustained during the initial outbreak period and therefore will be similar in both the with and without research scenarios. During the two week period, it is assumed the in-situ gassing method would have been trialled and approved for use in the third week of the outbreak, and the remaining two sheds gassed with the new method in the following week. While it was earlier acknowledged that the initial use of the in-situ method in the without situation may be less effective than in the with research investment situation due to the development of protocols being rushed, this benefit is not valued here. With scenario With the research, it is assumed that all 18 sheds requiring slaughter in the first two weeks could utilise the in-situ gassing method. For the method trialled, the gas supply for each shed would cost approximately $6,000, and there would be additional expenses for each shed of about $4250 per day (CO 2 monitors, breathing apparatus, disposables). As noted above, this is the same as the in-skip situation. Staff costs would be less than for the in-skip method. For each shed it is assumed 6 persons for 4 hours are required at a wage of $19 per hour (approximate award rate for poultry farm and hatchery employees). The total cost per shed $10,706, a saving of $1,368 per shed for 16 sheds (assumes the costs of the other two sheds are the same as they would be in the without situation). The use of the in-situ method greatly reduces the need for handling and interacting with infected, live birds. It is therefore assumed that the in-situ method of slaughter reduces the probability of a human contracting the virus from 3% to only 1% per shed. As all 18 sheds are able to be slaughtered within the two week time period, the probability of the small initial outbreak becoming a medium-sized outbreak is reduced marginally from 25% to 23%. Other emergency response measures would also influence the probability of the outbreak size including 24

33 effectiveness of quarantine, proximity of infected farms to other poultry farms etc. The 2% marginal reduction is a conservative estimate. Benefits not valued The benefits not valued in this analysis include the potential animal welfare impacts, reduced human morbidity costs, reduced environmental impact, and the less effective in-situ application in the initial stages of being able to use the in-situ method. These have not been valued due to difficulties in quantifying these types of impacts. Summary of assumptions Table 4 below summarises the assumptions used in the analysis. Table 4 Summary of Assumptions Variable Assumption Source Probability of initial outbreak of Newcastle disease Probability of initial outbreak of Avian influenza Number of sheds treated within two week period without research Number of sheds treated within two week period with research 10% Agtrans assumption based on past frequency of outbreaks 3% Agtrans assumption 8 Agtrans assumption 18 Agtrans assumption Cost of treatment without research $13,898 per shed for 8 sheds ($10,706 per shed for other ten sheds after the two week period) Agtrans assumption, following information in project final report Cost of treatment with research $10,706 per shed for 18 sheds Agtrans assumption, following information in project final report Probability of one human contracting AI without research Probability of one human contracting AI with research Probability of death after contracting AI 3% per shed Agtrans assumption 1% per shed Agtrans assumption 10% Adjusted from World Health Organisation Value of a human life $2.5 million Abelson, 2003 Probability of outbreaks (for both diseases) spreading to become medium-sized without research Probability of outbreaks (for both diseases) spreading to become 25% Agtrans assumption 23% Agtrans assumption 25

34 Variable Assumption Source medium-sized with research Cost of medium-sized ND outbreak to Australia Cost of medium-sized AI outbreak to Australia $50 million AQIS, 2007 $270 million Adapted from World Bank, 2006 Year of first benefit 2007/08 Year after completion of research Results All past costs and benefits were expressed in 2008/09 dollar terms using the CPI. All benefits after 2008/09 were expressed in 2008/09 dollar terms. All costs and benefits were discounted to the first year of investment (2006/07) using a discount rate of 5%. The base run used the best estimates of each variable, notwithstanding a high level of uncertainty for many of the estimates. All analyses ran for 40 years including the first year of investment. Investment criteria were estimated for both total investment and for the Program investment alone. The investment criteria are reported in Table 5. The high Benefit-Cost Ratio and Internal Rate of Return are the result of the very low cost of the project. 26

35 Table 5 Investment Criteria for Total Investment and Total Benefits (discount rate 5%) Criterion Program Investment only Total Investment Present value of benefits (m$) Present value of costs (m$) Net present value (m$) Benefit-cost ratio to to 1 Internal rate of return (%) Distribution of benefits Just over 1% percent of the benefits are derived from the saved labour costs, while 98% of the benefits are derived from reducing the probability of a medium-sized outbreak of the disease. The human health benefit contributed only 0.5% of benefits to the results. These proportions are represented diagrammatically in Figure 1. Figure 1 Distribution of Present Value of Benefits by Source Sensitivity analyses Sensitivity analyses were carried out on a range of variables and results are reported in Tables 6 to 8. All sensitivity analyses were performed on the total investment only using a 5% discount rate (with the exception of Table 6) with benefits taken over the 40 year period. All other parameters were held at their base values. Table 6 shows there is considerable sensitivity of the investment criteria to the discount rate. 27

36 Table 6 Sensitivity to Discount Rate (All investment, 40 years) Criterion Discount Rate 0% 5% (Base) 10% Present value of benefits (m$) Present value of costs (m$) Net present value (m$) Benefit-cost ratio to to to 1 Table 7 shows the sensitivity of the investment criteria to the probability of the initial outbreak of the two diseases (both with and without the research). The results show that if the assumed probabilities of the outbreaks are halved, then the results are still highly positive, with a Benefit-Cost Ratio of 51 to 1. Table 7 Sensitivity to Probability of Initial Disease Outbreaks (All investment, 5% discount rate, 40 years) Criterion Probability of Initial Disease Outbreaks ND 5% and AI 1.5% ND 10% and AI 3% (base) ND 20% and AI 6% Present value of benefits (m$) Present value of costs (m$) Net present value (m$) Benefit-cost ratio 51.4 to to to 1 Internal rate of return (%) ,208 Table 8 shows the sensitivity of the investment criteria to the reduction in probability of both AI and ND spreading beyond the initial outbreak with the research. The results show that even when the probability of spread is only reduced by 1% compared to the without research scenario, the investment criteria are still positive, with a Net Present Value of $2.26 million. 28

37 Table 8 Sensitivity to Probability of ND and AI Spreading Beyond Initial Outbreak (All investment, 5% discount rate, 40 years) Criterion Probability of ND and AI Spreading Beyond Initial Outbreak 22% 23% (base) 24% Present value of benefits (m$) Present value of costs (m$) Net present value (m$) Benefit-cost ratio to to to 1 Internal rate of return (%) Confidence rating A confidence rating has been developed for the investment analysis using a standard format (Table 9). Table 9 Confidence in Analysis Coverage of Benefits Confidence in Assumptions High Low Conclusions The research project successfully demonstrated a method to euthanase poultry in-shed using CO 2 in the event of an EAD outbreak. The value of having conducted the trial is in preparedness for an EAD outbreak, in terms of being able to quickly and efficiently instigate procedures to destroy infected birds and contain the outbreak. Without carrying out the trial, and developing a procedures manual, it is likely there would have been delays being able to use the method while protocols were developed and approvals were sought from animal welfare authorities. The potential value of having carried out such a trial is difficult to value in quantitative terms. Valuation of the benefits required the use of several uncertain assumptions relating to the probability of disease outbreaks, their likelihood of spreading to humans, and spreading beyond the initial outbreak. These probabilities should be considered illustrative only, and sensitivity analyses were carried out to demonstrate how changes in these probabilities reflect the investment criteria. Despite the uncertainties surrounding some assumptions, the analysis has shown that with respect to potential EAD outbreaks, even small improvements in preparedness and containment can result in large benefits, due to the potential large impact of these diseases. Acknowledgments Mike Bond, Animal Health Australia Vivien Kite, RIRDC Research Manager 29

38 References Abelson, P. (2003) The value of life and health for public policy. Economic Record 79, S2-S13. Animal Health Australia (2004) Disease Strategy: Newcastle Disease (Version 3.0) AUSVETPLAN Edition 3 Primary Industries Ministerial Council. Animal Health Australia (2006) AUSVETPLAN Operational Procedures Manual: Destruction of Animals A manual of techniques of humane destruction Version 3.0, 2006, Primary Industries Ministerial Council. Animal Health Australia (2008) Disease Strategy: Avian Influenza (Version 3.3) AUSVETPLAN Edition 3 Primary Industries Ministerial Council. Animal Health Australia (2009) Newcastle Disease Management Plan Australian Government Workplace Authority (2008) Pay Scale Summary derived from the Poultry Farm and Hatchery Employees Award State 2002), Published 15 July AQIS (2007) Newcastle Disease webpage Primary Industries Standing Committee (2002) Model Code of Practice for the Welfare of Animals: Domestic Poultry 4 th Edition. SCARM Report 83, CSIRO Publishing. Rubira, R. (2009) Animal welfare considerations in response to an emergency animal disease 2009 RSPCA Australia Scientific Seminar. World Bank (2006) Loans for Vietnam, India and Laos. World Bank, Washington. World Health Organisation, 2009 Avian Influenza Factsheet ( 30

39 Addendum 1: Results for CRRDCC Process As for the results presented earlier, all past costs and benefits were expressed in 2008/09 dollar terms using the CPI. All benefits after 2008/09 were expressed in 2008/09 dollar terms. All costs and benefits were discounted to the year of analysis (2008/09) using a discount rate of 5%. These results are shown in Table A.1 and A.2 and are reported for different periods of benefits with year 0 being the last year of investment. All analyses ran for a maximum period of 30 years from year 0. Investment criteria were estimated for both total investment and for the Program investment alone. Table A.1 Investment Criteria for Total Investment and Total Benefits (discount rate 5%) 0 years 5 years 10 years 15 years 20 years 30 years Present value of benefits ($) Present value of costs ($) Net present value ($) Benefit-cost ratio to to to to to 1 Internal rate of return (%) negative Table A.2 Investment Criteria for Program Investment and Program Benefits (discount rate 5%) 0 years 5 years 10 years 15 years 20 years 30 years Present value of benefits ($) Present value of costs ($) Net present value ($) Benefit-cost ratio to to to to to 1 Internal rate of return (%) negative The flow of annual benefits is shown in Figure A.1 for both the total investment and for the Program investment. 31

40 Figure A.1 Annual Benefits 32

41 Appendix 2: Impact Assessment of Investment in New Diagnostic Assays to Improve Control of Coccidiosis in Poultry Project description Background Coccidiosis is a major parasitic disease of poultry. There are seven identified species of the disease (Eimeria) in chickens in Australia. The species are E. tenella, E. necatrix, E. mitis, E. acervulina, E. praecox, E. maxima and E. brunetti. Transmission of the disease is via ingestion of infective oocysts which are shed in the faeces. The disease is normally controlled either through chemical coccidiostats or through live species-specific vaccines. The use of chemicals has become less desirable due to increasing parasite resistance to chemicals and concerns about residues in the environment and in food. Live vaccines are preferable as they provide longer term economic protection against the disease, there are no problems with chemical resistance and the problems of withholding periods due to chemical residues can be avoided. However, when using species-specific live vaccines, effective diagnostic assays are essential to diagnose accurately the species of coccidiosis present and maximise the effectiveness of the control programs. Diagnostic tests must be suitable for: epidemiological investigations (determining the species present on properties, assessing disease risk, preventing introduction of new species, minimising vaccination costs) investigating coccidiosis outbreaks (causative species, disease thresholds) investigating suspected problems with vaccination (inadequate dosing, mishandling of the vaccines, suspected vaccine failure) To be effective diagnostic assays should have several key characteristics: animal handling time should be minimised to reduce flock stress sample processing steps should be minimised to reduce risk of cross contamination assays must be species-specific to minimise false positive reactions assays must be sensitive enough to detect low level infections Prior to this project, conventional PCR and sequenced based DNA markers had improved species discrimination but lacked the ability to quantify Eimeria load, particularly in animals with mixed infections. This project was funded in order to provide appropriate quantitative detection and serololgicial assay techniques to meet the above requirements. The project was carried out by the Animal Research Institute, Queensland Primary Industries and Fisheries (QPI&F). 33

42 Project objectives The objectives of the project were: to develop and validate new DNA-based quantitative assays for the diagnosis of poultry coccidiosis to develop and validate new serological assays for the diagnosis of poultry coccidiosis Project activities Real-time PCR DNA sequence data generated previously by the research group was used to identify a DNA marker small subunit ribosomal DNA (SSU rdna) appropriate for development of PCR primers and real-time PCR probes. The rdna ITS2 was chosen as a suitable candidate for an Eimera species-level marker after eliminating the SSU rdna and ITS1 markers. PCR primers were then designed and used to determine the DNA sequence of the target region for at least three strains of each of the seven species of Eimeria to ensure that intraspecific variation didn t confound assay development. Real-time PCR probes were designed, and then optimised and validated. There was collaboration with another research group within the Poultry CRC to use their DNA sequence data for designing the ITS2 probes saving significant time in developing the real-time PCR assay. A range of DNA purification and extraction techniques was tested and the most efficient and costeffective was adopted as the standard procedure. Various techniques for the preservation of field samples and the timing of DNA extraction from the samples were also assessed. Oocysts from experimentally infected birds were used to assess the assay sensitivity for single and mixed species infections and to develop response curves for measuring parasite numbers in samples. Once this process was determined, parasite population profiles pre- and post-vaccination were examined. This involved single species profiles of vaccinated birds (four species vaccine) in laboratory trials. Trials with a commercial rearing flock were also carried out screening for seven species. There was also a snapshot screening of vaccinated birds at a single point in time. Investigations of parasite population profiles were also undertaken in unvaccinated commercial broiler flocks. ELISAs An attempt was made to develop competitive ELISAs utilising monoclonal antibodies produced in mice using conventional hybridoma technology, however this was unsuccessful. Instead, an indirect ELISA was developed from E. tenella merozoite antigens. The indirect ELISA was then used to asses sera from vaccinated and unvaccinated birds from commercial farms. Cost of investment Estimates of the total investment by the Program and others are provided in Table 1. Table 1 Estimate of Investment in Project DAQ-316A (nominal $) 34

43 Year ending June Chicken Meat R&D Program Other investors 1 Total ,635 61, , , , , , , , ,771 69, ,476 Total 247, , ,870 Source: Project Proposal and Clarity database 1 Other investors include QPI&F and the chicken meat industry Outputs and outcomes Outputs The key outputs from the research were: The development of seven species-specific real-time PCR assays that detect and quantify exposure of the seven known Australian species of Eimeria in chickens. The development and validation of an indirect serological test (ELISA) that can detect exposure of chickens to E. tenella and E. necatrix. This ELISA can also clearly distinguish between inoculated and uninfected birds. Field trials on a commercial vaccinated flock found both the sensitivity and specificity of the assay to be over 95%. The project developed the first protocol for screening faecal samples for Eimeria without having to first purify the parasites with a primary concentration procedure such as salt flotation. DNA extraction from field collected chicken faecal samples was optimised and involved a bleach treatment to remove non-oocyst DNA, bead beating for 10 minutes to crack the oocysts for DNA release followed by extraction using a Qiagen stool kit to remove PCR inhibitors. A laboratory protocol for this procedure was produced. Key findings from the research included: Field samples collected as fresh faeces will contain unsporulated oocysts while vaccine stocks and lab maintained strains contain sporulated oocysts, and as a result will amplify four times the amount of DNA from the same number of oocysts. This is because the real-time PCR probes will detect all eight sporozoites within a single oocyst (a sporulated oocyst contains eight haploid sporozoites thus carries four times as much DNA as one diploid unsporulated oocyst). Rather than attempting to sporulate the individual field collected faecal samples, a variable is added to the real-time PCR quantification equation to account for sporulation. Field samples can be stored in a fridge or freezer for up to 6 months without significant loss of oocyst DNA. For longer term storage, freezer storage is recommended to significantly reduce the growth of undesirable organisms i.e. bacteria and fungus. Bird to bird variability of parasite population profiles can be enormous, and therefore it is important to sample from more than one bird. Shedding profiles over time for five species highlight the danger of missing an infection if using snapshot, single time point diagnostics. Monitoring the health of a large flock should take this variability into account by sampling from multiple birds over multiple time points. 35

44 Snapshot screening of faecal samples from single time points of vaccinated birds highlighted the need for re-circulation of oocysts to ensure complete vaccine coverage. In the vaccinated commercial flock peak oocyst output was not observed until the second round of infection suggesting the majority of birds sprayed with vaccine are not receiving a significant dose until they pick up recirculating oocysts. In terms of peak oocyst output the vaccine strain of E. tenella vastly outnumbers the other vaccine species followed by E. acervulina and lastly E. necatrix and E. maxima. Although it was not possible to produce a generic competitive ELISA, the results of the process did provide further understanding of the chicken s antibody response to infection. It was found that different Eimeria life stages vary in their antigenicity and that greater purity of the different life stages was necessary to prevent background noise from obscuring the specific antibody response. The recommendations coming out of the study were: Faecal samples for RT-PCR screening should be stored in the fridge short term and freezer long term. High bird-to-bird variation indicates that screening pooled faeces will better reflect shed health. Sound poultry management requires accurate and sensitive diagnostic tests for the different species of Eimeria. More samples from field trials are required to validate the tests. Diagnostic assays cannot currently distinguish live vaccine strains from wild strains; neither can they distinguish virulent wild strains from non-virulent strains. Strain diagnostics is essential to investigate suspected vaccine break-throughs. Outcomes Both the DNA-based and serological diagnostic assays can be offered as a service to the Australian poultry industry and be made available to be sold and/or licensed to other diagnostic laboratories outside Australia. Within Australia the diagnostic assay is currently available as a non-commercial service through the Queensland Department of Primary Industries and will soon be available as a commercial service through Biosecurity Queensland and the Poultry Diagnostics Facility in Melbourne. The assay has been used by the project s commercial partner, Eimeria Pty Ltd who commercially manufacture and distribute coccidiosis vaccines to confirm vaccine line purity. A second vaccine company that has recently entered the Australian market (Paracox Pty Ltd) has used the diagnostic assays in a limited way in order to confirm that the birds they have been vaccinating in the breeding sector of the industry have successfully achieved immunity. Interaction by the project team with industry representatives at state (e.g QPI&F s Poultry Health Liaison Group) and other national activities revealed that there was wide industry support for using live coccidiosis vaccines, and acknowledgement that these vaccines could be put to better use with a platform of informative diagnostic assays. Interest has been expressed from both chicken meat and egg production sectors. The purposes for which the diagnostic assays are being, and will potentially be, used include: epidemiological investigations (determining the species present on properties, assessing disease risk, preventing introduction of new species, minimising vaccination costs) 36

45 investigating coccidiosis outbreaks (causative species, disease thresholds) investigating suspected problems with vaccination (inadequate dosing, mishandling of the vaccines, suspected vaccine failure) Adoption of the ELISA kits might be limited while tests for only two out of the seven species are available. However, the two species for which the tests are available are the most economically important species. The Elisa tests have not been adopted by industry at this stage. The protocol developed for screening faecal samples for Eimeria has been adopted for all field sample screening. Measuring impacts and benefits The without R&D scenario The proposal for this research project recognised that there had been some results published in the previous ten years detailing DNA-based techniques for diagnosing coccidia of a wide range of host animals, including chickens. There were eight published papers on identification of Eimeria species from chickens using PCR, some of which were from members of the research team. However while some of the techniques provided useful methods for differentiating species, none provided a quantitative result and most did not incorporate all of the appropriate species, or were difficult to perform and time-consuming. There was found to be no evidence in the literature that real-time PCR has been applied to Eimeria diagnostics and no relevant patents. There was also no literature on the development of ELISAs for the diagnosis of Eimeria infections and was thought that there were no ELISA kits available commercially in the world. There were few other research groups actively working on live vaccines and improved diagnostics for poultry Eimeria and no others had access to a similar range of Eimeria isolates for research purposes. Therefore it is likely that without this research project, the tests would not have been developed by other research groups, at least in the short-term. Impacts of the R&D Improved diagnostic assays for coccidiosis can be used for a range of purposes that assist with controlling the disease in chickens. The disease affects all sectors of the poultry industry where chickens live on the ground, including breeders, broilers, barn system and free-range layers, and floorreared replacement pullets. However, live vaccines are not commonly used in Australian broilers due to their shorter life spans, and therefore relatively lower risk for contracting coccidiosis (this may change in the future as New Zealand markets a live-vaccine specifically for broilers). Cage reared birds (largely layers) are not generally vaccinated because they are less susceptible to Eimeria infections which rely on recirculating oocysts. Vaccines are therefore most commonly used for breeders (those hens producing fertilised eggs for broilers). The advantages of the real-time PCR assays are that they are non-invasive, and they permit the accurate identification of species and the quantification of oocyst load, directly from faecal samples. The assays can assist with controlling the spread and incidence of the disease through explaining outbreaks, monitoring and controlling quality of vaccination programs, and monitoring the development of chemical resistance. 37

46 There are a number of ways in which the use of these assays, and the subsequent control of the disease, have the potential to positively impact on the poultry industry including: More effective use of chemical coccidiostats to control the disease in meat chicken flocks, potentially leading to decreased costs. For example, it has been estimated that over $10 million is spent each year in Australia on phrophylactic coccidiostats alone. That figure does not take into account the labour costs, treatment costs and production losses associated with the disease. By accurately understanding the exact combination of strains present in the shed, or contributing to an outbreak, the chemical regime can be altered to provide the most effective treatment. Reduced production losses from the disease where control is improved due to more effective vaccination programs. This is particularly relevant to the breeder flocks responsible for producing meat chickens, as this is where vaccinations are mostly commonly used. Reduced costs of monitoring the disease and vaccination programs through the use of the new protocol for screening faecal samples for Eimeria, which reduces handling time and potential contamination. The use of the ELISA assay will also reduce costs as it is low-cost, no special equipment is needed and the birds can be assessed for Eimeria exposure when routinely screened for other diseases. Improved animal welfare, through better disease control. Reduced risk of chemical residues to the environment through the reduced use of chemical coccidiostats. Greater consumer confidence due to the reduced risk of chemical residues in meat and eggs. A summary of the principal types of benefits and related costs associated with the outcomes of the project is shown in Table 2. Table 2 Categories of Benefits from the Investment Benefits Productivity and Profitability Reduced production losses, particularly in breeder flocks, due to more effective vaccination programs Potential reduced costs of vaccination and diagnostic programs Potential reduced disease and management costs when using chemical coccidiostats Environmental Reduced risk of chemical residues in the environment Social Reduced risk of chemical residues in food Increased animal welfare due to avoided disease Public versus private benefits The impacts of the investment are a mix of private and public benefits. The major benefits are private benefits to industry, through reduced costs and reduced impact of disease. There are also some potential public benefits including the reduced impact of residues on the environment and consumers, as well as increased animal welfare through reduced disease impacts. 38

47 Distribution of benefits along the supply chain The private industry benefits will be distributed along the supply chain as occurs within the existing sectors of the poultry industries. While the assay has the potential to benefit all sectors of the poultry industry, the current adoption of the assays has largely been with respect to the breeder industry as they are the sector of the industry that has principally adopted the use of vaccines for controlling coccidiosis. Benefits to other primary industries While the benefits of using the assays in the short-term appear to mostly relate to the breeder sector of the Australian poultry industry, there is also the potential for benefits to accrue to a number of other sectors within the Australian poultry industry including broilers, barn system and free-range layers, and floor-reared replacement pullets. The basic scientific knowledge developed as part of the process has the potential to be of benefit to a number of other primary industries, as coccidiosis is a disease affecting many other agricultural animals, including cows, sheep and goats. Coccidiosis is one of the five most economically important diseases of the cattle industry and continues to be a major health problem internationally. There is also the potential to negatively impact on competitive meat markets (e.g. pork, lamb, beef) if the perception of reduced chemical use in the chicken meat industry results in consumers choosing chicken meat over other meats. Match with national priorities The Australian Government s national and rural R&D priorities are reproduced in Table 3. Table 3 National and Rural R&D Research Priorities Australian Government National Research Priorities Rural Research Priorities 5. An environmentally sustainable Australia 6. Promoting and maintaining good health 7. Frontier technologies for building and transforming Australian industries 8. Safeguarding Australia 6. Productivity and adding value 7. Supply chain and markets 8. Natural resource management 9. Climate variability and climate change 10. Biosecurity Supporting the priorities: 3. Innovation skills 4. Technology This project makes some contribution to National Research Priorities 2, 3 and 4, and to Rural Research Priorities 1 and 5, as well as the two supporting priorities. Additionality If the government s contribution to the Chicken Meat R&D Program was reduced by half, then this project may have still been funded as coccidiosis is a high priority issue for the industry. However, the total funding may have been reduced, or it may have been spread over a greater number of years. If the Chicken Meat R&D Program did not exist at all, the project is unlikely to have been funded by industry alone (either in aggregate or an individual company, due to the strategic nature of the 39

48 research. However, another public research funder such as a state government may have undertaken the research. In this case, the investment may have been delayed in time. Estimates of benefits Of the key impacts identified above, only one of the economic benefits is quantified. The quantification of benefits will focus on the benefits to the breeding sector of the chicken meat industry, as this is where the greatest use of vaccines occurs, and where the diagnostic assays are being most likely to be utilised in the shorter-term. The specific benefit to be valued is the reduced impact of disease by identifying when the vaccine hasn t worked and therefore being able to repeat the vaccine program to avoid an outbreak of the disease. The other economic, environmental and social benefits are not valued, as the link from the research to such benefits is less clear than for the benefit valued. The nature of the environmental and social benefits also makes them more difficult to value. The breeding sector is responsible for selectively breeding meat chickens from imported fertile eggs, through three generations, to the broilers themselves that are placed on broiler farms at one day old. Table 4 describes the process for each generation. Table 4 Great Grandparents Summary of Breeding Flock Characteristics Imported as fertile eggs from overseas nucleus breeding flocks Hatched in a quarantine facility Released at 9 weeks of age and placed on breeding farms Produce fertile eggs that will be hatched to become the Grandparents of meat chickens Start producing eggs from about weeks and produce around 100 fertile eggs in their 52 week lifetime At any one time there might be 20,000 to 24,000 great grandparents on the ground across the whole chicken meat industry in Australia These birds are extremely valuable Grandparents Placed on Grandparent breeding farms after hatching Produce fertile eggs that will be hatched to become the Parents of meat chickens Start producing eggs at about weeks of age and in their lifetime (60 weeks) produce between fertile eggs At any one time there might be between 200,000 to 250,000 Grandparents of all ages on the ground across Australia Parents Placed on Parent breeding farms Produce fertile eggs that will become the meat chicken (broilers) that are farmed for meat Are kept until approximately 64 weeks and produce about 160 fertile eggs in 40

49 their lifetime. At anyone time there might be between 5.5 million and 6 million parent birds across Australia Meat Chickens (Broilers) Placed at day old on broiler farms Grown out to days of age Source: Australian Chicken Meat Federation, 2009 Slaughtered and processed for human consumption The breeder flocks are valuable, and are immunised against a range of diseases, including coccidiosis, to protect their own health and productivity, and also give added protection to chicks through antibodies passed on in the yolk sac. The term breeder flocks from here on is used to refer to all breeders including great grandparents, grandparents and parents. All breeder flocks in Australia are vaccinated for coccidiosis (Giles, pers. comm., 2009). In any vaccination program, there is a risk of a vaccination not being successful, and an outbreak of the disease occurring anyway. This risk is generally not due to the quality of the vaccine itself, but rather due to the conditions in the shed when it is administered, and sometimes the way in which it is administered. The proportion of cases in which this might occur is difficult to estimate and varies from season to season, however after discussions with industry personnel it is assumed that even with vaccination, there is still a 10% probability of a medium level outbreak occurring in a given shed. Coccidiosis is one of the most economically important diseases of the poultry industry, and can cause loss of production, morbidity and death. The degree of impact of the seven species varies greatly, and some birds may show no clinical signs of the disease, while others will suffer a range of symptoms including mild loss of appetite, weight loss or decreased weight gain, diarrhoea and dehydration (Poultry Hub, 2009). For the purpose of this analysis it is assumed that the coccidiosis outbreak in the shed would result in the death of a proportion of those birds infected. While the actual death rate due to coccidiosis is highly variable, for the purposes of this analysis it is assumed that the average death rate due to the outbreak is 5%. As well as mortality, the disease and the subsequent morbidity also reduce the number of hatchlings the infected birds (who survive) produce. This reduction is not always significant and is as low as a 2.5% (the average number of hatchlings produced per bird under normal circumstances is assumed to be 160). One significant impact the disease can have is to lead to a loss of flock uniformity in terms of body composition and subsequent management. There are performance bonuses that are determined on uniformity of birds as stock, and therefore some significant costs can accrue from losing this uniformity due to disease. Such a cost is difficult to value, and therefore to account for this, a higher proportion of lost hatchlings of 5% is used to measure productivity loss. As breeder flocks are integrated systems, it can be difficult to place a market value on the lost birds and fertilised eggs as they don t pass through a market system. A Canadian study was carried out into the appropriate compensation to pay when birds, eggs or chicks are destroyed due to a poultry disease outbreak. The study concluded that the average value of a broiler breeder was $11, and that the average cost of a hatchling was 23 cents (Ott and Bergmeier, 2005). These values were in 2001 dollar terms (US dollars). It is assumed that the nature of the industries between the two countries is comparable, and that these values (adjusted for time and currency) are appropriate for use in this analysis. Therefore, the values used in this analysis are $19 per breeder broiler and 40 cents per hatchling (in Australian 2008/09 dollar terms). While it is recognised that great grandparent and grandparent flocks would be of higher value than parent flocks, there numbers are smaller and therefore the same values are conservatively used across all flocks. 41

50 Without scenario In any vaccination program, there is a risk of a vaccination not being successful, and an outbreak of the disease occurring anyway. As noted above it is assumed that even with vaccination, there is still a 10% probability of a medium level outbreak occurring in the shed due to, for example, the vaccination being ineffectively administered. Without the availability of the diagnostic assay, it is assumed that this risk of outbreak would be difficult to detect, and this probability of outbreak would continue at the same level. With scenario With the availability of the diagnostic assay, there is the potential to determine routinely whether the vaccination has been effective in immunising the flock in the shed. This means that the flock can be revaccinated if required, and a costly outbreak of coccidiosis avoided. It is assumed that the adoption of the PCR diagnostic assay for this purpose is only low currently. It is assumed that in the year ending June 2011, 4% of the industry will routinely be using the assay for this purpose, and that this adoption rate grows linearly to reach 20% over the next five years. For those who use the assay, the risk of an outbreak is assumed to be reduced from 10% to 5%. The cost of carrying out the PCR diagnostic assay per sample is $ This sample can be defined as a faecal sample or gut scraping from a single bird, or a pooled faeces sample from a pen or shed. For the purposes of this analysis, it is assumed that 2 pooled faeces samples are required per shed, and that the average breeder shed houses 8,000 breeders (Baiaida website). Therefore, the average cost of the test per bird is $0.03 per bird. In some situations only 1 pooled sample would be required per shed, however as the oocyst load may be very low in some of the sheds being tested for this purpose, it is conservatively assumed 2 pooled samples may be carried out. The cost of the vaccine per bird is 14 cents, while the cost to administer the vaccine varies depending on the method. A total vaccination cost per bird of 20 cents is considered a reasonable (and conservative) estimate for the revaccination cost (Chris Morrow, pers. comm., 2009). Summary of assumptions Table 5 below summarises the assumptions used in the analysis. 42

51 Table 5 Summary of Assumptions Variable Assumption Source General Assumptions Total size of breeder flocks in Australia Proportion of breeder flock vaccinating for coccidiosis Death rate during coccidiosis outbreak Reduction in number of hatchlings produced across all birds due to coccidiosis Number of hatchlings produced per bird without disease 5,747,000 birds per annum ACMF, % Giles and Morrow, pers. comm., % Agtrans estimate 5% Agtrans estimate 160 ACMF, 2009 Value of broiler breeders $19.13 Adapted from Ott and Bergmeier, 2005 Value of hatchlings $0.40 Adapted from Ott and Bergmeier, 2005 Without research Probability of a coccidiosis outbreak in shed following vaccination 10% Agtrans estimate, after discussion with Tom Grimes and Morrow With research Probability of a coccidiosis outbreak in shed even following vaccination 5% Agtrans estimate Cost of carrying out PCR assay $0.03 per bird (based on a cost of $ per pooled sample, with 2 samples per shed, and 8,000 birds per shed) Agtrans estimate after discussions with Jessica Morgan Cost of revaccination $0.20 per bird Chris Morrow, pers. comm., 2009 Adoption rate of diagnostic test 4% in the year rising to 20% by year 2013/14 Agtrans estimate 43

52 Results All past costs and benefits were expressed in 2008/09 dollar terms using the CPI. All benefits after 2008/09 were expressed in 2008/09 dollar terms. All costs and benefits were discounted to the first year of investment (2003/04) using a discount rate of 5%. The base run used the best estimates of each variable, notwithstanding a high level of uncertainty for many of the estimates. All analyses ran for 40 years including the first year of investment. Investment criteria were estimated for both total investment and for the Program investment alone. The investment criteria are reported in Table 6. Table 6 Investment Criteria for Total Investment and Total Benefits (discount rate 5%) Criterion Program Investment only Total Investment Present value of benefits (m$) Present value of costs (m$) Net present value (m$) Benefit-cost ratio 3.0 to to 1 Internal rate of return (%) Sensitivity analyses Sensitivity analyses were carried out on a range of variables and results are reported in Tables 7 to 11. All sensitivity analyses were performed on the total investment only using a 5% discount rate (with the exception of Table 10) with benefits taken over the 40 year period. All other parameters were held at their base values. Table 7 shows there is considerable sensitivity of the investment criteria to the discount rate, largely due to the time lag between the investment and likely adoption. Table 7 Sensitivity to Discount Rate (All investment, 40 years) Criterion Discount Rate 0% 5% (Base) 10% Present value of benefits (m$) Present value of costs (m$) Net present value (m$) Benefit cost ratio 7.8 to to to 1 Table 8 shows the sensitivity of the investment criteria to the assumption regarding the likely probability of a coccidiosis outbreak in the with research scenario. The base scenario assumes that the probability of an outbreak reduces from 10% without the research, to 5% with the research. The 44

53 sensitivity analysis shows that if the probability of the outbreak was reduced even further to 2%, that the Benefit-Cost Ratio increases to 5.3 to 1. If the probability is only reduced to 7%, then the Benefit- Cost Ratio is still positive (1.4 to 1). Table 8 Sensitivity to Probability of Coccidiosis Outbreak With Research (All investment, 5% discount rate, 40 years) Criterion Probability of coccidiosis outbreak with use of diagnostic assay 2% 5% (base) 7% Present value of benefits (m$) Present value of costs (m$) Net present value (m$) Benefit-cost ratio 5.3 to to to 1 Internal rate of return (%) Table 9 shows the sensitivity of the investment criteria to the assumption regarding the assumed death rate in the flock due to coccidiosis. The base scenario assumes that the death rate is 5% (both with and without the research). The results show that the analysis is not very sensitive to the assumed death rate (as the assumed productivity loss remains the same). Table 9 Sensitivity to Assumed Death Rate (All investment, 5% discount rate, 40 years) Criterion Assumed Death Rate 2% 5% (base) 10% Present value of benefits (m$) Present value of costs (m$) Net present value (m$) Benefit-cost ratio 2.4 to to to 1 Internal rate of return (%) Table 10 shows the sensitivity of the investment criteria to the assumption regarding the assumed reduction in the number of hatchlings produced due to coccidiosis. The base scenario assumes that the reduction is 5% (both with and without the research). The results show that the analysis is sensitive to this variable, with the Benefit-Cost Ratio increasing to 6 to 1 when the assumed reduction in hatchlings is doubled to 10%. 45

54 Table 10 Sensitivity to Reduction in Hatchlings Produced (All investment, 5% discount rate, 40 years) Criterion Assumed Reduction in Hatchlings Produced 2.5% 5% (base) 10% Present value of benefits (m$) Present value of costs (m$) Net present value (m$) Benefit-cost ratio 1.5 to to to 1 Internal rate of return (%) Table 11 shows the sensitivity of the investment criteria to the potential adoption of the diagnostic assay. The base scenario assumes that the maximum adoption is 20% of breeder flocks. The results show that the Benefit-Cost Ratio increases from 3.0 to 4.4 to 1 when the assumed maximum adoption is 30%. Table 11 Sensitivity to Maximum Assumed Adoption (All investment, 5% discount rate, 40 years) Criterion Assumed Maximum Adoption 10% 20% (base) 30% Present value of benefits (m$) Present value of costs (m$) Net present value (m$) Benefit-cost ratio 1.5 to to to 1 Internal rate of return (%) Confidence rating A confidence rating has been developed for the investment analysis using a standard format (Table 13). Table 13 Confidence in Analysis Coverage of Benefits Confidence in Assumptions Low Medium 46

55 Conclusions The research project was successful in developing a PCR diagnostic assay that can clearly identify which of the seven strains of Eimeria are present in a shed, and in what volume. Given the strategic nature of the research, the potential uses of such an assay are wide ranging, however the most likely short-term use of the assay will be in the breeder industry for broiler production to assist with vaccine management, and aid in identifying when vaccination has not been successful. This analysis has demonstrated that given the assumptions made regarding adoption and impact, that the research will provide a Benefit-Cost Ratio of 3 to 1 (at a 5% discount rate, over 40 years). The investment criteria may be underestimates, given that in the future the assay may be used by other sectors of the poultry industry for other purposes related to coccidiosis prevention and management. Acknowledgments Tom Grimes, Grimes Consultancy Pty Ltd Jessica Morgan, Animal Research Institute, Queensland Primary Industries & Fisheries Chris Morrow, Bioproperties Pty Ltd References Australian Chicken Meat Federation (ACMF) (2009) Breeding the Day-Old Meat Chicken ( Baiada (2009) Breeder Farms ( Ott, S., and Bergmeier, K. (2005) Determining Poultry Indemnity Values: Examples and Lessons Learned form Poultry Disease Outbreaks in Canada and the United States. Paper prepared for presentation at the Canadian Agricultural Economics Association Annual Meeting, San Francisco Poultry Hub (2009) Coccidiosis ( 47

56 Addendum 1: Results for CRRDCC Process As for the results presented earlier, all past costs and benefits were expressed in 2008/09 dollar terms using the CPI. All benefits after 2008/09 were expressed in 2008/09 dollar terms. All costs and benefits were discounted to the year of analysis (2008/09) using a discount rate of 5%. These results are shown in Table A.1 and A.2 and are reported for different periods of benefits with year 0 being the last year of investment. All analyses ran for a maximum period of 30 years from year 0. Investment criteria were estimated for both total investment and for the Program investment alone. Table A Investment Criteria for Total Investment and Total Benefits (discount rate 5%) 0 years 5 years 10 years 15 years 20 years 30 years Present value of benefits ($) Present value of costs ($) Net present value ($) Benefit-cost ratio to to to to to 1 Internal rate of return (%) negative negative Table A.2 Investment Criteria for Program Investment and Program Benefits (discount rate 5%) 0 years 5 years 10 years 15 years 20 years 30 years Present value of benefits ($) Present value of costs ($) Net present value ($) Benefit-cost ratio to to to to to 1 Internal rate of return (%) negative negative Table A.3 shows the Net Present Value over differing time periods for low, medium and high adoption rates. 48

57 Table A.3 Net Present Values for Differing Time Periods and Differing Adoption Levels Maximum adoption 0 years 5 years 10 years 15 years 20 years 30 years 10% % (base) % The flow of annual benefits is shown in Figure A.1 for both the total investment and for the Program investment. Figure A.1 Annual Benefits 49

58 Appendix 3: Impact Assessment of Investment in Understanding and Reducing Dust, Odour and Pathogen Emissions in Poultry Project description Background Chicken meat (broiler) production is an intensive industry that is often situated relatively close to population centres. Increasing urbanisation has led in some cases to housing being developed in close proximity to established chicken meat farms. There are often concerns regarding the impact of the chicken meat industry on the surrounding environment in terms of dust, odour and pathogen emissions. These issues can be the source of conflict and disagreement in communities. The chicken meat industry is committed to reducing such impacts where they do exist, but also developing tools to better measure such emissions, and the risk of such emissions. This will require the collection and collation of datasets and knowledge to demonstrate the specific level of emissions and risk relating to these emissions. Objective data and measurement techniques will be of considerable value in preventing disputes with communities, and also in determining whether interventions adopted to minimise such emissions are making a difference. The RIRDC chicken meat research program has funded a number of projects aimed at understanding and minimising dust, odour and pathogen emissions from chicken meat farms. This analysis considers four of these projects that have been completed over the past five years. The first of the projects focuses on determining if windbreak walls are a cost-effective technology for reducing odour impacts from tunnel ventilated sheds. Windbreak walls were already being used and promoted as a potential technology to disperse odour, however the actual efficacy of the walls for dispersion had never been properly assessed. The second project sought to trial odour control technologies. The need for this project was in response to the Victorian Code for Broiler Farms, which came into effect in 2001 and was incorporated into the Victorian Planning Provisions. The implications of the Code were that 90% of the farms that existed at the time could not expand on their existing sites unless they committed to the adoption of effective superior technology for the destruction or elimination of odour. The adoption of such technology would provide for up to a 40% reduction in required buffer distances so expansion could take place. The Code did not identify specific super technologies and was aimed to encourage industry to explore odour technologies for their effectiveness and feasibility. The technologies had to be odour absorbing or destructing and also be shown to be highly effective, reliable and readily operated by growers. An Odour Controls Workshop was convened by the broiler industry and the Victorian EPA in March 2002 that reviewed previously completed research projects and identified a range of possible new technologies for odour control. It was determined that objective data on the technologies was a constraint to the ability of individual producers to select effective and proven technologies; this resulted in the RIRDC research project being funded. As well as odour, pathogens and dust emissions are also of concern. The third project considers the pathogen risk and other risks from the utilisation of litter from meat chicken sheds. Meat chickens are 50

59 raised in sheds on litter and the industry produces around 1.6 million m 3 of litter each year. As the litter contains all 13 of the essential nutrients used by plants, it is often used as a fertiliser in intensive horticulture, vegetable crops, pastures and broadacre agriculture. There are well accepted environmental and health risks associated with some spent litter utilisation practices, and there was a need to quantify these risks, as well as identify risk reducing practices. There were also known to be dust emissions (and speculated to also be pathogen emissions) in exhaust plumes from meat chicken sheds. There have therefore been some concerns about the potential for disease transmission to humans. However there was an absence of valid data collected from Australian meat chicken production facilities so industry had not been able to demonstrate to the public and to regulators what the level of risk was, and that sustainable practices were being pursued by the industry. The fourth project in the group pursued determining this level of risk. Project objectives The objectives of each of the four projects included in this analysis are presented in Table 1. Table 1 Project No. and Title Summary of Objectives for Four Projects Objectives DAQ-321A: Efficacy of windbreak walls for odour reduction DAV-213A: Trials of odour control technologies on broiler farms Identify the value of windbreak walls for improving dispersion of exhaust air from tunnel ventilated sheds Evaluate the use of windbreak walls as an odour reduction strategy for meat chicken sheds Identify, assess and quantify the performance of technology options to control odour emitted from broiler sheds Define the conditions and application methods in which they work Monitor the extent of odour emissions as they occur on a number of farms Develop test protocols for testing the efficacy of future odour control technologies as they become available FSE-3A: Literature review and risk assessment for the safe and sustainable utilisation of spent litter from meat chicken sheds DAQ-318A: Evaluating risks posed by pathogen and dust emissions from meat chicken sheds Provide a summary of the literature and conduct a risk assessment on the use of spent litter and spent litter products as fertiliser or soil conditioners Develop guidelines for the safe and sustainable utilisation of spent litter in relation to nutrients, contaminants (metals) and pathogens Quantify emission rates for pathogenic bacteria (Salmonella spp, Escherichia coli, Campylobacter jejuni/coli) from typical tunnel ventilated meat chicken sheds Quantify dust emission rates from typical tunnel ventilated meat chicken sheds Evaluate the potential for harmful human health effects by these pathogen and dust emissions evaluated by combining measured 51

60 emissions, Gaussian air dispersion models, bacterial survival models and applying quantitative microbial risk assessment (QMRA) methodology Project activities DAQ-321A: Efficacy of windbreak walls for odour reduction Three methods were used to improve the understanding of how windbreak walls might assist with odour reduction or dispersion: 1. Tracer gas measurements: A tracer gas was released from the poultry shed and downwind concentrations of the tracer gas sampled using sorbent tubes and vacuum pumps. This method did not provide any clear information and this method was subsequently discontinued. 2. Smoke observations: Smoke was generated and released from two neighbouring sheds, one with a windbreak wall and one without. The plumes were photographed and assessed for variations in position, size and density to provide an indication of movement and dispersion close to the shed. 3. Computational fluid dynamics (CFD) modelling: CFD modelling was used to model emissions from a conventional tunnel ventilated poultry shed, and sheds configured with either a windbreak wall or short stacks (both potential odour dispersing technologies). The modelling was used to provide a set of standardised, defined conditions that enabled direct comparison between the three shed configurations under identical conditions. DAV-213A: Trials of odour control technologies on broiler farms The project comprised six key steps: 1. Preliminary farm survey: survey of 10 Victorian broiler farms to understand typical farm and litter conditions. Four farms were then selected for ongoing experimental work including 22 farm visits over 2 years to examine odour emissions and litter conditions. 2. Method development study. 3. Review of odour control products to select the four products suitable for further field trials. 4. Field trials on four products. 5. Assessment of the relationships between odour emissions and farm management factors. 6. Recommendations for odour and litter assessment methodologies. FSE-3A: Literature review and risk assessment for the safe and sustainable utilisation of spent litter from meat chicken sheds A literature review was undertaken on the latest available knowledge on characteristics of meat chicken litter, as well as the impact of site design and management on litter quality, options for spent litter utilisation and government regulations of chicken litter end use. A structured survey of chicken litter from farms located in the eastern states of Australia was then carried out to generate data on the microbiological and heavy metal characteristics of chicken litter. 52

61 Following the literature review and survey, a risk assessment was performed, and guidelines developed for the safe and sustainable use of chicken litter. DAQ-318A: Evaluating risks posed by pathogen and dust emissions from meat chicken sheds Laboratory based studies were undertaken to validate the microbiological methods necessary to ensure successful and reproducible quantification of pathogenic bacteria in the aerosol environment. Field studies were then performed at four different meat chicken facilities in south-east Queensland. The field studies examined the levels of air-borne bacteria inside and outside the sheds, as well as the levels of bacteria in the litter inside the shed. Harmless bacteria were quantified (staphylococci bacteria), as well as potentially pathogenic bacteria Salmonella and Campylobacter. Methodologies and equipment were validated for the dust component of the project, and field studies were performed on two different south-east Queensland meat chicken facilities. Cost of investment Estimates of the total investment by the Program and others are provided in Tables 2, 3 and 4. Table 2 Estimate of Program Investment in Four Projects (nominal $) Year ending DAQ-321A DAV-213A FSE-3A DAQ-318A Total June ,961 88,393 28,995 65, , , ,501 67,665 84, , , , , ,951 26, , , ,980 57,980 Total 51, ,977 96, , ,058 Source: RIRDC Clarity database,

62 Table 3 Estimate of Other Investment in Four Projects (nominal $) Year ending DAQ-321A DAV-213A FSE-3A DAQ-318A Total June , , , , , , , , , , , , ,237 45, ,236 41,236 Total 15, , , ,466 Source: RIRDC Clarity database, 2009 Table 4: Estimate of Total Investment in Four Projects (nominal $) Year ending June Chicken Meat R&D Program Other Total , , , , , , , , , ,795 45, , ,980 41,236 99,216 Total 895, ,466 1,881,524 Source: RIRDC Clarity database, 2009 Outputs and Outcomes Outputs Table 5 summarises the outputs from each of the four projects. Table 5: Summary of Project Outputs Project No. and Title Outputs DAQ-321A: Efficacy of windbreak walls for odour reduction The efficacy of the windbreak wall and short stacks to improve dispersion was dependent on conditions such as atmospheric stability, horizontal wind speed, the number of active fans and ambient temperature. 54

63 Project No. and Title Outputs Windbreak walls and short stacks are not capable of reducing odour emissions from tunnel ventilated poultry sheds, however the devices can direct the emission upward to improve turbulent mixing. In general the improvements in dispersion from walls are limited and dependent on ambient and shed operating conditions. Windbreak walls and short stacks should not be regarded as a reliable means for reducing odour impacts. If they were to be installed, there must first be a thorough understanding of the conditions under which impacts occur in the specific situation for that shed to determine if there will be any benefit. The field work identified a number of potential benefits of windbreak walls unrelated to dispersion enhancement including: o o o o Blocking sunlight from entering the shed through open fan shutters Altering dust deposition close to the exhaust fans Reducing fan noise Maintaining fan performance when strong opposing winds prevail DAV-213A: Trials of odour control technologies on broiler farms The provision of baseline data representing typical odour emission rates for Victorian broiler farms when birds are within the range of days of age. Four commercial odour control technologies were tested for their efficiency. Within the limits of the methodology, the technologies were not shown to reduce odour under the conditions in which they were tested. However lessons were learnt with respect to assessing these types of technologies that may be of use in the future. The mean odour emission rate from the farms was 1,700,000 ou.m3/min. The odour emission rates ranged from 400,000 to 3,500,000 ou.m3/min for 98% of the results. These values could be considered as indicative of typical odour emission rates from Victorian sheds at the time when the sheds are most under load (ie at maximum odour output). Odour emission results were examined in regards to their potential relationship to farm management factors. It was found that odour emission was impacted by the age of the birds, which is an indicator of increasing load in the shed. Shed load is determined by increased bird weights, faecal loads, nutrients in the litter, litter degradation, restriction in litter aeration etc. Odour emission rates increased with increasing ventilation rates. Statistically, there were few variables that were significant explanatory variables of odour emission. This is likely to be a reflection of the complex biological, chemical and physical systems that drive odour 55

64 Project No. and Title Outputs production. It was found that while the type of odorants being produced may be significantly affected by variables such as litter moisture and ph, the total odour emission rates may be unchanged. Method protocols were developed for the measurement of odour and litter conditions on broiler farms, particularly the use of olfactometry, and the methodology for the analysis of litter moisture, litter ph and shed ammonia concentrations. A limitation of olfactometry is that it does not provide a measure of the nature of the odour and its potential to cause offence. It is therefore of limited value if a technology or farm management practice is targeted at reducing the offensiveness of the odour rather that the total odour emissions. Therefore, chemical analysis or odour intensity studies are required to understand the changing nature of odour with changed management practices or technologies. Shed ammonia concentration can be variable within the shed and should be measured from multiple points throughout the shed. A method for air sampling within the shed was developed and described. A method protocol for measuring litter moisture and litter ph was developed that identifies variability in the shed, and involves creating a shed profile, rather than a shed average. FSE-3A: Literature review and risk assessment for the safe and sustainable utilisation of spent litter from meat chicken sheds A published literature review on characteristics, management and use of meat chicken litter. Data on the microbiological and heavy metal characteristics of chicken litter. Risk assessment regarding use of chicken litter. Guideline document produced titled Guidelines for the Safe and Sustainable Utilisation of Spent Litter from Meat Chicken Sheds. The literature confirmed that poultry litter has useful properties as a fertiliser and a soil conditioner, but a significant percentage of key nutrients (nitrogen, phosphorous and potassium) are not in a form immediately available to plants. The survey of chicken farms tested for heavy metals and confirmed that the litter is generally acceptable as a component of compost, solid conditioner and mulch. All available evidence suggested that other potential contaminants (pesticides, antibiotics, hormones) are not a realistic risk and can be managed with appropriate guidelines. The data survey on the chicken farms tested for three potentially significant pathogens (Campylobacter, Salmonella and Listeria monocytogenes). No L. monocytogenes was detected, and in 10 of the 56

65 Project No. and Title Outputs 28 samples Campylobacter was detected, although for seven of these the levels were less than 100 organisms per gram. Salmonella was detected in 20 of the 28 samples, although for 11 of these the strain of Salmonella was one that rarely infects humans. Of the 9 samples that contained Salmonella capable of infecting humans, the highest level was 230 organisms per gram. DAQ-318A: Evaluating risks posed by pathogen and dust emissions from meat chicken sheds Provision of the first set of quantifiable data on the levels of pathogens in the air inside, and surrounding, meat chicken sheds. Clear demonstration of the principle that management practices that ensure low levels of litter pathogens will consequently ensure low levels of these same pathogens in the air in and around meat chicken sheds. Salmonella was only present intermittently and at low levels in the litter and this was reflected in the levels in the air inside the sheds. Salmonella was only rarely detected in the external aerosol environment, and when detected the levels were low and posed no significant issues in terms of human health outside the sheds. Levels of Campylobacter were high in the litter late in the production cycle, however as it is a poor survivor, it was only detected once in the shed, and not at all in the external aerosol environment. The project identified a group of harmless, non-pathogenic bacteria (staphylococci bacteria note not Staphylococcus aureus) that can be used as indicators of the impact of the chicken sheds on the surrounding environment. During the meat chicken production cycle the air-borne levels of these organisms inside and outside the shed rise above the background level. Measuring how they travel provides an indicator of how other airborne bacteria may travel. Dust emissions from empty sheds with fresh bedding are initially high once the ventilation is turned on. After 1.5 hours the emissions drop to background levels and do not change regardless of ventilation conditions. Biological particles emitted from empty sheds from fresh bedding are only a small fraction of total particles and are at the same levels as in the background. Particle concentrations in shed emissions slightly decrease with increased ventilation rate. Total particle emissions per shed increase with the increase of ventilation rates and are dependent on bird age, with the highest particle emissions detected at bird ages of 4-5 weeks. The majority of particle mass emitted was larger than 2.5 µm and in the range from µm. Before the first thinning of birds the sheds emit around 7.6 grams of dust (smaller than 10 µm) per hour for every 500 kg of bird mass, while 57

66 Project No. and Title Outputs that number drops down to 2.8 grams after the first thinning. Outcomes The key outcomes for each of the four projects are summarised below. DAQ-321A: Efficacy of windbreak walls for odour reduction The outputs of the study showed that windbreak walls and short stacks are not appropriate technologies for enhancing odour dispersal from tunnel ventilated poultry sheds. They may be of some value in very particular situations, but this would need to be assessed on a case by case basis. There are also a number of other potential benefits not related to odour from the use of windbreak walls in particular situations. Therefore the key outcome is information to support decision making regarding the installation of such walls, with the most likely outcome being avoiding installation of a wall that would be of little benefit for odour reduction purposes. DAV-213A: Trials of odour control technologies on broiler farms The four technologies studied were not shown to be effective in the reduction of odour under the conditions studied, despite them being selected as being the most potentially feasible options for the industry. Therefore, industry may need to consider other odour control technology options that have higher setup and maintenance costs in order to achieve significant odour reduction. The project findings will therefore assist growers in decisions regarding adoption of such odour control technologies on farms and provide guidance to manufacturers of the technologies about the testing required to substantiate the effectiveness of their products. Prior to the research being carried out only a few farms had tried using these technologies on an experimental basis, but the cost and technical requirements for validating the technology had been prohibitive to providing data that could withstand the scrutiny of the planning process. Since the project, the principal investigator is not aware of any adoption of the specific (or similar) technologies tested in the project. Word of mouth most likely resulted in growers understanding that the project did not uncover any technology solutions, and growers had been waiting for the results of the project before adopting any such technologies. Further, the companies did not actively promote the technologies in Victoria following the study. Finally, regardless of the outcomes of the study, the adoption may have been limited anyway as such high cost technologies are only normally adopted when there is a significant driver e.g. being under pressure to address an ongoing odour issue. It was highlighted by the project that the superior technology referred to in the Victorian Code for Broiler Farms is not an element of the Code that is presently available for adoption by industry. Therefore, growers have not wasted time and resources in trying these types of technologies. Since the Code came into effect in 2001, no farm in Victoria has expanded using superior technology to rationalise reduced separation distances (Julie Simons, pers. comm., 2009). The industry in Victoria did not grow for several years after the introduction of the Code, but from 2006 onwards there has been some new farm development occurring in less urbanised areas. The final report of the project has not yet been published, and therefore the industry has not been able to make use of much of the data and information in the project including the baseline odour levels, methodologies etc to examine other technology options, or to inform odour modelling trials being undertaken by others. However, the principal investigator has provided advice to councils to help inform decisions about whether a technology should be regarded as a superior technology. 58

67 The Victorian Code of for Broiler Farms is currently under review. However the Steering Committee for the review has not been able to formally utilise the results of the study due to it not being published. In addition, several odour modelling studies are currently being undertaken in Victoria that could make use of the baseline data if it were available (Julie Simons, pers. comm., 2009). FSE-3A: Literature review and risk assessment for the safe and sustainable utilisation of spent litter from meat chicken sheds The guidelines developed are intended to be used by chicken growers and potential users of chicken litter to accurately assess the potential risks of spent litter and ensure that users of spent litter can adopt practices that minimise these potential risks. The guidelines relate to issues such as: Storage of spent litter Understanding the nutrient content of spent litter and calculating application rates for a variety of uses including broadacre cropping, pasture production and fresh food production Understanding the risks associated with spent litter including nutrient run-off and leaching, pathogens, odour and dust, and metal contamination Methods for monitoring and managing such risks Protocols for sampling litter and soils It is too early to assess the adoption and therefore the potential impacts of the use of these guidelines. DAQ-318A: Evaluating risks posed by pathogen and dust emissions from meat chicken sheds The identification of the easily monitored harmless air-borne bacteria can act as an indicator of the impact of poultry production on the surrounding environment. The project demonstrated that there is no realistic health risk to neighbours from pathogens such as Salmonella and Campylobacter. Not only were they found to be not present at all, or present in very small quantities, but the intestinal nature of the diseases requires they must have access to the intestinal tract to be of danger, and that the small size of the particles makes this very difficult. Management practices already in place to minimise the level of these organisms in the litter inside the shed were found to reduce the level of air-borne pathogens. Therefore there is no need to develop or adopt any additional management practices. As the project report has not yet been publicly released, the findings have not been communicated to the industry at this stage. Measuring impacts and benefits The without R&D scenario Without these R&D projects, meat chicken farmers may have continued to adopt a number of odour reducing technologies that were not actually effective at reducing odour to a measurable degree. In addition, without the development of measuring techniques, and data collection undertaken during these projects, there would have continued to be concern regarding the potential for pathogens to be exported off meat chicken farms, either through the air or in litter. There may have also continued to be significant gaps in data and data collection techniques developed with respect to dust and odour. 59

68 Impacts of the R&D The key impacts of the R&D are related to improving the understanding of the risk of adverse impacts from meat chicken farms on the surrounding environment due to dust, odour and pathogen emissions. Specific potential impacts include: Improved decision making with respect to the adoption of windbreak walls. Most commonly, the impact will be in the form of avoided costs of adopting windbreak walls as an odour dispersal strategy due to evidence that they are not an effective strategy in most situations. However, evidence was also presented that there are some minor odour reducing benefits from their use in certain situations, and that there are a number of other potential benefits from their use not related to odour management. Some farmers may find this information of use and determine that the use of windbreak walls would be appropriate and cost-effective in their particular situation. There is no information available on the adoption rate of windbreak walls, or on how the findings of the report may have affected decision making. However, it will provide credible information for decision making to those considering and comparing a range of odour dispersal technologies. Improved decision making with respect to the potential adoption of a range of technologies previously thought to reduce odour emissions from meat poultry sheds. This has the potential to result in saved costs due to avoidance of adoption of technologies that would not be effective in reducing odour. If published, the measurement protocols developed for assessing odour technologies may also save time and resources for individual poultry sheds having to undertake such analysis and trials individually when attempting to demonstrate odour reduction in order to allow expansion and reduce buffer zones. Increased investment in innovation with respect to odour reducing technologies could potentially take place through the results of the research showing the lack of effectiveness of existing technologies. The availability of data and guidelines with respect to the use of litter from meat chicken sheds on agricultural land has the potential to reduce the risk of adverse impacts on the use of such litter on human and environmental health. Such potential adverse impacts include the run-off of excess nutrients into waterways, and the contamination of crops with heavy metals and pathogens. The study on pathogens in litter also demonstrated the risks of contamination of crops with heavy metals and pathogens are very low, particularly with the use of the guidelines, and this information can be used to ensure the continued use of litter for this productive purpose, and possibly even result in increased litter use due to increased confidence. Finding alternative disposal options for the litter would be very costly. The study on the risk of air-borne pathogens has demonstrated that the risk of harmful pathogens travelling beyond the shed is extremely low, and the project has also developed an indicator for monitoring any risk that might exist. The benefit of this finding is that objective data is available to demonstrate to regulators and communities that such risk is extremely low in the event of any dispute over the impacts of meat chicken sheds on the environment and local communities. A summary of the principal types of benefits and related costs associated with the outcomes of the project is shown in Table 6. 60

69 Table 6 Categories of Benefits from the Investment Benefits Productivity and Profitability Avoided costs of adoption of non-effective technologies Avoided costs of not being able to expand (or having to relocate) due to planning decisions made in the absence of quality and appropriate data Environmental Reduced risk of negative impacts from nutrient run-off from the use of litter from meat chicken farms Social Reduced risk of health impacts from pathogens in chicken meat litter (noting that existing risk was already low) Potential contribution to reduced dust and odour emissions in the future Data and information to alleviate community concerns regarding the risks of pathogen emissions from meat chicken sheds Public versus private benefits The potential benefits resulting from this series of project will be a mix of private and public benefits. The private benefits will be saved costs to poultry farms in terms of avoiding technology that does not deliver genuine odour, dust or pathogen reduction. There is also the potential private benefit to farmers having the data and data collection methods available to assist with improved planning and dispute resolution, which may result in saved costs in the future. Potential public benefits include reduced risk from pathogens in chicken litter used off-site, and reduced likelihood of other negative off-site impacts of chicken litter use including nutrient run-off. None of the research is likely to directly result in the reduction of dust and odour emissions, however the data and methods developed have the potential to be of significant contribution to future research in this area. Distribution of benefits along the supply chain The private benefits potentially resulting from this group of research will be distributed along the supply chain. Benefits to other primary industries There may be some benefits to other primary industries with respect to the use of the guidelines for the use of chicken litter on pasture and cropping enterprises. The use of the guidelines may contribute to improved effectiveness of the use of this source of nutrients, and may also reduce the risk of negative impacts from its use. There may also be some lessons in terms of the data and methods relating to dust, odour and pathogen emissions for other intensive agriculture industries such as pork and dairy. Match with national priorities The Australian Government s national and rural R&D priorities are reproduced in Table 7. 61

70 Table 7 National and Rural R&D Research Priorities Australian Government National Research Priorities Rural Research Priorities 9. An environmentally sustainable Australia 10. Promoting and maintaining good health 11. Frontier technologies for building and transforming Australian industries 12. Safeguarding Australia 11. Productivity and adding value 12. Supply chain and markets 13. Natural resource management 14. Climate variability and climate change 15. Biosecurity Supporting the priorities: 5. Innovation skills 6. Technology This project makes some contribution to National Research Priorities 1 and 2 and to Rural Research Priorities 1 and 3. Additionality If the government s contribution to the Chicken Meat R&D Program was reduced by half, then projects in the area of dust, odour and pathogen emissions may still have been funded as impacting on the surrounding environment is a fairly high priority for the industry, and one that is probably best addressed at the collective scale. However whether these specific projects would have been funded is uncertain. If the Chicken Meat R&D Program did not exist at all, the projects as designed would be unlikely to be funded by industry alone, and it is also unlikely that individual stakeholders in the industry would have undertaken some research into these issues. Estimates of benefits It is difficult to quantify the impacts from this type of research, as it is not likely to result in actual reductions in odour, dust and pathogen emissions in the short-term. Rather, together this group of projects are contributing to increasing the understanding regarding the environmental impacts of chicken meat farming, in terms of dust, odour and pathogen emissions (air-borne and in litter). As well as increased understanding, the projects have generated reasonable and defensible odour, dust and pathogen emissions data. Such data can potentially be of use for industry management, industry planning, regulation development and dispute resolution. The availability of improved data, data collection methods, and emission assessment methods will contribute to gaining increased confidence with environmental regulators and the community. This may assist the poultry industry to expand in the knowledge that impacts will be minimised due to improved planning. The data collected and methodologies developed in the projects may also assist poultry farms being established to calculate sufficient separation distances as a part of their planning processes (e.g. expansion policies) to minimise the chance of negative odour, dust and pathogen impacts on neighbours. Statistics show that the demand for chicken meat is increasing in Australia. Chicken meat consumption per capita in 2002/03 was 33.8 kg, and in 2007/08 was 35.9 kg. Over the ten years to 2007/08 chicken meat production increased by almost 42% (from just over 564,271 tonnes to 800,100 tonnes) (ACMF, 2009). If this trend continues it means that new farms and expansion of existing farms will be required. If this cannot occur because planners do not have adequate data on the potential impact of the industry to make effective decisions, the industry would suffer losses in the form of foregone income. 62

71 In the past, it has sometimes been necessary for poultry farms to relocate to more isolated areas, as urban development has encroached on them in their original location. It could be assumed that a certain number of poultry farms will now avoid having to relocate due to improved planning. Therefore the relocation costs will be saved. For the purposes of this analysis it is assumed that poultry farms and local authorities will require the use of data, information and data collection methods on dust, odour and pathogen emissions over the next five years. These poultry farms could be either new establishing farms, or existing farms. The new farm would be using any available data, methods and information to help with site selection for the new enterprise, and ensure it will be an appropriate distance from any existing neighbours. In the context of an existing farm, the data and monitoring tools might be used by a local council or other authority when planning other non-poultry developments that have the risk of being located too close to the poultry farm (for dust, odour and pathogen reasons), or when the existing poultry enterprise is considering expanding. Without scenario It is assumed that data and information will be used by either farms or local councils in relation to one poultry farm per annum, for five years (total of five farms). Without the research, two of the five poultry farms would have had to relocate within seven years, due to complaints from neighbours regarding dust and odour, or unfounded concerns regarding pathogen emissions. Dawson (2006) reported that the average investment in a typical poultry farm (housing 100,000 broiler chickens) in Queensland is $3 million, including land. However, many of the farms for which the data and models may be used would be significantly larger than this (at least 250,000 chickens). In addition, it is recognised that in some cases, some of the existing infrastructure from the original site can be salvaged and moved, saving on new infrastructure costs. In addition, the value of the existing land (which can be sold), is likely to be greater than the value of the land being bought for the new site. There are many other variables likely to affect this relocation cost, including the size and age of the operation, the distance to be moved, and the level of integration with and proximity to other facilities within an area. For example, important factors in locating chicken farms tend to be their proximity to a nearby feed mill, guaranteed water supply, guaranteed electric power, access for heavy transport, available labour and other services such as tradesmen and veterinarians. For the purposes of this analysis, it is assumed that the average relocation cost is $3.0 million. This is a function of the likely larger operations to which the data and model would be useful, as well as the likely saved costs when relocating as opposed to starting an entirely new enterprise. With scenario It is assumed that the data and information in each of the reports is available for use by industry and regulators in the year ending June With the research, and the ability of these farms to use the information generated in them, there is no need for relocation for these two businesses, because appropriate distances have been maintained, and therefore the relocation costs are saved. 63

72 Summary of assumptions Table 8 below summarises the assumptions used in the analysis. Table 8 Summary of Assumptions Variable Assumption Source Number of enterprises using data, information and methods developed from research First year of use of research outputs Number of farms that would have relocated without use of research outputs Number of farms relocating with use of research outputs 1 per annum for five years Agtrans estimate 2008/09 Agtrans estimate (first year after completion of all research projects) 2 Agtrans estimate 0 Agtrans estimate Timeframe for relocation for the 2 farms 7 years after use of data and model Agtrans estimate Cost of relocating $3 million per farm Adapted from Dawson, 2006 Results All past costs and benefits were expressed in 2008/09 dollar terms using the CPI. All benefits after 2008/09 were expressed in 2008/09 dollar terms. All costs and benefits were discounted to the first year of investment (2003/04) using a discount rate of 5%. The base run used the best estimates of each variable, notwithstanding a high level of uncertainty for many of the estimates. All analyses ran for 40 years including the first year of investment. Investment criteria were estimated for both total investment and for the Program investment alone. The investment criteria are reported in Table 9. Table 9 Investment Criteria for Total Investment and Total Benefits (discount rate 5%) Criterion Program Investment only Total Investment Present value of benefits (m$) Present value of costs (m$) Net present value (m$) Benefit-cost ratio 1.5 to to 1 Internal rate of return (%)

73 Sensitivity analyses Sensitivity analyses were carried out and results are reported in Tables 10 and 11. All sensitivity analyses were performed on the total investment only using a 5% discount rate (with the exception of Table 10) with benefits taken over the 40 year period. All other parameters were held at their base values. Table 10 shows there is considerable sensitivity of the investment criteria to the discount rate. The results show that the investment criteria are sensitive to the discount rate, and that when the discount rate is 10%, the Benefit-Cost Ratio is less than 1 (0.8 to 1). Table 10: Sensitivity to Discount Rate (All investment, 40 years) Criterion Discount Rate 0% 5% (Base) 10% Present value of benefits (m$) Present value of costs (m$) Net present value (m$) Benefit-cost ratio 2.9 to to to 1 Table 11 shows the sensitivity of the investment criteria to the key assumption of the number of farms benefitting from the technology. It shows that if the number benefitting through avoiding relocation increases to 4 (from 2) that the Benefit-Cost Ratio is 2.9 to 1, and the Internal Rate of Return is 13%. If the number of farms benefitting from the technology is reduced to 1, then the investment criteria are negative, with a Benefit-Cost Ratio of 0.8 to 1. Table 11 Sensitivity to Number of Farms Adopting and Benefitting from Use of Data and Models (All investment, 5% discount rate, 40 years) Criterion Number of Farms Benefitting 1 benefitting 2 benefitting (Base) 4 benefitting Present value of benefits (m$) Present value of costs (m$) Net present value (m$) Benefit-cost ratio 0.8 to to to 1 Internal rate of return (%) The investment breaks-even, when the cost of relocation is assumed to be $2.04 million (as opposed to the $3.0 million assumed in the analysis) assuming that two farms are benefitting. 65

74 Confidence rating A confidence rating has been developed for the investment analysis using a standard format (Table 12). Table 12 Confidence in Analysis Coverage of Benefits Confidence in Assumptions Low Medium Conclusions The group of projects analysed all had the intended objectives of improving understanding, data and data collection methods in relation to potential adverse impacts from meat chicken production, including dust, odour and pathogen emissions. Generally, the group of projects is unlikely to result in any actual reductions in such emissions in the short-term. However, the increased understanding and availability of defendable data provides the industry with the opportunity to utilise such information when communicating with regulators and community. The valuation method used in the analysis is a surrogate for demonstrating the potential scale of impact from general research in this area. The reports for two of the four projects have not yet been published, and therefore the ability of the industry to utilise the data is limited at this time. Given the assumptions made, the investment criteria are positive at a 5% discount rate, with a Benefit-Cost Ratio of 1.5 to 1, and a Net Present Value of $0.9 million. Acknowledgments Pat Blackall, Queensland Primary Industries and Fisheries Mark Dunlop, Queensland Primary Industries and Fisheries Julie Simons, Department of Primary Industries, Victoria References Australian Chicken Meat Federation (2009) Industry Facts and Figures ( Dawson, D. (2007) Review of Intensive Livestock Farm Management Systems (FMS) Programs in Queensland. Queensland Farmers Federation, December

75 Addendum 1: Results for CRRDCC Process As for the results presented earlier, all past costs and benefits were expressed in 2008/09 dollar terms using the CPI. All benefits after 2008/09 were expressed in 2008/09 dollar terms. All costs and benefits were discounted to the year of analysis (2008/09) using a discount rate of 5%. These results are shown in Table A.1 and A.2 and are reported for different periods of benefits with year 0 being the last year of investment. All analyses ran for a maximum period of 30 years from year 0. Investment criteria were estimated for both total investment and for the Program investment alone. Table A.1 Investment Criteria for Total Investment and Total Benefits (discount rate 5%) 0 years 5 years 10 years 15 years 20 years 30 years Present value of benefits ($) Present value of costs ($) Net present value ($) Benefit-cost ratio to to to to 1 Internal rate of return (%) negative negative Table A.2 Investment Criteria for Program Investment and Program Benefits (discount rate 5%) 0 years 5 years 10 years 15 years 20 years 30 years Present value of benefits ($) Present value of costs ($) Net present value ($) Benefit-cost ratio to to to to 1 Internal rate of return (%) negative negative The flow of annual benefits is shown in Figure A.1 for both the total investment and for the Program investment. 67

76 Figure A.1 Annual Benefits 68

77 Economic Evaluation of Investment in the Chicken Meat R&D Program RIRDC Publication No. 09/144 By Sarah Simpson and Peter Chudleigh The Chicken Meat R&D Program supports increased sustainability and profitability in the chicken meat industry. The Program is funded by statutory levies paid by industry participants and matching funding provided by the Australian Government. The investments made by the Program follow the R&D Plan for the Chicken Meat Program In May 2008 an Evaluation Framework for RIRDC was finalised. This framework, among other things, sets out a process for reviewing each of RIRDC s programs in the final year of its five year plan. One of the three programs selected for assessment in 2009 was the Chicken Meat Program. A part of each specific program review is to randomly select three independent investments within the program for an impact evaluation through cost benefit analysis. The three economic analyses provide specific case studies that will demonstrate the extent and distribution of benefits that have been, are being, or will be, captured in future. Such information is valuable to not only RIRDC management, but also to the members of the industry (or industries) at which the investment has been targeted. The Rural Industries Research and Development Corporation (RIRDC) manages and funds priority research and translates results into practical outcomes for industry. Our business is about developing a more profitable, dynamic and sustainable rural sector. Most of the information we produce can be downloaded for free or purchased from our website: or by phoning (local call charge applies). Most RIRDC books can be freely downloaded or purchased from or by phoning (local call charge applies). Contact RIRDC: Level 2 15 National Circuit Barton ACT 2600 PO Box 4776 Kingston ACT 2604 Ph: Fax: rirdc@rirdc.gov.au web: