Costs of biosecurity and factors contributing to biosecurity in Finland Jarkko Niemi and Jaakko Heikkilä MTT Agrifood Research Finland Nordic-Baltic seminar on Biosecurity: experiences, training, motivation and economic aspects Johannesberg Castle, Sweden, 6-8 May 2014, 9.5.2014
Outline Introduction Factors contributing to the use of biosecurity Producer perceptions and estimates on the costs of biosecurity Are economic incentives an issue? Simulation results Conclusions 2
What is biosecurity? A framework for managing the risk of biological hazards Measures to reduce the risk ( prevention vs. treatment ) Externalities: Benefit to all, costs paid by individual(s) Biosecurity has characteristics of a public good Non-excludable: We all can benefit from it Non-rivalrous: It doesn t affect the amount of biosecurity how much you enjoy it or whether ten or million people enjoy it! However, biosecurity is to some extent joint production It is of vital importance when livestock producers are protecting their animals, and to the society in general MTT Agrifood Research Finland 9.5.2014 3
Biosecurity Environmental health - invasive alien species (e.g. lupine) Animal health - non-zoonotic animal diseases (e.g. Classical Swine Fever, bluetongue) Plant health - plant pests and diseases (e.g. Colorado potato beetle, sweetpotato whitefly) Social health - various diseases and species Environmental safety - Natural forces (flood, drought, earthquake, tsunami, fire, avalanche) - Social hazards (terrorism, sabotage, mass hysteria, violence) - Multiple hazards (combinations, infrastructure, large constructions, etc.) SECURITY AND SAFETY Human health - foodborne microbes (e.g. salmonella, E. coli, Listeria, campylobacter) - diseases in cooked meat (e.g. CJD/BSE) - diseases in uncooked meat (e.g. Newcastle disease, avian influenza) Human health - non-foodborne zoonotic diseases (e.g. bubonic plague, rabies) Food safety Human health - food-borne acute chemical substances - physical safety of food (e.g. radiation, foreign objects) ENVIRONMENTAL HEALTH Dietary safety (excessive or exiguous accumulation) Human health Foodborne accumulating chemical substances - dioxin - acryl amide - pesticide residue - heavy metals - food additives Human health - Physical risks (radiation, noise, temperature) - Chemical non-foodborne risks (environmental pollutants, toxic substances) HUMAN HEALTH Human health Foodborne accumulating substances - fat - salt - sugar Human health Foodborne substances acquired in deficient quantities - vitamins - minerals - iron - etc. Human health - sports - way of life - stress Peltola and Heikkilä
Decision-making & biosecurity Decision-maker should have sufficient incentives to take a biosecurity measure Farmers may be reluctant to take very costly biosecurity measures Poor biosecurity by one stakeholder may frustrate others In some cases, it may be more beneficial for a livestock producer to allow poor biosecurity as s/he may be better off if the animals are culled Cognitive dissonance Low probability-high consequence events may be underestimated Decision on biosecurity is state-dependent The more likely or more severe the threat, the more likely is decisionmaker to take extra measures Risk aversion if the benefits of biosecurity are uncertain, the measures might not be taken 5
Prevention Eradication Containment Asset protection Costs and benefits of biosecurity can change over time Impact Time 6
Factors contributing to biosecurity Next few slides are based on two different surveys Finnish pig and cattle farms (Sahlstöm et al., 2014) Finnish pig and poultry farms (Heikkilä and Niemi, 2012) We have examined how different factors contribute to The use of biosecurity measures among respondents and how Farm-specific factors are related to the costs of adopting these measures 7
Costs of use affect biosecurity Wear protective clothing Verify health of incoming animals Pigfarm + + + Full-time farmer + + Female respondent + + Farm has a production contract + + Farm size increases by one SD + Highly educated + Intentions to expand + Suckler cow farm - - + + Not engaged in continuous training - - Costs increase by one SD - - 8
Probability of ausing the measure Likelihood Costs and implementation are linked to each other 1,0 0,8 0,6 0,4 0,2 0,0 Verify health status Wear protective clothing Very low costs per measure Costs at an average level Very high costs per measure MTT Agrifood Research Finland 5/9/2014 9
Farms with disease history usually pay more attention to some measures Separate loading room Room cleaned after use 0 % 20 % 40 % 60 % 80 % 100 % Everybody entering the facility to change boots and clothes Used protective clothing Feed storage and equipment cleaned frequently Feeds purchased from selected partners only Pigs, no disease Pigs, disease Poultry Use carcass container Participates in training 10
The costs of biosecurity measures Extra labour input Materials (protective clothing, disinfectants etc.) Extra services needed (e.g. vets inspecting animals, cleaning, transports) Impacts on prices of inputs (e.g. certified feed may be more expensive) Consequential costs due to changes in business management Other costs 11
Producers perceptions about the costs In a recent survey pig and cattle producers estimated that the use of protective clothing or boots typically costs 100-200 /year/farm The costs of changing clothes always when entering the facility usually range from about 100 to about 2000 /farm/year Measures require different resources The costs of verifying the health of animals coming to the farm was usually less than 2000 /farm/year Measures which require investments can cause substantial costs (e.g. compartmentalization, separate loading room) 12
Different background factors contribute to the perceived costs Perceived costs usually decreased by Previous experience on the measure Female respondent Newer animal shelter Older respondent Low education Plans to expand Perceived costs usually increased by Larger farm size Full-time farmer Producer not engaged in continuous training Contracts made by the farm (Low education) (Plans to expand) 13
Ensuring food safety carries a cost In the early 2000 s Kilpeläinen et al. estimated that the costs of food safety (mitigating zoonotic diseases) at the farm level costs roughly as follows Milk 4.38 cents/kg Pigmeat 14.9 cents/kg Broiler meat 10.51 cents/kg Eggs 0.18 cents/kg 14
The costs of preventive biosecurity at the poultry farm level Siekkinen et al. (2008): Semi-structured phone survey of Finnish broiler producers and hatching egg producers Broiler farms 3,55 euro cent / bird (90% confidence interval 2,56-4,40) 2,54 euro cent / kg 4,64 euro / m² 0,10 euro cent / bird / rearing day Hatching egg farms 75,73 euro cent / bird (90% confidence interval 39,3-115,5) 4,19 euro / m² 0,27 euro cent / bird / rearing day A batch of 75,000 broilers -> total cost 2 700 euro Siekkinen et al. 2012
Biosecurity costs at the farm level Costs by category % of total costs 0,00 0,10 0,20 0,30 0,40 0,50 0,60 Biosecurity plan Preventive bio-treatment Pest control Equipment Education Sanitation (special) Purchase contracts Structural planning Health monitoring programme Operational hygiene Production and health monitoring Insurance Monitoring Broiler producers Hatching egg producers Siekkinen et al. 2012
The costs of preventive biosecurity at the farm level Preventive biosecurity (Siekkinen et al. 2011) Approximately 2% of total production costs Work time represents some 8% of total work time on broiler farms and about 5% on broiler breeder farms Compare to cost of vaccination Organic turkey vaccination against erysipeloid, cost of vaccination (substance + labour) 0,63 0,68 euro per bird (Schulman et al. 2014) Vaccination against Newcastle Disease in poultry 0.32 euro per bird (Ek-Kommonen et al. 2005) Siekkinen et al. 2012
How does the cost vary? Regression 1 Regression 2 Regression 3 Dependent variable Total cost per bird Direct cost per bird Labour cost per bird Intercept 3.673 (p=0.000) 2.417 (p=0.000) 1.256 (p=0.001) Annual number of birds -0.00000235 (p = 0.004) -0.0000007353 (p = 0.190) -0.00000161 (p = 0.031) Processor B (dummy) 0.945 (p = 0.006) 0.592 (p = 0.025) 0.353 (p = 0.244) Processor C (dummy) 0.582 (p = 0.028) 0.339 (p = 0.100) 0.243 (0.326) Female producer 0.528 (p = 0.026) 0.090 (p = 0.606) 0.438 (p = 0.060) Regression statistics F = 11.437 Sig. = 0.000 R 2 = 0.792 F = 2.602 Sig. = 0.089 R 2 = 0.465 F = 5.028 Sig. = 0.013 R 2 = 0.626 Siekkinen et al. 2012 MTT Agrifood Research Finland 5/9/2014 18
Loss /pig space unit Restrictive measures upon a highly contagious animal disease An important cost item can be that biosecurity measures can disrupt the production process (Niemi et al. 2004) A producer may be financially better off if the animals are culled and compensated than if s/he applies stringent biosecurity in the face of business disruptions Potential incentive problem Is the producer enough motivated to take care of biosecurity? Substantial indirect costs 25 (revenue losses) must be 20 taken into account 15 10 5 Culled Not culled 0 Five weeks Three weeks One week Slaughter day Time until slaughter if business-as-usual 19
WHAT ABOUT THE BENEFITS AND PRODUCER S BEHAVIOUR? 20
Benefits of biosecurity More stable business Healthier animals and safer food! The benefits of biosecurity are caused by lower costs of disease i.e. losses that can be avoided by putting effort on their prevention 21
A case-study (simulation) to illustrate the benefits of improved biosecurity Foot and Mouth disease used as an example because the data were readily available Simulations based on models represented by Lyytikäinen et al. (2012) In the following slide we illustrate how a decrease in the probability of infection on one farm could decrease losses Assume that the probability of infection would decrease either by 25% or by 50 % decrease Assess how that could affect to the losses caused by the disease MTT Agrifood Research Finland 5/9/2014 22
Expected costs of disease /dairy farm/year /Dairy farm/year A dairy farm as an example A smaller impact was simulated at pig farms 30 25 20 15 +336% Assumed probability of infection: Baseline 10 5 +145% Baseline -25% Baseline -50% 0 Average-sized farm Fairly Average+1 large standard farm deviation (=mean+1 SD) Average+2 Very large standard farm deviations (=mean+2 SD) MTT Agrifood Research Finland 5/9/2014 23
Putting the incentives right Many decisions to combat contagious animal diseases are made by individual producers, without government being able to control for their decisions Instead of choosing actual measures, society can design a scheme which provides producers with incentives to choose mitigation actions that benefits society too The next slides represent a simulation-based example about the role of economic incentives 24
Costs of FMD outbreak to society millio on average Expected costs of FMD million Incentives to voluntarily reduce contacts between farms during an FMD outbreak 1. Without any extra incentives 2. With compensations paid only to farms which take measures to reduce the probability of infection (whether this option is used, is decided individually by the each farm) 29 Providing extra incentives can help to reduce the costs of disease 28 Without scheme With scheme 27 0 500 1000 Cost of biosecurity EUR/week/farm 25
Coverage in relation to zero-cost scenario Percentage of farms using a biosecurity measure While the costs may decrease a little, the use of biosecurity may increase a lot 100 % 80 % 60 % 40 % 20 % An example on how providing extra incentives can help to improve biosecurity With scheme Without 0 % week 1 Week 2 Week 3 Period 26
Conclusions Economics of biosecurity is more than cost-benefit analysis The costs vary by the type of measure and farm Simple practices can be quite inexpensive The costs increase by farm size The costs per animal seem to be lower on large farms (economies of scale?) Motivation, attitudes and skills matter The use of biosecurity depends on farm-specific factors such as production type and farm size High costs and lack of education reduce biosecurity Economic incentives matter, because the use of biosecurity is often decided by the producer Compensation and payment policies can promote biosecurity 27
Thank you for your attention! This presentation is based on results of research projects carried out by MTT. The authors gratefully acknowledge fruitful collaboration with Evira, and funding from the Ministry of Agriculture and Foresty to research in this field. For further information, please contact: jarkko.niemi@mtt.fi or jaakko.heikkila@mtt.fi NJF seminar: Economics of Animal Health and Welfare 2-3 October 2013, Hämeenlinna, Finland http://www.njf.nu/ => Upcoming seminars Erasmus-network to enhance the use of economics in animal health www.neat-network.eu 28