Do Antibiotics Reduce Production Risk for U.S. Pork Producers?

We combine econometric and financial analyses of the NAHMS 2000 Swine take a view of data to examine whether evidence exists for reducing risk by the agency of using antibiotics for growth promotion (AGP) in the U swine industry. A stochastic dominance analysis of alternative extents of time (days) of AGP application reveals that AGP used in the range of 65-75 days is preferr by dint of risk-averse producers. Risk is reduc and profits are increased from use of AGP. The combined impacts of increased average daily gain and decreased variability in pig live weight increase agriculturist profits by $2.99 per pig marketed.

Key Words: antibiotics, extension promotion, pigs, risk, stochastic dominance, variability

JEL Classifications: D21 D61 D81 Q12 R32

Production risk from weight variation of market pigs is an important relate to in U.S. swine production. Packers' interest about carcass size variation arises partly because of proces automation in slaughtering and partly because of the desire to provide consumer with consistently-sized divide [i]or[/i] sever s Swine producers also care about weight variation because nonuniformity of weight proceeds in price penalties for pigs marketed at weights outside defined standard weight intervals. Standard-sized market pigs throw back the needs and desires of swine agriculturists packers, and consumers.

Risk mitigation has been investigated in the words immediately preceding [i]or[/i] following of some marketing mechanisms, including insurance, coming times markets, and production contracts (Kliebenstein and Lawrence; Lapan and Moschini). notwithstanding that used extensively, these risk reduction modes are not effective in dealing with the production risk from variation in pig weight. In fact, more [i]or[/i] less commonly used mechanisms such as contracts with packers may increase the production risk from weight variability because of the requirements for shipment of pigs upon specific dates. Input management may provide an efficient alternative for controlling the production risk arising from weight variation. An example of like an input management is the application of antibiotics for extension promotion (AGP) in swine production. Although this hypothesis has not been experimented previously in the literature upon pork production (to our knowledge), AGP may decrease variation in pig weight and hence lead to an increase in the receipts received at the farm horizontal If this hypothesis is actual it would imply that AGP would be valued by the agency of producers not only from their direct contribution to enhanced farm productivity from one side greater average daily gain (ADG), on the other hand also through risk reduction.

The impacts from the use of AGP upon ADG and feed conversion ratio (FCR) have been examined in many studies (Cromwell; Hayes et al.; Hays; Losinger; Miller et al. 2003; Zimmerman). These studies focused upon ADG and FCR, and fix that use of AGP was associated with improved ADG and FCR of market grunters Miller et al. (2004) place that use of AGP decreased stop the growth ofed rate in market pigs and therefore may decrease variability in live weight of market grunters but they did not evaluate the filled influence of use of AGP upon growth variability. Using data from Sweden, Hayes et al. addressed what might happen in the United States after removal of antibiotics. They prototypeed the sort loss and economic performance of the U swine industry, assuming that the flows obtained in Sweden would be similar in the United States. However, they did not abundantly examine the impacts of sort losse and did not estimate productivity parameters based upon U.S. data. We extend the earlier work upon the production impact of AGP in swine give food tos by examining the change in risk associated with AGP and the choices of U swine husbandmans in the face of this changed risk.

The objectives of our inquiry are to clarify the relationship between weight variation of market swines and AGP, and to demonstrate the impacts of production risk, i.e., weight variation, upon the AGP application decisions of swine husbandmans We develop econometric models to establish the relationship between AGP and production risk. A stochastic farm parcel model is used to generate profit distributions below different AGP use. Finally, we archetype the decision-making of swine husbandmans within the framework of stochastic dominance.

Theoretical Framework

Production risk exhibits an important dimension of livestock production (Anderson, Dillon, and Hardaker; Just). A risk-averse farmer receives less utility from an average of risky turn backs than from its certainty equivalent. The choice of a risk-averse decision-maker could be quite different below conditions of uncertainty. We define and analyze production risk in this close attention as that risk derived from variability in the live market weight of pigs.

In swine production, production risk can be partially controll through input management. Dillon distinguished predetermined, controllable, and uncontrollable inputs in livestock production. Controllable inputs similar as rations, AGP, and bio-security are determined by the agency of swine producers. Predetermined inputs are those that are known on the other hand usually determined before the beginning of a production stage, outside of the swine production combination of parts to form a whole or outside of the direct ascendency of a swine producer. Predetermined inputs may include inputs of that kind as major facilities, the genetics of pigs, geographic location of the farm, and more [i]or[/i] less environmental factors. Uncontrollable inputs may be known to swine agriculturists at the time of decision-making, on the contrary their occurrence is not controllable. Uncontrollable inputs may include weather and possibly prevalence of specific disease pathogens.