Economic Analysis of Pharmaceutical Technologies in Modern Beef Production

Cattle production is the largest single agricultural sector in the U.S. with cash receipts of $49.2 billion in 2005. Like the rest of agriculture cattle producers have adopted efficiency and quality improving technology to meet consumer demands for a safe, wholesome, and affordable food supply. This research uses meta analysis to combine over 170 research trials evaluating pharmaceutical technologies in the cow-calf, stocker, and feedlot segments of beef production. These results were used to estimate the farm level economic value of parasite control, growth promotant implants, sub-therapeutic antibiotics, ionophores, and beta agonists for the industry in 2005. The Food and Agriculture Policy Research Institute (FAPRI) model of U.S. agriculture was used to estimate the impact on beef production, price, and trade and the rest of agriculture if these pharmaceutical technologies were not available. Using 2005 prices and production levels the cost savings of the five pharmaceutical technologies evaluated was over $360 head over the lifetime of the animal. Selling prices would have to increase 36% to cover the increase in costs. The resulting industry would have a similar beef cow inventory, lower beef production, and higher prices from retail through to producers. However, the higher prices do not fully offset the higher cost of production. Some consumers are requesting “natural” or organically produced beef and a portion of consumers are willing to pay a premium for these products. However, if pharmaceutical technologies were not available in the US cost of production would rise forcing some producers and resources out of cattle production. The smaller industry and domestic beef supply, increased net beef imports, and higher prices to all consumers.