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Economies of Feedlot Scale, Biosecurity, Investment, and Endemic Livestock Disease

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  • David A. Hennessy

Abstract

Infectious livestock disease creates externalities for proximate animal production enterprises. The distribution of production scale within a region should influence and be influenced by these disease externalities. Taking the distribution of the unit costs of stocking an animal as primitive, we show that an increase in the variance of these unit costs reduces consumer surplus. The effect on producer surplus, total surplus, and animal concentration across feedlots depends on the demand elasticity. A subsidy to smaller herds can reduce social welfare and immiserize the farm sector by increasing the extent of disease. While Nash behavior involves excessive stocking, disease effects can be such that aggregate output declines relative to first-best. Disease externalities can induce more adoption of a cost-reducing technology by larger herds so that animals become more concentrated across herds. For strategic reasons, excess overall adoption of the innovation may occur. Larger herds are also more likely to adopt biosecurity innovations, explaining why larger herds may be less diseased in equilibrium.

Suggested Citation

  • David A. Hennessy, 2006. "Economies of Feedlot Scale, Biosecurity, Investment, and Endemic Livestock Disease," Center for Agricultural and Rural Development (CARD) Publications 06-wp433, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  • Handle: RePEc:ias:cpaper:06-wp433
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    Citations

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    Cited by:

    1. Evans, Jason R. & D'Souza, Gerard E. & Collins, Alan R. & Brown, Cheryl & Sperow, Mark, 2011. "Determining Consumer Perceptions of and Willingness to Pay for Appalachian Grass-Fed Beef: An Experimental Economics Approach," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 40(2), August.
    2. Robert H. Beach & Christine Poulos & Subhrendu K. Pattanayak, 2007. "Farm Economics of Bird Flu," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 55(4), pages 471-483, December.

    More about this item

    Keywords

    agricultural industrialization; biosecurity; inefficiency; Nash behavior; overinvestment; technology adoption.;

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture

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