A Synopsis of a Recent Study in Connecticut on the Economics of Using rBST

Dr. E. Bruce Godfrey
USU Extension Economics Specialist

At the start of the Christmas holidays I received two articles concerning the economics of using BST. The first was by John Fetrow and was entitled � The economics of rBST� and was included in a packet of material from Monsanto. The second appeared in the November 2002 issue of the American Journal of Agricultural Economics (AJAE) and was titled �The adoption and profitability of rBST on Connecticut dairy farms�. These two papers are indicative of several that have been published in the past. The first outlines the potential benefits of using this technology and is similar to a large number of publications that project the profitability of using BST. There are numerous articles that have outlined the potential benefits of using BST, but few studies have been published that have evaluated the actual benefits and costs. The second study is one of the few studies that provides analysis of dairies that do and do not use BST. A sample of dairy farmers in Connecticut, including those that are currently using, those that once did but not longer use BST, and those that are not using BST provided the basis for this study. A similar study was done in New York shortly after BST was released for adoption in 1994 (AJAE, February 1999), but no studies of this type have been conducted in the western United States. As a result, inferences about the profitability of using BST in the west, which has much larger dairies than those studied, must be made with caution. The basic conclusion of both the articles that were published in AJAE is that BST increases the amount of milk produced, but there was no statistical evidence that it increases the net returns obtained by producers that were studied. This suggests that the economic benefits of using BST to the producer need to be carefully evaluated. It certainly is not a �silver bullet.�

While the primary emphasis of the Connecticut (and New York) study was on the use of BST, some of the associated results are at least as interesting as the economics of using BST. The AJAE articles indicate what others have also found concerning those who tend to use BST. They tend to be larger (herd size), younger and more educated operators. They also have a greater tendency to use other technological innovations (TMR, balanced rations, computers, etc). One thing that was a bit surprising in the AJAE article reviewed was that BST adoption increased with herd size but at a decreasing rate. The data also indicate that the use of BST tended to have a greater influence on milk production than most studies have projected and is larger than increases associated with other technologies. However, the costs were also apparently greater than most studies have projected. Some of the factors that were negatively associated with profits (total farm receipts less operating costs and depreciation) per head included the use of BST, TMR, a parlor system of milking, computers, the age of the producer (younger were more profitable), and regularly scheduled use of veterinary services. Factors that tended to be associated with higher profits included higher levels of production, education of the operator, herd size, percentage of cows in herd being milked, and milking three times a day. The use of DHIA was the most profitable technology used by the producers sampled.

One of the interesting aspects of the Connecticut study was the evaluation of characteristics of those who had tried BST and no longer used it (23% of those who indicated they had used BST were no longer using it). These producers were similar to those that were currently using BST and both groups were different from those that had never used it. Those that had never used it were smaller (herd size), had lower levels of production, used fewer other technological innovations and were less likely to use some type of dairy record program (DHIA and other). ©