Banning Antibiotics at What Cost?
Jane Messenger
| Tuesday, March 12, 2002
There's no such thing as a free lunch. This holds true for many scenarios, including the controversy surrounding the use of feed-grade antibiotics in U.S. pork production. Sweden started the trend in 1985 and Denmark followed suit about a year and a half ago.
In an effort to determine the implications that a similar ban would have in the United States, experts from Iowa State University and the National Pork Board went to Sweden to study the country's pork industry. In reality, because of animal-welfare laws, the Swedish production system is more like the U.S. pork industry of the 1950's and early 1960's, but it's a starting point.
"One thing we found out is that the Swedes don't have before and after comparisons regarding antimicrobial use as it relates to resistance and human health implications," says Paul Sundberg, NPB assistant vice president, veterinary issues.
In spite of those obstacles, Sundberg admits that taking a look at Sweden helped U.S. researchers learn more about that country's production system. Sometime this year, the same group of researchers will visit Denmark, whose pork production systems have more similarities to those of the United States.
From the Swedish review, Dermot Hayes, Iowa State agricultural economist, has looked at the potential economic impact of a feed-grade antibiotic ban in the United States.
Besides taking into account the differences between the U.S. and Swedish pork industries, Hayes also looked at current use rates of feed-grade antibiotics in the United States. According to USDA's Animal and Plant Health Inspection Service, U.S. pork producers use
antibiotics in 90 percent of starter feeds, 75 percent of grower feeds, more than 50 percent of finishing feeds and at least 20 percent of sow feeds.
On average, the cost of feed-grade antibiotic use for all livestock producers is estimated to be about 3.75 percent of total ration costs.
"A ban on the use of feed-grade antibiotics will lead to changes in processes and practices in pork production. It will likely have an economic impact on the U.S. pork industry and pork market," says Hayes.
The research team of Hayes, Helen Jensen, Lennart Backstrom and Jay Fabiosa studied three scenarios. They were classified as: "most likely", "best case" and "worst case".
The most-likely case uses evidence from Sweden's experience to describe what is most likely to occur if a feed-grade antibiotic ban were implemented in the United States. The results are compared with a base-line case as well as if there was no change in feed-grade antibiotic use.
Due to differences in Swedish and U.S. production practices, the researchers couldn't provide a precise estimate of a ban's impact.
For example, suppose the data showed an increase in mortality of one pig per litter with a range across farms of 0.5 to 1.5 pigs per litter. It may be that most U.S. operations are similar to the farms that lost only 0.5 pig per litter, or that U.S. farms are more similar to those that lost 1.5 pigs per litter. Rather than attempt to make these judgment calls, the research team simply reported results for all three cases. Therefore, the report presents a worst-case and best-case scenario. Lying between these two scenarios is what the researchers call the most-likely scenario.
Let's start with the most-likely case. Under that scenario, cost per head increased by $6.05 in the first year and $5.24 by the end of the 10-year period. This estimate included additional fixed costs of $1.41 to $2.79 per head. Profit declined by $4.17 per head in the first year and by 79 cents through the tenth year. Total industry income would decline by $1.039 billion for the 10 years.
"Initial evidence coming out of Denmark indicates that first-year production costs after an antibiotic ban are equivalent to $4 per head," notes Hayes.
In the worst-case scenario, total cost per head increased by $7.92 in the first year and by $7.45 for the 10-year period. Of these costs, the additional fixed costs equaled $1.42 to $2.80 per head, essentially the same as for the "most-likely case". Under this scenario, profits declined by $1.05 per head. Over 10 years the production sector's income would drop by $1.135 billion.
For the best-case scenario, cost per head increased by $3.10 in the first year and by $2.10 within 10 years. Of these costs, additional fixed costs represented $1.25 to $2.50 per head. Lost profit per head was 88 cents in the first five years and 28 cents for the last five years. Researchers estimate the production sector's income over the 10-year period would decline by $0.429 billion.
Results for the three scenarios show that overall production costs would increase by $5.24 to $6.05 per head. However, with higher live-hog prices because of the resulting smaller pork supply, researchers estimate net profit would decline only by 79 cents per head over a 10-year period. That translates to less than 1 cent per pound of pork in terms of retail weight. The value of lost income to the industry over a 10-year period would be $1.039 billion.
All of the case studies include costs of adding feed troughs and space requirements to accommodate
restricted-feeding practices. These totaled $960 million – or $1.20 per hog.
Keep in mind, the estimated impact of a feed-grade antibiotic ban varies widely depending on the type of operation. However, if restricted feeding has to be used almost all producers would have to make some adjustments in their operation.
One area that would be vulnerable is the post-weaning period. Hayes points out that it's common practice to use feed-grade antibiotics in weaned pigs to counteract the high stress load that can cause health problems. Without those antibiotics, he says, the only way to reduce stress is to restrict feed intake because pigs can stress their systems by eating too much. The problem with that practice is it's expensive.
As for commercial operations, producers who follow good hygienic and herd-health practices, and have all-in/all-out systems on multiple production sites, would see the smallest impact from a feed-grade antibiotic ban. Producers hit the hardest would be those with densely populated operations in counties with high hog numbers, who have older buildings and don't follow strict management practices.
"It's likely that such a ban would speed progress toward more larger and modern integrated systems," adds Hayes.
From a pure economic standpoint, closing down old, less modern operations makes sense. Producers with those operations would be able to use their capital resources elsewhere. However, this trend has already created tensions in the industry.
Now that you've looked at production costs, lets see what a feed-grade antibiotic ban might cost consumers. In this segment, researchers only looked at the price of pork, and did not change the price of beef or poultry. Also, they did not factor in any price affect on consumers' willingness to pay for antibiotic-free pork.
Overall, retail pork prices would increase if feed-grade antibiotics were banned, but not dramatically.
It could be another story for the export market. So far, exporters have not been overly concerned about suppliers using subtherapeutic antibiotics.
"However, once the EU – or more specifically Denmark – can guarantee reliable supplies of antibiotic-free pork, the situation may change," says Hayes. "Impact on the U.S. pork industry associated with the loss of an important export customer, such as Japan, would dwarf the other losses previously described."
Could such a ban occur in United States? The jury is still out, but Hayes isn't so sure.
"I think the U.S. pork industry is headed this way – I'd say within about 10 years," he notes. Hayes believes public opinion and export markets will pressure the United States into this situation.
On a final note, Hayes did serve on a National Academy of Science's panel to determine if antibiotic-resistance could be passed from animals to humans. "So far, there is no evidence that this can occur," concludes Hayes. "This doesn't mean it isn't true, there's just no evidence."
What Would Consumers Pay?
How much would a feed-grade antibiotic ban cost U.S. consumers in terms of their retail pork purchases? Researchers at Iowa State University drew up the following table, which outlines the most likely impact for retail pork prices under such a case. The costs are based on a family of four.
Change in retail price +$0.052 per pound
Per capita consumption 53 pounds
Extra cost per capita +$2.75 per year.
Extra cost per family +$11.02 per year
Extra cost nationally +$748 million per year
Source: Iowa State University, National Pork Board
