Bovine Somatotropin (BST) is a naturally occurring hormone in
dairy cows which affects milk production levels (Chalupa and
Galligan, 1988). The effects of BST have been known since the
1930's but limited supply of this hormone made any large scale
commercial use impossible. Recently a low cost source of BST
became available through recombinant DNA technology. This low cost
availability of the hormone has led to research experiments which
show that recombinant BST can significantly increase a cow's
ability to produce milk (Peel and Bauman, 1987; Burton et al, 1987;
Soderholm et al, 1988; De Boer et al, 1988).
A number of studies have examined the firm level impacts of
BST on the Canadian dairy industry. This present work will build
upon these earlier studies by examining the impacts of BST at the
both the firm and aggregate levels for all of the dairy producing
regions in Canada.
To facilitate this analysis at an aggregate level a linear
programming model of the Canadian dairy industry was used. This
model describes the dairy sector for each province, including the
production, processing, trade and marketing subsectors, and is
incorporated into the Canadian Regional Agricultural Model (CRAM),
(Webber et al, 1986).
Several scenarios were examined representing different
government policy responses with the introduction of BST to the
Canadian dairy industry. These scenarios are compared to a 1986
"base case" situation of the dairy industry.
The first scenario examined represents a "no policy change"
situation. Provincial quota levels, producer prices, levies and
subsidies all remain unchanged and BST adoption rates are assumed
for each province. In order to maintain existing milk production
levels with BST a 5% reduction in the national cow herd results.
This lower number of animals producing the same amount of milk as
in the base case results in a 5% increase in dairy producer income
at the national level.
In the second scenario the impact of BST on quota values is
examined. As in the first scenario all dairy policy instruments
remain at 1986 base levels. The decrease in marginal costs for a
producer fully adopting BST is then estimated. Using a marginal
cost estimate of $32 per hi, the fall in marginal cost was nearly
6% or $2.00 per hi on average for Canada. This results in an 18%
increase in what these producers can pay for quota. Using lower
marginal cost estimates would result in a greatre increase in this
variable and smaller quota increases.
In scenario 3 some of the benefits of BST adoption are passed
on to consumers. This is done by allowing production levels to
expand such that the difference between farm-gate price and supply
price remains the same as prior to the introduction of BST. Quota
values remain at their base case level. This resulted in a 2%
increase in the national supply of raw milk. In the fluid milk
market the supply of standard milk increased by 2% and lowfat milk
production increased by approximately 3 percent. In the industrial
market cheese production increased by 6%, butter production
increased by 2% and skim milk powder production fell by
approximately 4 percent.
In the final scenario the benefits of BST adoption are passed
on to the taxpayers. This is accomplished by reducing the dairy
subsidy by an amount which just offsets the cost savings in each
province as a result of BST adoption. This leads to a decrease in
the dairy subsidy of $80 million at the national level or
approximately 30% of the 1986 subsidy payment.
At the firm level, given the assumptions of this study, the
main impacts of BST are a fall in marginal costs of $2 per hi and
an increase in quota values of 18%. While these estimates of firm
level changes resulting from BST adoption are not trivial they are
much less than would be expected with earlier results of milk yield
increases of over 25 to 3 5% accompanied by dry matter feed
increases of only 10 to 15 percent (Bauman et al, 1985; Soderholm
et al, 1988) .
Given the assumed Canadian adoption rates of approximately
50% the aggregate level impacts of BST are more moderate. The
national herd size falls by 5% and dairy producer incomes are
increased by 5% to produce at the base case 198 6 production levels. / Land and Food Systems, Faculty of / Graduate
| Identifer | oai:union.ndltd.org:UBC/oai:circle.library.ubc.ca:2429/42012 |
| Date | January 1989 |
| Creators | Stennes, Bradley Kenneth |
| Publisher | University of British Columbia |
| Source Sets | University of British Columbia |
| Language | English |
| Detected Language | English |
| Type | Text, Thesis/Dissertation |
| Rights | For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use. |
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