Pseudorabies (PRV) is a disease problem in U.S. swine herds which is recognized to cause considerable economic loss. An eradication program for this disease was implemented in the U.S. in 1989. At the end of 1992, it was recognized that an assessment was needed of what the eradication program had achieved to date, and what could the eradication potentially achieve. Of particular interest, was where the eradication program stood in relation to the economic returns derived from the program, and the costs of the program. Thus, the objective of this study was to conduct a benefit-cost analysis of the PRV eradication program.

There are three phases to this study: 1) a PRV epidemiological model, 2) a PRV productivity model, and 3) a PRV benefit-cost model. The first two phases of this project have previously been reported.1,2 These first two phases used an expert panel to estimate probabilities of disease transmission used in the epidemiological model, and to estimate the productivity impacts on PRV infected herds for the productivity model. The third phase of this study is an evaluation of the economic impact of the PRV eradication program at the national level using welfare analysis. The results from the first two phases of the study are incorporated into the benefit-cost analysis.

Why is it important to use benefit-cost analysis in this evaluation? One important reason is because the prevailing market price for hogs is an inadequate index of the value of the change in hog production which will occur from PRV eradication. Eradication of a disease which influences farm productivity and profitability, such as PRV, will result in an outward shift of the supply curve for pork, and a resultant change in the equilibrium price for pork. Accounting for these supply curve shifts and change in equilibrium price is handled in benefit-cost analysis.

There are several important influences on the final results of any benefit-cost analysis. The type of supply curve shift is an important influence on the benefit-cost results.3 Both a pivotal and a parallel supply curve shift are modeled in these analyses. Also, the discount rate which is applied is an important influence. Standard discounting techniques were used to calculate discounted benefit-cost ratios, using a discount rate of 5 percent. The length of the time for projections is another important influence, and projections were made in this study for 1993-2012.

Impacts on both consumers and producers of pork products were estimated. These impacts were determined by estimating the change in consumer and producer surplus measures, which were estimates of the welfare which accrue to these two groups as a result of the PRV eradication program.

The epidemiological model found that except under optimistic conditions, PRV will be a difficult disease to eradicate. Even under these optimistic conditions, PRV is not projected to be eradicated from the U.S. until 2012.

The productivity impacts of PRV resulted in marked differences in the economic status of farms. Infected farms had significantly less enterprise profitability compared with non-infected farms. Costs of production were approximately $6.00/cwt marketed lower in non-infected farms. Sensitivity analysis revealed that the most important variable in the analysis influencing farm profitability, for which there was the most uncertainty, was the influence of PRV on hogs marketed/sow-year.

The benefit-cost ratios varied from less than 1 to 2.2 depending on several assumptions, including the amount of federal funding and the type of supply curve shift modeled. While the exact benefit-cost ratio cannot be known, economic arguments can be made for a benefit-cost ratio which is closer to 2.2 than to 1 if federal funding for the PRV eradication program is increased by 25 percent, with this increased funding targeted to be spent in areas with higher PRV prevalence.

An interesting finding from the benefit-cost analysis was that the majority of benefits derived from the PRV eradication program accrue to consumers of pork products rather than to pork producers. The benefit to pork producers was highly sensitive to the type of supply curve shift modeled. However, even with a model which allowed for the potential of more benefits to be demonstrated for pork producers, consumers still received nine times the benefit from the eradication program than received by pork producers.

Such a finding points sharply toward an evaluation of the distribution of appropriate expenditures for the PRV eradication program between producers and consumers (tax payers). In addition, the distribution of PRV program expenditures within the federal government should be examined. The proportion of money allotted for various parts of the eradication program, is probably as important, or more important than the actual total dollars spent for PRV eradication. For example, if an important goal of the program is insuring that herd plans be developed for all known infected herds, then dollars from the program which filter down to the field-level probably becomes the limiting factor. This needs further examination.

1. Miller, G.Y., Forster, D.L., Tsai, J., Bech-Nielsen, S. Predicting the number of herds infected with PRV in the U.S. accepted for publication

2. Miller, G.Y., Forster, D.L., Tsai, J., Bowman, G. Productivity and profitability differences between pseudorabies infected and non-infected farrow-to-finish swine herds. accepted for publication

3. Miller, G.Y., Rosenblatt, J.M., Hushak, L. The effects of supply shifts on producer surplus. AJAE 1988 (70):886-891.