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Alistair Stott at QMS R&D Conference - The economics of technology in driving efficiency
Dr Alistair Stott (opens in new window)
In a recent address to the Quality Meat Scotland R&D Conference in Perth, Dr Alistair Stott, SAC Reader in Animal Health Economics highlighted the role new technologies can play in reducing the cost of production and improving the efficiency and profitability of farming.
He stressed the importance of linking science and technology in a way that gives greater efficiency and prosperity while not damaging the environment or affecting animal welfare. This is a brief extract of his paper.
“Agriculture involves adding inputs to a biological system in a way that provides saleable outputs. The technical efficiency of a farming system is measured by the degree of output for any given level of input. Unfortunately, in real life, the output response can be uncertain and tends to decrease when the level of inputs is high. For financial success it is necessary to reduce the uncertainty and discover, by comparing output value against input costs, which combination of inputs yields the greatest profit margin.
Technology can help in this process in three main ways.
First, by providing information that reduces the uncertainty. For example, technology can help identify the most efficient/profitable combination of outputs and inputs in the production system. Least-cost diet formulation is probably the best know example in the livestock sector but precision farming methods often include such technologies.
Technology can also alter the relationship between inputs and outputs in ways that increase technical efficiency. For example, better diagnostic tools can help eradicate livestock disease. This improves production as stock can respond better to other inputs such as feed or other investments in disease prevention.
Thirdly, technology can be an input to the production process in its own right and substitute for other more expensive inputs. For example, labour is one of the greatest input costs in livestock production. Recent research at SAC funded by AHBD has shown how much ‘lambing’ time on extensive sheep farms is devoted to unproductive tasks such as travel. The work explored the best ways to reduce labour input without compromising productivity or welfare. Some of this may be achieved through use of technology such as computerised record gathering and data handling.
Finally it’s important to look at the impacts of new technologies beyond the individual farm. Once a way of increasing efficiency becomes widely adopted it reduces overall production costs and lead to an increased supply to the market. This will lower prices and offset the original on-farm benefits, unless the new efficiencies add value to the output and so increase demand. If Scottish farming’s improvement in efficiency is sufficient to to drive out any competition it can move ahead and improve its market share.
SAC has explored this aspect of the economics of efficiency in the pig and beef sectors. This has allowed us to assess the benefits of innovation on trade and on the environment, looking for example at the national benefits of Scotland’s drive to eradicate BVD. There are exciting opportunities from technology driven innovation and the use of Economics can help us find the best ways to put innovations in science and technology to work”.