Evaluation of producer and consumer benefits resulting from eradication of bovine viral diarrhoea (BVD) in Scotland, United Kingdom

In this paper we evaluated the distributional effects on actors in the milk market of a hypothetical programme to eradicate bovine viral diarrhoea (BVD) from the Scottish dairy herd. With this in mind, we applied an economic welfare methodology which utilizes data on price, on output quantity, on elasticities of supply and demand and on simulated cost and yield effects of an eradication programme. Our analysis is based on Markov-chain Monte Carlo simulation of BVD spread in the dairy herd. We found that consequent upon the eradication of the disease milk yield per cow increased for all herd sizes in Scotland whereas milk price received by farmers fell. Consequently, milk consumers gained around £11 million in discounted economic surplus and producers with infected herds gained around £39 million whereas producers with un-infected herds lost around £2 million in discounted surplus. On balance, however, the eradication programme generated around £ 47 million in discounted economic gain for Scotland. We found that the results are sensitive to changes in yield gains made by owners of the infected herd.