The effect of bovine somatotropin on the cost of producing milk: Estimates using propensity scores

Abstract

Annual farm-level data from New York dairy farms from the years 1994 through 2013 were used to estimate the cost effect from bovine somatotropin (bST) using propensity score matching. Cost of production was computed using the whole-farm method, which subtracts sales of crops and animals from total costs under the assumption that the cost of producing those products is equal to their sales values. For a farm to be included in this data set, milk receipts on that farm must have comprised 85% or more of total receipts, indicating that these farms are primarily milk producers. Farm use of bST, where 25% or more of the herd was treated, ranged annually from 25 to 47% of the farms. The average cost effect from the use of bST was estimated to be a reduction of $2.67 per 100 kg of milk produced in 2013 dollars, although annual cost reduction estimates ranged from statistical zero to $3.42 in nominal dollars. Nearest neighbor matching techniques generated a similar estimate of $2.78 in 2013 dollars. These cost reductions estimated from the use of bST represented a cost savings of 5.5% per kilogram of milk produced. Herd-level production increase per cow from the use of bST over 20 yr averaged 1,160 kg.