Project 1 – Benefit-Cost Analysis of NIRS Feeding Initiative for the Alberta Livestock and Crop Industry

Location: University of Alberta and AARD
Research Team: Scott Jeffrey, Henry An, Jim Unterschultz, Mary-Lou Swift
Duration: March 2012 – March 2013



Near Infrared Reflectance Spectroscopy (NIRS) is a technology that may be used to quickly predict the nutrient content of feed ingredients for livestock rations.  As such it represents a potential tool for livestock producers that may allow them to better “tailor” rations for cattle (beef and dairy), hogs and poultry.  There may also be indirect benefits to crop producers in terms of providing more accurate information concerning the value of their outputs.  Work is underway to examine the feasibility of commercial introduction of this technology in Alberta.


This project evaluates the distribution of net benefits and costs associated with the adoption of NIRS by the Alberta livestock and crop sectors.  Private and public net benefits of the NIRS feed grain initiatives will be estimated.  The analysis will be extended to a regional level for Western Canada.


Benefit-Cost Analysis (BCA) will be used to evaluate the NIRS program.  The analysis, where feasible, includes estimates of the social benefits and costs associated with NIRS (e.g. environment, manure production). Monte Carlo simulation will be used to conduct key sensitivity analysis. As appropriate, other layers of qualitative analysis will be incorporated to examine environmental and key social issues that cannot be monetized.

The approach will undertake BCA separately for the AB beef (ILO), pork, dairy, poultry/broiler and beef (cow-calf) sectors.  As appropriate, the separate livestock sectors will be linked. Base models will be constructed based on information from workshops/meetings with industry participants, existing literature and expert opinion.  The base models provide the basis for comparison with NIRS future scenarios.  Estimates of cost savings, production changes and/or price changes will be developed, based on available literature, consultation with NIRS researchers, industry representatives and other expert opinion. Depending on feasibility, other potential related/relevant applications of NIRS technology will be considered if identified through these consultations.  These values are then used to estimate changes in the net benefits to the feed users (e.g., livestock farms) and feed sellers/producers (e.g., feed mills, grain suppliers such as AB crop farms). Existing estimates of elasticities will be used to determine if potential shifts in demand/supply with introduction of the NIRS warrant inclusion in the analysis. Estimates of net benefits converted to a $ per tonne of feed or an appropriate animal unit base will allow aggregation to the provincial and Western Canada level. This will be cross checked with more sophisticated analysis.  The BCA analysis will focus primarily on the industry level and with less emphasis placed on any additional social benefit/cost. The BCA will be extended to include distributional analysis of the impact on different stakeholders.


A final report summarizing the results of the research project (i.e., estimates of private/public net benefits, distribution of benefits between cropping/livestock sectors, etc.) will be delivered at the completion of the overall project. A preliminary report, summarizing progress to date and any preliminary results, will be provided to the network in spring 2013.  A poster presentation may be made at the 2013 policy conference, with conference papers to be submitted for presentation in 2013 and 2014 (e.g., CAES, WAEA and/or AAEA conferences).  Presentations of results will also be made to relevant industry and government groups.  Training is provided for two M.Sc. students.