Step 3: Enumerate Costs & Benefits

Step 3: Enumerate Costs and Benefits

For many people, identifying and quantifying costs and benefits is the most challenging part of an animal health economic analysis. The information required is rarely located in a single source, and it can be surprisingly difficult to find precise dollar values or probability estimates for every component of a decision. It is also easy to become overwhelmed by the number of possible effects that a disease or intervention can have.

A systematic approach is essential. The goal of this step is not to achieve perfect precision, but to ensure that all relevant costs and benefits are identified, counted once, and described transparently. Importantly, not every cost on the farm needs to be included. Many overhead costs, such as mortgages, utilities, and insurance, are incurred regardless of whether a particular herd health programme is implemented. While these broader budget constraints matter to farmers, they are not usually attributable to individual interventions and are therefore excluded from most farm-level analyses.

Identify Intervention Costs

A practical place to start is by identifying the costs associated with implementing each intervention. These costs are generally easier to observe and measure than benefits and help establish the minimum investment required.

Intervention costs can be broadly divided into fixed and variable components.

Fixed Costs

Fixed costs are incurred regardless of how many animals are treated or affected. These costs do not change with scale, at least within the range of animals being considered.

Examples of fixed intervention costs include:

Farm call and mileage fees
Major equipment purchases, such as footbaths, RFID readers, or infrastructure upgrades
Fixed labour costs, including minimum call-out fees or contracted services
Training or setup costs required before an intervention can be implemented

Fixed costs are particularly important to recognise in smaller herds, where they may be spread over relatively few animals.

Variable Costs

Variable costs depend on the number of animals treated or the intensity of intervention. These costs are multiplied by the number of animals affected or treated and often make up the bulk of intervention expenses in large herds.

Common variable costs include:

Medication costs, including dose number and duration
Diagnostic test costs, such as sampling supplies, laboratory fees, and shipping
Procedure costs, including surgical or specialised treatments
Additional labour required per animal beyond any fixed labour component
Consumables such as needles, syringes, gloves, blood tubes, and dressings
Milk and meat withholding losses during and after treatment
Loss of carcass value due to injection site reactions, wool damage, or downgraded quality

When listing variable costs, it is important to be explicit about assumptions, such as how many animals will be treated and whether all animals receive the same protocol.

Identifying Intervention Benefits

In most herd health analyses, the benefits of an intervention arise in one of two ways:

Increased productivity gained by making a sick animal healthy
Production losses avoided by preventing a healthy animal from becoming sick

A critical rule is that these two perspectives should never be combined in the same analysis. The benefit must be expressed either as gains achieved or losses avoided, but not both. Including both will result in double counting and overestimation of benefits.

For example, if a pig farmer has 20 piglets with umbilical hernias and expects to lose $5 per animal at slaughter due to reduced growth, the total potential loss is $100. Treating the hernias does not generate a new $100 benefit on top of that loss; rather, the benefit of treatment is the $100 loss that may be avoided. Counting the loss and the avoided loss separately would incorrectly suggest a $200 benefit.

Common Sources of Economic Benefit

To identify benefits, consider all the ways that disease can affect animal health, productivity, and longevity. Common categories include:

Mortality
Loss of the animal’s market or productive value, carcass disposal costs, and replacement costs.
If an intervention reduces mortality in young stock, additional rearing costs for surviving animals must be subtracted from the gross value gained.
Growth and weight gain
Delayed time to reach market weight, reduced final weight, or increased variability in growth rates.
Feed efficiency
Poor feed conversion leading to higher feed costs per unit of output or lower output for the same feed input.
Production losses
Reduced milk yield, lower milk components, decreased wool or fibre production, or reduced egg output.
Reproductive performance
Fewer offspring, weaker offspring, increased days open, prolonged calving intervals, or additional inseminations.
Market penalties
Reduced payout due to carcass or organ condemnation, downgraded meat quality, milk penalties, or loss of premium market access.
Reduced productive lifespan
Earlier culling or reduced lifetime production, leading to increased replacement costs and lost genetic potential.

Not all benefits will be relevant in every analysis, but systematically working through these categories helps ensure that important effects are not overlooked.

Intangible and Non-Market Values

Some benefits of disease control are difficult or impossible to express in monetary terms, but may still influence decision-making. These values should be acknowledged explicitly, even if they are not included in the numerical analysis.

Examples include:

Improved animal welfare and reduced suffering
Environmental benefits from improved efficiency, such as producing the same output with fewer animals
Reduced reliance on antimicrobials and lower risk of antimicrobial resistance
Improved consumer confidence and social licence

While these factors are often excluded from farm-level cost-benefit calculations, they may still affect which option is ultimately preferred.

Using Existing Economic Studies

For many common diseases and interventions, economic analyses have already been published. These studies are valuable guides for identifying which cost and benefit components are likely to be important and for obtaining approximate estimates of effect size.

When using published analyses:

Treat them as guides rather than exact templates
Check that production systems and disease contexts are comparable
Adjust values to reflect local prices, management, and scale

If published estimates are unavailable or inappropriate, it is acceptable to use informed assumptions based on clinical experience, provided these assumptions are stated clearly and tested later through sensitivity analysis.

Step 2: List Alternate Interventions

Step 4: Select an Analysis Framework

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