Benefit-cost analysis of near-infrared spectroscopy technology adoption by Alberta hog producers

Abstract

Feed cost is a significant component of livestock production costs, accounting for over half of total operating costs for hog producers. This provides an incentive to minimize feed costs while meeting dietary requirements. However, producers may not know the nutritional content of their feed grains with certainty. Near-infrared reflectance spectroscopy (NIRS) imaging technology can quickly and accurately estimate the nutritional content of different types of feed grain. Although the technology has been available for almost five decades, producer adoption has been slow due to issues with cost and usability. The objectives of this study are to estimate feed cost savings resulting from the adoption of NIRS on a representative Alberta hog farm and to conduct a benefit-cost analysis to investigate the potential viability of NIRS adoption. A joint mathematical programming-simulation approach is used to estimate the cost savings generated by adoption of NIRS technology. Results suggest mean annual savings of up to $4 per hog and benefit-cost results suggest that adopting NIRS technology may be viable, particularly for larger Alberta hog operations. However, initial investment requirements, uncertainty in the magnitude of benefits, and access to the technology from feed mills will likely continue to limit adoption.