Overview of costs and benefits associated with regulation in Scottish agriculture

8. Disposal of fallen livestock under The Animal By-Products (Scotland) Regulations 2003 ( SSI 2003/411)

Abstract

The EU Animal By-Products Regulation based on a wide-ranging review by the European Commission of the Animal Waste Directive (90/667/ EEC), lays down the health rules governing the disposal and processing of animal by-products not intended for human consumption. In Scotland the EU regulation is enforced along with some national requirements reflected in The Animal By-Products (Scotland) Regulations 2003. These regulations make it illegal to bury or burn fallen stock on-farm.

The impact (cost) of fallen stock scheme on farmers in England has been estimated by Defra to be at £14m, £15m and £15m for 2006, 2011 and 2015 respectively. Given the lower animal population in Scotland the estimated impact of the Regulation, in this case study, £11.6m on Scottish farmers seems reasonable.

Introduction

The EU Animal By-Products Regulation based on a wide-ranging review by the European Commission of the Animal Waste Directive (90/667/ EEC), lays down the health rules governing the disposal and processing of animal by-products not intended for human consumption. This EU Regulation has been adopted and implemented in member States. In Scotland the EU regulation is enforced along with some national requirements reflected in The Animal By-Products (Scotland) Regulations 2003. These regulations make it illegal to bury or burn fallen stock on-farm (Scottish Government, 2003a). Under these Regulations fallen stocks or animal by-products originated in the remote areas of Scotland (which covers most of the Highlands and Islands and Argyll), specified in Schedule 3, can be disposed of as waste by burning or burial on-site. Also in the case of an outbreak of a disease mentioned in List A of the International Office of Epizootic Diseases ( OIE), fallen stocks or animal-by products can be disposed of as waste by burning or burial on-farm only if the fallen stocks or animal-by products are transported, and buried or burnt, in accordance with a notice given by the Scottish Ministers (Scottish Government, 2003a).

Furthermore, burying or burning an adult bovine or goat on-farm without official approval is forbidden. Under the TSE (Scotland) Regulations 2002 all livestock keepers, including those within the "remote area", have a legal responsibility to report the death or slaughter on-farm of all bovine animals aged over 24 months and all goats aged over 18 months to the TSE Surveillance Helpline number. After registration, the Helpline will arrange for the carcass to be collected , tested for BSE and destroyed free of charge. The aim of this case study is to evaluate the regulations concerning disposal of fallen livestock in Scotland in terms of costs and benefits of the regulation.

Scientific justification

The risk resulting from fallen livestock and condemned materials depends on (i) the origin (source) of the material, (ii) the reason why the animal died or was killed or the reason for condemnation, (iii) whether or not this cause or reason can reliably be acceptable ( EU, 1999). However, humans should never be exposed to the risks of fallen stock and condemned materials, via products that could be recycled from them. If the reason why an animal died or was killed or the cause of a material to be condemned is unknown or suspect, such material should be disposed of. Ways of disposal depend upon the risk and vary from incineration to recycling into products for exclusive technical use. If the cause of death of an animal or the reason for material to be condemned can be determined positively, and the potential resulting risk for humans, animals and the environment can be eliminated/neutralised by appropriate processing (which implies the exclusion of any TSE risk), the material can be recycled into animal feed or for technical uses. Materials that present an actual or potential TSE risk should be disposed of. Ways of disposal vary according to the level of risk, from incineration (if there is an actual TSE risk) to recycling in products for exclusive technical use (e.g., specified risk materials from healthy animals otherwise found fit for slaughter and consumption) ( EU, 1999). Scientific evidences show that the degradation process essential to ensure reduction of BSE/ TSE infectivity cannot be guaranteed by burial. Even after burial Scrapie infected material can persist in the soil for years and present a source of infection. Improper burial can also cause pollution problems and act as a vector for the transmission of disease to man, animals, birds, & insects. Therefore, from May the 1 ^st 2003 the only legal methods of disposal has been rendering or incineration and any on-farm burial and burning of animal carcases is forbidden.

Implementation

Three different options have been offered by the Scottish Government to farm-animal owners to collect and depose their fallen livestock (Scottish Government, 2003b): (i) farmers can make their own commercial arrangements with an approved disposal operator (such as the local knackery or hunt kennel), (ii) an approved incineration unit can be purchased by one or a group of farmers and installed on-farm, and (iii) farmers can join the National Fallen Stock Scheme ²² which provides a subsidised (currently 20% of the commercial cost), bio-secure, uniform collection and disposal service throughout most parts of the UK including the "remote areas" on the Scottish mainland ( NFSCo, 2008).

Analysis

The main costs and benefits of the regulations are outlined table 1 and 2 below:

Table 1 Main costs of the regulations ²³

	Action	Scale of cost
Admin	Compensation paid by the government to farmers (20% of the costs)	Low
Policy	Pressure cook animal by-products (non-recurrent cost)	Medium
	Disposal arrangement costs to the farmers	Medium

Table 2 Main benefits of the regulations

	Action	Scale of benefit
Private	Higher farm bio-security level	Medium
Social	Avoiding and preventing highly costly animal disease outbreaks	High
	Reducing TSEs spreading risk	High
	Improving public health with respect to incidence of human vCJD cases	High

In general the Animal By-Products Regulation imposes costs on livestock keepers and producers of animal by-products such as abattoirs and producers of products derived from by-products. The majority of the businesses affected are small businesses. Specifically, the ban of on-farm burial of fallen stocks increases the costs of collecting and disposing of fallen stocks for the farmers who were not using the local knackery services. Two categories bear the costs: farmers and by-products processors. According to the regulatory impact assessment, the total cost of implementing the regulation was estimated to be greater than £100 million (including investment costs or non-recurrent costs and recurrent costs) (Scottish Government, 2002). In this case study only the direct recurrent costs of the dead animal disposal for the farmers are estimated. However, to give the readers an insight into the non-recurrent and recurrent costs for the animal by-products processor the available figures are summarised in the next section.

Cost items for animal by-product processors

The regulatory impact assessment (Scottish Government, 2002) has provided the anticipated non-recurrent costs for the processors. To pressure cook animal by-products, renderers may need to invest around £0.75 million per cooker for up to 75 cookers, or up to £50-60 million in total. (Scottish Government, 2002). If most of the hunt kennels and other premises handling animal by-products for feeding to hounds, maggots, fur animals, etc. had to upgrade their premises, the cost could be as much as £1.5 million. It has also been estimated that the price that slaughterhouses pay for the disposal of blood could rise from the current £16/tonne to £60-80/tonne. To meet the requirements of the Waste Incineration Directive, the capital compliance cost for an individual incinerator was estimated at £230,000, with annual operating costs of approximately £12,000. A two year transition period has been obtained to enable the requirements of the Regulation to be phased in for those low capacity incinerators which do not burn SRM. Around 80,000 tonnes of used cooking oils are produced in the UK each year and the Feed Fat Association (representing the blenders) has estimated that additional feed costs of between £29 and 45 million p.a. will result from the need to use alternative sources (these costs was predicted to be passed on to the feed industry and farmers).

Costs to the farmers and beneficiaries of the regulations

The costs to individual farmers of disposing of sheep and cows via existing disposal routes are in the region of around £15 per sheep and £90 per cow (Scottish Government 2002). The additional disposal costs for cattle should be small as the collection of all fallen stock over 24 months is currently met by central funds for TSE surveillance purposes. However, there will be additional disposal costs for sheep producers, many of whom currently bury fallen stock on-farm, and there may also be costs for the small number of pig and poultry producers who do not already use a legitimate outlet (most intensive producers routinely use legitimate outlets to maintain biosecurity levels). The continued burial of fallen stock will however be permitted in remote areas, and a significant number of crofters and farmers in Scotland are likely to benefit from this derogation.

Various groups receive the benefits of implementing the fallen stock Regulations. The livestock industry and associated industries receive the benefits by the following mechanisms: (i) reducing the risk of the transmission of animal and human diseases; (ii) providing a framework for a potential relaxation of the restrictions on the use of animal protein in feed; and (iii) increasing domestic and foreign consumer confidence. Consumers also receive the benefits via enhancing the public health and providing better environment (e.g. less pollution) by developing new operations such as composting and biogas plants.

Cost and benefit assessment

Table 3 Estimated total costs of fallen stock disposal in 2007 in Scotland.

	Animals population 1	Total value of animals 2 £ * 1000	Mortality rate 3 per year (%)	Costs 4 (£)
Dairy cows and heifers	242,650	121,325	5
Beef cows, heifers and bulls	540,250	432,200	2
Other cattle, prime cattle and <1 year	1,115,640	390,474	5
Total bovine	1,898,540	943,999		7,084,755
Ewes and rams	3,820,940	114,628	5
Lambs	3,677,280	147,091	1.6
Total ovine	7,498,220	261,719		3,748,252
Laying hens	2,919,810	13,723	8
Pullets rearing for laying	1,237,750	5,817	5
Fowls rearing for breeding	1,586,800	7,457	5
Broilers	8,314,990	83,149	3.5
Other poultry	69,610	1,044	5
Total Poultry	14,128,960	111,192		435,056
Total Swine	456,670	68,500	6	342,503
SUM		1,385,411		11,610,566

¹ Based on June 2007 statistics (Economics Report on Scottish Agriculture, 2008 Edition).

² Following values were used to estimate the total value of the animal populations: dairy cow £500, beef cow £800, other cattle £350, ewes £30, lambs £40, laying birds, pullets and fowls £4.7, broilers £10, other poultries £15 and pigs £150.

³ Following references were used: for dairy cows: (McConnel et al, 2008), for beef cows: (de Roes, 2007), ewes, lambs, poultry and swine: personal communications with SAC experts.

⁴ Following disposal costs were considered based on reference (Scottish Government, 2002): £90 per cow, £15 per sheep, £12.50 per pig and £0.65 per bird.

In this section the direct costs of fallen stock disposal for the farmers have been estimated for four species namely bovine, ovine, swine and poultry. The goal of this simple cost calculation was to produce a quantitative figure which can be used for a cost-benefit analysis. The total costs of disposing fallen livestock were estimated based on the animal population in Scotland as well as the mortality rates reported in the literature or by experts. Results show that the total direct cost to the livestock farmers is estimated at £11.6 million for 2007 in Scotland. The details for each industry are summarised in Table 3. According to the chairman of the National Fallen Stock Company ( NFSCo), over £16 million was paid to the farmers, who are member of the scheme, against the costs of fallen stock across the GB last year. By considering 15% of those farmers being in Scotland, £2.4 million subsidy has been paid to the Scottish farmers via NFSCo which equals to 20% of our estimated total cost of fallen stocks for the Scottish animal keepers (£2.4/£11.6 = 0.02).

Discussion

In this case study we focused on recurrent costs for the animal keepers in Scotland. As discussed, this regulation also imposes and has imposed recurrent and non-recurrent costs to other small businesses mainly animal by-product processors. Thus, the estimated costs in this case study only reflects the direct or recurrent cost and thus the total costs of the whole Animal by-products Regulations is an under estimate. According to the regulatory impact assessment, the total cost of implementing the regulation was estimated to be greater than £100 million (including investment costs or non-recurrent costs and recurrent costs) (Scottish Government, 2002). Our estimated recurrent cost for the farmers is almost 11% of the total predicted costs of the Regulations. However, a lower total cost of implementing the Regulation is anticipated in the years after the enforcing the Regulation (2003). More updated data from the animal by-product industry are required to be able to generate the total costs of the Regulations. However, estimating the recurrent costs for the farmers helps to evaluate the efficacy of the part of the regulations that deals with fallen stock (that was our main goal). The impact (cost) of fallen stock scheme on farmers in England has been estimated by Defra to be at £14m, £15m and £15m for 2006, 2011 and 2015 respectively (Defra, 2005). Given the lower animal population in Scotland the estimated impact of the Regulation £11.6m on Scottish farmers seems to be a reasonable estimate.

Estimation of the direct and indirect benefit of the Regulation is harder than estimation of the costs. When focusing only on the help of the fallen stock regulation on safeguarding the animal populations, by reducing the exposure to the infectious materials and risk of spreading the devastating animal diseases, the benefit has been certainly positive. This is demonstrated in our simple benefit-cost analysis and sensitivity analysis using a range of scenarios. As it can be seen in Figure 1, The highest (positive) B/C ratios are achieved, by assuming the highest effectiveness for the regulation (i.e. high level of compliance), in the scenarios where the economic impacts of the disease were very high (50%). In other words, by assigning a high compliance for implementing the regulation, it is more cost-effective when a disease with high economic impact occurs. By contrast, by assuming a lower effectiveness (i.e. representing a scenario where regulation does not effectively change the probability or severity of disease outbreak) for the regulation in all the examined scenarios (i.e. low, moderate and high economic damage) the B/C ratios are smaller than one and thus implementing the regulation is not cost-effective and cannot be justified. These findings imply that, the high compliance in implementing the regulation has a positive effect on reducing the risk of introducing and spreading animal diseases and consequently reducing the economic damages. It is expected this effect is greater in case of animal diseases with higher epidemiological and economic impacts. By including the effects of the regulation on safeguarding the public health (e.g. less bovine related vCJD cases) and enhancing the environmental parameters, the benefits of implementing the fallen stock regulation would be higher.

As it has been mentioned in the regulatory impact assessment (Scottish Government, 2002), this Regulation helps to safeguard public and animal health and the environment and reduce the risk of transmission of a wide range of diseases. There are some indications confirming that the regulations and measures against TSE have been effective in reducing the number of confirmed cases in both cattle and sheep across the Great Britain. These have been demonstrated in the latest report of the Veterinary Laboratories Agency on number of confirmed BSE cases (Defra 2008). (Figures A1a and A1b in Appendix present these outcomes for cattle). Although the current available data cannot confirm any statistically significant relationship between the observed reduction in number of vCJD human cases (from 18 cases in 2003 to 5 cases in 2007- see Figure A1c) ( NCJDSU, 2008) and implementation of the fallen livestock disposal regulation, it can perhaps be considered as a positive sign. Quantifying the mentioned possible effectiveness of those observations is difficult and needs extensive economic-epidemiological studies to establish the impact on disease incidence and quantify the benefits.

Under the Scottish Regulations, fallen stocks or animal by-products originating in the remote areas of Scotland (which covers most of the Highlands and Islands and Argyll), can be disposed of as waste by burning or burial on-site. Scottish Government has provided a detailed guideline for on-farm disposal of the fallen stocks (Scottish Government, 2005). As the definition of the remote areas covers a relatively large proportion of the country, the inspection and supervision of the enforcement of the mentioned on-farm burial guideline, to protect the environment from the pollution, is crucial. Due to the mentioned fact, it can be concluded that more efforts is required and is spent to comply with the fallen stock regulation in Scotland compared to the other parts of the country.

As it has been learnt from the previous animal disease crises, the benefits of avoiding and preventing highly costly animal disease outbreaks are obvious and extremely large. The ban of dead animals' on-farm burial that has been stated in the Scottish Animal By-Products Regulations is considered as a practical step towards using those experiences in formulating new regulations and guidelines. Maintaining and improving these regulations is crucial to enhance the animal health and welfare levels, the regulations. In rural areas, the regulations can impose more costs to the farmers in the remote areas and can increase the spread of the animal diseases if the fallen stock are not buried properly. Thus, any change to the currently in practice regulations, or any change in implementation of the EU legislation by the Government might have an important influence on maintaining and enhancing animal health and welfare. Therefore, it is essential any possible change of the Regulations be carefully investigated and communicated with the stakeholders in advance. This should be done so as to minimise the difficulties caused by the public good nature of some aspects of animal health.

Review of RIA

Disposal of fallen livestock under The Animal By-Products (Scotland) Regulations 2003 ( SSI 2003/411)

Does the regulation originate from an EU Directive?

Yes. European Commission of the Animal Waste Directive (90/667/ EEC).

Has a RIA been done?

Yes.

Does the RIA quantify costs?

Yes, has quantified costs for disposal, but not total costs.

Does the RIA quantify benefits?

No, benefits not quantified.

Does the RIA demonstrate that benefits exceed costs?

Not applicable.

Data required to improve assessment of costs and benefits

Not applicable.

Recommendations for improvement

Any change to the current regulations, or any change in implementation of the EU legislation by the Government might have an important influence on maintaining and enhancing animal health and welfare. Therefore, it is essential any possible change of the Regulations be carefully investigated and communicated with the stakeholders in advance. This should be done to minimise the difficulties caused by the public good nature of some aspects of animal health.

References

Defra 2004. Scottish Executive, and Welsh Assembly Government 2004 - "Animal Health and Welfare Strategy for Great Britain". Defra, London

Defra 2005. Agriculture and the economics base on farm regulation - November 2005. http://www.defra.gov.uk/farm/policy/regulation/charge/pdf/econ-evidence-summary.pdf

Defra 2008. General Statistics on BSE cases in Great Britain. http://www.defra.gov.uk/vla/science/docs/sci_tse_stats_gen.pdf

de Roest, K., 2007. Implementation of the CAP reform on beef fattening systems. http://www.eaap.org/Dublin/Videos/07_DeRoest.pdf

EU 1999. http://ec.europa.eu/food/fs/sc/ssc/out53_en.pdf. Scientific opinion, EU publication.

M. G. Doherr, D. Heim, R. Fatzer, C. H. Cohen, M. Vandevelde and A. Zurbriggen, 2001. Targeted screening of high-risk cattle populations for BSE to augment mandatory reporting of clinical suspects. Preventive Veterinary Medicine, 51, 3-16.

C. S. McConnel, J. E. Lombard, B. A. Wagner and F. B. Garry, 2008. Evaluation of Factors Associated with Increased Dairy Cow Mortality on United States Dairy Operations, Journal of dairy science, 91:1423-1432.

NCJDSU 2008. The National Creutzfeldt-Jakob Disease Surveillance Unit ( NCJDSU). http://www.cjd.ed.ac.uk/figures.htm

NFU 2008. Scotland Newsletter, Issue 10, June 10, 2008. Defra Cuts Threaten Island Fallen Stock Collection. http://www.nfus.org.uk/news_detail.asp?newsID=1440&newsIndex=yes

NFSCo 2008. http://www.nfsco.co.uk/images/stories/pdf/gov_support_to_rise_feb2008.pdf. Government support for fallen stock collection to rise from February to May 2008. NFSCo (National Fallen Stock Company). Press Release.

Scottish Government 2002. http://www.scotland.gov.uk/Resource/Doc/47074/0030326.pdf. Regulatory Impact Assessment. The Animal By-Products (Scotland) Regulations 2003 (which enforce Regulation ( EC) No 1774/2002 of the European Parliament and of the Council laying down health rules concerning animal by-products not intended for human consumption).

Scottish Government 2003a. http://www.opsi.gov.uk/legislation/scotland/ssi2003/20030411.htm Scottish Statutory Instrument 2003 No. 411 The Animal By-Products (Scotland) Regulations 2003.

Scottish Government 2003b. http://www.scotland.gov.uk/Topics/Agriculture/animal-welfare/policies/PolicyInfo/AnimalByProducts/fsdlet. Fallen stock disposal, Scottish Government.

Scottish Government 2005. Disposal of Animal Carcasses. http://www.scotland.gov.uk/Publications/2005/03/20613/51376

Scottish Government 2008. http://www.scotland.gov.uk/Publications/2008/10/15102224/0 Assessing the Economic Impact of Different Bluetongue Virus ( BTV) Incursion Scenarios in Scotland

Appendices to case study 8

Appendix 1

Figure A1a. BSE cases confirmed by passive surveillance in Great Britain, plotted by month and year of clinical onset (adapted from Defra 2008).

Figure A1b. BSE cases confirmed by active surveillance in Great Britain, plotted by month and year of slaughter (adapted from: Defra 2008).

Figure A1c. The number of deaths of definite and probable cases of human vCJD in the UK, up to 2nd June 2008 (adapted from: NCJDSU 2008).

Appendix 2

Supplementary analysis

To estimate the effectiveness of intervention (regulation) 'without' regulation scenario is compared to 'with' regulation scenarios. The result of a study on BSE in Switzerland has revealed that the chance of finding a BSE case was 49 times higher in the fallen stock than other animals (Doherr et al, 2001). In other words the chance of being BSE positive in normal animals in a herd is 0.02 of that chance in fallen stock. If, based on this finding, we assume that the probability of outbreak of a certain animal disease (e.g. FMD) and consequently the economic losses due to animal mortality and animal slaughtering can be reduced (i.e. multiplied) by the factor 0.02 (as a result of regulations). This assumption is made in order to examine the related benefit-cost ratios in the case where regulation acts to decrease the probability or severity of disease outbreak. We clarify this by the following example.

In this example two hypothetical outbreaks (e.g. FMD and AI) occurs and cattle, sheep, pig and poultry industries are affected. We assume that, in without regulation scenario, a 5% economic loss (i.e. disease mortality and welfare/preventive slaughtering) is imposed to those sectors. This assumption is supported by the recent figures of 5-8% total economic loss for cattle and sheep industries due to bluetongue ( BTV8) incursion scenarios (Scottish Government, 2008). Based on the estimated livestock values (Table 1) this equals to approximately £69 million. Now, by introducing the regulation, the impact of the economic losses due to the outbreaks is assumed to be reduced to 0.1% (10%* 1/49). As a result of that, the total economic losses are reduced to £1.4million. Based on that the benefit-cost ratio of the mentioned intervention is calculated at 5.84 using formula below:

B/C ratio = (Without reg. losses - with reg. losses) / reg. implementation costs

In order to get more insight on benefit-cost ratio evaluate our assumptions, a simple sensitivity analysis was performed. A range of values for the effectiveness of the regulations were used (i.e. most effective: 0.02, moderate effective: 0.04, low effective: 2 and very low effective: 5) against a range of loss impact to the imaginary outbreaks (i.e. 1%, 5%, 10% and 50%). The outcomes of this analysis, in terms of benefit-cost ratio) are presented in Figure A2a.

Figure A2a. Benefit-cost ratio for implementing the fallen stock disposal regulation as a measure to reduce the economic losses due to imaginary animal disease outbreaks.

Based on the above analysis and the discussion presented it can be conclude that the efficacy of the fallen stock regulation (higher benefit-cost ratios) in preventing/controlling the economic losses due to animal disease outbreaks is greater in modelled scenarios where there is a better compliance level in implementation.