Flu outbreaks continue apace on U.S. turkey farms. In Minnesota alone, the infected turkey count has hit 1.5 million, with new reports coming in virtually every day.
That is over 3 percent of our average annual output of some 46 million birds. Moreover, because it takes only 14 to 22 weeks to raise a turkey and multiple batches are pushed through any single facility in a year, the 1.5 million is an even higher percentage of all the birds on farms right now. There are similar outbreaks in at least 10 other U.S. states and in three Canadian provinces. It is a major epidemic.
State agencies in the affected areas plus the federal government have people working 24/7 to contain the outbreak. Gov. Mark Dayton asked for an emergency $500,000 appropriation to cover overtime and temporary workers. The Legislature is likely to appropriate at least $1.5 million overall to fight the epidemic. And many other costs will be picked up by the feds.
From the point of view of the total budgets of state and federal government, this may amount to, shall we say, “turkey feed.” But why isn’t anyone, even among the most vocal “small-government” advocates, asking why government needs to be involved at all.
Since I started to draft this column, I’ve heard at least three GOP presidential candidates call for downsizing government. But not one uttered a peep about cutting back on animal epidemic response. Why not?
Inertia and tradition are powerful forces in public policy. The U.S. Constitution says nothing about using the federal government to control bird flu or hoof-and-mouth disease for that matter. But for more than a century, the U.S. Department of Agriculture has had statutory powers and some funding to control animal epidemics. And for many decades, there was substantial federal funding of veterinary research and massive efforts to eradicate endemic diseases such as brucellosis. One of my earliest memories as a child in the 1950s is of the “cattle inspector” coming to the farm to test some wild Angus beef cows.
That particular effort was related to human health because the disease could be passed to people by direct contact with animals or through unpasteurized milk and cheese. The resulting “undulant fever” was a serious disease, though seldom fatal. It now is virtually unknown here, but it did cause 6,500 cases in Mexico as recently as 1998. So this particular animal disease could be viewed as a human disease problem, the economics of which are a little different.
The particular strain of avian flu causing problems now is not transmissible to humans. Nor is the baby pig virus that decimated some hog herds over the past two years. So why do millions of tax dollars get doled out to solve a problem confined to private profit-making businesses?
The answers are found in economics.
As long as agriculture approached “perfect competition” with millions of small producers vying for market share, farm animal disease control was a “public good.” Because the benefit to any single producer was small and the costs of trying to organize a group to attack the problem was high, unified action on a private voluntary basis was rare. And because it is difficult to keep the benefits of controlling an epidemic from “spilling over” to benefit those who would not pay or participate in the cure, a group of volunteers bears all the costs but can reap only a part of the benefits.
The outcome — not enough disease control and potential market devastation — is economically inefficient. Government action to contain and cure the disease can restore this lost efficiency and benefit society as a whole in the form of cheaper and, in the case of bovine diseases, healthier food.
But the features of agricultural structure that made private efforts inefficient — the enormous number of small producers and the high cost of coordinating a private-sector response — no longer are as true as they once were. There are fewer than 100 turkey growers in Minnesota, and some are part of very large publicly traded corporations, such as Hormel. Coordinating action in this small a group is not impossible.
Yes, the temptation for any individual producer to refuse to pay and “free-ride” on the efforts and money of others exists. Instead of using this as justification for government taking over the task, one could instead enact a law that gives a private-sector group, whose voluntary members are a majority of producers, the power to charge nonmembers part of the cost whenever there are spillover benefits to all. Such legislation, albeit hated by some, already exists in “check-off” rules for advertising specific farm products.
Libertarian leaners tend to hate any sort of coercion, but the alternative is a less efficient economy with households paying more for food. If you are sure all government efforts are poorly managed and wasteful, isn’t a private group with some statutory power to coerce free-riders a less-bad alternative?
Yes, I may be setting up a straw man here. I’m not convinced personally that animal disease control should not be a function of government. But if you think the size of government should be shrunk, as many people do today, then this may be one place to start.
One question that arises in an epidemic like this is what it will do to product prices and how that will affect households. And other than killing birds, what will this do to producers?
The answer is that an epidemic like this reduces supply. At any given price, a smaller quantity of birds is offered for sale. The market price increases. The degree to which that happens depends on how “inelastic” demand is. In other words, for, say, a 10 percent increase in price, what percentage do purchases drop?
That depends on what substitutes there are for the product. Americans like turkey, but it isn’t a necessity. One can always eat ham or chicken or even a beef roast. If these don’t increase in price, even the deaths of millions of turkeys won’t necessarily make the price skyrocket.
Another consideration is that even if the bird flu cull is minimal, by percentage of the flock, and yet other countries impose import bans on U.S. turkeys, prices may actually drop, as supply on the U.S. market would grow.
Also, “turkey” is not a “homogeneous product.” Sliced smoked turkey breast for sandwiches is different than a whole bird for Thanksgiving. Demand for the first is more elastic than for the second. A ham sandwich is a good substitute to smoked turkey at lunch, but our traditions are such that there is no perfect substitute for a beautifully roasted turkey at Thanksgiving. So if the epidemic persists through the summer and into fall, expect to pay substantially more in November. (Although the Thanksgiving turkey is often a retail “loss-leader,” practically given away to get shoppers into stores to buy higher margin packaged stuffing, cranberries, gravy mixes etc.)
Just as for a few farmers who get rain in a drought year, the turkey raisers whose flocks do not fall ill benefit from an epidemic. They get the benefit of higher prices due to reduced supply and don’t lose any output. It is a natural biological equivalent of the famous mandatory killing of baby pigs implemented by Franklin Roosevelt’s administration in 1934 in an effort to boost hog prices. It is bad to lose the animals, but the total income to producers as a whole can go up, as the effects of the price increase can overcome the lost income due to dead animals.
That’s enough. Time for a nice cheddar and turkey sandwich.