30The economic, environmental and social benefits to NSW from investment in the CRC for Beef Genetic Technologies

Griffith GR, Parnell PF and McKiernan W (2006) The Economic, Environmental and Social Benefits to NSW from Investment in the CRC for Beef Genetic Technologies, Economic Research Report No.30, NSW Department of Primary Industries, Armidale, September.

Executive Summary

The Australian cattle and beef industry and the associated RD&E community recently developed a successful proposal for a third Cooperative Research Centre (CRC) related to this industry - the CRC for Beef Genetic Technologies. The proposal contained four major areas of scientific research (high quality beef for global consumers; feed efficiency, maternal productivity and responsible resource use; adaptation and animal welfare; and female reproductive performance), as well as an education and training program including specialists in economics and adoption methods, and a cross-program group of underpinning science, bioinformatics and database specialists. The focus of the CRC is on gene discovery and gene expression, and accelerated adoption. Seven major industry outcomes have been targeted across some 20 individual project areas.

The expected benefits from the proposed scientific programs of the renewed CRC were estimated using the DREAM economic modelling framework. A “top-down” assessment philosophy was used that included explicit “with-CRC” and “without-CRC” scenarios. Differences in assumed investment levels, rates of improvement in meat quality, rates of productivity improvement, probabilities of success and levels and rates of adoption were compared in separate demand and supply analyses that incorporated data on prices, quantities and market elasticity values for each Australian state and the major beef trading countries.

Total estimated benefits from the with-CRC scenarios are in the order of $1.930b. The present value of the full cost of the CRC program is $98m when discounted. This results in a NPV of $1.831b and a BCR of 19.7:1. Total estimated benefits from the without-CRC scenarios are $516m with total costs of $58m. This results in a NPV of $458m and a BCR of 8.9:1. Thus, the benefit from the extra investment and consequent research effort is estimated to be worth over $1.4b in present value terms. Every $1 of these extra resources brought into the Australian beef industry through funding the new Beef CRC is expected to return around $35 to the industry.

The marginal returns to the NSW beef industry from funding the CRC were also estimated. Under the same assumptions as made in the aggregate assessment, it was estimated that NSW DPI involvement in a refunded CRC will generate an additional $251m in economic benefits to the cattle producers, beef processors and marketers, and beef consumers of NSW, in present value terms. The estimated net cost required to fund this involvement is $3.785m. So while the marginal cost to NSW DPI of being involved in the CRC is minimal, the anticipated benefits are substantial. The marginal NPV is $247m and the marginal BCR is 66:1.

Some additional benefits were also enumerated. First, it was estimated that an extra $111m in benefits would flow through to the broader NSW economy, beyond those accruing to the cattle producers, beef processors and marketers, and beef consumers of NSW. Second, net feed intake is a major research area of the new CRC and it is now accepted that selection for more feed efficient cattle will lead to a reduction in greenhouse gas emissions from the beef herd. It was estimated that a minimum value for the saved methane output due to adoption of NFI genetics in the NSW beef herd is in the order of $28m, over the 25 year simulation period. A substantial proportion of that expected benefit could be assigned to the new CRC through further development and adoption of the net feed intake technology. Other social benefits are also discussed although no formal value is placed on these.