The profitability of rBST on U.S. dairy farms

Abstract

This brief paper addresses some of the issues that surround rBST use on United States (U.S.) dairy farms 5 years after its commercial availability. Specifically, the focus of our inquiry is on two fundamental issues. First, has this technology been profitable and productive at the farm level? And, second, has it changed the competitive position of adopters vis-à-vis nonadopters? While it would appear that rBST is an effective technology for increasing milk production and would also appear to be an economically feasible technology, the conclusions of the few ex post studies available seem to give mixed results. Is profitability truly lacking for this technology, and if so why? How do we reconcile this potentially lackluster performance at the farm level with all the accumulated experimental evidence and our economic models? Is Monsanto extracting all of the innovation rents and, if so, is this optimal (even for Monsanto)? These are some key questions that beg for further economic analysis.