Farm Management, Production Economics, Productivity Analysis,

Olynk, Nicole J.

Tonsor, Glynn T.

Wolf, Christopher A.

English

Research Papers in Economics

Producer Technology Use and the Value of Autonomy:  
The Case of rbST  
 
 
Nicole J. Olynk, Christopher A. Wolf, and Glynn T. Tonsor, 
 
Author Contact Information: 
Nicole J. Olynk 
Assistant Professor, Dept. of Agricultural Economics 
Purdue University 
403 West State Street 
West Lafayette, IN  47907 
Phone: (765) 494-2567 
Email: nolynk@purdue.edu 
 
Christopher A. Wolf 
Professor, Dept. of Agricultural, Food, and Resource Economics 
Michigan State University 
317A Agriculture Hall 
East Lansing, MI  48824-1039 
Phone: (517) 353-3974 
Email: wolfch@msu.edu 
 
Glynn T. Tonsor 
Assistant Professor, Dept. of Agricultural Economics 
Kansas State University 
331-J Waters Hall  
Manhattan, KS 66506 
Phone: (785) 532-1518 
Email: gtt@agecon.ksu.edu 
 
 
 
Poster prepared for presentation at the Agricultural & Applied Economics Association 2010 
AAEA,CAES, & WAEA Joint Annual Meeting, Denver, Colorado, July 25-27, 2010 
 
 
 
 
 
 
Copyright 2009 by Nicole J. Olynk, Christopher A. Wolf, and Glynn T. Tonsor.  All rights 
reserved. Readers may make verbatim copies of this document for non-commercial purposes by 
any means, provided that this copyright notice appears on all such copies.   Introduction
Producer Technology Use and the Value of Autonomy: The Case of rbST 
Nicole J. Olynk1, Christopher A. Wolf2, and Glynn T. Tonsor3
1 Department of Agricultural Economics, Purdue University
2 Department of Agricultural, Food, and Resource Economics, Michigan State University
3 Department of Agricultural Economics, Kansas State University
Conclusions
Nicole J. Olynk Christopher A. Wolf Glynn T. Tonsor
nolynk@purdue.edu wolfch@msu.edu gtt@agecon.ksu.edu
• Consumers are increasingly sensitive to the conditions 
under which their food is produced.  Consumers today are 
considering factors such as:
• Environmental impacts
• Animal Welfare
• Other process attributes 
• Production agriculture is facing increased pressure to 
adopt changes to production processes.
• Milk producers facing questions regarding willingness to 
produce milk without the use or rbST.
Producer Decision Making
• In the legal arena rbST has been controversial since 
approval.  The FDA failed to force Monsanto to devise a 
test for rbST, which has provided grounds for challenging 
the FDA’s decision to approve rbST for commercial use.
• The FDA determined that a tolerance level for rbST was not 
required due to the fact that “[i]t is undisputed that the dairy 
products derived from herds treated with rbST are 
indistinguishable from products derived from untreated 
herds.”
• Regardless of the reasons retailers are demanding milk 
produced without the use of rbST, producers must 
respond to changes in their demand if they wish to 
continue to serve the market.
• This analysis analyzes the welfare impacts on Michigan 
dairy farmers when rbST was eliminated as a technology 
available for use
Data and Methods Producer 
Survey 
Summary  
Results and Discussion – Producer Welfare Implications
What is rbST?
Recombinant bovine somatotropin (rbST), also called 
recombinant bovine growth hormone (rbGH), was approved 
by the Food and Drug Administration in November 1993 for 
commercial use to increase milk production in dairy cattle.  
First made commercially available in the U.S. in February 
1994, controversy continues today over the use of rbST in 
milk production
• A mail-based survey was used to obtain information from 
Michigan dairy producers regarding rbST usage, perceived 
benefits of rbST usage, and questions surrounding 
producers’ perception of consumer desire for dairy 
products produced without the use of rbST.
• Choice experiments were used to elicit producers’ 
preferences for attributes of the dairy industry, looking 
forward to 2013. In response to each situation presented 
producers were asked to choose which production option 
they preferred given described dairy industry environment 
as of January 2013.  In each of the presented situations, 
producers were asked to select either one of two 
production options or could choose to stop milking cows.   
An example scenario from the choice experiment is: 
Random Parameters Logit Model
The RPL model estimated in this analysis specified the 
systematic portion of utility as: 
where, Prod is identifying the production practice 
(conventional or rbST free).  Interactions between operator 
age, whether rbST was used in 2007 and herd size in 2007
with Prod were included.  Milk is the increase in herd milk 
production presented in the choice experiment (increase of 
1.5% 25% or 100% per year).   C is a constant included to 
capture producer sentiment regarding stopping milking cows 
and C=1 if opting out is selected.  IOFC is the income over 
feed cost that is calculated by incorporating the corn price 
and milk price presented in the choice experiment.  Three 
variables were interacted with the constant to include 
whether there is a next generation expected to return to the 
farm (Gen=1 if next generation is expected), herd size in 
2007 (Size), and whether or not that herd used rbST in 2007 
(rbST=1 if rbST used in 2007), respectively.
A survey was developed to obtain 
information from Michigan dairy producers 
regarding preferences for changes in milk 
production practices.  
•Mailed to 1,200 dairy farms in Michigan 
in December of 2007. 
•Reminder postcard followed 2 weeks 
later.
The welfare impacts for producers of going from a situation in 
which conventional, rbST free, and exiting the industry were 
options to the producer to a scenario in which the option of 
conventional production is eliminated are presented below.
As expected, those producers forced to make adjustments had larger welfare impacts than those 
not forced to make adjustments.  Still, those not making adjustments had statistically significant 
welfare losses due to the loss of a choice of production system, even though it was a system that 
they had not used in the year preceding the change.
Forced disadoption of practices, in the case of rbST in milk production, was shown to have 
heterogeneous welfare effects.  Similar analyses could be completed for welfare analyses of 
producers facing potential disadoption of other practices, such as tail docking or individual crates. 
Implications of heterogeneous welfare effects must be recognized when production systems are 
eliminated from producers’ options, whether via legislative channels or through market changes.
The complete combinatorial test prescribed by Poe, Giraud, and Loomis 
(2005) was used to determine if the welfare impacts on producers with 
different characteristics were statistically different from one another.  
Results from the test prescribed by Poe, Giraud, and Loomis (2005) are 
shown below for the cases in which differentiation was based upon rbST 
use in 2007. 
Recognition of the heterogeneity of welfare impacts across producers, 
depending on whether or not a producer used rbST prior to the 
disadoption of rbST by the market, is important for determining the 
impacts of such market change on the industry. 
Michigan as a case study …The decision by Kroger to 
procure rbST-free milk led to a chain of events occurring in 
the Michigan milk market as cooperatives and individual 
producers adjusted to meet changing demands. 
For the individual Michigan producer this is essentially a  
mandated change (regardless of the fact that it is market 
rather than legislatively driven).
Producer Respondent Summary Statistics
•Gender: 95% male
•Average Age: 49.2 years old
•Average Herd Size: 229 cows
•% of herds using rbST in 2007: 37%
•% of herds having ever used rbST: 67%
•% of respondents indicating next 
generation is returning to the farm: 53%
In the survey introduction, dairy 
farmers were told, “Recently, there 
has been a movement towards rbST-
free milk for beverage consumption.  
Several Michigan retailers have 
requested milk from cows not 
supplemented with rbST beginning 
February 1, 2008.  With this in mind, 
please answer the following 
questions.”  Many questions on the 
survey incorporated preferences for or 
against rbST-free milk production.  
The timing of the survey was such 
that these questions were posed not 
only hypothetically on the survey, but 
were also being faced concurrently by 
producers in the Michigan dairy 
industry. 
Option A Option B Option C
Milk price ($/cwt) $18.00  $18.00 
Stop 
milking 
cows
Corn price ($/bu) $2.00  $2.00 
Production 
Practice Conventional rbST-Free
Herd Milk 
Production Trend 100%
I choose …
) ( ) (
) ( ) (
) ( ) ( ) (
) ( ) ( ) (
10 9
8 7
6 5 4
3 2 1
Size rbST
Age
rbST Size
Gen j
Prod Prod
Prod Prod
Milk C C
C OFC I C v
 
 
  
  

 
  
   
Producer Group 
Characteristics
$/cwt per 
choice 
scenario
Annual per cow welfare 
impacts for cow production 
level:
190 cwt/year 210 cwt/year
All Producers -$0.23 -$43.70 -$48.30
Producers using rbST in 2007 -$0.32 -$60.80 -$67.20
Producers not using rbST in 
2007 -$0.18 -$34.20 -$37.8
Producers using rbST in 2007 
(herd size of 100 cows)
-$0.31 -$59.90 -$65.10
Producers using rbST in 2007 
(herd size of 500 cows) -$0.33 -$62.70 -$69.30
Producers not using rbST in 
2007 (herd size of 100 cows)
-$0.18 -$34.20 -$37.80
Producers not using rbST in 
2007 (herd size of 500 cows) -$0.20 -$38.00 -$42.00
Testing if statistically significant differences 
in welfare impacts between:
P-Value Interpretation 
(0.05 Significance 
Level)
Differentiation Based Upon rbST Use in 2007
All producers using rbST in 2007 versus all
producers not using rbST in 2007
.0384 Evidence of 
Heterogeneous 
Welfare Impacts
Small producers (herd size of 100 cows) using
rbST versus small producers (herd size of 100
cows) not using rbST in 2007
.0412 Evidence of 
Heterogeneous 
Welfare Impacts
Large producers (herd size 500 cows) using rbST
in 2007 versus large producers (herd size 500
cows) not using rbST in 2007
.0386 Evidence of 
Heterogeneous 
Welfare Impacts
Evidence of Heterogeneous Welfare Impacts

Producer Technology Use and the Value of Autonomy: The Case of rbST

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