PRODUCTION ANIMALS PRODUCTION ANIMALS Australian Veterinary Journal Volume 86, No 10, October 2008 © 2008 The Authors Journal compilation © 2008 Australian Veterinary Association 398 Blackwell Publishing Asia Financial modelling of the potential cost of ovine Johne’s disease and the benefit of vaccinating sheep flocks in southern New South Wales RD BUSH, a PA WINDSOR, a JA TORIBIO a and SR WEBSTER b Objective To develop an enterprise gross margin (GM) model that predicts the on-farm financial impact of ovine Johne’s disease (OJD) for various sheep enterprises in Australia. In addition, to estimate the benefits and costs of control through the use of the Gudair™ vaccination, including a breakeven point. Design and population Data for the model was gained from an observational study conducted over a 3-year period from 2002 to 2004 using sheep from 12 OJD-infected flocks from southern New South Wales. Flocks ranged between 3500 and 20,000 sheep, with owner estimates of 5% or greater OJD mortality at the start of the study. Procedure A GM model was developed to predict the on-farm financial impact of OJD for various sheep enterprises in Australia, comparing non-infected, infected (status quo) and infected (vaccination) disease scenarios. Results Vaccination breakeven points are achieved within 2 to 3 years for breeding enterprises if OJD mortalities are high, rising towards 7 years for a Merino ewe enterprise if OJD mortalities are low. Conclusion The GM model demonstrates the returns to investment of vaccination for Australian sheep producers with OJD-infected flocks. Key words: financial modelling, ovine Johne’s disease, sheep, vaccination Abbreviations: DSE, dry sheep equivalent; GM, gross margin; NPV, net present value; OJD, ovine Johne’s disease Aust Vet J 2008;86:398– 403 doi: 10.1111/j.1751-0813.2008.00347.x P revious work conducted to estimate the financial impact of ovine Johne’s disease (OJD) in Australia has been done at both the farm 1–3 and industry level. 4–7 Understanding the farm-level financial impact of the disease and associated implications will best assist sheep producers manage OJD on-farm and should be considered in connection with an understanding of industry- level impacts such as sheep movement restrictions. An accurate and meaningful estimate of the on-farm cost of OJD should include the primary treatment costs, including Gudair™ vaccination, and the non-veterinary expenditure related to disease management associated with altering or completely changing the enterprise mix on the farm. 8 Estimating the financial impact of a disease is more complicated than simply determining the value of lost production and trade. 8–10 A flock that has tested positive to OJD cannot return to an uninfected status without incurring some cost, 11 hence the difference between infected and uninfected enterprise profit has little meaning for enterprise managers. The degree to which the cost of OJD can be minimised through disease control strategies such as vaccination and management, or the proportion of the total cost of OJD that is avoidable, is more instructive than determining the total cost of OJD on a farm. 9,12 Enterprise gross margin (GM) calculations are commonly used by Australian sheep producers when budgeting and planning, because they provide a simple and quick direct comparison of the relative profitability of similar enterprises 13 and can be used to analyse actual enterprise performance under different disease scenarios. However, it only considers the variable costs specifically associated with the enterprise, and ignores fixed costs associated with farm infrastructure. A GM model, using biological and financial parameters from Australian mortality and vaccine research, 6,14–16 was developed to predict the on-farm financial impact of OJD for a range of wool and sheep-meat enterprises and disease scenarios within Australia. The model estimates changes in profits because of increased deaths as a result of OJD, and the benefits and costs of control through the use of Gudair™ vaccination. Breakeven points for vaccination are reported at varying disease levels for each enterprise. This model builds on our previous work 16 and will assist in determining the benefits and costs of various management and control options available to affected sheep producers. Materials and methods MS Excel 2003 was used to construct the GM model, with the more complex worksheet functions programmed using MS Excel Visual Basic 6.0. Information on the farm carrying capacity, enterprise mix, income and costs of production, and the number of OJD deaths is entered. GM budget options include Merino fine (19 μm), medium (21 μm) and strong (23 μm) wool enterprises, as well as first- and second-cross lamb production. Merino sheep are further separated into ewe and wether enterprises. The model user determines the enterprise size by entering the number of core breeding ewes or wethers at a particular time of year, such as shearing or joining, and the carrying capacity in dry sheep equivalents (DSEs). a Faculty of Veterinary Science, University of Sydney, PMB 3, Camden, NSW, Australia; russellb@camden.usyd.edu.au b Department of Primary Industries, Orange, NSW, Australia