Communicative diagnosis of cost-saving options for reducing nitrogen emission from pig finishing

Abstract

Reducing nitrogen emission from livestock production is usually perceived as costly. Nevertheless, production process related measures addressing the transformation of input(s) into output(s) may result in a cost-saving reduction of nitrogen emission. This paper explores the separate and combined use of traditional key performance indicators and an environmentally adjusted Data Envelopment Analysis (DEA) to reveal firm-specific cost-saving mechanisms for pig-finishing farms. Traditional key performance indicators are easy to communicate but have shortcomings when assessing benchmarks for comparative farm analysis. The environmentally adjusted DEA decomposes both cost and environmental efficiencies into technical and allocative efficiency components, separating the physical production analysis from price and nutrient content information. DEA makes efficiency benchmarks and improvement paths explicit, but the practical value of such efficiency scores is low. This paper proposes to take advantage of both methods: concrete benchmarks and eligible improvement paths are assessed using frontier methods, while the decision variables that steer farmers towards changes are described in terms of traditional key performance indicators. This leads to an improved diagnosis that is easy to communicate to farmers and may therefore facilitate decision support. Our pig-finishing case study shows that farms can achieve economic-environmental win-win situations through improving technical, cost allocative and cost efficiencies, which are mainly driven by feed conversion. Less technical efficient farms are found to require a lower delivery weight in order to minimize costs, which shows the farm-specificity of economic-environmental improvement advice.