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Outline Preconditions Outcome: What are you supposed to learn? The framework and definition of herd management The management cycle Objectives of production, utility theory Advanced Herd Management Classical production theory Course

  1. Outline Preconditions Outcome: What are you supposed to learn? The framework and definition of herd management The management cycle Objectives of production, utility theory Advanced Herd Management Classical production theory Course introduction Co se int od ction Classical replacement theory Cl i l l h Limitation of classical theories Anders Ringgaard Kristensen Outline of the course Teachers The concept of uncertainty Slide 1 Slide 2 Preconditions Brush-up courses … Courses • Animal production: ”Husdyrproduktion” The course will start up with brush-up courses of • Mathematics: ”Matematik og • Probability calculus and statistics modeller”/ ”Matematik og planlægning” • Linear algebra • Statistics ”Statistisk dataanalyse 2” • Mandatory first year (economics etc) Mandatory first year (economics etc) Slide 3 Slide 4 Learning outcome Outcome - knowledge After attending the course students should be able to After completing the course the student should be able to: participate in the development and evaluation of new tools Describe the methods taught in the course for management and control taking biological variation and Explain the limitations and strengths of the methods in observation uncertainty into account. relation to herd management problems. Give an overview of typical application areas of the methods. Slide 5 Slide 6 1

  2. Outcome - skills Outcome: Competencies: After completing the course the student should be able to: After completing the course the student should be able to: Construct models to be used for monitoring and decision Evaluate methods, models and software tools for herd support in animal production at herd level. management. Apply the software tools used in the course. Transfer methods to other herd management problems than those discussed in the course. Interpret results produced by models and software tools. Slide 7 Slide 8 A pig (an animal) Pig production = N × a pig? Medicine Medicine Piglets Piglets Meat Meat Manure Manure Feed Feed Milk Milk Slide 9 Slide 10 Pig production Pig production = N × a pig? Pigs: •Ages •Groups •Individuals Medicine Buildings B ildi Fields Fi ld N i hb Neighbors, society, consumers i Piglets Meat Manure Feed Milk Owner Farm hands Slide 11 Slide 12 Feed 2

  3. Elements of production I Elements of production II The factors (input to production) Objectives: Maximization of the farmer’s welfare: • Animals • Income (personal) • Feed • Leisure time (personal) • Buildings, inventory • Animal welfare (animals) • Labor • Management • Working conditions (farm hands) • Veterinary services • Environmental preservation (future generations) • Energy • Prestige (personal) • … • Product quality (consumers) Slide 13 Slide 14 Elements of production III Definition of herd management Having discussed the three key elements: Constraints limiting production • Factors (input to production) • Physical (land, housing capacity, storage capacity) • Objectives (farmer’s welfare) • Economical (capital, prices) • Constraints (limitations) • Legal (laws) we are now able to define what we mean by Herd • Personal (skills, education) Management: Herd management is a discipline serving the purpose of g p g p p concurrently ensuring that the factors are combined in such a way that the w elfare of the individual farmer is maximized subject to the constraints imposed on his production. A dynamic optimization problem under constraints. Decisions! We decide how to combine the factors. Slide 15 Slide 16 The management cycle: Classical theories The management cycle: A never ending story (Scarce Utility Resources) Theory, Ch. 3. Basic Neo-classical N l i l Production Production Monitoring, Theory, Ch. 5. Ch. 4. (Animal science, Production function) Slide 17 Slide 18 3

  4. Herd Management Science Utility theory Basic level: We need a criterion for comparison of plans • As we define the basic level, it consists of (“ways” to produce). • Utility theory Several concerns: • Neo-classical production theory Animals • The farmer • Basic production monitoring • The staff • (Animal nutrition, animal breeding, ethology, • Consumers farm buildings) fa m b ildings) Farm buildings Land F b ildi Land Neighbors, society, consumers i hb i • The animals • What any animal scientist should know about • Environment management • … • The starting level of this course Who decides the • Briefly revised today weighting? Owner Slide 6 Farm hands Feed My answer: The farmer! Slide 19 Slide 20 Farmer’s preferences When is ”something” an attribute? The farmer has/ defines a list of concerns: When it directly influences the subjective welfare of the farmer. • Own direct concerns: May NOT be an attribute: • Income, u 1 • Leisure time, u 2 • Average milk yield of cows • Prestige, u 3 • Average daily gain of slaughter pigs • ... • Animal welfare, ”because animals at a high level of welfare also produce at a higher level”. • Indirect concerns (because he cares for others) ( ) May be an attribute: • Animal welfare, u 4 • Working conditions, u 5 • Monetary gain • Environment, u 6 • Leisure time • Product quality, u 7 • Animal welfare, if the farmer is willing to accept that it to some extent decreases the levels of other • … attributes. The farmer knows/ decides the weighting The “items” on the list ( u 1 , u 2 , … , u k ) are called attributes of the farmer’s utility. Slide 21 Slide 22 Aggregation of attributes: Utility function Consequences measured by attributes Stage The utility function Attribute 1 2 … T • Aggregation over time • Monetary gain 1 u 11 u 12 … u 1 T • Animal welfare 2 2 u 11 u 11 u 22 u 22 … … u 2 T u 2 T • … • Aggregation over attributes … … … … … k u 11 u k2 … u kT Expected Utility Theorem: Maximization of U is all we need At any stage, the attributes will depend on the production Y t and to care about! the factors x t . The relation is given by the attribute function h: Refer to Chapter 3 for details! u t = h( Y t , x t ) Slide 23 Slide 24 4

  5. Production function Production function In classical production theory, the uncertainty represented by the e’s is ignored. Slide 25 Slide 26 Neo-classical production theory How much to produce Answers 3 basic questions: One factor x and one product y • What to produce. Prices p x and p y • How to produce. A production function y = f( x ). • How much to produce. Marginal considerations Profit u ( x ) = yp y – xp x = f(x) p y – xp x Basic principle: Continue as long as the Problem: Problem: m arginal revenue, MR, exceeds m arginal • Find the factor level that maximizes the profit costs, MC. At optim um w e have MR = MC. Slide 27 Slide 28 How much to produce How much to produce Maximum profit where u’ ( x ) = 0. u ( x ) = f(x) p y – xp x 1 u’ ( x ) = f’( x ) p y – p x Total revenue, f( x ) p y 0 ,8 u’ ( x ) = 0 ⇔ f’( x ) p y = p x 0 ,6 Maximum profit where: • Marginal revenue = Marginal 0 ,4 cost! Average revenue, f( x ) p y / x 0 ,2 0 Marginal revenue, f’( x ) p y -0 ,2 Slide 29 Slide 30 5

  6. How much to produce, optimum How much to produce, logical bounds 1 1 Total revenue, f( x ) p y Total revenue, f( x ) p y 0 ,8 0 ,8 0 ,6 0 ,6 0 ,4 0 ,4 Average revenue, f( x ) p y / x Average revenue, f( x ) p y / x 0 ,2 0 ,2 Price of factor p x 0 0 Marginal revenue, f’( x ) p y Marginal revenue, f’( x ) p y -0 ,2 -0 ,2 Slide 31 Slide 32 Classical replacement theory Definition Replacement: • When an existing asset is substituted by a new The replacement problem in a broad sense is one of the most one with (more or less) the same function. important decision problems in animal production. • Examples: Dynamics: What we decide at this stage (keep/ replace) may • Light bulbs influence production in many future stages. • Cars Many other decision problems relate to the replacement y p p • Sows So s problem: • Milking robots • Insemination • Treatment for diseases • Feeding level • … A correct handling of the other problems implies that the question of replacement must be taken into account. Slide 33 Slide 34 Replacement problems in animal production Replacement problems in animal production Female production animals: • (Ewes, mink, goats) • Sows Technical: • Dairy cows • Examples: • Two levels: • Farm buildings • Optimal lactation to replace • Equipment & machinery • Optimal stage of lactation to replace • Very similar to the sow replacement problem, except for the y p p , p • Repeatability of milk yield over lactation rather high ”biological” variation (as opposed to litter size in sows). • Technological improvements probably more important than the corresponding genetic improvement in cows. • Marginal/ average considerations apply well Slide 35 Slide 36 6

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