8. The fundamental economic problem is efficiency in both the short- and long-term. The (on-farm) test for any new technology is first, does the value of the output exceed the cost of the inputs used in its production; second, is there an alternative use for the same inputs which will yield an even greater value of output? Economic efficiency requires that the first test be affirmative, and the second test negative. If a new technology involves greater risk in terms of variability in output (income), the impact on food/income security as well as farmers' willingness to accept more risk in exchange for higher expected income must be considered.
9. In making these tests one should also be assured that the technology is presented in its best economic light. That is, inputs should be presented in their most efficient combination and the production process carried to its economic optimum (to the point that obtains the maximum difference between the total value of all output and the cost of all inputs). In addition, the risk implications of any new technology must be understood and addressed in terms of the producers' ability to bear risk and their willingness to accept greater risk in exchange for higher expected returns. Technologies that reduce risk may be particularly welcome.
10. As stated earlier, livestock production may be increased by increasing output per animal, or by increasing the number of animals, or a combination of these. The economic efficiency problem in livestock production is, however, very complex. A single species may produce many products under a wide array of systems varying in time rates of input use and production. Inputs such as labour, capital, land, and different feedstuffs can be used in different ratios to obtain a given output though perhaps a different rate of output per unit time. Feedstuffs can also be used in different ratios and combinations including pasture, crop residues, and forage crops, each used singly or in combination with cereal grains, pulses, and/or industrial by-products from crop and food processing.
11. The problem is further complicated by the fact that different livestock species and even crops may use the same inputs. At the same time, some livestock outputs (e.g. draught power and manure) are important inputs in crop production while the output of feedstuffs from crops and crop residues are inputs in livestock production. Thus, while our main focus is on cattle milk and meat, interactions with other cattle products, or with other livestock and crops cannot be ignored in addressing the full range of economic considerations in cattle production.
12. Complexities in dealing with the economic efficiency problem also emanate from the interactions and trade-offs among or between the technical constraints enumerated in paragraph 5 above. Such interactions and trade-offs are important aspects which economic considerations should address.
13. The subsequent discussions in this paper mainly focus on the economic aspects of mitigating the major technical constraints. These deal with the economic aspects of: increasing the quantity and quality of feed; improved nutrition: genetic improvement: and animal disease prevention or control and health. The part dealing with genetic improvement (including the annex) presents an illustration of how to consider interactions and tradeoffs between technical constraints. A separate section briefly deals with risk which is not a technical constraint in the above sense but which, as pointed out earlier, is an important element in producers' acceptance of technical solutions.
