Population And Economics Propel Beef Demand

It’s impossible to feed exponentially more people with exponentially less food while maintaining a current or improved quality of life.

Wes Ishmael

August 30, 2013

10 Min Read
Population And Economics Propel Beef Demand

Predicting the eventual demise of the beef cattle business in the United States seems as foolish as assuming the business represents some sort of unalienable birthright.

Yet, the confidence and volume of those claiming positions in both camps continue to grow as the business seeks answers to old rules of thumb dashed asunder by a variety of business, supply and demand shocks over the past decade.

Chiseling with a broad blade, those convinced the business is unsustainable look at ongoing herd liquidation and continuing producer attrition. They earnestly wonder how the next generation or the one after it can survive in a business awash with stifling equity requirements, historic levels of price volatility, intrusive government regulations and activist groups hell-bent on the industry’s destruction.

As earnestly, those in the other camp consider the sweeping, untillable vastness of the U.S. and assume, since ruminants offer the only practical solution to utilizing the forage there, then cattle must always be part of the landscape. Besides, they reckon, higher prices and increased volatility make for more turns in the market, and more chances to turn a profit.

In between, plenty of folks are just plumb uneasy, proud of the responsibility and grateful for the opportunity to run cows, but wondering how to position their businesses for survival in an environment defined by so many uncontrollable variables.

No one has the answer, of course. But, maintaining economic viability during and after the current industry metamorphosis demands considering facts, both obvious and often overlooked.

That’s the aim of this special, though necessarily incomplete, industry focus.

It’s impossible to feed exponentially more people with exponentially less food while maintaining a current or improved quality of life.

This is the simple reality ignored or misunderstood by all of those folks wanting to ban various production technologies, claiming human and animal rights are equal and demanding locally grown agricultural commodities from the kind of operations that exist in imagination or along the subsidized margins of modern, intensive, sustainable agriculture.


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“The level of U.S. farm output in 2009 was 170 percent above its level in 1948, growing at an average annual rate of 1.63 percent,” say authors of Agricultural Productivity in the United States, published by USDA’s Economic Research Service. “Aggregate input use increased a mere 0.11 percent annually, so the positive growth in farm sector output was substantially due to productivity growth. This contrasts with a 3.6 percent annual output increase in the private nonfarm sector, with productivity growth accounting for a little more than a third of the economic growth.”

“In 1940, one person in U.S. agriculture could only feed 19 people. By 1960, one farmer could feed 26 people. Today, a farmer feeds 155 people worldwide,” say authors of Living in a World of Decreasing Resources & Increasing Regulation: How to Advance Animal Agriculture. This white paper revolves around information synthesized from the 2012 Annual Conference of the National Institute for Animal Agriculture (NIAA) in March this year.

“Advances in technology means fewer people are needed in agriculture, allowing individuals to pursue other professions. They become engineers, computer programmers, researchers who discover new cures, doctors who heal more children, teachers who educate today’s children, etc. If technology was frozen in the year 1955, it would require an additional 450 million acres—the total land mass of Texas, Colorado, Kansas, New Mexico and Oklahoma—to produce the beef being produced today,” the white paper authors say. “In 1961, the United States population was close to 184 million people. In 2006, that number was greater than 300 million people. Relating those numbers back to 1960, if agriculture technology today was the same as 1960, the United States would either have to expand acres by 63 percent or decrease food consumption by 63 percent.”

Population & Economics Propel Demand

Unfortunately, producers and consumers must worry about more than current reality.

The global population today is 7.1 billion; it’s expected to peak at 8.5-9.5 billion by 2050. Various analysts suggest the world’s food supply must double in the next 40-50 years in order to keep up with the demands of the growing population.

“The demand for animal protein in the next 38 years is anticipated to increase significantly,” according to the NIAA white paper. “Economists estimate that by the year 2050, global meat production must increase by 73 percent to meet the expected 43 percent boost to the world’s population. Three other basic factors driving global demand for animal protein are economic growth and income, the rising middle class of countries, particularly China and India, and urbanization. Broken down by species, to meet anticipated animal protein demand, global poultry production will need to increase by 125 percent, followed by sheep and goat meat at 78 percent; beef at 58 percent; and pork at 37 percent.”

Keep in mind that 925 million people in the world were undernourished in 2010, according to World Hunger Education Services (WHES). That’s about 13 percent of the global population or about one out of every seven people.

Though it’s true that many of the world’s hungry live in undeveloped and developing countries, plenty of folks go hungry in the U.S., too. According to WHES, 17.2 million U.S. households were undernourished in 2010, or about 14.5 percent of households.

So, even as economics have some questioning their survival in the beef cattle business, the need for current and increased production has never been more urgent.

“While the United States has a reputation for providing safe, affordable food and will be a major player in helping provide animal protein to meet this growing global demand, economists maintain that the answer is not only intensification of production,” say authors of the NIAA white paper. “Achieving anticipated increased demand for animal protein by producing twice as many poultry, 80 percent more ruminants, 60 percent more cattle and 40 percent more pigs using the same level of natural resources is unrealistic.”

Efficiency Must Increase

Amid the challenges imposed, experts contributing to the NIAA paper explain U.S. agriculture—already the most efficient in the world—must become even more so.

For perspective, according to The Changing Organization of U.S. Farming from USDA’s Economic Research Service, “Use of two major inputs, land and labor, has decreased over time. From 1982 to 2007, land used in agriculture dropped from 54 percent to 51 percent of total U.S. land area, while farming used 30 percent less hired labor and 40 percent less operator labor. Meanwhile, new technologies (such as precision agriculture), often requiring new or advanced management techniques, have been increasingly adopted by farmers.”

Looking ahead, the NIAA white paper authors say, “One economist maintains that 70 percent of the anticipated needed food supply will have to come from advancements in efficiency improving technology: practices, products and genetics. For example, in the beef industry, technology has resulted in each pound of beef produced in the United States in 2007 requiring 14 percent less water and 34 percent less land than in 1977.”

While that’s true, it’s also a fact that much of the increased production with fewer cows the last several decades as been largely the result of post-weaning technologies aimed at increasing weight gain and ultimately carcass weights.

Stan Bevers, an agricultural economist with Texas AgriLife pointed out a couple of years back that key measures of cow productivity, as measured by decades of Southwest Standardized Performance Analysis data, remained static or declined. These measures include average calf weaning weight, annual calving rate and average pounds weaned per cow exposed.

One of the basic reproductive technologies available to cow-calf producers, one that continues to gather dust, is heterosis, especially the maternal heterosis developed through managed, complimentary crossbreeding.

Crossbred cows remain in the herd 1.3 years longer than their straightbred counterparts and yield 30 percent more lifetime productivity. Crossbred cows have crossbred calves that serve up 10-20 percent more weaning weight than their straightbred peers. Those are just some of the benefits.

Moreover, for all of the strides that have been made for assessing and rewarding added value in the marketplace, arguably, pounds gained and marketed continue to drive the profit equation at all production levels.

Feed Me What I Can Afford

There has been plenty of bantering the past couple of decades about the beef industry evolving into a two-tiered system. One tier that’s pricier, value-added, has all of the quality and verification bells and whistles; the other being everything else—commodity beef. Directly or indirectly, these conversations commonly include the inference that producers make the choice which tier to serve, the assumption being the most progressive, business minded will get in the line for quality and value added.

In fact, economic necessity may dictate this kind of tiered system based simply upon the ability of consumers to pay for beef.

Consider the growing wealth gap in the United States.

For the 1 percent of the population with the highest income, average real after-tax household income grew by 275 percent between 1979 and 2007, according to Trends in the Distribution of Household Income published by the Congressional Budget Office. For the 60 percent of the population in the middle of the income scale (the 21st through 80th percentiles), the growth in average real after-tax household income was just under 40 percent. For the 20 percent of the population with the lowest income, average real after-tax household income was about 18 percent higher in 2007 than it was in 1979.

“The U.S. ranks third among all the advanced economies in the amount of income inequality. The top 1 percent of Americans control nearly a quarter of all the country’s income, the highest share controlled by the top 1 percent since 1928,” according to Stanford University’s Stanford Center on Poverty and Inequality (CPI).

According to CPI, “In 1983, the wealthiest 20 percent of Americans held 81 percent of the wealth. By 2009, they held 87 percent. Currently, more than 25 percent of Americans have zero or negative wealth.”

None of this should be construed as political commentary; these are simply facts that will define and lead the market.

At least anecdotally, the information about income and wealth, in tandem with beef sales during the Great Recession provide some potential insight. As most folks tightened their purse strings, it was ground beef and the lower value end meats that supported wholesale beef values, while demand for the more expensive middle meats languished. Amid economic recovery a more typical pattern emerged with middle meat prices showing more strength than the end meats. Simplistically, a case can be made for the fact that those who have the economic wherewithal to afford beef, have enough jack in their pockets to afford the middle meats at least occasionally. At the other end of the spectrum, as tight supplies push retail beef prices higher, it appears some consumers are getting shut out of beef altogether unless it’s ground beef.

So, it seems logical that a tiered industry could emerge based more on serving a growing dichotomy of domestic consumer wealth, and less on producer’s willingness to manage more or less intensively,


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