LIVESTOCK INDUSTRY GROWS DESPITE HIGH GRAIN PRICES
Carl Zulauf and Nick Reddig, professors of Agricultural, Environmental and Development Economics at The Ohio State University, have completed a series of articles comparing the current period of farm prosperity to the 1970s period of farm prosperity. Their articles have been published on FarmDocDaily, with the most recent article focusing in on the health of the U.S. livestock industry during recent years and contrasting that with the 1970s.
Interestingly enough, their summary finding is that livestock numbers (including eggs and milk) are all projected to be higher in 2013 than before the current period of high grain prices. This is due to several things: larger farms that can still make a profit even when the return for livestock producers is negative and a growing export market as examples.
Here’s their conclusion:
In conclusion, at least as of year 8 of the current period of prosperity, the U.S. livestock sector has, in general, continued to expand production. Obviously, the period since 2005 has been difficult for many livestock producers. The likely reconciliation of the apparent conflict between financial stress for many livestock producers and the observed increased in livestock production is cost economies of size that is causing production to shift toward ever fewer, ever larger livestock producers. Higher feed costs and expanding ethanol production may have exacerbated the stress associated with this structural shift in U.S. livestock production, but they are not likely the root cause. Last, the continued expansion of the U.S. livestock sector in a period of high feed costs bodes well for domestic livestock feed demand when crop price declines occur in the future.
The highlight that jumps out for this association is that according to these researchers, ethanol production was not the cause of the livestock farmer’s pain, but an easy target. This falls in line with polling IL Corn did of its members over the last couple of years, where farmers with both grain and livestock interests indicated that we should not slow the growth of the ethanol industry for the benefit of livestock farmers.
IL Corn continues to support the livestock market, partnering with Illinois livestock associations and providing significant funding to the U.S. Meat Export Federation and the U.S. Poultry and Egg Export Council, both of which are working to provide the meaningful growth in export numbers that have kept the U.S. livestock industry moving forward.