|Livestock to 2020 - The Next Food Revolution. 2020 Vision for Food, Agriculture, and the Environment. Discussion Paper 28. (IFPRI, 1999, 79 p.)|
Truly it is not inappropriate to use the term Livestock Revolution to describe events in world agriculture in the next 20 years. Like the well-known Green Revolution, the label is a simple and convenient expression that summarizes a complex series of interrelated processes and outcomes. As in the case of cereals, the stakes for the poor in developing countries are enormous. Not unlike the Green Revolution, the revolutionary aspect comes from the participation of developing countries on a large scale in transformations that had previously occurred mostly in the temperate zones of developed countries. And like the gradually but steadily rising cereal yields in the 1970s and 1980s that typified the Green Revolution, the Livestock Revolution started off gradually and increased its rate of growth. But the similarities end there.
The Green Revolution for cereals was a supply-side phenomenon; it rested on fundamental technological change and the adaptation and extension of seed-fertilizer innovations in developing countries. The Livestock Revolution is demand-driven. With notable exceptions for milk and poultry in the developed countries, where technological progress arguably preceded and precipitated changes in demand through lower prices, the supply side of the Livestock Revolution until now has mostly responded - often under distorted incentives - to rapid increases in demand.
This paper shows that the Revolution has seven specific characteristics, each of which offers both dangers and positive opportunities for human welfare and environmental sustainability. The seven are: (1) rapid worldwide increases in consumption and production of livestock products; (2) a major increase in the share of developing countries in total livestock production and consumption; (3) ongoing change in the status of livestock production from a multipurpose activity with mostly nontradable output to food and feed production in the context of globally integrated markets; (4) increased substitution of meat and milk for grain in the human diet; (5) rapid rise in the use of cereal-based feeds; (6) greater stress put on grazing resources along with more land-intensive production closer to cities; and (7) the emergence of rapid technological change in livestock production and processing in industrial systems.
The dangers and opportunities raised by each of the seven characteristics of the Livestock Revolution will be examined in turn. Then four major pillars on which to base forward-looking policymaking for the livestock sectors of developing countries will be suggested. Many of the specific actions are discussed in more detail in the conclusions to Chapters 6 through 9 of the report.
Characteristics of the Livestock Revolution
Rapid Increases in Demand That Affect Production Patterns and Trade
Rapid demand growth in developing countries propels the global Livestock Revolution. Expanding demand is the result of a combination of high real income growth, swelling populations, rapid urbanization, and the ongoing diversification of developing-country diets away from very high levels of starchy staples. Milk consumption has grown more than 3 percent per year in developing countries since the early 1980s and is projected to grow even faster through 2020. Meat consumption has been growing about 5 percent per year and is expected to grow 2.8 percent per year through 2020.
These developing-country growth rates can be compared to the slow forecast for consumption growth in the developed world: 0.7 percent per year for meat and 0.4 percent per year for milk through 2020. This low growth in developed countries is largely explained by slow population growth, slowing urbanization, satiation of diets, and growing health concerns about high intakes of cholesterol and saturated fatty acids from some animal products.
The rapid growth in consumption of food from animals has not been and is not likely to be evenly distributed across regions or even within countries. Since the early 1980s, most growth in consumption of meat and milk has occurred in the rapidly developing countries of East and Southeast Asia and to a lesser extent in Latin America. Africa has lagged behind, as has India in the case of red meat, although India has recently witnessed rapid growth in milk and poultry consumption.
Production trends in the developing countries are following consumption trends. By 2020 the developing countries are expected to produce 95 million metric tons more meat per year and the developed countries 20 million metric tons more compared to production levels observed in the early 1990s. This production level equals an additional 15 kilograms per capita of meat in the developing world, given expected population in 2020. The value of the annual increase in animal food production in developing countries currently far exceeds that of the growth in production of all the major cereals combined. The caloric value of animal livestock food product increases will exceed the caloric value of cereals some time in the next 10 years. The developed countries are also expected to add an additional 15 kilograms per capita of annual meat production by 2020, much of which will be sold to the developing countries.
Such rapid change is creating new opportunities for livestock producers in developing countries, where some of the worlds poorest people live. The increase in livestock food products also holds promise for relieving widespread micronutrient and protein malnutrition, while making positive contributions to the sustainable intensification of smallholder agriculture. Yet, significant new dangers are also arising. Some forms of livestock production encouraged by policy distortions are leading to serious environmental and health risks. Furthermore, increasingly global livestock and feed markets are sharing economic pains faster and more directly, even as they share economic prosperity. Under standing the stakes involved helps motivate those who seek to meet the emerging challenges.
World Market Share Steadily Shifts to Developing Countries
A steady increase is under way in the share of developing countries in the worlds production of meat and milk. Shares for the latter commodities amounted to only 31 and 25 percent, respectively, in the early 1980s. The baseline projections estimate that developing-country shares in 2020 will be 60 percent and 52 percent. Clearly the brunt of the benefits and costs expected from the Livestock Revolution will accrue to the developing countries.
Sensitivity analysis suggests that these projected trends are robust. Even under the assumption of prolonged economic crisis in Asia, the growth of aggregate consumption of livestock products remains strong in developing countries. Furthermore, if tastes in India shift toward increased red meat consumption, as they already appear to have done for chicken, the negative effects of a severe Asian economic crisis on world livestock markets are wiped out.
Change in Status from a Local Multipurpose Activity to a Global Food Activity
Traditionally, livestock in both the developed and developing countries were kept on-farm for a variety of purposes, including food, savings, animal draft power, fiber, hides, and so forth. In developed countries the use of livestock has become specialized. The same trend is being observed in developing countries because the opportunity for selling meat and milk has increased and the share in production of specialized food animals, such as pigs and poultry, has risen in response to food demand.
Livestock food sectors - traditionally a major forum for nontariff barriers - are now undergoing rapid changes in national policies, including trade liberalization; investment in trade infrastructure (roads, ports, refrigeration facilities); privatization of production and marketing; deregulation of internal markets; and reduced government spending on research, extension, and inspection. These changes have spurred consumption of livestock products and increased trade.
The expansion and globalization of world markets for feed and livestock products increases the extent to which demand and supply shocks, and the overall effects of economic boom or bust, are spread to feed and meat prices throughout the world. Major exporting countries such as Argentina, Australia, and United States need to pay close attention to Asia. The 50 percent fall in prices for feedgrains and meat during 1998 in the midwestern United States was largely attributable to macroeconomic events in Asia and the former Soviet Union. Even persons solely interested in the course of future livestock prices in East African countries, for example, cannot neglect events affecting livestock in Asia at the present time, although doing so would not have been so unthinkable only a short time ago.
Substitution of Meat and Milk for Grain in the Human Diet
Widespread evidence exists that as societies grow wealthier they substitute higher-priced livestock calories for lower-priced starch calories, at a decreasing rate as the substitution proceeds. In rural China, for example, where meat and milk consumption is still very low, people may well reduce their direct annual per capita consumption of cereals over the next few decades by 20 to 30 kilograms. Their cereal consumption levels will approach those in the wealthier segments of developing societies today. On the other hand, the annual per capita use of cereals as feed is projected to rise by about 60 to 70 kilograms in China by 2020. This widely reproduced trend in developing countries will be hard to stop if income and urban population growth continue.
Contrary to the situation in developed countries - especially the United States, where livestock foods are heavily consumed - even small increases in the consumption of meat and milk would be beneficial for most women and children in developing countries, at least outside the richest urban areas. Protein and micronutrient deficiencies remain widespread in developing countries, as Chapter 6 points out. Some evidence exists that increased poultry and fish consumption would be preferable to increased red meat consumption above a certain level. As income growth and urbanization proceeds, the diseases of affluence associated with excess cholesterol intake could well become more of a problem, as they already are in much of the developed world.
Rapidly Rising World Demand for Purchased Feed Concentrates
Available evidence, both from historical trends and from in-depth econometric studies, suggests that price responsiveness is considerable in world cereals production. Simulations under various scenarios indicate that the net effect of the Livestock Revolution on cereal prices in 2020 would be to prevent them from falling further from their currently low levels. Under pessimistic assumptions prices may increase by 10 to 20 percent, but nowhere near the high levels of the 1980s.
This view of cereal prices is confirmed further by events in world markets during the past 25 years. Demand increases for meat and milk have largely been met through expansion of feed production or imports at world prices that are declining in real terms. Historically, the livestock sector has helped stabilize world cereal supply. Evidence from cereal price shocks in the 1970s and 1980s suggests that reductions in cereal supply were largely absorbed by reductions in feed for livestock.
In any event, IMPACT projects that an additional 292 million metric tons of cereals will be used annually as feed by 2020, with minimal impact on cereal prices (a 2 percent increase in 2020 relative to the early 1990s in the baseline simulation). In the worst case scenario, maize prices rise 21 percent above the baseline projections for 2020.
Simulations testing the effect of changes in the efficiency of grain conversion to meat or milk show that efficiency and cost matter greatly to the relative competitiveness of individual countries. Livestock exports in countries with ample grazing resources, such as Argentina, did well when feedgrain prices were high because they use less feed to produce a unit of meat. Countries with ample feedgrain production and feed-intensive production practices, such as the United States, exported more livestock when feedgrain prices were low. Feed conversion efficiency also mattered to the composition of specific feeds used, cereal demand generally, and world trade patterns, but it barely affected the level and distribution of livestock consumption across countries. In a price-responsive global system of markets, increased feed demand will be met with increased supply, with minimal changes in the final supply of meat.
Yet the soaring feed demand projected under the Livestock Revolution also raises a major caveat. Just because world maize and other feed-grain yields expanded steadily under significant public and private investment in the past, does not guarantee that this will continue in the future, especially if productivity research stops or public policy discards the yield potential of biotechnology. IMPACT projections show that annual growth in maize yields for most countries averages just above 1 percent through 2020, a rate significantly below historical trends. If future yield growth rates fall below those baseline projections, cereal prices would be higher than predicted. Furthermore, an unforeseen meltdown in global maize production, perhaps due to diseases spread because of decreased genetic diversity in maize varieties, would increase grain and meat prices in the immediate term because of the Livestock Revolution.
Greater Stress on Extensive Resources and More Intensive Livestock Production Closer to Cities
Demand-led increases in livestock production have led to the intensification of production near major urban markets and areas with plentiful supplies of high energy feed. These increases have degraded production resources, such as pasture. To date, the highest levels of intensification have occurred primarily in the developed countries. Developed-country experiences may provide examples of pitfalls that developing countries can avoid.
The past expansion of livestock food production in developing countries has come primarily from increased herd sizes. Range degradation has been observed in extensive production areas, such as grazing land in the Sahel. In forest areas such as the Amazon, perverse incentives led to irreversible deforestation by large cattle ranches in the 1970s. As the Livestock Revolution proceeds, increments to production will have to come increasingly from higher productivity of meat and milk per unit of land to avoid further degradation of extensive resources.
Thirty-seven percent of global livestock production already occurs under industrial farming conditions. Increasing the level of industrial production in many cases is leading to difficult problems of manure disposal and nutrient overloads in adjoining soils and bodies of water. While these problems have raised concerns primarily in developed countries, they will soon become serious problems in a number of fast-growing developing countries as well.
Growing concentration of animals and people in the developing worlds major cities (Addis Ababa, Beijing, Lima, and Mumbai, for example) are leading to rapid increases in food safety problems. Infections from salmonella and E. coli, and emerging diseases such as the avian flu observed in Asia, give much cause for concern. Pesticides and antibiotics are also building up in the food chain because of livestock production practices in the developed countries and in countries where monitoring and enforcement are lax. Furthermore, as the consumption of livestock products increases in tropical climates, especially among those populations for whom everyday use of such products is relatively new, food safety risks from microbial infection become more prevalent.
While the list of dangers above may seem uniformly negative, this is also the appropriate place to note that the prospects for sustainable intensification of smallholder agriculture under rainfed conditions would be much more difficult without a dynamic livestock sector. Families living on a hectare or two cannot survive economically with crops alone, especially in periurban areas. More intensive livestock production on these farms provides both a higher return to farmers labor and land and a source of organic material and soil nutrients generally lacking in such systems. Womens smallholder dairy development in East Africa illustrates the promise that a new livestock activity can offer to a farming system under economic stress.
An Era of Rapid Technological Progress, Especially for Industrial Livestock
As set out in detail in Chapter 9, the last two or three decades have seen rapid technological progress in industrial livestock production, mostly in developed countries. Progress has come in the form of improved feed conversion, higher output per animal, and higher quality of final product.
In the developed countries, technological progress for both ruminants and monogastric animals involved reproductive and genetic technology, including advances in biotechnology; feed improvement through blending, processing, genetic means, and chemical treatment; use of growth hormones; and improvements in animal health maintenance. Some of these industrial technologies, especially for pigs and poultry, have been fairly easily transferred to developing countries.
The private sector has played an important and often dominant role in boosting livestock productivity and solving environmental problems in industrial systems. While livestock systems and productivity levels in some developing countries have begun to converge with those in developed countries, some whole regions, such as Sub-Saharan Africa, have fallen behind. This raises the question of how productivity increases in those areas are best developed and propagated.
Strategic Elements for Livestock Policy in Developing Countries
Taken together, the many opportunities and dangers of the Livestock Revolution discussed above suggest that it would be foolish for developing countries to adopt a laissez faire policy for livestock development. Many specific recommendations for concrete action are given in the individual conclusions to Chapters 6-9. The focus here, however, is on the four broad pillars on which to base a desirable livestock development strategy for developing countries. These are (1) removing policy distortions that artificially magnify economies of scale in livestock production; (2) building participatory institutions of collective action for small-scale farmers that allow them to be vertically integrated with livestock processors and input suppliers; (3) creating the environment in which farmers will increase investment in ways to improve productivity in the livestock sector; and (4) promoting effective regulatory institutions to deal with the threat of environmental and health crises stemming from livestock.
Removing Policy Distortions that Promote Artificial Economies of Scale in Livestock Production
The political economy in developing countries often favors systems that significantly benefit a few targeted individuals or institutions rather than providing small increments for large numbers of people. Inappropriate livestock development patterns, such as high-cost and highly capitalized industrial pig, milk, and poultry production in the periurban areas of developing countries, are often the result of deliberate policy choices. Artificially created economies of scale in production add to technological economies of scale that may exist for poultry and pigs (though they probably do not exist for dairy or ruminant meat). The result may be a livestock industry dominated by a few large producers, with few opportunities for poor farmers and little control of environmental or health risks.
Even in the absence of specific tax breaks or subsidies, distortions in domestic capital markets that provide cheap capital to large enterprises and limited or expensive loans to small-scale operations, favor the large over the small and the substitution of capital for labor. Policies dealing with infrastructure and access to natural resources can unintentionally benefit large-scale producers at the expense of smaller ones.
Urban piggeries and dairies that do not adequately dispose of waste materials often operate in poor regulatory environments, under distortions in the marketing chain that prevent competition from rural areas, and without legal accountability for pollution. Overgrazing often results from inadequate property rights development and enforcement mechanisms as well as politically motivated subsidies to large producers. The point is that there is a degree of choice in how governments promote livestock development, and the deck is often stacked in favor of systems that harm the environment and provide lesser benefits to large numbers of poor rural people.
Alternatives to large, industrial production systems might be developed through vertical coordination of specialized crop and livestock activities in high-potential areas. This would permit specialized enterprises to perform efficiently while maintaining the biophysical links between crops and livestock. Such contracts between specialized feed and livestock producers are more likely to emerge if vertically integrated companies in the industrial system have to bear the full costs of their use of the environment.
The main alternative to an industrial production system in many developing countries is one that uses the labor and quality-control of many small farmers in production, but also benefits from the expertise, technology and assets of large-scale companies that are under contract for input provision, processing, and distribution of output. Such arrangements in fact characterize the poultry industry in the United States and correspond to contract farming of high-value crops in many developing countries. As discussed above, many apparent economies of scale are in fact located in input supply and output processing and distribution. This suggests that institutional innovations can allow the poor to enjoy a greater share of the benefits of the Livestock Revolution.
Building Institutions for Incorporating Poor Producers into the Benefits of the Livestock Revolution
Considerable evidence from field studies around the world shows that the rural poor and landless presently earn a higher share of their income from livestock than better-off rural people. Poverty alleviation policies must find a way to help the rural poor participate in the growth made possible by the Livestock Revolution. The alternative might be that the poor are driven out by industrial livestock producers, and the one growing market they presently compete in will be closed to them.
Small producers face many hidden costs under developing-country conditions. They find it difficult to gain access to productive assets such as credit and refrigeration facilities and to information such as knowledge of microbial contamination prevention procedures. In addition, the small producer of perishables in the tropics typically is at a bargaining disadvantage with marketing agents, because the product must be moved immediately or lose its value. Contract institutions restore the balance and also benefit distributors by assuring quality and reliable supply. The probable existence of genuine economies of scale in input supply to livestock enterprises and in processing and distribution of perishable commodities generally, suggests ways should be found to integrate small producers vertically with livestock food processors who are also in a position to manage input supply. In developed countries this has been accomplished through contract fanning or participatory producer cooperatives, especially in the case of milk and poultry.
Governments and development partners seeking to invest in economic capacity-building, while facilitating the participation of the poor in commercially viable activities, need to follow the Livestock Revolution closely. The stakes are high and growing, and the rapidly rising demand for output increases the probability of success. The worst thing that well-motivated agencies can do is to prevent public investments that could facilitate sustainable and market-oriented livestock production by small producers. This will not stop the Livestock Revolution, but it will help ensure that the form it takes is less favorable for poverty alleviation and sustainability.
Creating Urgently Needed Public Goods for Livestock Production Creation in Developing Countries
The benefits provided by technology development and extension in the industrial livestock sectors of developed countries largely accrue in the marketplace. The private sector, therefore, will continue to play the leading role in further livestock technology development and diffusion in developed-country industrial systems. Industrial technologies for pigs and poultry are largely transferable to developing countries, suggesting that the need for public goods provision for these items is modest. The problem is that technology development and extension are also required for cattle and other types of livestock production. The role of the public sector becomes an issue here, especially in developing countries, where large private companies rarely operate outside the industrial livestock sector.
As the stakes rise with the Livestock Revolution, policy regarding the costs of livestock production in developing countries become even more critical than before. Educational, veterinary, research, extension, and input provision are not yet fully privatized and in many cases cannot yet be privatized at prevailing stages of development. The public goods aspect of livestock development in developing countries has always existed. The difference now is that because the market is growing, creating opportunities and risks, the public goods aspect really matters, especially in disease-control for smallholder-produced animals in vertically integrated industrial systems.
Meat and milk presently contribute more than 40 percent of the value of food and agricultural production in the world, but receive a disproportionately small allocation of public investments for facilitating production. Greatly increased attention must be given to livestock productivity issues in developing countries, including postharvest processing and marketing. Policy not only needs to facilitate the shift from increasing herd size to increasing productivity, but it needs to steer this development away from overintensification and environmental degradation.
Above all, publicly funded research and extension should focus on agricultural resource management that comprehensively furthers policy goals that relate to human needs. Rather than emphasizing output maximization above all else, research and extension should find ways to use a dynamic livestock sector to improve food security and alleviate poverty and at the same time minimize adverse effects on public health and the environment. The design of public investment must therefore go beyond a strict technical orientation and consider the social, economic, and ecological dimensions of the interaction of livestock with the betterment of livelihoods.
Enhancing the design of public investment in the livestock sector of developing countries requires substantial improvements in the creation, dissemination, analysis, and use of policy-relevant information concerning livestock. Specifically, an improved inventory and monitoring system of the changes in the availability, use, and management of the agricultural resource base worldwide has to be created. Differences and overlaps between the ecological and economic efficiency of livestock production need to be defined. These steps will require the compilation and dissemination of extensive ecological and economic data pertaining to livestock production to complement the extensive technical data available.
Regulating Environmental and Public Health Concerns
In the present phase of livestock development in the more dynamic developing countries, the size, composition, and end destination of livestock production arguably have outgrown the limited institutional capacity of ministries to cope with resulting environmental and public health issues. Regulatory agencies need to function in a way that is commensurate with the kinds of problems arising. For example, meat hygiene needs to be better enforced in urban China and grazing better managed in West Africa. Generally, technologies that deal with environmental and public health dangers stemming from the Livestock Revolution will not work unless regulatory enforcement backs them up. Such institutional developments will likely occur only when the political demands for better regulation become strong. Such was the case in an earlier era in the developed countries. In developing countries, an ounce of prevention may eliminate the need for a pound of cure.
In sum, it is unwise to think that the Livestock Revolution will somehow go away in response to moral suasion by well-meaning development partners. It is a structural phenomenon that is here to stay. How bad or how good it will be for the populations of developing countries is intricately bound up with how countries choose to approach the Livestock Revolution. Policies can significantly improve poverty alleviation, environmental sustain-ability, and public health, but only if new actions are undertaken. Failing to act risks throwing away one of the few dynamic economic trends that can be used to improve the lives of poor rural people in developing countries.