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close this bookLivestock to 2020 - The Next Food Revolution. 2020 Vision for Food, Agriculture, and the Environment. Discussion Paper 28. (IFPRI, 1999, 79 p.)
View the document(introduction...)
View the documentForeword
View the documentAcknowledgments
View the document1. The Livestock Revolution
View the document2. Recent Transformation of Livestock Food Demand
View the document3. Accompanying Transformation of Livestock Supply
View the document4. Projections of Future Demand and Supply to 2020
View the document5. Implications of the Livestock Revolution for World Trade and Food Prices
View the document6. Nutrition, Food Security, and Poverty Alleviation
View the document7. Environmental Sustainability
View the document8. Public Health
View the document9. Technology Needs and Prospects
View the document10. Taking Stock and Moving Forward
View the documentAppendix: Regional Classification of Countries Used in this Paper
View the documentReferences
View the documentRecent Food, Agriculture, and the Environment Discussion Papers

4. Projections of Future Demand and Supply to 2020

Trends during the past 15 years suggest that the developing countries are in the midst of a demand-driven Livestock Revolution that already has increased the shares of world livestock products consumed in those countries by a substantial margin. Even more important effects are expected in the foreseeable future. These future changes are of such magnitude that they cannot occur in a vacuum. They will affect the global economy and in turn be affected by it.

This chapter and the next will examine the likely magnitude of the changes, the feasibility of the changes given the world’s capacity to produce livestock and feed, the likelihood of the required production increases occurring in developing or developed countries, and the implications for world prices of meat, milk, and cereals. This chapter presents both an approach to addressing these questions and some answers in the form of baseline results from a global economic model. It also looks at what some plausible changes in future scenarios might entail for world milk and meat. Chapter 5 examines the projected impact of the Livestock Revolution on world trade in meat and milk and world food prices under different scenarios.

Global economic models are subject to many uncertainties and are typically specified at such a high level of product aggregation (meat and milk are usually lumped in with “food”), that they are not very useful for the purpose at hand. Fortunately, the authors have at their disposal a model developed at IFPRI (Rosegrant, Agcaoili-Sombilla, and Perez 1995; Rosegrant et al. 1997; Rosegrant, Leach, and Gerpacio 1998; and Rosegrant and Ringler 1998) that is particularly appropriate for looking at these issues and assessing the sensitivity of results to different assumptions. The tool in question is the International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT), June 1998 version. 7 (For further information on the model, see the box.)

7 The June 1998 version of IMPACT incorporates parameters and assumptions that reflect lower expected overall economic growth in Asia relative to the assumptions in prior versions, in addition to updated parameter estimates for Africa (Rosegrant and Ringler 1998). Demand and supply parameters for milk have also been extensively reviewed and revised in this version; milk was included previously, but not reported on separately. Readers interested in the structure of model equations, which have not changed, are referred to the appendix of Rosegrant, Agcaoili-Sombilla, and Perez (1995), published in the same series as the present paper.

Projected Consumption Trends to 2020 in the Baseline Scenario

The baseline scenario represents the most realistic set of assumptions governing international and national economies. With the sole exceptions of beef in the developed countries and milk in the developing countries, consumption of food products of animal origin is projected to grow at a substantially lower annual rate over the 1993-2020 period than it did in the 1982-94 period (Tables 16 and 7). The projected rates of growth to 2020 are expected to be about half those observed in the last 15 years in most cases. Three factors produce these lower growth rates to 2020. First, recent rapid growth in consumption means that the base for projecting growth beyond 1993 is larger than that in 1983. Thus a given absolute annual increment accounts for an increasingly smaller percentage increment. Second, slowdowns in the rate of overall income and urbanization growth will occur for the same reason. Third, consumers begin to get satiated as the importance of meat in their diets increases.

The Baseline IMPACT Model

IMPACT is a global food model that divides the world into 37 countries or country groups. Its baseline version represents the most realistic set of assumptions according to the model team. The countries and groups can be conveniently aggregated into regions that are compatible with FAO definitions (see the Appendix). Fan and Agcaoili-Sombilla (1998) compared the results of early versions of the model and other international models for cereal production and consumption in China in 2010 and 2020. They found that the projections from the IMPACT model are middle of the road in outlook and neither pessimistic nor bullish with respect to the issues raised at the beginning of this chapter.

The IMPACT model covers 18 commodities, including beef, pork, poultry, sheep meat, goat meat, bovine milk, and eggs. The base data used in the current version are averages of the 1992-94 annual data from the FAO Statistical Database (the same source used for the tables in previous chapters, with 1993 data exactly equivalent to the IMPACT base year). Since each of the 37 country groups produces and/or consumes at least some of each commodity, literally thousands of supply and demand parameters had to be specified (income, price, and cross-price elasticities of demand; production parameters including crop area, yield growth trends, and herd size and productivity; price response parameters; initial levels and trends in feed conversion; trade distortion parameters; and so on). Parameter estimates were drawn from econometric analysis, assessment of past and changing trends, expert judgement, and synthesis of the existing literature. The myriad assumptions are too detailed to report here, but attention is given to those parameters that matter the most, such as the detailed structural parameters of shifting meat demand in China, taken from Huang and Bouis (1996).

National income, population, and urban growth rates are also assumed for each country group, along with anticipated changes in these rates over time. The model uses the revised United Nations medium-variant projections for 1996 for demographic assumptions. National income projections are estimated based on a review of projections drawn from sources such as the World Bank. The model is solved on an annual basis by linking each country model to the rest of the world through commodity trade. The market-clearing condition solves for the set of world prices that clears international commodity markets, so that the total imports of each commodity equals total exports. World prices of commodities thus act as the equilibrating mechanism and maintain the model in equilibrium. When an exogenous shock is introduced in the model, such as an increase in crop yields from higher investment in crop research, the world price will adjust and each adjustment is passed back to the effective producer and consumer prices. Changes in domestic prices subsequently affect the supply and demand of the commodities, necessitating their iterative readjustments until world supply and demand are in balance and world net trade again equals zero.

The outcome of this annualized iterative process is an estimated annual series of projected market-clearing prices, consumption levels by commodity and country group, feed-use levels, production area, yield and production levels by commodity and region, and net trade across country groups by commodity. The analysis extends to the year 2020. The increasing globalization of agricultural markets is represented in the model by its set of endogenous world prices estimated through annual iterative solutions. Events affecting net exports from one country group will affect prices in others, in turn changing supply, demand, and net trade, eventually converging to a solution.

An important advantage of a modeling approach such as IMPACT is that it can be used to investigate the feasibility of production increases simultaneously with the determination of production costs and output prices. Actual production of commodities in the model requires the use of sufficient quantities of all needed inputs in the country and year concerned. Particular attention is devoted to cereal-based feeds. Cereal feed demand in IMPACT is driven by livestock production, cereal feed ratios, own- and cross-price relationships among feed crops, and an exogenously specified “efficiency parameter” that can be used to model exogenous technical progress or other secular changes affecting feed demand.

The mix of feeds used for a specific livestock product starts from actual averages in the 1992-94 base period. For each livestock product, the feeding ratio for each main feed commodity in the model - maize, other coarse grains, wheat, oilcakes, cassava, sweet potatoes, and potatoes - is specified for the base period. What happens to the amount of each commodity fed after the base period is modified by the relative price movements of feeds, which change in the model depending on both human and animal demand and by the specified rates of change in feeding efficiency due to technical progress. Browse, backyard slops, and other noncereal, non-oilcake feeds are implicitly costed as free, and are thus not explicitly modeled. Reporting focuses on cereals used as feed, since this is the aspect of feed use that is controversial and it is also in all likelihood the binding constraint in producing adequate mixed feed rations.

The approach has the drawback that where production systems are shifting from low cereal use systems (as in backyard poultry or range-fed ruminants) to industrial feedlots, current ratios of cereal feed to specific meat products may underestimate future ratios. The exogenous feed ratio efficiency parameter in the feed demand equation is specified to compensate for this in some countries. It also allows further sensitivity testing in this area.

The ratio of total cereal feed use to total meat production (with feed use for milk and eggs netted out) in the early 1990s was 1.40 to 1.00 in China and 3.64 to 1.00 in the United States. Between 1983 and 1993, feed conversion efficiency in the United States increased by about 15 percent across all meats, with the increases for poultry outstripping those for beef (CAST forthcoming). The proportionately greater use of natural pastures, household wastes, roots, tubers, and byproducts for feeding in developing countries explains why their cereal feed ratios are lower than those in developed countries.

Even by 2020, per capita consumption of milk products in developing countries is expected to be on average only one-third that of developed countries (up from less than one-fifth in the early 1990s). Per capita consumption of meat in developing countries is projected to be 36 percent of that in developed countries in 2020, up from 28 percent in the early 1990s. Yet in aggregate terms 62 percent of the world’s meat and 60 percent of milk consumption will take place in the developing countries in 2020. This is a major change from the early 1990s, when 52 percent of the world’s meat and 59 percent of the world’s milk were consumed by the developed world.

The consumption trends by region and the annual growth rates to 2020 are given in Table 17. The projected consumption growth rates for China of 3 percent for meat and 2.8 percent for milk are on the low side of the literature (Ke 1997).8 They are fully comparable to those projected for other parts of Asia, but are significantly above the 0.6 and 0.2 percent averages projected for developed countries as a whole. Per capita meat consumption in 2020 is projected to remain low in Sub-Saharan Africa, partially vegetarian India, and other countries in South Asia. The assumptions concerning tastes for meat in India will be tested below as part of the sensitivity analysis, as will assumptions about productivity growth and the severity of the Asian financial crisis.

8 As noted in Chapter 2, the FAO consumption and production figures for meat in China in the early 1990s, used here for the 1992-94 base, may overstate actual consumption and production by up to 30 percent (Ke 1997). Ke studied the discrepancy between food-balance-sheet and survey estimations of meat consumption in China in detail. He concludes that actual total demand for meat is only likely to grow at 3 to 5 percent per year in China in the foreseeable future, a lower rate than that predicted by “some” (unspecified) persons. While the IMPACT-estimated level of meat demand in China in 2020 might be seen as somewhat high because of a base period estimate of meat consumption that is “too high,” the IMPACT estimation is also the result of projected annual growth over 27 years that is “low” because of the conservative assumptions built into the model. There is also little concern about the effect of an overestimate of Chinese livestock production in the base period (1992-94) on imports in IMPACT because the overestimate of production, if there is one, is balanced by an overestimate of consumption. There does not appear to be a compelling reason to revise the estimates for China given here.

Table 16 - Projected trends in the food consumption of various livestock products, 1993-2020


Projected annual growth of total consumption,

Total consumption

Annual per capita consumption

Region/Product

1993-2020

1993

2020

1993

2020


(percent)

(million metric tons)

(kilograms)

Developed world


Beef

0.4

32

36

25

26


Pork

0.3

36

41

28

29


Poultry

1.0

26

34

20

25


Meat

0.6

97

115

76

83


Milk

0.2

245

263

192

189

Developing world


Beef

2.8

22

47

5

7


Pork

2.8

38

81

9

13


Poultry

3.1

21

49

5

8


Meat

2.8

88

188

21

30


Milk

3.3

168

391

40

62

Sources:

Total and per capita consumption for 1993 are calculated from FAO 1998. Projections are updated figures following the same format as that reported in Rosegrant et al. 1997.

Notes:

Consumption refers to direct use as food, measured as uncooked weight, bone in. Meat includes beef, pork, mutton, goat, and poultry. Milk is cow and buffalo milk and milk products in liquid milk equivalents. Metric tons and kilograms are three-year moving averages centered on the two years shown.

Projected Production Trends to 2020

Projected production trends for meat to 2020 closely follow those projected for consumption, with the exception of WANA (Tables 17 and 18). Generally IMPACT projects that in 2020 deficit countries will import feed rather than meat. This contradicts the conventional wisdom that it is cheaper to trade the commodity with the higher value-added (meat as opposed to bulk cereals). But it is consistent with current trade patterns and with the experience of rapidly developing countries such as Taiwan. These livestock trade patterns may reflect the realities of relative overall costs and benefits of producing and trading strategies better than a simple comparison of value to bulk.

Table 17 - Projected trends in meat and milk consumption, 1993-2020


Projected annual growth of total consumption, 1993-2020

Total consumption in 2020

Per capita consumption in 2020

Region

Meat

Milk

Meat

Milk

Meat

Milk


(percent)

(million metric tons)

(kilograms)

China

3.0

2.8

85

17

60

12

Other East Asia

2.4

1.7

8

2

67

20

India

2.9

4.3

8

160

6

125

Other South Asia

3.2

3.4

5

41

10

82

Southeast Asia

3.0

2.7

16

11

24

16

Latin America

2.3

1.9

39

77

59

117

WANA

2.8

3.0

15

51

24

80

Sub-Saharan Africa

3.5

3.8

12

31

11

30

Developing world

2.8

3.3

188

391

30

62

Developed world

0.6

0.2

115

263

83

189

World

1.8

1.7

303

654

39

85

Sources:

Projections are updated figures following the same format as that reported in Rosegrant et al. 1997.

Notes:

Consumption refers to direct use as food, measured as uncooked weight, bone in. Meat includes beef, pork, mutton, goat, and poultry. Milk is cow and buffalo milk and milk products in liquid milk equivalents. Metric tons and kilograms are three-year moving averages centered on the two years shown. WANA is West Asia and North Africa.

Table 18 - Projected trends in meat and milk production, 1993-2020


Projected annual growth of total production, 1993-2020

Total production in 2020

Per capita production in 2020

Region

Meat

Milk

Meat

Milk

Meat

Milk


(percent per year)

(million metric tons)

(kilograms)

China

2.9

3.2

86

19

60

13

Other East Asia

2.4

3.9

7

3

55

29

India

2.8

1.6

8

172

6

135

Other South Asia

2.6

3.1

4

46

9

92

Southeast Asia

3.1

2.9

16

3

25

5

Latin America

2.2

2.0

39

80

59

121

WANA

2.5

2.6

11

46

18

72

Sub-Saharan Africa

3.4

4.0

11

31

10

30

Developing world

2.7

3.2

183

401

29

63

Developed world

0.7

0.4

121

371

87

267

World

1.8

1.6

303

772

39

100

Sources:

Projections are updated figures following the same format as that reported in Rosegrant et al. 1997.

Notes:

Meat includes beef, pork, mutton, goat, and poultry. Milk is cow and buffalo milk and milk products in liquid milk equivalents. Metric tons and kilograms are three-year moving averages centered on the two years shown. WANA is West Asia and North Africa.

Comparison of projected milk production and consumption in 2020 shows a somewhat different story. Unlike meat, milk is itself a major input into domestic livestock production. The consumption figures in Table 17 include only what is consumed by humans, but milk production figures include milk used as feed. Milk production in 2020 in the developed countries is projected to exceed milk consumption by 108 million metric tons (or 29 percent of projected production). Seventy-seven million metric tons of milk will be used as feed and the remaining surplus will be exported to developing countries. Only 41 million metric tons (10 percent of projected production) are likely to be used as feed in developing countries, despite a herd size larger than that in the developed countries.

In developed countries the annual growth rate of production through 2020 is projected to be 0.7 percent or less for each of the major livestock food commodities other than poultry (Table 19). In the developing countries the projected annual rates of growth are 2.7 percent for meat and 3.2 percent for milk. The majority share of livestock production will take place in developing countries, even though per capita production levels will be much higher in the developed countries.

Projected Cereal Feed Use to 2020

The trends in cereal feed use since the early 1980s (Table 15) highlighted the fact that the growth rates of cereal feed use exceeded cereal production growth rates in all regions of the world except WANA. Comparison of projected and historical growth rates of cereal feed use shows a slowdown through 2020 in China, Other East Asia, Southeast Asia, and Sub-Saharan Africa (Tables 15 and 20). But feed use accelerates in India, Other South Asia, and WANA, largely due to fast-growing milk production.

Per capita cereal use as feed increases by only 8.1 percent in aggregate from the early 1990s to 2020 in developed countries, but rises by 44 percent in developing countries. Given this stagnation in developed countries, which presently have high cereal feed use, global cereal feed use is projected to increase by only 46 percent by 2020. This translates to a 1.4 percent compounded annual rate of growth, noticeably higher than the 0.7 percent annual growth rate observed from the early 1980s to the early 1990s. Cereal production is projected to grow by 1.3 percent per year through 2020.

Table 19 - Projected trends in production of various livestock products, 1993-2020


Projected annual growth of total production,

Total production

Per capita production

Region/product

1993-2020

1993

2020

1993

2020


(percent)

(million metric tons)

(kilograms)

Developed world


Beef

0.6

35

38

26

28


Pork

0.4

37

41

29

29


Poultry

1.2

27

36

21

26


Meat

0.7

100

121

78

87


Milk

0.4

348

371

272

267

Developing world


Beef

2.6

22

44

5

7


Pork

2.7

39

81

9

13


Poultry

3.0

21

47

5

7


Meat

2.7

88

183

21

29


Milk

3.2

164

401

39

63

Sources:

Total and per capita production for 1993 are calculated from FAO 1998. Projections are updated figures, following the same format as that reported in Rosegrant et al. 1997.

Notes:

Meat includes beef, pork, mutton, goat, and poultry. Milk is cow and buffalo milk and milk products in liquid milk equivalents. Metric tons and kilograms are three-year moving averages centered on the two years shown. WANA is West Asia and North Africa.

An additional 292 million metric tons of cereals will be used as feed in 2020 compared to the early 1990s. For further comparison, a normal U.S. maize crop in the early 1990s totaled around 200 million metric tons of grain. The increase in grain use as feed will be met primarily through expansion of yields in the traditional exporting countries and expansion of cultivated area in South and East Asia. Feedgrain cultivation has been of relatively minor importance in South and East Asia compared to foodgrain cultivation, but maize production is increasing rapidly while rice production is slowing.

Table 20 - Projected trends in use of cereals as feed, 1993-2020


Projected annual growth rate of total cereal use as feed

Total cereal use as feed

Per capita cereal use as feed

Region

1993-2020

1993

2020

1993

2020


(percent)

(million metric tons)

(kilograms)

China

3.4

84

178

62

125

Other East Asia

2.2

7

20

116

167

India

5.0

3

14

4

11

Other South Asia

2.9

1

4

6

7

Southeast Asia

2.7

12

30

32

45

Latin America

2.0

55

92

116

140

WANA

2.5

29

66

93

104

Sub-Saharan Africa

3.5

3

5

4

5

Developing world

2.8

194

409

45

65

Developed world

0.6

442

519

346

374

World

1.4

636

928

115

120

Sources:

Total and per capita use for 1993 is calculated from FAO 1998. Projections are updated figures following the same format as that in Rosegrant et al. 1997.

Notes:

Cereals includes wheat, maize, rice, barley, sorghum, millet, rye, and oats. Metric tons and kilograms are three-year moving averages centered on the two years shown. WANA is West Asia and North Africa.

Table 21 - Changes in IMPACT’s baseline assumptions: A severe Asian crisis and high Indian meat consumption

Scenario

Phenomenon being modeled

Mechanism

Nature, magnitude, and duration of changed parameters

Severe Asian crisis

Enduring depreciation of Asian exchange rates

Insertion of additional wedge between domestic and world commodity prices for Asian countries

Lasting one-shot increase in wedge of 5 to 13 percent of world prices depending on country


Lower nonagricultural income growth in Asia

Decrease in exogenously specified growth rates of GDP for Asia

Lasting decrease of 30 to 45 percent in GDP growth rates, depending on country

High Indian meat consumption

Shift of Indian tastes toward animal foods including beef

Income elasticity for animal foods raised for India

Lasting rise in elasticity to 1.5 to 2.0, depending on the commodity


Production response of Indian herds

Permanent increase in the trend of Indian herd growth rates

Fixed intercepts shift upward by 0.3 to 0.7 percent by commodity


Increase in cereal feed use in India

Progressive upward shift in feed conversion ratios (kilogram of cereal/kilogram of animal food)

By 2020, India has ratios higher than most other developing countries, but lower than developed countries

Source:

The scenario for a severe Asian crisis is described in Rosegrant and Ringler 1998.

Sensitivity of Projections to Changes in Assumptions

Four experiments that test some of the assumptions in IMPACT and take into account some major changes that might occur in the world are discussed here: (1) a prolonged decline in economic growth in Asia; (2) a structural change in tastes in India toward increased consumption of milk and meat; (3) a broad, secular increase over time in feed conversion efficiency (due to technological progress, perhaps); and (4) a broad secular decrease in cereal feed con version efficiency over time (due perhaps to increasing use of cereal feeds as livestock production intensifies).

What Happens in the Event of a Long-Run Economic Crisis in Asia?

Because demand from developing countries, primarily in East Asia, drives the Livestock Revolution, a prolonged Asian economic crisis could have a major effect on livestock trends through 2020. 9 The scenario for a more severe outcome in Asia is laid out in Table 21. The scenario includes an enduring depreciation of Asian exchange rates and a lasting decrease in income growth rates. Depending on the country, price wedges between domestic and world prices are increased by 5 to 13 percent. Annual GDP growth rates are cut by 30 to 45 percent. This scenario, presented in detail in Rosegrant and Ringler (1998), is a “worst-case” pessimistic scenario, especially because the effects are assumed to last until 2020. The results are presented here to illustrate the robustness of the Livestock Revolution, even in the face of a lasting slowdown in Asia.

9 The June 1998 baseline used here already incorporates less optimistic assumptions about Asian growth than previous versions of IMPACT. See Rosegrant and Ringler (1998) for a detailed discussion. The current baseline assumes that long-term nonagricultural GDP will grow at 5.5 percent per year in China, 4.5 percent in Indonesia, 5 percent in Malaysia, 3.5 percent in Korea, 5 percent in India, and 5 percent in Thailand.

A comparison of the results of the severe Asian scenario to those of the baseline model are given in Table 22. A severe Asian crisis would cause meat, milk, and feed consumption to fall, most notably in China and India. But even where consumption declines by 20 percent relative to the baseline, the baseline projections of 200-300 percent growth for meat and milk in India and China by 2020 mean that consumption will grow 160-240 percent in those countries, still a large increase.

Even with a severe Asian crisis, the prospects for long-term livestock expansion in Asia and the world are quite robust. In Latin America and Sub-Saharan Africa the severe Asian scenario increases meat and milk consumption slightly because of price effects (cheaper world prices for meat and feed). For the world as a whole, consumption of livestock commodities declines by 8 percent or less relative to the baseline, a negligible change considering it is spread over 27 years.

What Happens if People in India Dramatically Increase Their Meat Consumption?

Another major structural change that could affect the global livestock economy is a shift in Indian tastes that accelerates meat consumption (Bhalla, Hazell, and Kerr 1998). Urbanization, income growth, and secularization could cause people in India to increase their meat consumption at a rate similar to high milk consumption growth rates. Total milk consumption in India grew by 53 percent between the early 1980s and 1990s (Table 6).

This scenario assumes that Indian income elasticities increase to between 1.5 and 2.0, depending on the product (Table 21). It also assumes that Indian production systems change in tandem, with permanent increases of 0.3 - 0.7 percent in the trend of Indian herd-size growth rates. Finally, the scenario assumes that livestock production in land-scarce India increases primarily through intensification and that the amount of cereal feed required per kilogram of meat rises as a consequence.

Table 22 - Difference between baseline projections and projections of aggregate consumption in 2020 due to changes in assumptions about the Asian crisis and Indian consumption


Severe Asian crisis

High Indian meat consumption

Region

Beef and mutton

Pork and poultry

Milk

Cereal used as feed

Beef and mutton

Pork and poultry

Milk

Cereal used as feed


(percent difference between new scenario and baseline)

China

-20

-19

-18

-13

-3

-2

-7

4

India

-14

-17

-27

-16

343

505

154

250

Other Asia (including WANA)

-8

-13

-5

-1

-4

-3

-9

7

Latin America

1

4

2

-5

-3

-4

-4

8

Sub-Saharan Africa

2

4

4

-4

-4

-2

-8

5

Developing world

-6

-13

-13

-8

33

6

59

14

Developed world

-2

2

0

-2

0

0

-2

3

World

-4

-8

-8

-5

19

4

34

8

Notes:

The severe Asian crisis incorporates lower projected income growth and depreciation in exchange rates for countries in Asia. Depending on the country, income growth projections are 30-45 percent lower than in the baseline scenario, and exchange rate depreciation results in 5-13 percent higher domestic prices.

The high Indian meat consumption scenario incorporates a shift in tastes toward consumption of animal foods and increases in production and feed use ratios by Indian livestock producers. Income elasticities for animal products rise to between 1.5 and 2.0, depending on the commodity. The trend growth rate of Indian herd size rises by 0.3-0.7 percent (depending on the commodity), and feed conversion ratios rise above those typical in developing countries.

Mutton includes sheep and goat meat. Milk includes all dairy products in liquid milk equivalents.

The large percentage changes for meat and feed in India reflect a low initial base. Projected beef consumption in 2020, for example, is still only 31 kilograms per capita under the high meat scenario, less than in China today. WANA is West Asia and North Africa.

The high Indian meat consumption scenario pulls in the opposite direction from the severe Asian crisis scenario. The effect on the growth of Indian consumption is huge in both absolute and percentage terms, but still relatively modest in per capita terms (Table 22). Milk consumption and cereal feed use rise the most in absolute terms. For the world as a whole, milk consumption in 2020 would exceed the baseline by 34 percent and feed use by 8 percent.

Scenarios with Different Rates of Feed Conversion Efficiency

Feed can make up to three-quarters of the variable cost of livestock production in intensive systems (Sere and Steinfeld 1996). Changes in the feed requirements of meat and milk production play an important role in determining the final cost of livestock production. Technological innovations that increase the amount of meat obtained per unit of high energy feed and intensification of production (substitution of cereals for browse or slops) both can change the amount of cereal used per unit of meat and milk produced. Two opposite scenarios are presented: an increase in the rate that feed use efficiency improves and a decrease in that rate. These are both modeled in somewhat extreme form to test the sensitivity of results to changes in the assumed conversion ratios in either direction. The baseline scenario basically assumes that these two effects cancel each other out.

In the first, “optimistic” scenario, feed conversion ratios improve progressively. About 1 percent more meat per year is produced per kilogram of feed in developing countries, with a compounded effect over time. This mirrors the rapid technological progress observed in the developed countries from the early 1980s to the early 1990s. Under the optimistic scenario, feed conversion efficiency in developed countries improves by only 0.5 percent per year. This lower rate reflects less scope for adopting technology from other regions. The result is that in 2020 developing countries produce approximately 60 percent more meat per kilogram of feed than they do in the baseline projections. The effect is half as large in developed countries.

In the second, “pessimistic” scenario, feed conversion ratios worsen progressively. About 1 percent less meat per year is produced per kilogram of feed in developing countries, with the effect compounding over time. This scenario reflects increasing shifts from backyard production to more intensive feeding in lots. Because intensified feeding practices have already taken hold in developed countries for the most part, the worsening conversion ratio for developed countries is assumed to be only 0.5 percent per year. The result is that in 2020 developing countries produce approximately 60 percent less meat per kilogram of feed than they do in the baseline projections. The effect is half as large in developed countries.

Table 23 - Difference between baseline projections and projections of aggregate consumption in 2020 due to changes in assumptions about feed conversion


Increasing feed conversion efficiency

Decreasing feed conversion efficiency

Region

Beef and mutton

Pork and poultry

Milk

Cereal used as feed

Beef and mutton

Pork and poultry

Milk

Cereal used as feed


(percent difference between new scenario and baseline)

China

0

0

0

-15

0

0

0

17

India

0

1

0

-9

0

0

-1

11

Other Asia (including WANA)

0

1

1

-10

-1

0

-1

12

Latin America

1

1

0

-15

0

-1

-1

19

Sub-Saharan Africa

0

0

0

-12

0

0

0

14

Developing world

0

1

0

-13

0

0

-1

16

Developed world

0

0

0

-2

0

0

0

2

World

0

0

0

-7

0

0

0

8

Notes:

The increasing feed conversion efficiency scenario assumes an increase in the efficiency of converting maize to meat. This results in a decreased rate of increase for conversion ratios in regions where they are increasing, and an increased rate of decrease for conversion ratios in regions where they are decreasing.

The decreasing feed conversion efficiency scenario assumes a decrease in the efficiency of converting maize to meat. This results in an increased rate of increase for conversion ratios in regions where they are increasing, and a decreased rate of decrease for conversion ratios in regions where they are decreasing.

Mutton includes sheep and goat meat. Milk includes all dairy products in liquid milk equivalents. WANA is West Asia and North Africa.

Table 23 shows the effects of the optimistic and pessimistic feed conversion scenarios on consumption in 2020. The most striking result is that large changes in either direction have virtually no impact on livestock product consumption. Large changes, however, are associated with differences in the amount of cereal used to produce livestock products. Although not shown, changes in feed conversion ratios also cause changes in the location of livestock production in a competitive market system. A crucial point to note in Table 23 is that the amount of cereal used for feed in 2020 changes by only 2 percent in developed countries and 13 to 16 percent in developing countries, relative to the baseline. The change is small because increased feed efficiency leads to falling cereal feed prices, which encourages substitution back into cereal feeds among all producers, lessening the overall effect of changes in efficiency.

Progressively lower feed efficiency raises the world price of cereal feed to the point where substitutes become cost-effective. Production shifts from regions and commodities that cannot undertake these substitutions at low enough cost to those that can. Countries such as Argentina, with large production capacity on ranges, are favored in the “pessimistic” scenario because they can compete more easily, with more expensive lot-fed beef, for example. The reverse is true under the “optimistic” scenario. Higher feed efficiency (lower conversion ratios) tends to encourage increased use of cereals as feed and favor those countries where cereal supply is relatively cheap and cereal feeding practices are well-established.

A striking result is that as long as cereals are available worldwide in relatively elastic supply, feed conversion does not play a critical element in determining human consumption of livestock products, although it does affect the competitiveness of individual producers of livestock product. Feed efficiency and relative cereal prices, therefore, are likely to be quite important in determining the geographic direction of trade.