As commodity prices continue to
escalate, driven by increased global grain demand, as well as
subsidized grain-based ethanol, all kinds of lingering
fundamental debates are being ushered to center stage.
The loudest, most obvious, of course, is the debate surrounding
food versus fuel.
“You cannot use the combined
grain crops of Australia and Indonesia for U.S. fuel and not
have an impact on corn, soybean and food prices,” said Tom Elam,
president of Farm Econ at the recent Annual Meat Conference.
In fact, at a Congressional
briefing in March, analysts from the Food and Agricultural
Policy Institute (FAPRI) explained, “Continuing high crude-oil
prices and new bio-energy mandates, such as the U.S. Energy
Independence and Security Act of 2007, are expected to sustain
prices at historic highs across all agricultural commodities
over the next decade.”
Although recent market turbulence
and high crude-oil prices have clouded prospects, FAPRI analysts
say the 10-year outlook for the global economy continues to be
strong, with a 3.3% average annual rate of real growth in gross
domestic product. Downside risk in the outlook is seen in the
U.S. economy where rising energy and food prices, coupled with
recent difficulties in the financial and real estate markets,
restrict growth in 2008 to 1.9%.
With that said, FAPRI’s outlook calls for global net trade in
ethanol increasing by 2.53 billion gallons, reaching 3.61
billion gallons by 2017.
“New bio-diesel mandates in the
Americas and Europe almost double the price of bio-diesel,
pushing it to $6.00 per gallon, with the doubling of net trade
over the next decade,” say FAPRI analysts. Their projections are
for the world ethanol price to fall over the first half of the
decade because of strong supplies encouraged by previous price
increases. Growing demand is expected to strengthen the price
again through 2017.
Along the way, energy policies
will likely continue driving meat and poultry prices higher.
Elam expects food price inflation to rise to 5-6% in 2009.
Environmental Price Tag
All of this is based on current mainstream production methods
which utilize technology to increase both production and
economic efficiency. When you start talking about non-mainstream
production the spotlight shifts to another, less obvious debate:
technology versus food versus the environment.
Certainly, there is growing niche
demand for natural beef raised without the use of
growth-promoting hormones (GPH), and also for beef produced
start-through-finish on forage. Arguably, in both cases
consumers perceive these products to be more environmentally
friendly. The reality is different, though. At least it is based
upon a recent study conducted by Alex and Dennis Avery at the
Hudson Food Institute for Global Food Issues.
In their study, The Environmental
Safety and Benefits of Pharmaceutical Technologies in Beef
production—funded by the Growth Enhancement Technology
Information Team—the researchers examine the differences in
environmental costs between five beef finishing systems: organic
grain-finished; organic grass-finished; natural grain-finished;
natural grass-finished; conventional grain-finishing that
utilizes GPH.
It’s not surprising that natural,
organic and grass-finishing yield fewer pounds of beef per
animal than conventional grain-finishing (Table 1). Based on the
model used, a grass-based finishing system required 660 acres of
pasture and hay, whereas a conventional grain-finishing system
required 365 acres of pasture, hay and corn.
The environmental cost is less
obvious.
For instance, according to the Avery study, the land use cost
per pound of beef is 5.04 acre days per pound (ADPP) for organic
grass-fed beef, versus 1.99 ADDP for grain-fed beef produced
sans GPH, and 1.64 ADDP for grain-fed beef utilizing GPH.
“If put in terms of a farm
footprint, the use of growth-promoting hormones allows a 20
percent reduction in land needed for beef finishing over
grain-based finishing alone,” say the Averys. “Compared to
grass-based cattle production, grain-finishing, with
growth-promoting hormones, increases land use efficiency
three-fold.”
The researchers utilized an Iowa
State University (ISU) model that compares the profitability of
various niche beef production methods. You can find the details
associated with the study and how the model was used at
http://www.beeftechnologies.com/pdfs/avery_paper.pdf.
“In a very real sense, grass finishing of beef is an efficient
use of farmland less suited for growing feed crops. There are
several regions of the globe where grass production is arguably
the best, most productive and most environmentally sensitive use
of farmland,” say the researchers. “In such instances,
grass-based beef production is a good use of such farmland,
especially given the growing consumer demand for grass-finished
beef. However, in farming areas with good to excellent arable
cropland where grass production would represent a less efficient
use of the land, grain-finishing represents a better, more
efficient use of this farmland resource.”
The Averys point out the
parameters of the model they utilized likely underestimate the
relative advantage of grain-based finishing with GPH because the
ISU model assumed grain-finished cattle are in the feedlot
303-329 days. Typically, cattle spend 220-240 days in the
feedlot.
Another byproduct of increased
number of days on feed, however cattle are finished, is the
amount of greenhouse gasses they produce. Specifically, the
researchers looked at Carbon Dioxide, Secondary Methane and
Nitrous oxide.
In sum, the researchers conclude,
“Using a model system endorsed by sustainable agriculture
advocates, and the emissions factors stipulated by the United
Nations Intergovernmental Panel on Climate Change, we find that
organic grass-fed production requires three times more land and
results in 60 percent more greenhouse gas emissions (excluding
nitrous oxide) compared to grain feeding with the aid of
growth-promoting hormones.”
So, higher feed prices means the
cost of beef production grows one way or the other, even if the
direct cost hedge is leaving cattle on grass longer and in the
feedlot for less time. |
