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I. The Livestock Revolution[1]

1.1. Amazing Numbers and High Stakes

From the beginning of the 1970s to the mid 1990s, consumption of meat in developing countries increased by 70 million metric tons (MMT), almost triple the increase in developed countries, and consumption of milk by 105 MMT of liquid milk equivalents (LME), more than twice the increase that occurred in developed countries. The market value of that increase in meat and milk consumption totaled approximately $155 billion (1990 US$), more than twice the market value of increased cereals consumption under the better-known "Green Revolution" in wheat, rice and maize. The population growth, urbanization, and income growth that fueled the increase in meat and milk consumption are expected to continue well into the new millennium, creating a veritable Livestock Revolution. As these events unfold, many people's diets will change, some for the better, but others for the worse, especially if food contamination is not controlled.

A critical issue raised by these trends is that for once a sector that the poor are heavily involved in is growing. Table 1 shows that in fact pork and poultry are the growth sectors of developing country agriculture. If the poor fail to participate, they are condemned to even worse immizeration. If they participate, farm income could rise dramatically, but the conditions under which this could occur are still undetermined. Much anecdotal evidence, most of it based on experience in the developed countries, suggests that the poor and small-scale operators will quickly be displaced from growing livestock sectors as individual farms scale-up. Furthermore, whether the seemingly unstoppable growth of livestock products is a good or bad thing for the poor will also depend on the environmental and public health impact of rapidly rising livestock production in close proximity to population centers (Delgado et al., 1999). There are many reasons for concern, as the material reported below will illustrate.

1.2. The Consumer Rules

The Livestock Revolution is most fundamentally propelled by demand. People in developing countries are increasing their consumption from the very low levels of the past, and they have a long way to go before coming near developed country averages. In developing countries people consumed an annual average in 1996-98 of 25 kg/capita meat and 44 kg/capita milk, one-third the meat and one-fifth the milk consumed by people in developed countries. Nevertheless, the caloric contribution per capita of meat, milk and eggs in developing countries in the late 1990’s was still only a quarter that of the same absolute figure for developed countries and, at 10 percent, accounted for only half the share of calories from animal sources observed in the developed countries (Delgado, Rosegrant and Meijer, 2002).

Per capita consumption is rising fastest in regions where urbanization and rapid income growth result in people adding variety to their diets. Across countries, per capita consumption is significantly determined by average capita income. Aggregate consumption grows tends to grow fastest where rapid population growth augments income and urban growth (Rae 1998). Since the early 1980s, total meat and milk consumption grew at 6 and 4 percent per year respectively throughout the developing world.[2]. In East and Southeast Asia - where income grew at 4-8 percent per year between the early 1980’s and 1998, population at 2-3 percent per year, and urbanization at 4-6 percent per year - meat consumption grew between 4 and 8 percent per year.

The Livestock Revolution has been most evident in East and Southeast Asia, particularly China, as shown in Table 2. The share of the world's meat consumed in developing countries rose from 36 to 53 percent, and their share of the world's milk rose from 34 to 44 percent (Table 3). Pork and poultry accounted for 73 percent of the large net consumption increase of meat in developing countries from 1982/84 to 1996/98. Conversely, both per capita and aggregate milk and meat consumption stagnated in the developed world, where saturation levels of consumption have been reached and population growth is small. Nine-tenths of the small net increase in meat consumption that occurred in developed countries over the same period was from poultry.

The dominant role of China and Brazil in the meat part of the Livestock Revolution is shown in Table 2. However, the near doubling of aggregate milk consumption as food in India between the early 1980’s and the late 1990’s suggests that the Livestock Revolution goes beyond just meat and beyond China and Brazil. At 60 MMT of LME in 1996/98, Indian milk consumption amounted to 13 percent of the world’s total and 31 percent of milk consumption in all developing countries. This figure, which like the others used here is from the FAO database, is considered too low by knowledgeable Indian colleagues, who place the correct figure in excess of 70 MMT. The high milk consumption of Latin America in 1996/98, at 112 kg/capita, is half way between the developing world as a whole (44 kg/capita) and the developed countries (195 kg/capita), because of the very high level (75%) of urbanization in Latin America.

The rapid rise in livestock production in developing countries has been confronted in recent years by dwindling grazing resources for ruminant animals and a pattern of effective demand largely centered on rapidly growing mega-cities fueled by non-agricultural development. The latter increases pressures for rapid industrial approaches to satisfying urban meat demand. Together, these trends help explain the large share of non-ruminants in the production increases in both the North and the South. The decline in the feeding of cereals to ruminants in the North and the much larger increase in non-ruminant production in the South helps explain a relative shift to the South in the use of feed cereals.

Cereals feed use in the developed countries has actually declined since the early 1980’s, whereas it increased substantially in developing countries. The share of the latter in world use of cereals for feed went from 21 percent in 1982/84 to 36 percent in 1996/98. This salient fact has inspired many observers to wonder if the rise of production of pork, poultry, eggs, and milk for the urban middle class would jack up the price of cereals to the poor in both rural and urban areas of developing countries. Furthermore, others wondered whether the trends portrayed above could possibly continue far into the future, without resource scarcities or import constraints raising prices to the point that the growth in consumption would peter out (Delgado, Rosegrant and Meijer, 2002).

1.3. The Supply Side and Meat Prices

Claiming that the Livestock Revolution is propelled by demand does not mean that its course was and is not shaped by the supply side. As will be made clear further on in this paper, productivity breakthroughs in animal agriculture, and particularly for poultry and swine, have made certain forms of industrial organization the most likely response to a surge in consumer demand for meat. They also help determine who will produce the new meat demanded by growing Asian cities. Events on the supply side are also critical to the environmental and public health impacts of increased livestock production.

Supply side events, such as improvements in the efficiency of large-scale pork and poultry operations, clearly keep pork and poultry prices lower than they would be otherwise. In fact, a nostrum of U.S. agricultural economics in the 1970’s was that rapid technological progress in poultry from the 1950’s onwards led to chicken meat - a luxury good in the U.S. up to that time - becoming cheaper than beef, until recently the staple meat in the U.S. Such a change did occur, but the trends have been nuanced since 1980. The price series in Table 4 are indicative of world price trends for various livestock products and feeds, and are adjusted in Table 5 into constant 1990 U.S. dollars, to eliminate the effects of inflation. Table 5 clearly suggests the economic misery of agriculture since 1980. Between the first five years of the 1980’s and the last five years of the 1990’s, average deflated maize and beef prices declined by 44 and 54 percent respectively, relative to the base period. Real prices of pork and poultry, however, declined by only 28 and 25 percent, respectively, over the same period. Real milk prices declined 11 percent.

Since the rate of technological progress in milk, poultry and pork has undoubtedly been higher than for beef in the 1980’s and 1990’s, only demand-side events can explain the cheapening of beef relative to milk, pork and poultry in those decades. Without the strong technological progress achieved for the latter commodities, their world prices would surely have risen farther relative to beef. Milk prices within OECD markets have been kept artificially high by protective measures, and artificially low in world markets through export subsidies. Without policy distortions, the real milk export prices reported in Table 5 would have not have fallen since the early 1980’s, and may even have risen slightly (Rae 2001).

The same cannot be said for pork and poultry, however. A strong hypothesis, requiring more in-depth research - is that changing preferences away from beef in the markets of developed countries and rapidly rising demand for pork and poultry in developing countries are driving world price relatives for these commodities more than are the respective rates of productivity gain for the two commodities or policies in the OECD countries. The declining preference for beef in the developed countries is undoubtedly linked to health concerns about animal fats in general in countries with high consumption levels. However, it is clearly also a response to publicity about human fatalities from Bovine Spongiform Encepalopathy (BSE), and possibly even by consumer misperceptions of food safety issues arising from massive outbreaks of Foot-and-Mouth Disease (FMD).

In any event, cheap feed grains have without doubt also been a factor in encouraging the expansion of pork and poultry production in developing countries through industrial modes based on use of concentrate feeds. The latter account for roughly 60 to 70 percent of the nominal cost of production of poultry and pork. As shown in Table 6, the relative prices of pork/poultry and of maize have moved significantly in favor of meat producers since the early 1980’s. One wonders what the decline in real maize prices would have been without the Livestock Revolution in developing countries.

This project focuses on the impact of massive changing livestock market forces and policies on poor rural people primarily as small producers, both as income earners and persons living close to where livestock is produced. However, it should not be forgotten that without the rapid rise in large-scale production observed in developing countries over the past 30 years, meats previously only available to the middle class would be far less accessible in regions where the average intake of meat per day in the late 1990’s was still only 68 gr/person/day, or barely enough on average to meet minimum micro-nutrient requirements for persons not on supplements or without access to highly varied vegetable-based diets throughout the year (Table 3). Increased aggregate availability and increased participation by smallholders in economic growth do not guarantee that those who most need increased intakes of animal source foods will get them, but are surely pre-requisites to this purpose.

1.4. A Changing of the Guard in the Livestock Sector?

It has been argued elsewhere that the demand trends summarized in the previous section are robust and likely to continue well into the future (Delgado et al. 1999). The latter publication used the IMPACT global food projection model developed at IFPRI by a team led by Mark Rosegrant to substantiate the likelihood of this occurring, and these figures have since been widely accepted around the world. Tables 7, 8, and 9 summarize projections of livestock and cereal feed use to 2020 in terms of the share of specific areas of the world and of specific livestock products, using the most recent version of the IMPACT model (April 2002).

The story that emerges is that developing countries will continue to acquire market share for major products, accounting for two-thirds of the meat consumed globally by 2020, up from about one-third as recently as the early 1980’s. Similarly, the share of developing countries in milk consumption will rise from 34 percent in the early 1980’s to 57 percent by 2020. Developing countries accounted for only 22 percent of the cereals used as feed in the early 1980’s, and are projected to use 46 percent in 2020. Most importantly, feed items are projected to remain at current low prices in real terms, while meats will have only a slight decline in real price (3%) by 2020 and milk an 8 percent decline. Compare this to the halving of real beef and maize prices between 1980 and 2001 shown in Table 5.

A changing of the guard is occurring in livestock production. Developing countries are increasingly in the driver’s seat. If the producer incomes policy of the OECD countries can be said to have driven global livestock prices over the past quarter-century, it seems clear that the economic growth and trade policies of the developing countries, especially in Asia, will drive global livestock markets over the next quarter-century. Doubters may look at what happened to world pork and poultry prices during the Asian economic crisis.

If it is clear that the livestock sector of developing countries will continue to grow, and if world livestock and feed markets are becoming increasingly integrated, do we have any idea what will happen to the 60 percent (ILRI, 2000) of the world’s poor people who keep livestock? Can we really afford to be passive? Are inflexible economic processes at work that will inevitably displace small-scale producers? Can useful things be done at the margin to improve the impact of globalization of the livestock sector - driven for a change by the developing countries themselves - on social, health and environmental outcomes? Approaching these questions starts with a closer look at the changing world facing livestock producers.

[1] This section draws heavily on Delgado, Rosegrant and Meijer (2002).
[2] Compound annual growth rates estimated between 1982/84 and 1996/98.

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