RAP Publication: 1999/29

COVER
Proceedings of the workshop on the implications of the Asian economic crisis for the livestock industry held in Bangkok on 6–9 July 1999
Contents


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FOOD AND AGRICULTURE ORGANIZATION
OF THE UNITED NATIONS
Regional Office for Asia and the Pacific
Bangkok, Thailand
August 1999

© FAO1999

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Contents

General issues

Commissioned papers

Invited papers

Conclusions

annexe

Opening speech

Prem Nath

Assistant Director-General
and Regional Representative for Asia and the Pacific

Distinguished delegates, colleagues, ladies and gentlemen,

On behalf of FAO Director-General Dr Jacques Diouf and on my own behalf, I have great pleasure in welcoming you to the Workshop on the implications of the Asian economic crisis for the livestock industry.

This workshop results from the common interests of the animal production and health division staff in Bangkok and Rome and of the policy and planning group here in the regional office.

It is particularly timely, coming as it does just three weeks after the regional office hosted a very successful ministerial roundtable meeting entitled “Beyond the Asian crisis: sustainable agricultural development and poverty alleviation in the next millennium”.

High-level government representatives, including six ministers (from Indonesia, Malaysia, Myanmar, Pakistan, the Philippines and Thailand), three vice-ministers (from China, Vietnam and the Philippines) and two directors general (from India and the Lao PDR) participated in the roundtable, as did prominent policy experts, professionals and practitioners from key policy institutes.

The present workshop is planned to consider one particular sector of sustainable agriculture - the livestock sector. The livestock industry affects all other aspects of agriculture by using either the products or by-products of crops and forages to produce highly desirable products and food. Asia has the largest and fastest developing livestock industry as well as the largest population. It also has the most rapidly rising demand for livestock products.

The Asian crisis certainly has major repercussions upon the industry. Among countries in the region, the effects have varied widely between livestock species and even within species. Perhaps poultry best illustrates this point, with Indonesia losing the greater proportion of its industry in the early stages, while Thailand, almost equally bullied on the financial markets, has a poultry industry which suffered almost no significant ill-effects.

Similarly, the cattle industry in the Philippines and Indonesia relied heavily on importing feeder cattle from Australia but there were quite different effects from the economic crisis. In some countries, the livestock industry has made a good recovery while in others the negative impact will still be felt for a long time. Consumer reactions have differed from one country to another and they must be taken into account when planning strategies for the future.

The workshop will be an integral part of the information needed to analyse the history of the livestock industry and to draw conclusions which can be used to benefit all countries in the future. Livestock policies in this region have, in general, been driven by a tremendous demand pressure as economic growth soared to unprecedented levels. The aim was to increase total production and less attention was paid to increasing efficiency in the use of local resources.

In general, these policies were guided by a wish to industrialise and to copy the developed world. Certainly, the use of ‘western’ techniques, breeds and even whole systems suggests that the overall, long-term sustainability was not thoroughly examined or, indeed, that the implications of the policies adopted were not fully considered.

Although the recent crisis has, in general, been regarded as a financial problem, there are clear indications that some of the livestock development strategies such as increasing imports and reliance on external resources, enforcing subsidies on feed concentrates, reduction of tariffs, loans and tax breaks for purchase of imported breeding stock, equipment and machinery, etc, further worsened the deleterious effects of monetary changes.

At the recent ministerial roundtable meeting organised by this office, the livestock industry was unanimously cited as one of the main means by which poverty alleviation and rural development will be achieved. This brings with it a great responsibility on all those involved in the industry, as it already faces some serious difficulties. Not only does the industry have to try to provide for the increasing demand but it has real problems doing so, such as providing direct competition for cereals potentially available for human consumption, causing serious pollution from effluents and being involved in several serious health scares and even causing deaths.

This is, therefore, an opportune time to take stock of where the livestock industry has arrived and where it needs to get to - if it is to both provide adequate products for demand and do so in a sustainable manner. This is no easy task and it bears upon all aspects of agriculture. There is a tendency to regard the livestock industry as being apart from the rest of agriculture but, though it is obviously possible to industrialise many aspects of it, there must always be the overriding balance between crops and livestock.

It is essential that this opportunity to reconsider policies be grasped since, if it is not, the consequences of unsustainable production are likely to be much greater than those of a short-term problem in the present economic situation, given the current restructuring of the banking system.

The challenge is considerable and solutions are unlikely to be either quick or easy, but they are essential. I wish you well in your deliberations and look forward to seeing the fruits of your labour-possibly as a set of guidelines for the future planning of the whole livestock industry in each and every country, at least within this region. This is required to provide a sound base for sustainable production and, therefore, for long-term food security, without which the recent crisis will appear to be a minor occurrence in the history of man.

Ladies and gentlemen,

I wish you all success in the workshop deliberations and a pleasant stay in Bangkok.

Thank you.

Introduction to the objectives of the workshop

David E Steane

Regional Co-ordinator
Animal Genetic Resources & Livestock Specialist
FAO/RAP, Bangkok

The scrutiny of the Asian economic crisis has almost become an industry in its own right, with a multitude of publications and statements from all sorts of agencies and people. The analysis has been global, and many, at least in the early stages of the crisis, have predicted that the effects would be global and disastrous.

While such bodies as the World Bank, ADB and the IMF have been involved in comment and action, the reality is that the people in the countries caught up in the crisis need food, water, shelter and the hope of good health. It is not the function of this paper to discuss the possible reasons for the crisis but to raise questions about what might be learnt from the events of the last two years and the period leading up to the crisis - specifically in terms of the livestock industry.

Asia had been growing at a phenomenal rate, and livestock was no exception. Indeed the growth rate of the different livestock species is clearly linked to the rise in consumption. The economic growth of the 1980s and early 1990s had created a rapidly increasing demand for livestock products and everything looked set for a very successful development of the industry. Actually, many would argue that the situation has not really changed and that the crisis of the last two years has been an irritant but no more than that. Others, who have seen the tremendous effects of the crisis, are still not clear as to when it will end - many suspect that the light seen at the end of the tunnel really is of an incoming train. Certainly this is a time to consider the past two years, what has led to the crisis, what can be learned from it and what, if anything, may be done to ensure that it does not occur again; and alternatively, if it does reoccur, to ensure that the effects are not felt to any serious degree by the livestock industry.

As a reminder which will be put into greater perspective by the papers presented here, the increase in livestock products was mainly a function of increased numbers of animals rather than the result of an inherent improvement in productivity.

One of the most immediate consequences of the economic crisis in Asia was the major reduction in the poultry industry - most notably in Indonesia, but also, to varying degrees, in the Philippines, Thailand and the Lao PDR. In some cases, the industry shrank to 20–50 percent of its size and although it may have begun to expand again, the effects of the crisis are still being felt. There are indications that the pig industry also suffered, though perhaps not to the same extent - possibly because it is less easy to close a pig unit, which, in most industrial-scale farms, includes a breeding as well as a feeding unit. However, it remains that the major reason for the rapid loss of industrial production was feed cost, since the specialised feed (or, sometimes, its components) is usually imported.

In Indonesia, the beef industry too has suffered dramatically, mainly due to the fact that the country relied on the purchase of store cattle from Australia to feed and finish on by-products: the currency devaluation meant that cattle became too expensive. Even though the Philippines also relies on Australian imports of store cattle, the effects of the crisis on beef there were almost non-existent thanks to the very high demand, which still continues. The sensitivity of major food supplies to external monetary forces reminds everyone that there are limits to the level of risk people should face to achieve food security. The crisis offers an opportunity for countries to review and re-evaluate their livestock policies.

The first question which might be asked is, Has the livestock policy in each country been part of the cause of the economic crisis? Depending on the answer, the follow-up question might be, Did the policies contribute to the problems and, if so, how and why? It is not the function of this introduction to provide answers but to attempt to provoke further thought on these and subsequent questions. This paper will, however, comment on some issues - partly because the author has views and partly to challenge others to express theirs. The invited papers cover both the wider issues and specific countries, with emphasis on those that were considered to suffer most (which turned out to be not quite correct), followed by the next set, among which are very large countries with great influence. Some of the papers address or exemplify specific issues, including one showing the results of a very large modelling program. You will note that as much time has been allocated to discussion as to presentation of the papers - quite deliberately. It is essential that everyone expresses his or her views and ideas as to the causes, the options and, above all, the implications of any action or reaction. The final aim is to identify these options and implications, as well as to formulate recommendations for the future-about policies, about research and about needs to ensure that this type of phenomenon is a thing of the past rather than a recurring nightmare.

For the last five years, Asia - in the form of twelve countries - has had a regional project dealing with the conservation and use of animal genetic resources. My experience in this has led me to draw certain conclusions which I wish to share - however wrong they may be. More recently, when I was commissioned by FAO Headquarters to consider the subject of this workshop, discussions with many people have, if anything, confirmed some of my opinions and indicated that they are not restricted to genetics alone but address the broader context of livestock production and processing.

The overall drive to increase output clearly has implications which are worthy of consideration. However, given that food availability was the main requirement, it is not surprising that, at the start of the drive (some twelve to twenty years ago), the finer aspects were hardly discussed - if at all. Nonetheless there are clear implications associated with the increase in output, however it is achieved. They are all fairly obvious, yet what is not clear is to what extent they were taken into account and what kind of planning was done to maximise output in order to feed the people. This workshop will, it is hoped, shed light on this, among the several aspects under consideration.

The first aspect to consider is the policy issue itself - what policies were adopted and what were the implications. Certainly in genetics, the policy adopted seems best summarised by the phrase ‘the worship of the exotic’. Almost everywhere, there was a drive to bring in exotic genes, given the considerably greater output figures for the breeds used in North America, Europe and Australasia. There was also a concomitant increase in feed requirement, much of which was met by the adoption of an import policy. The frequently used rationale was that these breeds were more productive and more economic. Such importation was also usually part of an aid programme, often with an initial three- or five-year time span. Even those without biological expertise might have realised that animals - particularly bovines - do neither grow to maturity nor reproduce in less than the project life.

The economic argument is also one which can be questioned. The economics of the marketplace are known to be questionable, to say the least. No one really doubts this, yet everyone seems to accept the ‘economic marketplace’ as if it really existed. Certainly, it is only the marketplace that exists. The very acceptance of ‘western’ economics was perhaps the first difficulty of the policies adopted. This paper is not arguing that there should be no economic criteria - quite the reverse, as a matter of fact: economic criteria must be comprehensive and not deliberately ignore some of the important costs.

Ironically, as most of the increased livestock production policy was aimed at pigs and poultry, industrialisation was much easier and took place rapidly. It could be claimed that the policy aimed at these species because they could be easily industrialised. Industry, in its more traditional form, has, for decades, successfully manipulated facts and figures in order to, as economists would have us believe, ‘externalise’ its costs as far as possible. In other words, it has got someone else to pay its costs or subsidise its production. The motor industry has probably been the most successful in getting subsidies - on building factories and roads and other infrastructure and on controlling pollution Certainly the poultry and pig industries are trying to emulate this - and who can blame them - but at what cost to food security in the long run?

Many policies provide resources at no or at very little cost to the user - be it water (whether for consumption or irrigation), breeding (artificial insemination, for example) or effluent disposal (however achieved). The fact that many production costs are difficult to quantify is not a reason for ignoring them - the more prudent policy is surely to charge rather too much than too little where it is known that sustainability is likely to be jeopardised.

There appears to be a general belief that the larger, faster-growing animal is more efficient. There is much evidence to support this view, but it is not the panacea often believed. Poultry is a classic case in which increased growth gives better efficiency by lowering the age at slaughter, but efficiency becomes poorer when fat starts to be deposited (due to selection for growth and not for efficiency). In dairy cattle, it is only recently that Holstein breeders have accepted that yield is not related to body size. In beef, the documented facts that some 75 percent of genetic variation in growth is between breed whereas for feed efficiency about 75 percent is within breed have largely been ignored. From these two facts, it should follow that you choose breed if it is growth you want, and select within a breed if feed efficiency is your main aim.

In attempting to increase output, you improve growth, but at the expense of higher mature body weight, with consequent increases in feed requirement for maintenance without production. The feed for this additional maintenance component must be readily available. If it is not, reproduction is impaired - as instanced throughout the world. In all species, maintenance of the breeding female is a cost which has to be born by the progeny; this is particularly important in species with low reproductive rates.

In using exotic breeds as a strategy for improvement, it seems to have been assumed that genotype environmental interactions do not exist or that the optimal economic and sustainable crossing structure would automatically be developed. Unfortunately neither assumption is correct. So there are now many dairy industries whose programmes do not offer an alternative to back-crossing to Holstein. This invariably results in poorer performance both in milk yield and in calf production, once the Holstein-Friesian contribution is too great (depending on circumstances, the limit is either 50 or 75 percent).

In pigs, crossing programmes have hardly ever used the advantages of the local breeds, which are able to use local (roughage) feed and withstand disease challenges. Some major programmes are only now beginning to investigate such use, after failing to get the productivity expected from the exotic material. Indeed, in much of Asia, there appears to be a history of introducing breeds without proper evaluation and with little or no thought given to the breeding structures which will best use the available material.

Clearly, the provision of fodder is essential to livestock production and is the real limiting factor. The problem is being addressed but it remains hard to solve. The use of fertilisers is now widely perceived as having both benefits and dangers, especially wherever irrigation is not optimally managed. Integrated pest management has demonstrated that co-ordinated effort (not only the pest-management aspect) produces real benefits. That the quality of fodder can be improved by various treatments is now widely acknowledged, yet disregarded in many places; the reasons for this have to be investigated, and solutions found. The International Rice Research Institute virtually ignores straw yield and feed quality in its work, as if it could not care less about the main feed resource for much of the bovines of Asia. There are new methods for using biotechnology to improve digestibility of feeds either directly or indirectly. However, there is still the problem of fodder provision at the centre of several livestock production concentrations - namely the areas around towns. The movement of feeds (hence of nutrients) from the growing area to the livestock centres is recognised as presenting real problems both for future crop-growing and for the control of disease and pollution in the livestock centres. Others will address this concept in much greater depth during the workshop as area-wide integration is discussed. The fact that the value of manure in terms of both fertiliser and, perhaps more important in the long term, soil structure has either been forgotten or ignored is yet another technical error without excuse.

One area of technical development constantly identified as the future solution to problems is biotechnology. Again this can become a real error unless all of the various aspects are considered. The use of these technologies in adjusting rumen flora or crop digestibility has already been mentioned - in crops, the use of genetic engineering is now well underway. The provision of fodder can greatly benefit in the long term whenever programmes are well-designed. However, investment is normally after the most rapid financial gains, and these are unlikely to be in fodder crops. At the historical level, artificial insemination is biotech - it has created many benefits but also many difficulties, both biological and economic. Now embryo transfer is quoted; yet, embryo transfer will make little contribution to genetic progress. However, used as a major component in the provision of sexed crossbred embryos for dairy production, it could be part of a real solution for Asia to the dilemma of the Holstein-Friesian. This would involve in vitro maturation, in vitro fertilisation and semen sexing - a technique still not fully mastered and yet regarded as a solution ‘just round the corner’ for more than half a century.

Genetically modified organisms are now very much to the fore - in principle, there is little difference between modification either by selection or by gene insertion, but there are real difficulties and they have yet to be properly addressed. The evaluation of genetically modified organisms quite naturally has centred on the food safety aspects in order to protect the consumer but, so far, has essentially ignored the effects on the production system and all of its components. This could be regarded as an error of processing in the sense that the processor normally only considers food safety, although in other continents there are clear signs that this is changing. Overall, it is the sustainability of production which is essential to long-term food security. Such evaluations do take considerable time and, indeed, money, but that is part and parcel of the true economic cost of developing sustainable agriculture - without which economics has no future.

So, where do we go from here? It is no good giving the standard reply, “Well, to get there, I wouldn't start from here.”

Again, there is a technical route and a policy route, and both must be co-ordinated if there is to be any real change where change is needed - and I believe that this is crucial.

In terms of policy, there must be much more questioning of advice - not necessarily the doubting of it but certainly the identification of the implications and consequences for all aspects, not simply for the food output. It would appear that there has been little study of implications, which are assumed to be known rather than spelt out. The sensitivity of a given solution to changes in assumption or parameters is also an aspect which, if done at all, is not usually available for full consideration alongside the advice, or even shown in a project document.

Policy will always be the result of many objectives, not the least of which is the survival of the politician. This inevitably means that short-term interests tend to overrule all other considerations. However, even politicians do not wish to be associated with patently irresponsible decisions or those that are likely to create serious problems for our children - and theirs. Technical advice has to point out the adverse aspects as well as the benefits. One of the problems these days is caused by the need for scientists to show major cost-benefit returns for their proposal: this results in excessive optimism usually inflated by all-positive publicity. With expectations already too high, any adverse aspect has to be forgotten altogether if the researcher (and the institution involved, or both) is to maintain his or her public image of integrity and obtain funding.

It is essential that policymakers be properly briefed to ask relevant questions and that their advisers come up with thorough background studies. In this context, the so-called Asian culture does bear some consideration. No one wants to lose face, not just in Asia, but the world over. However, it all depends on whether changing one's mind in the light of evidence is viewed as losing face or as being progressive and responsible. Advisers who often appear to fear reprisal if they challenge authority may well need training in the art of motivating and influencing their fellow beings - to be able to do a scientific evaluation simply is not enough.

In my view, there is a need for a sea change in the way in which policy is developed. Maybe I have been unfortunate or misdirected, but there appears to me to be a dearth of people who are fully trained or, if trained, willing to take on the challenge of identifying the issues, options and implications for each specie and system of production. There is a dire need to ensure that there is a cadre of such people in every livestock planning group.

The technical aspects deserve further attention. There are still many unanswered questions and yet few seem to be addressed. Indeed it is difficult to see how they can be addressed when not even basic recording is being done across most of Asia - not even in selected, influential areas or districts. These crucial but unanswered questions have to be specifically identified and addressed. This is not the function of this paper but, again, an area for further inputs at all levels.

The technical aspects referred to earlier as inadequate or improper technical assumptions and beliefs should perhaps be addressed a little further. There is considerable information available at all levels in most of the science involved in and associated with livestock production and processing. The problem is identifying the crucial components for any particular group of people. For example, farmers do not need to know the detail of genetic segregation or indeed heterosis, but they do need to know the consequences and, hence, the implications for them. For instance, the different numbers of chromosomes between swamp and riverine buffalo clearly has important consequences in later generations when animals with different numbers mate; yet, this is not mentioned to the farmer.

Extension services in much of Asia are still in their early stages and it is essential that they be upgraded if sustainable animal production is ever to be achieved. The status of the extension service worker has to be recognised as being as good as that of the scientist or of the doctor (they do a similar job in many respects). In general, the status has been grossly undermined and extension service workers are either fairly low level or failed research science material. The extension service worker must also be more willing to listen to the farmer: the adviser is not someone with a greater knowledge but someone with a different knowledge. The art is to combine the best of both. The economists are attempting to make extension services pay for themselves - not an unreasonable pursuit, but quite unrealistic and unfair given the fact that nowhere in the developed world (with the possible exception of New Zealand) do agricultural extension services cover their costs.

At the technical level, industrialisation is a mixed bag. There are potential benefits of scale which allow specialised treatment of specific groups of animals that give both biological and economic benefits. However, there are real dangers, especially for health and particularly if management is not absolutely first-class. Industrialisation also brings with it an accelerated move off the land and a reduction in agricultural labour. Given the population of Asia and existing pressures on urban development, the social consequences of rapid industrialisation may swamp all other considerations.

This is not to say that industrial-type production should not be sought, but simply that the modus operandi and the location need to be subject to much more responsible regulation than has been the case in Asia up to now. There are examples of successful intensification by using groups of farmers to produce the livestock for a particular market outlet or company - awareness of the need to involve local participation is a major step toward systems that provide benefits to all sectors and contribute to food security.

It must be the responsibility of governments to ensure that regulations are in place and, more important, fully and openly implemented without fear or favour. However, it does not escape notice that, in many cases, the politicians - essentially the group responsible for law and the means of implementation - are involved directly or indirectly in the industrialisation of livestock production. This is true in developed and developing countries, though some of the latter have a distinct lack of transparency built into the system.

In my view, the Asian crisis has given the opportunity to reappraise the potential sustainability of the various livestock production and processing systems. This opportunity can be grasped and used, or it can be ignored. The difficulty in ignoring the implications is of assuming that the crisis was created by someone else and was but a nuisance blip on the screen of progress. The attractiveness of this option - especially to the politicians and those economists that advocate the marketplace rules - should not be ignored, and neither should the consequences of accepting that short-term view. Giving full consideration to the whole system and to the consequences of different courses of action does not necessarily mean changing all of the present policies: this will depend upon the circumstances and upon what the implications are. Ignoring this opportunity simply delays the day when, once again, Asia is found wanting and pays a steep price for it.