Des Moines Register
09-02-06
Let's reshape debate about livestock production
MARK IMERMAN
As I follow the debate on confinement livestock production, I keep thinking that a
different perspective might move us closer to a solution. This issue has been
divisive to the point of polarization, and polarization does not often result in a
sustainable resolution.
How and where livestock is produced are very real issues with important
implications that go far beyond farming. Clearly, producers need to acknowledge
the public needs and expectations that arise from these implications.
What is often unrecognized, however, is that the driving forces behind changes in
agriculture that some find unsettling also extend far beyond agriculture. We must
all recognize a stake in both the causes and consequences of livestock
production. We should start by understanding that livestock is not raised for the
sake of having lots of livestock. Livestock is raised because consumers will pay
for meat and other livestock products. Issues of product quality, consistency and
price are driven directly by the consumer. Many changes in livestock production
are direct responses to signals the consumer sends through the grocery store.
There are limits to what consumers will pay, however. Consumers will travel from
store to store to save money on livestock products, just as they shop to save
money on their other purchases.
This price-driven commuting reduces the profit margins of grocers, who already
operate in a low-margin industry. To remain profitable in the face of this price
pressure, grocers must either lower costs or capture a larger share of the overall
food-chain margin. Many in the grocery industry do this by merging to form larger
chains of stores and by consolidating backward into the wholesale warehouse
business. This gives them efficiencies of scale and increases their muscle in
bargaining with food processors farther back in the food chain.
As grocers succeed in garnering a larger share of the food-chain margin, they cut
into profit margins in the food-processing industry. To survive, food processors
must either lower costs or capture a larger share of the overall food-chain
margin. They often do this by growing or merging to capture larger shares of the
food production and processing markets. This gives them efficiencies of scale
and increases their muscle in bargaining with food producers (farmers) farther
back in the food chain.
The food-processing industry's success cuts into profit margins on the farm. To
remain profitable and feed their families, farmers must lower costs or find a way
to capture a larger share of the overall food-chain margin. They do this by
increasing the size of their farms, increasing land productivity and reducing labor
and other input needs.
Lowering costs on livestock production and increasing land productivity go handin-hand toward increasingly confined livestock production. This is a direct result
of the price squeeze that starts with a consumer shopping for the best possible
price on meat. There are no easily identifiable villains here. Everyone in the chain
is doing exactly what the American consumer insists they do - improving the
world's most efficient, plentiful and inexpensive food-delivery system. It is no
wonder that livestock producers, caught in the middle, look in both directions and
see the same faces.
One thing is certain. As long as the consumer shops for the best prices on meat,
more and more livestock will be produced in confinement. The question, from this
perspective, is not whether to allow or ban confinement production. The more
pertinent questions are: Where will production take place and how will it be
owned?
Recognizing that we all have a stake in the causes as well as the consequences
of these issues might get us out of the us-versus-them mind-set that polarizes
the discussion. It might move the questions from "Why?" to "How?"
That would be a productive change in perspective.
MARK IMERMAN is a staff economist in the Iowa State University
Economics Department.