I recently read an article titled “Economics of Animal Agriculture Production, Processing and Marketing” by Michael J. Boehlje. My marketing professor posted the article to blackboard for us to read. I found the article to be very interesting; it discussed a lot of important agriculture topics. I thought I would share with you all my thoughts on the main points of the article.
Along with higher energy costs comes an increase in costs of livestock production. Agriculture production is greatly affected by changes in energy prices due to energy consumed directly or by energy-based inputs such as fertilizer. High energy production costs will raise prices of agricultural products, reduce overall farm income, and lower agricultural output. Ethanol production is a huge factor in the livestock industry. The demand for corn for ethanol production has been the instigator behind the high feed costs. In my opinion, if ethanol production continues to increase, this creates a risk for animal agriculture as a whole. This affects the demand for higher values meat products, which then affects the overall profitability of animal agriculture.
I do not have a full understanding of how agri-food trade works, but from my knowledge, I think cross border flows are important for U.S. agriculture. Since the value of agricultural exports has risen, profits have also increased. Cross border trade has the potential to generate economic growth as well as reducing poverty among foreign households. In the long run, this product movement would increase U.S. production, productivity, and profitability in the agriculture industry.
The article focused a lot on comparing larger firms to smaller firms. Regulations cost smaller businesses more than larger businesses. I think this will eventually push several smaller businesses off the market, creating a monopoly. Those small businesses will not have the resources to stay in business. This leads me to question the agriculture growth potential and market conditions of the industry.
I believe the advantages of U.S. animal agriculture outweigh the disadvantages. The biggest strength that first comes to mind is our current market. Cattle are currently at record high prices; futures are not showing any sign of decreases anytime soon. Our beef exports have a strong performance with Japan and Mexico being our biggest buyers. We also have a high quality of meat, such as certified Angus beef, especially when selling on a carcass merit basis. Our pork exports are currently facing some challenges such as access restrictions in Russia as well as strong competition in the Japan market. Another weakness would be the fact that we import low grade beef. Finally, packer collusion is a factor in U.S. animal agriculture. Meat packers try to maintain dominance by controlling the meat market prices. This affects the market as a whole.
You can view this article online at http://www.choicesmagazine.org/2006-3/animal/2006-3-08.htm