Feed versus Food: The Future Challenge and Balance for Farming[1]

Zhang-Yue Zhou

Asian Agribusiness Research Centre, The University of Sydney, Orange, NSW 2800, Australia

Abstract

Demand for livestock products in the past three decades has increased rapidly, especially in developing countries. This increase has resulted in, and will continue to cause, increased demand for feed. This paper examines existing projections of global feed demand and supply with an emphasis on China. It first presents the emerging trends in demand for feed and food, followed by global perspectives of feed demand and supply. It then highlights the challenges facing future farming in its endeavour to meet the increasing demand for feed. Finally, the paper sheds light on whether the livestock revolution will offer much opportunity to farmers, especially small farmers in the developing countries and those at home in Australia.

1. Introduction

Globally, demand for animal products in the past three decades has increased rapidly, chiefly driven by the fast increasing demand in developing countries. Between 1964/66 and 1997/99, per capita consumption of meat in developing countries rose by 150% and that of milk and dairy products by 60% (FAO 2002a, p. 5). By 2030, per capita meat consumption in developing countries is projected to rise by a further 45% (from 25.5 kg in 1997/99 to 37 kg in 2030), compared to an increase by 14% in developed countries (from 88 kg to 100 kg for the same time period). Per capita consumption of milk and dairy products will rise from 45 kg to 66 kg in developing countries, and from 212 kg to 221 kg in developed countries. For eggs, per capita consumption will grow from 6.5 kg to 8.9 kg in developing countries and from 13.5 kg to 13.8 kg in developed countries (FAO 2002a, p. 5; Bruinsma 2003, p. 159).

To describe the enormous increases in demand for animal products, a term, “The Livestock Revolution”, has been used in an IFPRI 2020 Vision Discussion Paper, entitled ‘Livestock to 2020: The Next Food Revolution’ (Delgado et al. 1999). It is believed that the livestock revolution is a structural phenomenon that is here to stay. However, the livestock revolution will undoubtedly stretch the capacity of existing production systems and exacerbate environmental and public health problems, especially in developing countries. Consequently, Pinstrup-Andersen, Pandya-Lorch and Rosegrant (1999) point out that it would be unwise for developing countries to adopt a laissez-faire policy for livestock development. They call governments and industries to prepare for the on-going livestock revolution with long-run policies and investments that will satisfy consumer demand, improve nutrition, direct income growth opportunities to the poor, and alleviate environmental and public health stress.

The rapid increase in demand for animal products and the subsequent expansion of the livestock industry will pose various challenges to the whole international community. For example, will future farming be able to strike a balance by obtaining enough feed for the additional livestock without placing too much extra stress on the environment? [2]

If so, how will it achieve this? It is valuable to broadly examine likely future feed demand and supply situations and how the future farming may need to cope with challenges resulting from the so-called livestock revolution.

This paper looks at existing projections of global feed demand and supply with an emphasis on China. It will first present the emerging trends in demand for feed and food, followed by a perspective of feed demand and supply. It will then highlight the challenges facing future farming in its endeavour to meet the increasing demand for feed. Finally, it will shed light on whether the livestock revolution will offer much opportunity to farmers, especially small farmers in the developing countries and those at home in Australia. Because the increase in demand for animal products in China alone is projected to account for a significant portion of the total world increase, this paper will also have a focus on feed demand and supply in China. [3]

2. Feed versus Food: Emerging Trends in Demand

Studies show that the level of consumer income affects the composition of food consumption (Regmi et al. 2001; Jones et al. 2003). As income increases, demand for food of animal origin such as meat, eggs, and milk rises, by comparison with food of plant origin such as cereals. According to a recently released FAO report, World Agriculture: Towards 2015/2030, An FAO Perspective, the rising share of animal products in the diet is evident in developing countries. Even though calories derived from cereals have increased in absolute terms, their share of total calories has fallen and is expected to continue to fall to about 50% in 2030, compared with 60% in the early 1960s. By 1997/99, animal products had become the second source of calories (10.6%), overtaking the contribution of other traditional staple foods (such as potatoes, sweet potatoes, cassava, plantains and other roots). In developed countries, cereals contribute to only about 34% of dietary calories while the contribution of animal products has remained stable in the past decades at around 23% (Bruinsma 2003, p. 159). [4]

Clearly, per capita consumption of animal products is much less in developing countries than in developed countries (for example, in 1997/99, 25.5 kg vs 88 kg for meat; 45 kg vs 212 kg for milk; and 6.5 kg vs 13.5 for eggs). Hence, there remains a significant potential to increase the contribution of animal products to the diet, both in absolute and percentage terms, in developing countries. As such, income increase in developing countries will have a greater impact on the demand for animal products; a number of recent studies have come to similar conclusions (Regmi 2001; Wang, Zhou and Cox 2002). Studies have also shown that the increase in consumer income in fast growing developing countries such as Brazil, China and Malaysia tends to induce even more drastic changes in the composition of food consumption, notably a fast increase in the consumption of animal products (Bruinsma 2003, p. 88; Ishida, Law and Aita 2003; Wang and Yang 2003).

Taking China as an example, Table 1 shows that, as consumer income increases, per capita consumption of cereals falls while that of animal products grows. Between 1981 and 2002, per capita consumption increased by 88% for meat, 262% for eggs and 238% for aquatic products in rural China. For urban residents, the corresponding increases are 59%, 104% and 81%, respectively. The increase in percentage terms is smaller in urban areas than in rural areas due to the very low consumption level of these products by rural residents in the early 1980s. In absolute terms, the consumption level of urban residents is much higher than that of their rural counterparts.

Table 1. Per Capita Income and Per Capita Consumption of Animal Products and Cereals in China (1981-2002)

Source: SSB, various issues.

While the increase in the consumption of animal products by the Chinese in the past two decades is impressive, some analysts believe the actual consumption level would be higher than the government-reported estimates as presented in Table 1. This is because away-from-home consumption and consumption of retail processed animal products have become an increasingly important part of total animal product consumption in recent years. However, the SSB (State Statistical Bureau) surveys, on which the government estimates are based, have so far largely overlooked this part of consumption. Based on household surveys conducted in 1999 which included away-from-home consumption and retail processed animal products, Wang and Yang (2003) reveal that the SSB household surveys may have significantly underestimated the consumption level of animal products by the Chinese consumers (Table 2). That is, in 1998, per capita meat consumption in urban areas had in fact reached about 50 kg rather than 24 kg as reported by the government. For rural residents, the consumption was 27 kg rather than 16 kg. The consumption of eggs and aquatic products was similarly under-reported by the government.

Table 2. Comparison of China’s Per Capita Animal Product Consumption between Different Sources, 1998

Source: Wang and Yang (2003); SSB (1999, pp. 322, 346).

Hence, the consumption of animal products in both rural and urban China has reached a much higher level than previously estimated. Its level is anticipated to continue to rise. According to the empirical work by Wang and Yang (2003), per capita consumption of meat, eggs and dairy products (converted into fresh milk) in 1998 was 33.7 kg, 9.7 kg and 6.3 kg, respectively. Wang, Zhou and Cox (2003) estimate that by 2010, per capita consumption of meat, eggs and dairy products will increase to around 53 kg, 21 kg and 12 kg, respectively.

The increased consumption of animal products will lead to further decline in the direct consumption of grains as food, but increased use of grains as feed. According to Wu (2003), foodgrain consumption is projected to account for 43% and 38% of China’s total grain use in 2005 and 2010, respectively. In the meantime, the share of feedgrain use will rise from 36% in 2001 to about 40% and 49% in 2005 and 2010, respectively. Thus, by 2010, China’s demand for feedgrain is expected to exceed that of foodgrain (see Table 3).

Table 3. Trends in China’s Grain Usage (%)

Source: Wu (2003).

In other developing countries, an increased share of cereals is also used for feed purpose (from 11% in the mid 1970s to 17% by 1997/99); this emerging trend is projected to continue (see Table 4). Globally, while the share of cereal feed use is unlikely to be higher than the level in the 1970s, there will still be an increase of four percentage points compared to the 1997/99 level from 32% to 36% in 2030. In the 1990s, the demand for cereal feed declined, due mainly to the reduced use in two major consuming regions, the transition economies and the EU. According to Bruinsma (2003, p. 66), the collapse of feed use of cereals in the transition economies in the 1990s following the contraction of their livestock sectors was a major factor in bringing down the growth of world demand. Total cereal feed use in these economies declined from some 200 million tonnes in the late 1980s to 96 million tonnes in 1999. There was also a decline in cereal feed use in the EU up to the early 1990s due to the high internal prices of the Common Agricultural Policy (CAP). Cereal feed was replaced by largely imported substitutes, e.g., oilmeals and cassava.

However, it is expected that feed use will resume its place as the most dynamic element driving the world cereal economy, thanks to the turnaround of the two major consuming regions in their feed use of cereals. Cereal use for feed in the EU has been largely restored as a result of the reforms in the CAP. The declines in feed use of cereals in the transition economies had ceased and will revert to higher use.  The growing use of cereals as feed in these two regions, coupled with the increased feed use of cereals in developing countries, will lead to increased demand for cereal grains as feed. What, then, are the perspectives of global feedgrain demand and supply in the next couple of decades?

Table 4. Trends in Global Cereal Usage (%)

Source: Based on Bruinsma (2003, 75).

3. Feedgrain Demand and Supply: Global Perspectives

In 1997/99, global feedgrain demand was 657 million tonnes. This is projected to increase to 911 million tonnes in 2015 and 1148 million tonnes in 2030. In 2015 and 2030, total cereal demand (food, feed and other uses) will be 2379 and 2831 million tonnes, respectively. Total cereal supply will be 2387 and 2838 million tonnes, respectively, for the same projection years. Hence, at the global level, cereal demand will be met by the supply with a small surplus (Table 5), which in turn implies that there will be sufficient cereals for feed use. In both industrial and transition countries, overall cereal supply will be greater than demand (Table 5). The developing countries will experience a shortage of cereal supply. Feed use of cereals will more than double, increasing from 222 million tonnes in 1997/99 to 573 million tonnes in 2030. Food use will increase from 790 million tonnes in 1997/99 to 1185 million tonnes in 2030, an increase of 50%. There will be a deficit in cereal supply by 190 and 265 million tonnes in 2015 and 2030, respectively, an increase from 103 million tonnes in 1997/99 (Table 5).

Table 5. Projections of Global Cereal Demand and Supply

^a SSR: Self-sufficiency rate = production/demand.

Sources: FAO (2002a, p. 90), Bruinsma (2003, p. 65).

What, then, is the likely deficit in cereal feed supply in developing countries? Such projections are not readily available. The deficit, however, may be estimated according to FAO projections (see Table 6). We first obtain the proportion of feed use of each of the three major components of cereals (i.e., wheat, rice and coarse grains). We then multiply the production of each of the three components by its corresponding proportion to derive the feed supply from each. The sum of the three gives us a rough estimate of the likely cereal feed supply in a projection year. According to Table 6, the cereal feed shortage in developing countries will be at least 44 and 69 million tonnes in 2015 and 2030, respectively. However, a word of caution must be given. In this estimation, it has been assumed that the imported coarse grains are used in the same proportion for feed purposes as are domestically produced grains. This is very conservative because a higher proportion of imported coarse grains would be used for feed purposes. Unfortunately, details about such proportions are unavailable. Nonetheless, it would be safe to say that the shortage of cereal feed would be at least 44 and 69 million tonnes in 2015 and 2030, respectively, in developing countries.

Table 6. Estimation of Cereal Feed Deficit in Developing Countries (2015 and 2030) (m t) ^a

^a In this table, paddy rice is reported and hence total cereal production is greater than elsewhere. A ratio of 70% may be used to convert paddy rice to milled rice. Net trade figures for 1997/99 are not equal to production minus total demand. Originals are as such.

Source: Calculated based on FAO projections, FAO (2002a, p. 91).

As far as China is concerned, the total feedgrain demand and the feedgrain import requirements in the next couple of decades will be much smaller than previously projected. Table 7 provides a summary of several earlier projections on China’s feedgrains demand and supply. While the estimates of Huang and Rozelle (1996) are somewhat low, most other projections have overestimated China’s feedgrains demand. Some predicted that in 2000 China would require feedgrain imports of over 20 million tonnes. The fact is that in 2000 China exported over 10 million tonnes of feedgrains. The projections for China’s feedgrain demand in 2000 by Garnaut and Ma (1992, scenario II), Zhang (1997), and Findlay (1998) were much higher than the consumption, being about 160 million tonnes (Yang 2003) (see Table 7). According to some projections in Table 7 (e.g., Findlay 1998), in 2010, while China’s feedgrain supply will be in the order of 280 million tonnes, China’s feedgrain demand will range from 310 million tonnes (high feeding efficiency scenario and income growth by 10%) to as high as 346 million tonnes (low feeding efficiency scenario and income growth by 8%). Thus, by 2010, China would require feedgrain imports of some 30 million tonnes or even much more.

Table 7. Selected Projections of China’s Feedgrain Demand and Supply

^a Two growth scenarios are assumed. Normal growth scenario (the first row): a per capita GDP growth rate of 6%; high growth scenario (the second row): a per capita GDP growth rate of 7.2%.

^b Several sets of projections are given in the report with different assumptions, i.e., low and high feeding efficiency with income growth by 8% and 10%. Only two sets of the projections are quoted here. Set 1: low feeding efficiency scenario and income growth by 8%. Set 2: high feeding efficiency scenario and income growth by 10%.

^c Research conducted in 1996.

Based on our recently concluded project for GRDC, China’s feedgrain demand and hence feedgrain import requirement in 2010 is likely to be much smaller than some earlier projections. Our simulation reveals that technological improvements in animal raising, income growth, and the export growth of animal products all have relatively greater impacts, compared to other simulated factors, on the demand for feedgrains. Assuming technological progress and income growth maintain their current rates to 2010, China’s demand for feedgrains is expected to grow by 25-30% by 2010, and so too will its domestic feedgrain production. China’s demand for feedgrain in 2010 will be around 202-207 million tonnes and the supply of feedgrains will be in the range of 198 to 203 million tonnes, depending on the size of income elasticity for feedgrains. The feedgrain import will be in the range of 3-4 million tonnes. However, if China experiences a faster per capita income growth and is able to export livestock products to the world market, a further 5 million tonnes of feedgrain will be demanded and imported from the world market. Therefore, China’s feedgrain demand in 2010 is likely to be in the vicinity of 210 million tonnes and its import requirement in the range of 4-7 million tonnes (Xin, Wan and Liu 2003; Zhou and Tian 2003b). 

4. Matching the Demand with Supply

The discussion in the above section shows that global demand for cereal feed will increase in the next few decades, mainly as a result of the increased demand in developing countries. World agriculture as a whole will be able to produce sufficient cereals to meet the food and feed demand. However, while industrial countries will have a surplus in cereal feed, developing countries will have major cereal feed shortages.

Table 8 provides a summary of net trade balances of wheat, coarse grains and rice. Developing countries will experience shortages of coarse grains, primarily used for animal feed, of 89 and 128 million tonnes in 2015 and 2030, respectively. These shortages, however, can be easily met by the surplus available from the other two groups of countries, industrial countries and transition countries, which together will produce a surplus of 91 and 130 million tonnes, respectively, in 2015 and 2030.

Which of the developing countries will be the major importers of cereal feed? Countries in sub-Saharan Africa are unlikely to import feed cereals to any great extent. Per capita cereal food consumption is low and increasing (Table 9). Coupled with the very high proportion of cereal food use, there will be hardly any major increase in the use of cereals for animal feed in the next couple of decades. Countries in South Asia are unlikely to import much cereal feed either. Due to dietary habits, people in these countries consume much less livestock product, except for milk. This has resulted in a very high proportion of cereal use for food. In addition, cereal self-sufficiency rate (SSR) is high and import requirements are relatively small.

Table 8. Net Trade Balances of Wheat, Coarse Grains and Rice (m t)

Source: Bruisma (2003, p. 78).

Table 9 Cereal Balances by Developing Regions, All Cereals (Wheat, Rice [milled], Coarse Grains)

Source: Bruisma (2003, p. 68).

The proportion of cereal food use is the lowest in countries in Latin America and in the Caribbean region, implying that a large portion of cereals is used for animal feed. However, countries in these regions together will not be the major feed importers either. This is because cereal import needs are small and SSR in this region is likely to rise (Table 9). Countries in East Asia and Near East/North Africa are likely to be the major importers of cereal feed. Cereal import needs are the largest in the Near East/North Africa region where SSR is the lowest among all the developing regions and will decline. The share of cereal food use in East Asia will decline at the fastest rate among all the developing regions and hence a major increase in cereal feed use will occur there in the next couple of decades in East Asia (see Table 9).

Who will be the major exporters? Canada, the USA, EU15 and Australia will be the major cereal exporters. Four developing countries, namely, Argentina, Uruguay, Thailand and Vietnam, will also be major exporters. In the next few decades, cereal trade, including cereal feed, will increase between industrial surplus countries and developing deficit countries. By 2030, net exports from industrial exporters are likely to double the levels of 1997/99 (Table 10).  

Table 10. World Cereal Trade: Matching Net Balances of Importers and Exporters (mt)

^a Developing countries excluding Argentina, Uruguay, Thailand and Vietnam.

^b North America, Australia and EU15.

Source: Bruisma (2003, p. 82).

Corn is still the major cereal feed. Corn surplus tends to concentrate in a few countries, chiefly, the USA, Argentina and France. These countries are likely to seize a major portion of the world feed cereal exports. In China, corn will remain a major component of animal feed unless there is a clear price advantage in using other cereal feed such as feed wheat and feed barley. When China turns from being the current net feedgrain exporter to a net importer, corn will be the most likely imported item. China is likely to become a net cereal importer in 2-3 years time.

By 2010, China’s internal feedgrain trade volume will amount to about 42 million tonnes from the current 30 million tonnes. The four north provinces (Jilin, Liaoning, Heilongjiang and east Inner Mongolia) will ship out around 29 million tonnes of surplus feedgrain. The seven major feedgrain deficit regions (Sichuan, Hunan, Guangdong, Hebei, Henan, Anhui, Fujian) will out-source around 30 million tonnes in 2010 (Xin, Wan and Liu 2003). Several southern provinces (Guangdong, Fujian, Zhejiang, Hunan and Jiangxi) will be the major buyers from the world market, while the north-east region (Liaoning, Jilin, Heilongjiang and east Inner Mongolia) may supply corn to those feedgrain-deficit northern regions in China as well as export to the nearby East Asian markets such as Japan, South Korea, North Korea, and Malaysia.

When the need arises for China to import feedgrains, where China will source these imports will be largely governed by market signals given that China is now a member of the WTO. In general, the US corn has a price advantage. However, whether China will chiefly import corn from the US depends on (1) the US corn price which is subject to changes in the US government’s subsidy policy and (2) China’s acceptance of GM crops.

5. Meeting the Increasing Demand for Feed: Challenges for Future Farming

As pointed out earlier, globally, there is significant potential in the increase in the consumption of animal products. This increase will continue in the decades to come and will pose significant challenges for future farming to produce enough feed to raise additional animals. The challenge for developing countries is greater, simply because their farming resources have already been most stretched. Unless there is a drastic technological breakthrough that will dramatically save feed use or produce extra feed without using much of additional natural resources, there will be further strains on resources in developing countries.

Broadly, feed sources may include pasture, cereal grains, fodder crops, concentrate meals, food processing wastes, and others (see the Appendix for a broad classification of feed sources). The availability of each and also its practicality for use is related to local natural conditions, kinds of animals (monogastrics or ruminants), government regulations governing its use, and also the systems of animal production. There are three major production systems: (1) grazing systems, (2) crop-livestock production systems, and (3) intensive industrial livestock production systems.

• Grazing systems A quarter of the world’s land is used for grazing, and extensive pasture provides 30% of total beef production and 23% of mutton (FAO 1996). In developing countries, extensive grazing systems have typically increased production by herd expansion rather than by substantial increases in productivity. However, the availability of rangelands is decreasing and the scope for further increasing herd numbers in these systems is limited.
• Crop-livestock production systems Because of the complementarity between crop and livestock production, a significant portion of animal products is produced in mixed farming systems in developing countries. Crops and crop residues provide feed, while livestock provide animal traction, manure, food, and income diversification. Due to relatively small scale, some feeds, which cannot be economically utilised in large commercial operations, such as restaurant and household food scraps and some grasses, can be used in raising animals.
• Intensive industrial livestock production systems In recent years, production from these systems has grown twice as fast as that from traditional mixed farming systems, and more than six times faster than from grazing systems. The trend towards intensification is most pronounced in Asia, where there is a shortage of land but an abundance of relatively cheap labour (Bruinsma 2003, pp. 164-66). An increasing share of livestock production will come from industrial enterprises. However, increased intensification will require more feed cereals. [5]

Hence, the potential of pasture as a source of providing additional feed in the future is limited. While the traditional mixed farming systems can use some feeds that are not economically viable in large intensive systems, the utilisation of these feeds is likely to decline due to some changes that are taking place in the livestock industry. For example, as opportunity cost increases for small-scale traditional animal raising, such practices will give way to large scale commercial production, as has already been happening in developed regions in China (Zhou, Tian and Liu 2003). Developing countries may find it impossible to export products of animals that are fed with restaurant and household food scraps. In order to increase export, they have to avoid such feed. This reduces the ability of the mixed farming systems to use those feeds. Given that the potential to increase fodder crops (Category 3 in the Appendix) is limited (in competition with land use for other crops) and so is the potential to increase other feeds in Categories 4-6, it is inevitable that the demand for cereal feed will increase.   

At the global level, world agriculture has the capacity to produce sufficient cereal feed to meet the increasing needs; however, developing countries cannot obtain such imports without a cost. Thus, it is likely that, to increase animal production, farmers in developing countries will first resort to whatever feed resources are available in their own country. Hence, farmers in developing countries will face greater challenge, compared to their counterparts in developed countries, in providing additional feed to raise more livestock and also to protect their already strained, and in some cases fragile, agricultural environment.

The task of increasing feed supply in developing countries is not, and should not be, a challenge to be met only by farmers in these countries: this challenge should be tackled also by national governments in both developing and developed countries, international organisations, and researchers and extension workers. An increase in animal production can be achieved with or without drastic increase in feed consumption. Any of the following scenarios or their combinations can lead to increased animal production:

• Increased use of feed
• More efficient use of feed
• Improved animal breeds and animal raising techniques

Increased use of feed places further pressure on the environment (unless new feed items can be developed that will rely less on the natural resources). However, a combination of more efficient use of feed, and improved animal breeds, genetics and animal raising techniques will reduce feed use; in other words, it will relatively “increase” feed supply. Advances in these two areas offer greater potential to increase animal production without putting direct pressure on the environment. For example, improving the capacity of the rumen to digest high-fibre diets could dramatically improve the prospects of ruminant production, particularly in areas with easy access to roughage with low feed quality. A better understanding of how the rumen functions has already led to proven techniques for treating crop residues and other low-quality roughage. China is leading in this area and FAO has recently attempted to promote China’s experience to other parts of the world (FAO 2002b). Clearly, finding better ways to use fibrous plant material is of high priority. In the case of pigs and poultry, feed conversion rates have improved by 30 to 50% over the past decade, in part through breeding and in part through the addition of enzymes to feeds. Still, in monogastrics only 25 to 35% of the nutrients consumed are captured in the final products. Further understanding of digestive physiology and biochemistry can be expected to improve feed utilisation in these animals (Bruinsma 2003, pp. 169-70).

Advancement in both the above-mentioned two areas (i.e., more efficient feed use and improved animal breeding and raising techniques) requires R&D investment and the subsequent extension of new techniques to the farming community. It is here that national governments, international organisations, researchers and extension workers have an important role to play. Without their concerted and coordinated efforts, advancement in these areas is likely to be limited. In passing, as in many other development areas, it is in the interest of developed countries to provide generous assistance to developing countries to develop their feed techniques and improve their animal raising practices. Expansion and development of the livestock industry has been an important pathway for poor peasant societies to gradually become less dependent on cropping and to increase their wealth, thus improving their standard of living. The resultant increased demand for consumer goods, including imports from the international market, will bring enormous benefits to the developed countries from their development assistance to developing countries.

6. The Livestock Revolution: Opportunities for Farmers?

The rapid expansion and development of the livestock industry will benefit most farmers in both developed and developing countries. In general, income from livestock production is higher than that from cropping (especially in poorer countries), providing farmers with increased income. The expansion of livestock production consumes a significant portion of world cereals. This raises world cereal prices. Without such consumption, either cereal prices would be lower or these cereals would not be produced, thus income-earning opportunities would be lost to those cereal producers. It is noted, however, that farmers in many developing countries in sub-Saharan Africa have, unfortunately, not got involved in the so-called “livestock revolution” process (Bruinsma 2003, p. 87) and will be unlikely to gain much benefit from this revolution in the near future.

Farms of different sizes in developing countries will benefit to varying extents from this livestock revolution process. Those larger and more financially able farmers are likely to reap most benefit from it. Small and poorer farmers may also benefit from this process but this is not guaranteed. How and to what extent they can benefit will be critically dependent upon their governments’ initiatives to establish accessible market institutions. Many are not located near major markets and are also financially weak, making it difficult or impossible for them to participate in the market. Without necessary institutional arrangements, e.g., the presence of conducive agribusiness systems, to help those small and poorer farmers to realise the value, and better still, higher value from their products, these farmers will not be able to expand their production or they will have to accept low prices from middlemen. Consequently, the so-called livestock revolution will bring limited or little benefit to them.

Back home, farmers in Australia are likely to benefit greatly from the global livestock development. This is simply due to Australia’s relatively abundant endowments of agricultural resources and its very advanced status of crop and animal production systems. The expansion of the global livestock industry and the strong demand for animal products will bring Australian farmers enormous export potential on several fronts, namely, cereals, other feed materials, animal products, and management expertise.

• Cereals As noted earlier, Australia will be one of the major cereal exporters in years to come. However, Australia is unlikely to become a major cereal feed exporter in the near future. Australia’s potential to produce a large quantity of corn for animal feed is limited, confined by agronomic conditions and the relative lower returns (e.g., compared to sorghum). In Australia, wheat (low grade) and barley (higher protein or low grade) are the two major feedgrain items. But a significant portion of these cereals is used by domestic livestock industries, resulting in a relatively small and unstable surplus supply of feedgrains. Australia will therefore be most likely a small player in the international feedgrain market but will continue to be a major foodgrain exporter. Indeed, Australia has a well-established international reputation in the supply of premium quality of food wheat and malting barley and it pays for Australia to continue to be a premium quality foodgrain supplier. However, according to the FAO projections, feed use of cereals will become the most dynamic element in driving the world cereal economy and it will account for an ever-growing share in aggregate demand for cereals (Bruinsma 2003, p. 74). Thus, for long-term strategic planning, it is useful for the Australian grains industry to take the dynamics of cereal use into consideration.
• Other feed materials In the longer term, relatively backward animal production systems in many developing countries will be transformed into new ones that can respond to demand for higher quality and differentiated products. This will generate demand for high protein feed ingredients such as meatmeals and oilmeals. The potential of lupin export can be further explored, especially in Western Australia. Another area with promising potential is to export hay products. The production of hay through rotation helps to control weeds and prevent the development of herbicide resistance in weeds. Deep-rooted perennials can grow over summer and hence lower the water table, thus helping to reduce salinity problem. When exporting, the problem of “bulk” could be reduced by processing, e.g., into pellets. Market promotion is necessary to educate the potential users about the values of such products.
• Animal products In addition to the export of meats, there is also potential to increase exports of those products that are not commonly consumed by domestic consumers, such as animal offal and chicken feet. The potential to increase the exports of such products to the East Asian countries is promising, especially to the Chinese market.
• High-tech and management expertise Australia’s high-tech and advanced management expertise are also in demand by industries in developing countries. These may include feed processing technology, animal raising techniques, industry benchmarking and quality assurance programs.

While the export of all the above products and services is possible, Australia needs to make careful strategic choices between the trade of commodities (e.g., feed and animal products) and services (e.g., technology and management expertise). The relationships between them and the consequences of the choices, and thus the benefits that can accrue to Australia, are complicated: substitution in some cases and complementation in others. Clearly, there can also be conflicts of interest between industries, e.g., between the grains industry (exporting feedgrains) and the livestock industry (exporting animal products), and between the livestock industry and service providers (services that can help other countries to produce more and higher quality animal products and to compete in the international market). Such issues should be looked at by concerned industries in a coordinated manner; both short-term and long-term benefits and costs to individual industries and Australia as a whole should be considered. At the international level, development of partnerships between Australia and other countries in feed and animal production may prove to be beneficial to both parties.

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Appendix: Broad Classification of Feed Sources

Source: Compiled by the author with assistance from Sue Johnson.