Ag Economics welcomes Joe Chen to our team as an ag economist intern. In this post, Joe summarizes the research he conducted at the University of Guelph.
A growing global population and demand for meat will bring significant opportunities for livestock producers.
The future seems bright, but we also know that agricultural markets go through cycles. Cattle prices could decline from multi-year highs and/or feed prices could climb - either one reducing profitability.
Under such a scenario, livestock producers would be happy to relieve the pressure from higher feed costs. In the beef industry, feed costs can account for as much as two-thirds of all production costs. Suppose you are an owner of a feedlot, and you just know there are breeds of beef cattle eating less while growing the same weight (i.e., they’re feed-efficient). What would you do?
It’s rational to both applaud the availability of feed-efficient cattle and still hesitate to upgrade your own herds. After all, there’s no free lunch. Introducing this kind of efficiency is costly, even though it can result in significant reductions in cost thanks to rapidly changing technologies.
Actually, feed-efficiency is not a new topic in the livestock industry. The simplest way to measure feed efficiency is the feed-to-gain ratio. It measures how much feed is used to gain one additional unit of weight. The ratio for beef cattle has seen huge improvement over the past few decades - from 10:1 in the 1950s to 6:1 now. Even with these gains, the feed-to-gain ratio for beef is relatively low compared to the ratio for chicken (2:1) and hogs (3:1).
Recently developed technology has been shown to further improve the feed-efficiency for beef cattle. “Genomic selection” aims to improve the genetics of feed efficiency. It’s different than genetic modification. While both tools are based on breakthroughs in drafting genome sequences, genomic selection for feed efficiency can simply be understood as finding cows and bulls that are genetically superior in feed efficiency, and then using them for breeding. This process excludes direct manipulation of the organism’s genome.
The question now is whether the beef sector is willing to adopt genomic selection for feed efficiency. The answer rests on the expectation of producers’ profitability.
In an environment with feed costs falling, the appeal of feed-efficient technology is not as strong. However, Canada’s beef industry could still benefit from the adoption of the latest feed-efficiency technology if the efficiencies improve by at least five per cent. The benefit may amount to $83 million, which is roughly equal to 4.5 per cent saving in feed cost on average.
Markets are always the best place to test new technologies; only those able to help producers thrive in the future will be welcome.
Joe Chen, Agriculture Economist Intern