Livestock to 2020 The Next Food Revolution

Transcription

1 Food, Agriculture, and the Environment Discussion Paper 28 Livestock to 2020 The Next Food Revolution Chris to pher Del gado Mark Rosegrant Hen ning Ste in feld Simeon Ehui Claude Cour bois IN TERNATIONAL FOOD POL ICY RESEARCH INSTI TUTE FOOD AND AG RI CUL TURE OR GANI ZA TION OF THE UNITED NA TIONS IN TER NA TIONAL LIVE STOCK RE SEARCH IN STI TUTE

2 A 2020 Vision for Food, Ag ri cul ture, and the En vi ron ment is an initiative of the International Food Policy Research Institute (IFPRI) to develop a shared vision and a consensus for ac tion on how to meet future world food needs while reducing pov - erty and protecting the en vi ron ment. It grew out of a concern that the in ter na tional community is set ting priorities for ad dress ing these problems based on in com plete information. Through the 2020 Vision ini tia tive, IFPRI is bring ing to gether di ver - gent schools of thought on these issues, gen er at ing research, and identifying rec om - mendations. This discussion paper se ries pres ents technical re search re sults that encompass a wide range of sub jects drawn from research on policy-relevant aspects of ag ri cul - ture, poverty, nu tri tion, and the environment. The discussion pa pers contain ma te rial that IFPRI be lieves is of key interest to those involved in ad dress ing emerg ing food and development prob lems. The views ex pressed in the papers are those of the authors, and not nec es sar ily endorsed by IFPRI. These discussion pa pers un dergo review but typically do not pres ent final re search re sults and should be considered as works in prog ress.

3 Food, Ag ri cul ture, and the En vi ron ment Dis cus sion Pa per 28 Live stock to 2020 The Next Food Revolution Chris to pher Del gado Mark Rosegrant Hen ning Ste in feld Simeon Ehui Claude Cour bois In ter na tional Food Pol icy Re search In sti tute 2033 K Street, N.W., Wash ing ton, D.C U.S.A. Food and Agriculture Organization of the United Nations Viale delle Terme di Caracalla, Rome, Italy International Livestock Research Institute P.O. Box 30709, Nairobi, Kenya May 1999

4 Copyright 1999 In ter na tio nal Food Po licy Re search Ins ti tu te All rights re ser ved. Sec tions of this re port may be re pro du ced without the ex press per mis sion of but with ackno wledg ment to the In ter na tio nal Food Po licy Re search Ins ti tu te. ISBN

5 Con tents Foreword vii Acknowledgments viii 1. The Livestock Revolution 1 2. Recent Transformation of Livestock Food Demand 5 3. Accompanying Transformation of Livestock Sup ply Projections of Future Demand and Sup ply to Implications of the Livestock Revolution for World Trade and Food Prices Nu tri tion, Food Security, and Poverty Alleviation Environmental Sus tain abil ity Public Health Technology Needs and Prospects Tak ing Stock and Moving For ward 59 Appendix: Regional Classification of Countries Used in this Paper 66 References 67 iii

6 Ta bles 1. Increase in food consumption of meat, milk, fish, and major cereals, Per capita meat and milk consumption by region, 1983 and Percent of calories and protein from animal products, 1983 and Past population, urban population, and GNP per capita growth rates 7 5. Annual per capita consumption of se lected livestock foor products and per cent of total calo ries consumed from each prod uct, 1973 and Consumption of meat and milk by region, Trends in the food consumption of various livestock products, Demand elasticities for major food products of animal ori gin from a cross-country, sys tems estimation, , developing regions Production trends of various livestock products, Trends in the production of meat and milk, by region, Shares of total world production of meat and milk, by region, 1983 and Distribution of the world s livestock animals, 1983 and Growth rates of livestock out put and number of ani mals slaugh tered or milked, Productivity by region and animal type, , and productivity growth rate, Trends in the use of ce real as feed, Pro jected trends in the food consumption of vari ous livestock products, Pro jected trends in meat and milk consumption, Pro jected trends in meat and milk production, Pro jected trends in production of vari ous livestock products, Pro jected trends in use of cereals as feed, Changes in IMPACT s baseline assumptions: a severe Asian cri sis and high In dian meat consumption Difference be tween baseline projections and projections of aggregate consumption in 2020 due to changes in assumptions about the Asian cri sis and Indian consumption Difference be tween baseline projections and projections of aggregate consumption in 2020 due to changes in assumptions about feed conversion Net exports of various livestock products in 1993 and 2020, baseline scenario 32 iv

7 25. Difference be tween baseline projections of net exports in 2020 and projections with changes in assumptions about the Asian cri sis and Indian consumption Difference be tween baseline projections of net exports in 2020 and projections with changes in assumptions about feed conversion efficiency Past trends in real prices of selected crop, feed, and livestock products Real prices of selected crop and livestock products as pro jected by the IMPACT model The place of livestock in the in come of the rich and poor 40 Il lus tra tions 1. Per capita consumption of meat and milk, developing and developed countries, 1983 and The relationship be tween meat consumption and income 6 3. Trends in the prices of major ce real and meat commodities, to v

8 Fore word The combined per capita consumption of meat, eggs, and milk in developing countries grew by about 50 percent from the early 1970s to the early 1990s. As incomes rise and cities swell, people in the developing world are diversifying their diets to include a variety of meats, eggs, and dairy products. This trend toward diversified eating habits is likely to continue for some time to come and it has led to considerable controversy about the risks and opportunities involved. Some observers fear that greatly increased demand for feedgrains will raise the price of cereals to the poor. Others are concerned that higher concentration of livestock production near cities adds to pollution. Still others worry about the public health effects of increased consumptio n of animal fats and the rapidly increasing incidence of diseases passing from animals to humans. On the other hand, many analysts point to the nutritional benefits of increased consumption of ani - mal products for populations that are still largely deficient in intake of protein and micron utri - ents. Furthermore, livestock traditionally have been an important source of income for the rural poor in developing countries. Finally, increased demand for livestock products may provide an engine for sustainable intensification of smallholder food and feed production systems. A team of researchers from the International Food Policy Research Institute (IFPRI), the Food and Agricultural Organization of the United Nations (FAO), and the International Livestock Research Institute (ILRI) collaborated to produce this comprehensive and even-handed attempt at defining the nature, extent, scope, and implications of what they term the Livestock Revolution in developing countries. Looking forward to 2020, they argue convincingly that the structural shifts in world agriculture being brought about by shifts in developing-country demand for foods of animal origin will continue and that increasingly global markets have the ability to supply both cereal and animal products in desired quantities without undue price rises. They emphasize,how - ever, that policy decisions taken for the livestock sector of developing countries will determine whether the Livestock Revolution helps or harms the world s poor and malnourished. The report emphasizes the importance of continued investment in both research on and development of ani - mal and feedgrain production and processing, and the need for policy action to help small, po or livestock producers become better integrated with commercial livestock marketing and processing. It details a host of requirements in the area of technology development for production and processing of livestock products, potential benefits from new technologies, and critical policy issues for environmental conservation and protection of public health. Per Pinstrup- Andersen, Di rec tor Gen eral In ter na tional Food Pol icy Re search In sti tute Ab dou laye Sa wa dogo, As sis tant Director- General, Ag ri cul ture De part ment Food and Ag ri cul tural Or gani za tion of the United Na tions Hank Fitz hugh, Di rec tor Gen eral International Livestock Research Institute vii

9 Ac knowl edg ments The ambitious and multidisciplinary topic of this paper hints at the extent to which the authors had to rely on help from col leagues with a wide variety of disciplinary and geo graphic exper - tise. They are too numerous to mention individually, but several colleagues stand out because of the degree of their support for this collaborative project and the depth of their insights on previous drafts. Per Pinstrup-Andersen and Rajul Pandya-Lorch, director gen eral and head of the 2020 Vision initiative, respectively, of the International Food Policy Research Institute (IFPRI), provided an institutional framework for the project, con stant encouragement, and detailed and insightful comments through out the process. Abdoulaye Sawadogo, assistant director-general of the Food and Agriculture Organization of the United Nations (FAO), quickly recognized the value of this collaboration, discussed issues with the team, and facili - tated the conditions for effective FAO participation. Hank Fitzhugh, director gen eral of t he International Livestock Research Institute (ILRI), consistently sought to inte grate ILRI s broad strengths with respect to livestock issues in devel op ing countries with our activi tiesa nd facilitated ILRI s effective participation. A number of formal and informal external reviewers of earlier drafts of the report greatly improved the final product. Particular mention should be made of the very detailed and help ful comments of Cees de Haan of the World Bank and Maggie Gill of Natural Resources Interna - tional (U.K.) in this regard. While the technical livestock production aspects of this report, authored as it is by economists, probably still falls short of their high standards, there is no doubt that they substantially improved it over what it would have been otherwise. Catherine Geissler of King s College, London, helped improve the nutritional insights of the report; the remaining deficiencies are entirely the responsibility of the authors. The latter would also like to express their thanks for very helpful written com ments to Mercy Agcaoili-Sombilla of the International Rice Research Institute (IRRI), Jan Slingenbergh of FAO, Steve Staal of ILRI, Claudia Ringler of IFPRI, Bob Have ner of the World Food Prize Office, and Tjaart Schillhorn Van Veen of the World Bank. Finally, they would like to commend Uday Mohan, an IFPRI editor, on his cheerful and suc cess ful struggle under time pressure to turn our collectively authored, care fully hedged prose into a read able final report. viii

10 1. The Live stock Revo lu tion A revo lu tion is tak ing place in global agri cul ture that has pro found impli ca tions for our health, live - li hoods, and envi ron ment. Popu la tion growth, urbani za tion, and income growth in devel op ing coun tries are fuel ing a mas sive global increase in demand for food of ani mal ori gin. The resulting demand comes from changes in the diets of bil lions of peo ple and could pro vide income growth oppor - tu ni ties for many rural poor. It is not inap pro pri ate to use the term Live stock Revo lu tion to describe the course of these events in world agri cul ture over the next 20 years. Like the well- known Green Revo lu tion, the label is a sim ple and con ven ient expres sion that sum ma rizes a com plex series of inter re lated processes and out comes in pro duc tion, con sump tion, and eco nomic growth. As in the case of cere als, the stakes for the poor in devel op ing coun tries are enor mous. And not unlike the Green Revo lu tion, the revo lu tion ary aspect comes from the par tici pa tion of devel op ing coun tries on a large scale in trans for ma tions that had pre vi ously occurred mostly in the tem per ate zones of developed coun tries. But the two revo lu tions dif fer in one fun da men tal respect: the Green Revo lu tion was supply- driven, whereas the Live stock Revo lu - tion is driven by demand. The Livestock Revolution will stretch the capac - ity of existing production and distribution sys tems and exacerbate environmental and public health problems. Governments and industry must pre pare for this continuing transformation with long-run policies and investments that will satisfy consumer demand, improve nutrition, direct income growth opportunities to those who need them most, and alle - viate environmental and public health stress. The 23 percent of the world s population liv ing in devel oped countries presently consume three to four times the meat and fish and five to six times the milk per capita as those in developing countries 1 (Delgado, Courbois, and Rosegrant 1998). But mas - sive annual increases in the aggregate consumption of animal products are occurring in developing coun - tries. From the early 1970s to the mid 1990s, con - sumption of meat in developing countries grew by 70 million metric tons, whereas consumption in developed countries grew by only 26 million met ric tons (Table 1). 2 In value and caloric terms, meat con - sumption in developing countries increased by more than three times the increases in developed countries. Milk consumption in the developing world increased by more than twice as much as milk consumption in the developed world in terms of quantity, money value, and calories. Even more revealing is the comparison be - tween developing-country increases in meat, milk, and fish consumption dur ing the period with the in crease in ce real consumption (Table 1). The period spans the well known Green Revolution, when seed-fertilizer in no va tions in ce real produc - tion dramatically in creased wheat, rice, and maize output in developing countries, mak ing more food available and increasing farm incomes. But dur ing the same period there was also a dramatic, if often overlooked, rise in consumption of animal-origin food products in developing coun tries. On a quan - tity basis, the additional meat, milk, and fish con - sumed be tween 1971 and 1995 in developing coun - tries was two-thirds as important as the increase in wheat, rice, and maize consumed (Table 1). The Green Revolution provided many more calo ries 1 Fish con sump tion and pro duc tion are also un der go ing revo lu tion ary changes, but this is o ut side the scope of the cur rent pa per. In - ter ested read ers are re ferred to Wil liams (1996) and Westlund (1995). 2 All tons are met ric tons in this re port. 1

11 2 Table 1 Increase in food consumption of meat, milk, fish, and major cereals, Con sump tion in crease Value of con sump tion increase a con sump tion in crease Ca loric value of Com mod ity De vel oped De vel op ing De vel oped De vel op ing De vel oped De vel op ing (mil lion met ric tons) (bil lion 1990 US$) (tril lion ki lo calo ries) Meat b Milk Fish c Ma jor ce re als d ,064 Sources: The changes in quan ti ties and in calo ries are from FAO Money val ues are com puted for the dis ag gre gated com modi ties (shown in the notes below) us ing the av er age price. The com mod ity prices used for beef, sheep an d goat meat, pork, poul try, wheat, rice, and maize are de tailed in Ta ble 28. Dis ag gre gated fish prices are av er age im port un it val ues cal cu lated from FAO (1998) im port data. Developed- country im port unit val ues are used for developed- country con sump tion and dev eloping- country im port unit val ues are used for developing- country con sump tion. Notes: Cal cu la tions rep re sent ag gre gate changes be tween three- year av er ages cen tered on 1971 a nd a Cal cu lated us ing 1990 world prices ex pressed in con stant, av er age US$. b Beef, sheep and goat meat, pork, and poul try. c Ma rine and fresh wa ter fin fish, cepha lo pods, crus ta ceans, mol luscs, and other ma rine fish. d Wheat, rice, and maize used di rectly as hu man food. than the co in cid ing increase in meat consumption, but the additional meat consumed was worth almost three times the increase in cereal consumption at constant world prices. Furthermore, if the consumption patterns in developed countries are an indication of where developing countries are going, future growth in cereal consumption as food is likely to be much smaller than that in meat. Dur ing addi - tional consumption of meat, milk, and fish in the developed countries was much larger than that of cereal in terms of weight and value. In developing countries many people will soon be reaching satia - tion in their consumption of cereals, while meat and milk consumption is likely to continue to grow even more robustly into the next cen tury. Not sur pris ingly, major trans for ma tions of the mag ni tude of the Live stock Revo lu tion are not with out prob lems. Although domes ti cated ani - mals have been a source of human food, cloth ing, tools, trans por ta tion, and farm power since pre - his toric times, the cur rent rapid changes in demand for ani mal foods in devel op ing coun tries are put ting unprece dented stress on the resources used in live stock pro duc tion. The com bi na tion of higher demand, more peo ple, and less space is rap idly lead ing to a global trans for ma tion of the live stock sec tor, from one that mobi lizes sur plus and waste resources (back yard slops, remote pas - tures, and grasses indi gesti ble by humans) to one that actively seeks new resources for the pro duc - tion of ani mal food prod ucts (Ste in feld, de Haan, and Black burn 1997). The recent rapid expan sion of live stock food pro duc tion in devel op ing coun tries resulted pri - mar ily from increased num bers of ani mals rather than higher car cass weight per ani mal. In devel op - ing coun tries this has con trib uted to large con cen - tra tions of ani mals in urban envi ron ments where the regu la tory frame work gov ern ing live stock pro duc tion is weak (for exam ple, Addis Ababa, Bei jing, Lima, and Mum bai). Larger con cen tra - tions of ani mals have also led to deg ra da tion of rural graz ing areas and the clear ing of for est. Grow ing con cen tra tions of ani mals and peo ple in the major cit ies of devel op ing coun tries also lead to rapid increases in the inci dence of zoono tic dis - eases, such as sal mo nella, E-coli, and avian flu, which can only be dealt with through enforce ment of zon ing and health regu la tions. Other public health issues raised by the Live - stock Revolution are also of major importance. The intensification of livestock production is lead ing in many parts of the world to a build-up of pes ti cides and antibiotics in the food chain. Furthermore, as the scale of output increases, es pe cially in the trop - ics, food safety risks from microbial con tami na tion are becoming more prevalent.

12 3 Overconsumption of animal food products raises another concern. A growing consciousness of the dangers of large amounts of saturated animal fats in diets exists in most developed countries. Some ex - perts have concluded that policies should prevent a similar over-consumption in developing countries by discouraging public investment in livestock produc - tion (Brown and Kane 1994; Geissler forthcoming; Goodland 1997; Pimentel 1997). Increasing livestock consumption may also af - fect cereal prices. Because ruminant livestock such as cattle, sheep, and goats consume grain, and monogastric livestock such as pigs and poultry de - pend on grain in the industrial production sys tems of developed coun tries, some ana lysts argue that the high demand for livestock products in developed coun tries and rapidly increasing demand and pro - duction in developing countries deplete the grain available for di rect consumption by people. Livestock production and consumption have proponents as well. Livestock production is an especially important source of in come for the rural poor in developing countries. It enables poor and landless farmers to earn income using public, common-property re sources such as open range - land. Livestock consume many crop by-products that would otherwise become waste, they often can be raised on land that has no other sustainable agri - cul tural use, and they can employ labor dur ing peri - ods of slack in other agricultural activities. Poor women in particular often rely on the cash income from a dairy cow or a few chickens kept in the household. As livestock consumption increases there is considerable interest in how the poor can retain their market share of livestock production. Live stock prod ucts are an ap peal ing and con - ven ient nu tri ent source. Pro tein and mi cro nu tri ent de fi cien cies re main wide spread in de vel op ing coun tries be cause peo ple sub sist on diets that are al most en tirely made up of starchy sta ples. The addition of milk and meat pro vides pro tein, cal - cium, vi ta mins, and other nu tri ents that go lacking in diets that are ex clu sively made up of sta ples such as ce re als. Besides providing food, the driv ing force be - hind in creased livestock production, livestock have other valuable uses. Livestock remain the most im - portant if not the sole form of nonhuman power available to poor farm ers in much of the developing world. The poor, in particular, use fertilizer from livestock operations, especially when rising petro - leum prices make chemical fertilizers unaffordable. Livestock also store value and provide in sur ance for people who have no other fi nan cial markets available to them. Skins, wool, oil, and other re - sources are used as in puts in other industries. This re port will ex am ine in de tail the in terrelationships over time be tween sup ply and de - mand for live stock and feed grain, using IFPRI s IM PACT model. 3 It will in ves ti gate the plau si bil - ity of the pro jected de mand in creases for live stock prod ucts and the im pli ca tions of these in creases for world mar kets in feed, milk, and meat. The paper will argue that world grain mar kets cur rently have suf fi cient ca pac ity to han dle the ad di tional de mand for feed com ing from in creas ing live stock pro duc tion, even under a va ri ety of dif fer ent sce - nar ios for tech no logi cal de vel op ment and global eco nomic per form ance. The paper will argue further that the struc tural shift in developing-country diets toward animal proteins is a given that must be dealt with. It will re - view the evidence on the impact of livestock prod - ucts on nutrition in developing countries and on the food demand and income growth of the poor. The industrialization of livestock production in devel - oping countries can harm the welfare of the poor if other policies ar ti fi cially re duce the cost of indus - 3 The model was de vel oped by Rosegrant and col leagues (Rosegrant, Agcaoili- Sombilla, and Perez 1 995; Rosegrant et al. 1997; Rosegrant, Leach, and Ger pa cio 1998; and Rosegrant and Ringler 1998). It is global in na ture and bal ances supply and demand within ag ri cul ture with market- clearing prices for ma jor ag ri cul tural com modi ties, in clu d ing live stock prod ucts and feed. Start ing with ex oge nously speci fied trends in na tional in comes for 37 country groups, the model traces food de mand, feed de mand, and sup - ply levels for 18 com modi ties, it er at ing to market- clearing prices for ma jor com modi ties an nu ally through The re sults are based on a large number of pa rame ter as sump tions taken from the lit era ture, in clud ing assu mp tions about the open ness to trade. The model is use ful for il lus trat ing how demand- led shocks in Asia, for ex am ple, work them selves out in mar kets around the world. It also il lus trates that in sys tems of in ter linked global mar kets for live stock products and feed, the net ef fect of price- mediated pol icy in ter ven tions can be quite dif fer ent from what was en vis aged.

13 4 trial turn-key operations and otherwise frustrate the participation of small farmers. The paper will sug - gest that understanding the opportunities and dan - gers of the Livestock Revolution is critical to de - signing policies that promote the incorporation of the rural poor into economically and environmen - tally sustainable growth patterns. The rapid increase in demand for livestock products in developing countries presents crucially important policy dilemmas that must be resolved for the well-being of both rural and urban people in developing countries. These dilemmas in volve complex environmental and public health issues in the context of weak regulatory environments. Taken together, the many op por tu ni ties and dan gers of the Livestock Revolution suggest that it would be foolish for developing countries to adopt a laissez faire policy for livestock development. Many spe - cific recommendations for concrete action are given in chap ters ahead. The overall focus of the paper, however, is on the four broad pillars on which to base a desirable livestock development strategy for developing countries. These are (1) removing pol - icy distortions that artificially magnify economies of scale in livestock pro duc tion; (2) build ing par - ticipatory institutions of col lec tive action for smallscale farmers that allow them to be vertically inte - grated with livestock processors and input suppliers; (3) creating the environment in which farm - ers will in crease investment in ways to im prove productivity in the livestock sec tor; and (4) promot - ing effective regulatory institutions to deal with the threat of environmental and health crises stem ming from livestock. Technological progress in the production, proc - essing, and distribution of livestock products will be central to the positive outcome of the Livestock Revolution. Rapid advances in feed im prove ment and genetic and reproductive technologies offer scope for overcoming many of the technical prob - lems posed by in creased livestock production. Insti - tutional and regulatory development will also be critical to securing desirable environmental and public health outcomes. In sum, the demand- driven Livestock Revolution is one of the largest structural shifts to ever af fect food markets in developing countries and how it is handled is crucial for future growth prospects in developing country agriculture, for food security and the livelihoods of the rural poor, and for environmental sustainability.

14 2. Re cent Trans for ma tion of Live stock Food Demand Per Capita Consumption Pro gres sive eco nomic dif fer en tia tion be tween coun tries over the last few cen tu ries, has led to a situa tion where peo ple in de vel oped coun tries typi cally con sume three to four times the meat and five to six times the milk as do those in de vel op ing coun tries (Fig ure 1). But this pat tern is chang ing. Peo ple in de vel op ing coun tries have in creased their con sump tion of ani mal food prod ucts over the past 20 years, and the fac tors driv ing those in - creases are ro bust and un likely to sub side in the near fu ture. 4 Be tween 1983 (av er age of ) and 1993 (av er age of ) per cap ita an nual meat con sump tion rose from 14 to 21 kilo grams and milk con sump tion grew from 35 to 40 kilo - grams. Dur ing the same pe riod per capita con - sump tion of meat in de vel oped coun tries rose only 2 kilo grams and per cap ita milk con sump tion fell. At the regional level, Asia witnessed the most dra matic increases in per capita consumption of animal food prod ucts. In China per capita con sump - tion of meat and milk doubled between 1983 and 1993 (Table 2). Per capita meat consumption also increased in Other East Asia, Southeast Asia, and Latin America. Per capita milk consumption increased in India, Other South Asia, and Latin Amer ica. In Sub-Saharan Africa and West Asia and North Africa (WANA) per capita consumption of meat and milk stagnated or declined (see the Appendix for the regional classification of coun - tries used in this paper). Fig ure 1 Per capita consumption of meat and milk, developing and developed countries, 1983 and 1993 The relative importance of animal food prod - ucts in the diets of people in developing countries rose as well. Consumers obtained a greater share of calories and protein from animal food products in 1993 than in 1983 (Table 3). Through out Asia the share of calo ries and protein coming from animal food products increased, almost doubling in China, indicating that many consumers are increasing con - 4 Through out this pa per, food is used to dis tin guish di rect food con sump tion by hu mans fro m uses of ani mal prod ucts as feed, fuel, cos met ics, or cov er ings. Sta tis ti cal data in this pa per are taken from the FAO Sta tis ti c al Da ta base (FAO 1997, 1998), un less oth er - wise iden ti fied, and the world is clas si fied into nine coun tries or coun try ag gre gates, wit h de tails given in the Ap pen dix. The years 1983 and 1993 in all ta bles and fig ures re fer to three- year mov ing av er ages cen tered on the years shown. 5

15 6 Table 2 Per capita meat and milk consumption by region, 1983 and 1993 Fig ure 2 The relationship between meat consumption and income Meat Milk Re gion (kilo grams) China Other East Asia India Other South Asia South east Asia Latin Amer ica WANA Sub- Saharan Af rica De vel op ing world De vel oped world United States World Source: FAO Notes: Con sump tion re fers to di rect use as food, meas ured as un - cooked weight, bone in. Meat in cludes beef, pork, mut ton, goat, and poul try. Each number is a three- year moving av er - age cen tered on the two years listed. Milk is cow and buffalo milk and milk prod ucts in liq uid milk equiva lents.wana is West Asia and North Af rica. sumption of animal food products more rapidly than they are of other foods such as ce re als. But there re mains a great disparity be tween the per capita animal food consumed in developed and developing coun tries. National income is a critical determinant of this dis par ity. Fig ure 2 displays the positive, curved relationship between national per Table 3 Percent of calories and protein from animal prod ucts, 1983 and 1993 Calo ries from ani mal prod ucts Pro tein from ani mal prod ucts Re gion (per cent) China Other East Asia India Other South Asia South east Asia Latin Amer ica WANA Sub- Saharan Af rica De vel op ing world De vel oped world World Source: FAO Notes: Each number is a three- year moving av er age cen tered on the two years listed. Ani mal prod ucts, us ing the FAO defi ni tion, in clude meat, dairy, egg, and fresh wa ter and ma rine ani mal prod ucts. WANA is West Asia and North Af rica. Note: Each dot is an ob ser va tion for 1 of 78 de vel op ing and de vel oped coun tries ex am ined. The solid line is a sta tis ti cally sig nifi cant trend. capita in come and per capita meat consumption. Within this trend certain countries dif fer en ti ate themselves for cultural or other reasons. China, for example, lies above the trend, reflecting the impor - tance of pork in Chinese diets, and India lies below the trend because of religious pref er ences against meat. At higher incomes, per capita consumption of meat levels off because people reach saturation. This explains why developed countries have had much smaller increases in per capita meat and milk consumption over the past 20 years compared to developing countries. Countries at lower income levels are far from reaching the meat consumption satiation point de - spite recent increases. In the first half of the 1990s, people in developed countries consumed 76 kilo - grams of meat per capita per year as food, with higher amounts in the United States and lower amounts in some of the European countries (Table 2). Milk consumption in developed coun - tries was 192 kilograms per capita. People in devel - oping countries consumed on average 21 kilo grams of meat and 40 kilograms of milk. In Latin America, people consume 46 kilo - grams of meat and 100 kilograms of milk per capita, levels that are much higher than elsewhere in the developing world, though still about half the developed-country average. Per capita meat con - sumption in Other East Asia (44 kilograms per cap-

16 7 ita) does come close to the Latin Ameri can aver age and exceeds the Chi nese aver age. Sub-Saharan Africa has some of the lowest per capita con sump - tion levels: 9 kilograms of meat and 23 kilograms of milk per capita per year. The share of calories and protein com ing from meat is also much lower in developing countries than in developed ones (Table 3). In developed coun tries people obtain an average of 27 per cent of their calories and 56 percent of their protein from animal food products. The averages for developing coun tries are 11 percent and 26 percent, re spec - tively. People in Sub-Saharan Africa, WANA, South east Asia, Other South Asia, and India get a third or less than a third as many calories and half as much protein from animal products as people in developed countries. These low consumption levels give an in di ca - tion of how far animal food product consumption in developing countries could grow. The Livestock Revolution of the past 20 years will begin to look mod est in comparison to the one to come if the fac - tors that promote meat and milk consumption exert their full in flu ence. Determinants of Changes in Per Capita Consumption The growth rate of per capita consumption of animal food products is determined by economic factors such as incomes and prices and lifestyle changes that cause people s dietary patterns to evolve in qualita - tive ways. Per capita consumption increased in the regions where incomes grew rapidly during the period. For developing countries as a whole, GNP per capita grew at 2.1 percent per year (Table 4). In China, which had the most dramatic in - creases in per capita meat and milk consumption, GNP per capita grew at the extraordinary rate of 8.6 percent per year. India and Southeast Asia also had high income growth rates, fueling increases in per capita animal food product consumption. Latin American income growth was about zero ( 0.4 percent), but the region still managed a slight increase in per capita meat and milk consumption. Sub-Saharan Africa s per capita GNP fell signifi - cantly, explaining the region s drop in per capita consumption of meat and milk during the period. Table 4 Past population, urban population, and GNP per capita growth rates Re gion Popu la tion Urban population (per cent change per year) GNP per cap ita China In dia Other East Asia n.a. South east Asia Latin Amer ica Sub- Saharan Africa De vel op ing world De vel oped world World Source: UNDP Note: n.a. in di cates not avail able. De vel oped world is the UNDP indus trial countries. Data for WANA were un avail able. Prices of major meat and ce real food com - modi ties have trended down ward over the past 20 years, mak ing food more af ford able to con sum - ers of all in comes (Fig ure 3). Real ce real prices fell per cent (de pend ing on the grain in ques - tion) be tween the early 1980s and early 1990s, while de flated liq uid milk prices fell 37 per cent and real meat prices fell per cent. Al though ce real prices fell faster than meat and milk prices, many con sum ers have begun to di ver sify their diets into meat and milk be cause they are nearly sa ti ated with ce re als. Some have even reduced their con sump tion of ce re als. The most important life style change occurring in recent years is urbanization. Consumers in urban areas are more likely to diversify their diets into meat and milk (Huang and Bouis 1996; An der son et al. 1997). Urban consumers have greater food choices and more diverse die tary and cultural influ - ences than those typi cally found in rural areas. Urban consumers also often prefer foods that offer variety and convenience rather than maxi mum caloric content. Urban popu la tion growth has been sub stan tial through out the de vel op ing world in re cent years (Table 4). Be tween 1970 and 1995 cit ies in Asia grew 3 per cent per year and higher. The high est rate of urban growth, 5 per cent, oc curred in Af rica. The av er age for all de vel op ing coun tries was 3.8 per cent, more than three times the developedcountry rate.

17 8 Fig ure 3 Trends in the prices of major cereal and meat commodities, to Sources: Past data are from ERS 1997, IMF 1997, USDA 1997, and World Bank World Bank pro jec tions and the Manu fac - tur ing Unit Value in dex used for ex press ing val ues in con - stant 1990 US dol lars are from World Bank Notes: Wheat is U.S. no. 1, hard red winter, or di nary pro tein, ex port price de liv ered at Gulf ports for ship ment within 30 days. Rice is Thai 5 per cent bro ken, WR, milled in dica tive sur vey price, gov ern ment stan dard, f.o.b. Bang kok. Maize is U.S. no. 2, yel low, f.o.b. U.S. Gulf ports. Soy beans are U.S. c.i.f. Rot ter dam. Soymeal is any origin, Ar gen tina per cent ex trac tion, c.i.f. Rot ter dam, prior to 1990, U.S. 44 per cent. Fish meal is any ori gin, per cent, c.i.f. Ham burg, n.f.s. Beef is Aus tra lian/new Zea land, cow fore quar ters, frozen bone less, 85 per cent chemi cal lean, c.i.f. U.S. port (East Coast), ex dock. Pork is Euro pean Comu nity pork, slaugh ter whole sale price. Poul try is broil ers, twelve- city com po site whole sale price, read to cook, de liv ered. Lamb is New Zealand, fro zen whole car casses, whole sale price, Smith field mar ket, London. Milk is U.S. whole milk sold to plants and deal ers, U.S. De part ment of Ag ri cul ture. In addition to income growth, price changes, and urbanization, cultural differences have played an important role in consumption pat terns. Poultry meat and eggs are the most acceptable livestock commodities throughout the world. Lactoseintolerance, found particularly in East Asia, has limited milk consumption. Pork, while particularly valued by East Asians and people of Euro pean descent, is excluded from the diet of a large share of the world s population, especially Mos lems in the Near East, Asia, and Sub-Saharan Africa. South Asia has lower levels of meat consumption than low income alone would suggest because of cultural and religious reasons. Growing health consciousness in developed countries has in creased consumption of lean meats such as poultry and limited growth in the of consumption of red meat. These pref er ences are reflected in the aggregate changes in per capita con - sumption be tween 1973 and 1993 (Table 5). Total Consumption The importance of even small increases in per cap - ita consumption is compounded by rapidly increas - ing popu la tions in many developing regions. On average, popu la tion in developing countries grew by 2.1 percent per year between 1970 and 1995 (Table 4). The popu la tion in Sub-Saharan Africa grew the most almost 3 percent per year dur ing the pe riod. Rapid popu la tion growth coupled with increased per capita consumption resulted in dra - matic increases in the total consumption of animal food prod ucts through out the de vel op ing world (Table 6). For developing countries as a whole, total meat consumption grew 5.4 per cent per year and total milk consumption grew 3.1 percent. The com - pa ra ble fig ures for de vel oped coun tries were 1.0 per cent for meat and 0.5 percent for milk. China experienced an extremely high meat consumption growth rate of 8.6 percent, a value that is dis puted. China s role as the fastest growing market for live - stock products in the world is not in dis pute, but its growth rate may not have been so far ahead of the next fastest growing region, Other East Asia. The issue is con tro ver sial because China constitutes a large component of world demand. The food consumption figures used in this re - port are from the FAO statistical da ta base (FAO 1997, 1998). For China, as for most countries, the numbers are taken from food balance sheets pre - pared from na tional sources and are based primarily on estimates of production and net trade to derive estimates of consumption. Re cently, the use of this methodology for estimating livestock production figures in China in the 1990s but not in the 1980s has been challenged (Ke 1997). Although there is some uncertainty here, inde - pendent estimates of consumption based on house - hold surveys and feed use suggest that meat con -

18 9 Table 5 Annual per capita consumption of selected livestock food products and percent of total calories consumed from each product, 1973 and 1993 De vel oped coun tries De vel op ing countries Com mod ity (kilo grams) (per cent) (kilo grams) (per cent) (kilograms) (per cent ) (kilo grams) (per cent ) Beef Mut ton and goat Pork Poul try Eggs Milk and prod ucts ex clud ing butter Four meats Four meats, eggs, and milk Source: FAO Notes: Four meats in cludes beef, pork, mut ton and goat, and poul try. Val ues are three- year moving av er ages cen tered on the two years shown; per cent ages are cal cu lated from three- year mov ing av er ages. Milk is cow and buf falo milk a nd milk prod ucts in liq uid milk equiva lents. Food is used to dis tin guish di rect food con sump tion by hu mans from uses of ani mal products as feed, fuel, cos met ics, or cov er ings. sumption in the early 1990s in China proba bly ran closer to 30 million met ric tons (25 kilograms per capita) than the 38 mil lion met ric tons (33 kilo - grams per capita) given in the tables in this report (Ke 1997). If the lower fig ure is correct, the actual growth rate of meat consumption in China from the early 1980s to the early 1990s would be 6.3 percent, closer to the 5.4 per cent per year observed in the rest of Asia. Whether the true growth rate of meat consump - tion in China was ex ceed ingly high (6.3 percent per year) or astronomically high (8.3 per cent per year), Table 6 Consumption of meat and milk by re gion, An nual growth rate of to tal meat consumption To tal meat con sump tion To tal milk con sump tion Re gion (percent) (mil lion met ric tons) (mil lion met ric tons) China a Other East Asia In dia Other South Asia South east Asia Latin Amer ica WANA Sub- Saharan Af rica De vel op ing world De vel oped world World Sources: An nual growth rate of total meat con sump tion for is the growth rate from re gres sions fit ted to FAO an nual data (FAO 1998). To tal milk and meat con sump tion for 1983 and 1993 are three- year mov ing av er ages cal cu late d from FAO Notes: Con sump tion re fers to di rect use as food, meas ured as un cooked weight, bone in. Meat in clude s beef, pork, mut ton, goat, and poul try. Milk is milk and milk prod ucts in liquid milk equiva lents. Met ric tons are three- year mov ing av er ages cen tered on the two years shown. Milk is cow and buf falo milk and milk prod ucts in liquid milk equiva lents. WANA is Western Asia and No rth Af rica. a See text for quali fi ca tion on China. A lower es ti mate of 6.3 per cent per year growth, closer to the 5.4 per cent ob served in the rest of Asia, may be more ac cu rate. This would mean a 1993 total meat con sump tion of 30 million met ric tons.

19 10 the total amount in contention is less than 5 percent of estimated annual world meat consumption in the early 1990s. It should also be noted that the contro - versy does not include the distribution of con sump - tion among meats in China, nor does it in volve international trade in meat, because the down ward revision in the production fig ures is matched by a corresponding down ward re vi sion in the con sump - tion num bers. According to FAO, the total quantity of meat consumed worldwide rose by 45 mil lion met ric tons between 1983 and 1993 (Table 6). Total milk con - sumption rose by 57 mil lion metric tons in liq uid milk equivalents. In 1983 developing countries consumed 36 per cent of all meat and 34 percent of all milk consumed world wide. By 1993 those percentages had risen to 48 percent and 41 per cent, respectively. The breakdown of the growth rates of consump - tion of particular commodities (Table 7) shows that in developed countries total consumption grew slowly for all commodities except poultry. In the developing countries poultry led the field as well with 7.6 percent growth in consumption per year. Beef and milk grew at about 3 percent, and pork con - sumption grew at 6.2 percent. Quantifying the Effects of Growth Factors Quantifying the effects of individual forces that are driv ing real con sump tion requires a mod el ing approach to statistical estimation that is capable of sorting out the simultaneous influences of a host of determinants in order to iso late the contribution of each element. Research ers typically use a multipleregres sion economet ric approach, although the degree of com plex ity in their models varies greatly. The end objective is the estimation of robust elas - ticities that meas ure the effect on consumption of a 1 percent increase in the deter mi nant in question. These estimates often are obtained from a crosssection of house holds in a particular region at a par - ticular time, yielding elasticities that are usually quite satisfactory for the time period and region concerned, but which are too specific to use across countries or over long time peri ods. Elasticities from na tional data over long time periods are rarely estimated because of the diffi - culty in gathering data sets that satisfy the economic and econometric assumptions of the underlying de - mand model. Such estimation can, however, pro - vide a bet ter fore cast of the evolution of national Table 7 Trends in the food consumption of various livestock prod ucts, An nual growth rate of to tal con sump tion To tal con sump tion Per cap ita con sump tion Re gion/product (per cent) (mil lion met ric tons) (kilo grams) De vel oped world Beef 0.0* Pork Poul try Meat Milk De vel op ing world Beef Pork Poul try Meat Milk Sources: An nual growth rate of total con sump tion is the growth rate from re gres sions fit tedt o FAO an nual data (FAO 1998). Total and per cap ita con sump tion for 1983 and 1993 are cal cu lated from FAO Notes: Con sump tion re fers to di rect use as food, meas ured as un cooked weight, bone in. Meat in clude s beef, pork, mut ton, goat, and poul try. Milk is cow and buf falo milk and milk products in liq uid milk equiva lents. Met ric tons and kilo gra ms are three- year moving av er ages cen tered on the two years shown. WANA is West ern Asia and North Af rica. *Not sig nifi cantly dif fer ent from zero at the 10 per cent level.

20 11 consumption pat terns over time. Despite the diffi - cul ties, Schroeder, Bar kley, and Schroeder (1995) estimated the effects of national per capita income growth on na tional per capita consumption, using an nual data from 32 countries for The authors found that the largest ef fect of a US$1 increase in in come on meat consumption occurred in coun tries with the lowest levels of national income and meat consumption. As countries got richer the impact of an increase in in come on meat con sump - tion got weaker. Schroeder, Barkley, and Schroeder (1995) found that for coun tries with an nual per cap ita in comes in the neigh bor hood of US$1,000 (at 1985 prices), each 1 per cent in crease in per cap ita in come would increase con sump tion of pork by 1 per cent, poul try by nearly 2 per cent, beef by more than 2 per cent, and lamb by more than 3 per cent. At per cap ita income lev els above US$10,000, a 1 per cent in - crease in in come would in crease per cap ita con - sump tion of any of the com modi ties by ap prox i - mately 1 per cent or less. These re sults in di cate first, that an in crease in in come in a richer coun try will have a sub stan tially smaller im pact on meat con sump tion than the same in crease will have in poorer coun tries. Sec ond, the re sults in di cate that in coun tries with low but ris ing per cap ita in comes, per cap ita con sump tion of most meat com modi ties is likely to grow faster than growth of per cap ita in come. Schroeder, Bar kley, and Schroeder did not re - port price elasticities or the ef fects of other struc - tural changes on per capita consumption. Del gado and Courbois (1998) estimated expenditure, price, and urbanization elasticities based on data from 64 developing countries for They used a system of equations that sorted out relative price effects among animal products and that controlled for many cultural, geographic, physical, and eco - nomic differences be tween countries. The resulting expenditure elasticities (Table 8) estimate the percentage increase in the weight of beef, pork and mutton, poultry, or milk consumed due to a 1 percent increase in total expenditure on all animal food products in the developing countries in the sam ple. Thus the whole-sample expenditure elasticity of 1.36 for milk suggests that the relative share of milk in total animal product consumption increases as real expenditure on animal food prod - ucts increases across countries and over time, once the ef fects of relative prices, urbanization, and other factors are taken into ac count. The 0.27 coefficient for poultry suggests that its share decreases with a 1 per cent in crease in total expenditure on all animal food products, A com pari son of the poor est third of coun tries to the rich est third at subsam ple means sug gests that the pref er ence for ad di tional milk and beef de - creases mar gin ally when mov ing from poorer to richer de vel op ing coun tries. Pref er ence for poul try Table 8 Demand elas tici ties for major food products of animal origin from a cross-country, systems estimation, , developing regions Com mod ity Poor est b third of coun tries Ex pen di ture elas tic ity a Whole sam ple Rich est b third of coun tries Own price elasticity Ur ban population share elasticity Beef Pork and mutton Poul try Milk Source: Del gado and Cour bois Notes: These pa rame ters were es ti mated as a sys tem (with other ex plana tory vari ables and ex clu si ons not shown) for 64 coun tries using an nual data. N=1,143 and McEl roy s mul tie qua tion R 2 (Judge et al. 1985, 477) was All co ef fi cients were sta tis ti cally sig nifi cant at a 10 per - cent level or bet ter. a Ex pen di ture is the to tal ex pen di ture on ani mal food prod ucts in cluded in the study. Ex pe n di ture elas tici ties are cal cu lated at the subsam ple mean, to proxy for in come elas tici ties for spe cific sub groups. b Mean per capita gross do mes tic prod uct during the pe riod was used to clas sify all co un tries into one of three groups: poor est (<$800), mid - dle ($800 $3,000), and rich est (>$3,000). The sample was di vided into thirds, with each third h av ing the same number of coun tries.

21 12 is re marka bly sta ble across wealth groups of coun - tries. Pref er ence for pork and mut ton rises with in - creas ing in come. 5 The last re sult may hide changes in the qual ity of meat prod ucts con sumed when mov ing to richer coun tries, es pe cially given the large varia tion in qual ity in pork/mut ton meats. Fur ther more, while these elas tici ties are use ful for in di cat ing the rela tive re spon sive ness of con sump - tion of dif fer ent prod ucts to in come, de mand for in di vid ual prod ucts in in di vid ual coun tries may be more or less re spon sive than these mul ti coun try es ti mates in di cate. De mand would de pend in large part on whether the coun try in ques tion ex hib ited more or less income- responsiveness for ani mal prod ucts as a group. The own- price elasticities in Table 8 meas ure the change in consumption of vari ous animal prod - ucts in response to relative price changes within the group of animal products. As ex pected, price rises for a given commodity are associated with de - creased consumption of that commodity, other things being equal. The estimated price responsive - ness for both beef and poultry is rather modest. The price responsiveness of pork and mutton is higher, but still ine las tic. Only milk among the major live - stock food items is somewhat price responsive in the cross-country re gres sions. It would be an error, however, to infer that there is little scope for price policies to slow down the growth in demand for meat. Delgado and Courbois (1998) briefly surveyed elasticities from several rig - orous econometric demand analyses that included disaggregated animal product demand using multi - year samples and national level data for individual countries. They found a consumption response to own prices for meats of 0.5 to 1.0, suggesting that price responsiveness within countries is much higher than across countries. The cross- country re gres sion sys tem re ported in Table 8 in volved doz ens of vari ables to con trol for the many dif fer ences across time and coun tries that af fect con sump tion of ani mal food prod ucts. Most im por tant among these was the meas ure of urbanization. The ur bani za tion elas tici ties sug gest that as the per cent age of the popu la tion liv ing in cities in creased, so did the im por tance of pork, mut ton, and poul try in ani mal food prod uct con - sump tion, while the im por tance of beef and milk de creased. The two key messages of the data and analy sis summarized in this chapter are that animal food product demand has increased dramatically in the past and that it is very likely to increase in the future. The same factors that drove the enor mous increases in total meat consumption are expected to exert their influence into the next cen tury. Popula - tion is projected to grow more mod estly but still at an aver age of 1.5 percent per year in devel op ing countries (UNDP 1998). With that rate of population growth, even with - out a change in per capita consumption, demand for animal foods will grow enormously. But per capita consumption is also expected to increase. In the next 15 years, urban populations are expected to grow 2.9 percent per year on average for all developing countries (UNDP 1998). Per capita income will also grow. Provided the poor benefit from these trends, they will significantly increase their demand for animal food products with that new income. Other factors may further boost demand. Greater trade and communications, for example, will expose peo ple even in remote areas to other cultures and foods. Whether the world has the capac ity to meet this surg ing new demand with increased animal food produc tion will be a major ques tion for the rest of this report. The next chap ter will look at the evolu tion of supply systems over the past two decades lead ing up to the Live stock Revo lu tion. Subse quent chap ters will exam ine whether future demand trends coin cide with future resource avail - abil ity and at what cost. Finally, the paper will address simi lar ques tions more quali ta tively and look at envi ron mental, health, nutri tional, food secu rity, and tech no logi cal issues. 5 Pork and mut ton are com bined since most coun tries con sume a large amount of one or the other, but not both. De pend ing on the coun try, ei ther pork or mut ton is the main sub sti tute for beef.

22 3. Accompanying Transformation of Livestock Supply Pro duc tion of animal food products grew most rap - idly in the same regions where consumption did. Total meat production in developing countries grew at 5.4 per cent per year be tween 1982 and 1994, al - most five times the developed- country rate (Table 9). The highest production growth rates for meat occurred in Asia, especially in China where total meat production in creased by at least 6.3 per - cent and possibly as much as 8.4 percent annually (Table 10). 6 Per capita meat and milk production rose be - tween 1983 and 1993 in all regions except Sub- Saharan Africa and WANA (where milk production fell marginally), indicating that domestic supply kept up with population growth in most areas (Table 10). In 1993 both Other East Asia and WANA had sub - stantial discrepancies between per capita meat con - sumption and production, indicating that those re - gions imported large amounts of meat to keep up with growing demand (Tables 2 and 10). Southeast Asia and Sub-Saharan Africa had substantially higher per capita milk consumption than production in Poultry had the fastest total production growth rate in both developing and de vel oped countries Table 9 Production trends of various livestock products, An nual growth of To tal pro duc tion Per cap ita pro duc tion to tal production Re gion/product (per cent) (mil lion met ric tons) (kilo grams) De vel oped world Beef 0.1* Pork 0.7* Poul try Meat Milk 0.4* De vel op ing world Beef Pork Poul try Meat Milk Sources: An nual growth of total pro duc tion is the growth rate from re gres sions fit ted to FAO an nual data (FAO 1998). Total and per cap ita pro duc tion 1983 and 1993 are cal cu lated from FAO Notes: Beef in cludes meat from cattle and buf falo. Poul try in cludes all fowl listed in FAO Meat in cludes beef, pork, mut ton, goat, and poul - try car cass weights. Milk is cow and buf falo milk and milk prod ucts in liquid milk equiva lents. Met ric tons and kilo grams are three-year mov ing av er ages cen tered on the two years shown. *Not sig nifi cantly dif fer ent from zero at the 10 per cent level. 6 See dis cus sion of China data in Chap ter 2. The more likely fig ure of 6.3 per cent per year is still the highest in the world. Meat pro - duc tion grew at a mod est 2.9 per cent in Latin Amer ica and just 2.1 per cent in Sub- Saharan Af rica. In China, Other East Asia, Latin Amer ica, and Sub- Saharan Af rica to tal meat pro duc tion grew less than to tal meat con sump tio n, though for de vel op ing coun tries as a whole pro duc tion grew at the same rate as con sump tion. 13

23 14 Table 10 Trends in the production of meat and milk, by region, An nual growth of to tal meat production Per cap ita meat production Per cap ita milk production Re gion (per cent) (kilograms) (kilograms) China Other East Asia India Other South Asia South east Asia Latin Amer ica WANA Sub- Saharan Af rica De vel op ing world De vel oped world World Sources: An nual growth of to tal meat pro duc tion is the growth rate from re gres sions fit ted to FAO an nual data (FAO 1998). Per cap ita meat and milk pro duc tion for 1983 and 1993 are cal cu lated from FAO Notes: Meat in cludes beef, pork, mut ton, goat, and poul try car cass weights. Milk is cow and buf falo m ilk and milk prod ucts in liq uid milk equiva - lents. Kilo grams are three- year mov ing av er ages cen tered on the two years shown. WANA is West Asia and North Af rica. between 1982 and 1994 (Table 9). Production grew slowly in developed countries for all other livestock products, with total and per capita out put of beef and milk falling. In developing countries total meat and milk production grew rapidly, especially pork and poul try. Even the growth of beef production, which was near zero in developed countries, amounted to a robust 3.1 percent per year in devel - oping coun tries. Per capita production of pork, poultry, and milk in creased for developing coun - tries as a group. The large discrepancies between developingand developed-country total production growth rates are shifting world animal production, with all its benefits and costs, from developed to developing countries (Table 11). In one decade the developingcountry share of world meat and milk production rose from 36 to 47 percent and from 24 to 32 percent, Table 11 Shares of total world production of meat and milk, by re gion, 1983 and 1993 Beef Pork Poul try Meat Milk Region (per cent) China Other East Asia India Other South Asia South east Asia Latin Amer ica WANA Sub- Saharan Africa De vel op ing world De vel oped world (mil lion met ric tons) World Source: FAO Notes: Meat in cludes beef, pork, mut ton, goat, and poul try car cass weights. Milk is cow and buf falo m ilk and milk prod ucts in liq uid milk equiva - lents. Val ues are cal cu lated from three- year moving av er ages cen tered on the two years show n. WANA is West Asia and North Af rica.

24 15 respectively. China s share of global meat supply rose from 12 to 20 per cent. Milk pro duc tion is mainly concentrated in the developed world, but India increased its share of world production from 8 to 12 percent during the period. At the rate that pro - duction has been shifting to developing countries, it is likely that more than 50 percent of the world s meat is now produced in the developing world and that the same will be true for milk by Sources of Growth in the Output of Livestock Food Products The geo graphic distribution of the world s live - stock ani mals reflects different consumption pref er - ences and trends (Table 12). Cattle and buffalo are found where beef and milk are consumed in large amounts, primarily the developed world and Latin Amer ica, which are high beef-consuming regions, and South Asia, which is a high milk-consuming region. Growth in numbers of cattle and buffalo occurred through out the devel op ing world, with most devel op ing regions increas ing their share. Pigs are concentrated in the key porkconsuming countries of East and Southeast Asia. China s share of the world s pigs rose from 38 to 44 per cent be tween 1983 and 1993, and the major - ity of the world s pigs reside now in Asia. Num bers of chicken and other fowl grew rap idly between 1983 and 1993, es pe cially in Asia where 40 per cent of all chickens and other fowl were located in China had the largest increase in numbers of chicken and other fowl as well. Sheep and goats were most highly represented in WANA and Sub- Saharan Africa. The regional distribution of sheep and goat num bers shifted little from 1983 to In developing countries rap idly increasing meat and milk production coincided with rapidly increas - ing numbers of animals. The developing- country share of the world s stock of animals rose to twothirds of all pigs, fowl, sheep, and goats, and threequarters of all cattle and buffalo in By con - trast, numbers of cattle and pigs fell be tween 1983 and 1993 in the de vel oped countries, de spite in - creased beef and pork output. In developed coun - tries growth in numbers of ani mals was important only for poultry output. In creased output in devel - oped countries was made pos si ble primarily by in - creased productivity per animal, defined as greater amounts of meat or milk out put per animal and per unit of inputs. Comparing the location of the world s livestock in Table 12 to out put shares in Table 11 provides an indication of the relative productivity levels of the regions. Al though three-quarters of the world s cat - tle and two-thirds of the world s pigs, poultry, sheep, and goats lived in developing countries in 1993, those countries pro duced less than half of the world s meat and a third of the world s milk. Table 12 Distribution of the world s livestock animals, 1983 and 1993 Cat tle and buffalo Pigs Chickens/fowl Sheep and goats Region (percent) China Other East Asia In dia Other South Asia South east Asia Latin Amer ica WANA Sub- Saharan Af rica De vel op ing world De vel oped world (mil lion head) World 1,378 1, ,680 12,936 1,607 1,722 Source: FAO Note: WANA is West Asia and North Af rica.

25 16 Table 13 compares growth rates of animals slaughtered or milked with growth rates in meat and milk output, giving an indication of the extent to which productivity and increased numbers of ani - mals contributed to output growth. Countries in the relatively land-abundant Latin America and Sub- Saharan Af rica relied mostly on growth in numbers of ani mals for their in creased livestock production. In Latin Amer ica and Sub-Saharan Africa, the number of cattle that were slaugh tered or milked grew at rates nearly equal to, or above, the growth rate of beef and milk output, indicating that number of ani mals was more important than productivity in providing the additional meat. Pig num bers grew at about the same rate as pork output in both regions, indicating little productivity growth. The number of chickens grew at about the same rate as poultry out - put in Africa. In Latin America the number of chickens grew more slowly than poultry out put, suggesting the existence of productivity growth in poultry out put. In Asia, where land is scarce, growth in num - bers of ani mals made up a smaller proportion of output growth for beef and pork. Productivity growth was rela tively more important. Not includ - ing China, where reported productivity growth was even greater, cattle num bers grew less than 2 per - cent per year between 1982 and 1994, while both milk and beef output grew by more than 3 percent. Also in Asia with out China, pig num bers grew at about four-fifths the rate of pork out put, indicating a small amount of productivity growth. Less pro - ductivity growth occurred in poultry production, as chicken num bers grew at approximately the same rate as out put. Productivity is much higher in developed coun - tries than that typically found in developing coun - tries. Table 14 presents the number of kilograms of meat or milk pro duced per animal. Productivity by this yard stick was clearly higher in developed coun - tries, especially for beef and milk. Pork and poultry productivity levels showed greater similarity across re gions. Certain developing regions appear to be catch - ing up with developed-country rates for per animal productivity. Productivity growth rates in some de - veloping countries exceed those in developed coun - tries for some commodities (Table 14). Beef pro - ductivity through out Asia has been grow ing at rates higher than the 0.9 per cent growth rate in the devel - oped world. Milk productivity growth rates in Asia, with the exception of China, also ex ceeded those in developed countries. Beef and milk productivity in Latin America and Sub-Saharan Af rica fell increas- Table 13 Growth rates of livestock output and number of animals slaughtered or milked, Cattle Milk Pigs Chickens Re gion Out put Slaugh tered Out put Milked Out put Slaugh tered Out put Slaugh tered (percent growth per year) China Other East Asia * India Other South Asia South east Asia Asia, ex clud ing China Latin Amer ica * 0.4* WANA * Sub- Saharan Af rica De vel op ing world De vel op ing world, excluding China De vel oped world World Source: Es ti mated from FAO 1998 data. Notes: As dis cussed later in the re port, the of fi cial China pro duc tion fig ures for the mid- 1990sa re cur rently un der re vi sion and may be re duced. China has been ex cluded from the Asia fig ures to avoid any bias this may in tro duce. *Not sig nifi cantly dif fer ent from zero at the 10 per cent level.

26 17 Table 14 Productivity by region and animal type, , and productivity growth rate, Re gion Beef from cattle Milk Pork Poultry Pro ductivity Growth rate Pro ductivity Growth rate Pro ductivity Growth rate Pro ductivity Growth rate (kilo grams/ head) (per cent/ year) (kilo grams/ head) (per cent/ year) (kilo grams/ head) (per cent/ year) (kilo grams/ head) (per cent/ year) China , Other East Asia H 1, * H In dia Other South Asia H South east Asia H Asia, de vel op ing coun tries, ex clud ing China * Latin Amer ica , H H WANA , H * H Sub- Saharan Af rica * De vel op ing world H De vel op ing world, ex clud ing China H De vel oped world , World , Source: FAO (1998) fig ures on to tal food com mod ity pro duc tion per re gion and item are di vided by th e cor re spond ing number of ani mals slaugh - tered (or milked) from FAO Growth rates of pro duc tiv ity are from re gres sions fitted to an nual es ti mates of pro duc tiv ity ob tained through this means. WANA is West Asia and North Af rica. *Not sig nifi cantly dif fer ent from zero at the 10 per cent level. HNot sig nifi cantly dif fer ent from de vel oped world at the 10 per cent level. ingly behind the developed countries. Pork produc - tiv ity growth rates ex ceeded developed- country levels in Asia. Poultry productivity growth was on av er age more rapid in de vel oped countries than in developing countries excluding China. Sources of Productivity Growth Productivity growth in developed re gions mainly oc curs through fur ther tech no logi cal prog ress. Farm ers can raise many more ani mals per unit of land by using capital-intensive mechanization that reduces labor requirements, by increasing per ani - mal feed use and feed quality, and by investing in improved animal genetics and health. Nearly 37 percent of the world s meat supply comes from in - dustrialized livestock production (FAO 1995b). In recent years, industrial livestock production grew glob ally at twice the rate (4.3 per cent) of more tra - ditional, mixed-farming systems (2.2 percent), and more than six times the rate of grazing system (0.7 per cent) (Sere and Steinfeld 1996). Industrial livestock production is knowl edgeand management-intensive, especially when de liv - ering products for an increasingly quality-conscious urban population. Industrial livestock production maximizes the use of scarce resources, notably land, labor, and feed, and it involves the develop - ment of genotypes, application of biotechnology, general improvement in animal husbandry and veterinary care, and advances in the back ward and forward linkages of livestock output (such as meat marketing systems, feed mills). Production costs of monogastrics, such as pigs and poul try, tend to fall faster than those for ruminants in land- scarce situations because monogastrics require less space and are more efficient at converting feed concen - trates to meat. Livestock production in developing coun tries relies much more on traditional operations. A quar - ter of the world s land is used for grazing, which sustains about 10 per cent of world meat production (FAO 1995b). Grazing sys tems typically increase production by increasing the number of heads and the land area used. As land becomes scarce, graz ing systems lead to ei ther land deg ra da tion and eco - nomic decline or mixed or industrial livestock pro - duction systems.

27 18 Mixed livestock and crop production is the most common form of livestock operation in devel - oping countries, providing more than 50 percent of the meat produced in the world (FAO 1995b). The crop component of the farm provides residues for roughage, while the livestock component provides animal traction, fer til izer, animal fibers, a form of savings or collateral, and a role in social functions. Livestock kept in mixed sys tems are primarily large and small ruminants because they are efficient at converting pastures, crop residues, and other rough - ages into meat. Such fibrous materials and grasses have little or no alternative use. Large ruminants can also provide farm power. Cur rently an es ti mated 250 mil lion work ing ani mals pro vide draft power for mixed farms that cover about 28 per cent of the world s ar able land. Ap proxi mately 52 per cent of avail able crop land in de vel op ing coun tries is farmed using ani mal draft power. The use of ani mal draft power in creased in the 1970s and 1980s in those parts of West Af rica where the tech nol ogy was rela tively new, dis ease was being controlled, and introduction of new crops such as cot ton and maize re quired added farm power (Pin gali, Bigot, and Binswan ger 1987). East ern and South ern Af rica and South Asia in par ticu lar have longer tra di tions in the use of draft ani mals and are likely to con tinue to use them for some time to come. Mechanization is rapidly occurring in other areas, such as East and Southeast Asia (Steinfeld 1998). In these areas mixed farm ing is evolv ing as the food value of animals increases and the value of their other uses declines. The diffusion of machin - ery, fertilizer, synthetic fibers, and financial serv - ices re duces the value of livestock s other roles. Mechanization improves the productivity of animal food production because ani mals no longer need to be kept into adulthood for draft power, enabling more rapid slaugh ter rates. Mechanization also makes pos si ble a shift from large and small ru mi - nants to ani mals such as pigs and chickens that re - quire less time and space for production. In past decades livestock development in Asia suffered from an ex treme shortage of land and quality feed but enjoyed a relative abundance of labor and water. Capital, first in short supply, became less of a limiting factor as rapid industrial de vel op ment took place and incomes increased. Progress in de - velopment led to the adoption of a number of tech - nologies that dealt first with land scarcity and then replaced labor with capi tal. The first set of innovations introduced into Asian mixed-farming systems included basic animal health care, such as control of infectious diseases and parasites. Next came the provision of additional feed, first from crop byproducts, but then increasingly from cereals and other concentrates. In Indonesia and elsewhere, cut and carry systems, essentially a combination of forage cultivation and stall feeding, developed for milk production. Breeding continued to be based on local selection for preferred traits; crossbreeding was practiced to some extent. As demand for livestock foods expanded rap - idly, mixed-farming systems could not keep up. Feed require ments could no longer be met from domestic sup plies of cereals and other concentrates. Asia began to import large amounts of feedgrains, mainly from the developed countries. At this point the industrial production of pork, poul try, and eggs that emerged was more efficient at using imported feeds. Industrial systems make use of imported live - stock genetic material and sophisticated feed ing practices, such as phased feeding, the use of feed additives, and, at an even more advanced stage, synthetic amino-acids. As of this writing, in early 1999, these systems appear to have been dispropor - tionately disadvantaged by the Asian economic cri - sis, which raised the cost of imported feeds and depressed urban demand. WANA exhibits different trends. Land is not a limiting factor per se but agricultural potential is, given the scarcity of water. Traditional pastoralism and, to a limited extent, mixed farming continue to exist, but oil revenues and the resulting economic ex - pansion since 1973 have introduced imported indus - trial production units, for poultry and dairy in par - ticular. These units have state-of the-art technology but require many imported inputs and the domestic production of others (for example, forage production for dairy cows). For the most part they cannot com - pete with world markets but are maintained through protection as a matter of political choice. Because of the emergence of these subsidized industrial production systems, as well as other major distortions in the food market, little techno - logical change has occurred in the graz ing and small mixed-farming sectors in WANA. Feed lots

28 19 for small ruminants have developed to some extent, mainly in response to the market requirements of the region. These requirements include the seasonal de mand for whole animals dur ing religious holi - days. In more ecologically fa vor able en vi ron ments, notably the Nile valley in Egypt, competitive dairy sys tems have emerged that use a mixture of domes - tic and im ported feed resources and intermediate labor-intensive tech nol ogy. The relative abundance of land and extreme scarcity of capital resulted in little productivity in - crease per animal in Sub-Saharan Af rica over the past two decades. Without significant per capita in - come growth the region lacked the stimuli and the means for adopt ing meat production technology out side the poultry sector in large coastal markets. Dump ing of livestock products from developed coun tries dur ing the late 1970s and throughout the 1980s also discouraged production innovation, as did overvalued exchange rates that favored imports. Sub-Saharan Africa s livestock sector con tin - ues to be largely made up of ruminants located in tsetse- free areas and fed locally avail able feed. By and large health care is rudimentary and only sim ple feed supplements, such as minerals, are pro - vided. Close to urban cen ters, and where agroecological conditions per mit, semi-intensive and intensive dairy ing has developed using cultivated fodder and agro-industrial by-products. Poultry production has begun to industrialize. Apart from low income and a shortage of quality feed, livestock production technology in Africa continues to be severely con strained by disease, especially trypano - somia sis, which is spread by the tsetse fly (Al ex an - dra tos 1995). Cattle production is difficult in areas in fested with the tsetse fly. Other diseases must be controlled as well before widespread intensification of pork and poultry production can occur. Latin America is char ac ter ized by an abun - dance of land. The re gion experienced considerable livestock development prior to the 1960s. Urbani - za tion had already advanced by that point, unlike in the rest of the developing world. Income stagnation in the 1970s and early 1980s and low world market prices for meat slowed productivity growth and technology adoption. It was gen er ally cheaper to ex pand livestock production into new areas than invest in new technology. Pas tures continue to be unimproved, ex cept for areas close to consumer centers, and the technology used in extensive ranch - ing only involves such basic measures as fenc ing, disease prevention and treatment, and some genetic development. Recently, intensive poultry production and, to some extent, dairying have developed in Latin America. These livestock sys tems took advantage of the traditionally high urbanization rate and a resurgence of economic growth in the 1990s. Inten - sive in nature, these systems use many of the same basic tech nolo gies found in developed countries but use them at lower levels of intensification. Feed Use Recent rapid increases in meat production caused global use of cereal as feed to rise at 0.7 per cent annually between 1982 and This growth rate reflects negligible growth in use of cereal as feed in the developed countries and a more than 4 per cent per year growth rate in the devel op ing countries (Table 15). Despite the higher growth rate, develop - ing countries still use less than half as much cereal for feed as do developed countries. In con - cen trated cereal feed pro vided between 59 and 80 per cent of the nutri tion provided to ani mals in the developed world. By contrast, cereals accounted for only 45 per cent of total concentrate feed in Southeast Asia, the developing region with the most intensive use of feedgrains. As output of livestock products grows in devel - oping regions, animal production methods and feed - ing patterns are shifting rapidly. Grazing systems are rapidly diminishing in importance throughout the world. Land available for grazing is caught in a squeeze. Urbanization and crop production are encroaching on traditional grazing areas. Preserva - tion efforts are limiting expansion of grazing opera - tions into virgin areas. Mixed-farming sys tems also face lim its. Inno - vations in crop production have reduced crop resi - dues and non grain biomass avail able for feed ing. Crop research has largely ignored the feed value of crop residues. Unimproved varieties in low external input sys tems typically pro duce three to four times as much nongrain biomass as grain, whereas mod - ern hybrids often produce an equal share or less nongrain biomass as grain.

29 20 Table 15 Trends in the use of cereal as feed, An nual growth rates To tal ce real To tal ce real To tal ce real use as feed pro duc tion, use as feed, Re gion (per cent) (mil lion met ric tons) China a 84 Other East Asia India Other South Asia South east Asia Latin Amer ica WANA Sub- Saharan Af rica De vel op ing world De vel oped world 0.2* 0.5* World Sources: Pro duc tion and use growth rates for are from re gres - sions fit ted to FAO an nual data (FAO 1998). To tal use for 1983 and 1993 is cal cu lated from FAO Notes: Ce re als in clude wheat, maize, rice, bar ley, sor ghum, mil let, rye, and oats. Met ric tons are three- year mov ing av er ages cen tered on the two years shown. WANA is West Asia and North Af rica. a Simp son, Cheng, and Mi yazaki (1994) report 40 mil lion met ric tons from U.S. De part ment of Ag ri cul ture data. That figure is used here be - cause it is more con sis tent with the feed quan ti ties and feed/meat con - ver sion ratios in Rosegrant et al FAO (1998) re ports 49 mil lion met ric tons. *Not sig nifi cantly dif fer ent from zero at the 10 per cent level. Household food waste, such as tuber skins, stems, and leaf tops, has traditionally been another important feed re source, for backyard monogas tric production in particular. But small-scale back yard operations are disappearing because of low re turns to labor and increased competition from large- scale producers. Al though each backyard op era tion is small, at the aggregate level such systems act as major transformers of waste into meat and milk. Because large operations are un likely to find it cost-effective to col lect small amounts of waste from many households, this source of animal feed may be underused in industrial sys tems. The use of ce re als as feed has been fastest in Asia, where out put growth has risen the most and land is scarce (Table 15). In Other East Asia, South - east Asia, and Sub-Saharan Africa, ce real use as feed grew faster than meat production, indicating that those regions are intensifying their use of feed per unit of meat output (Tables 10 and 15). Most of Asia, WANA, and Sub-Saharan Africa lack the capacity to pro duce substantial amounts of feedgrain at competitive prices. The grow ing amounts of feedgrains imported into these re gions attest to this deficiency. Given that many develop - ing countries can not expand crop area, two possibilities remain: intensification of existing land re - sources and importation of feed. Because much of the gain from intensification will probably go to - ward meet ing the increasing demand for food crops, substantially more feedgrains will have to be im - ported by developing countries in the future. Will feedgrain availability, the infrastructure for moving large amounts of grain, and other access-related factors keep up with projected surges in de mand?

30 4. Projections of Future Demand and Supply to 2020 Trends dur ing the past 15 years suggest that the developing countries are in the midst of a demanddriven Livestock Revolution that already has in - creased the shares of world livestock products con - sumed in those countries by a substantial margin. Even more important ef fects are expected in the foreseeable future. These future changes are of such magnitude that they cannot occur in a vacuum. They will af fect the global economy and in turn be affected by it. This chapter and the next will examine the likely magnitude of the changes, the feasibility of the changes given the world s capacity to pro duce livestock and feed, the likelihood of the required production in creases oc cur ring in developing or developed countries, and the implications for world prices of meat, milk, and cereals. This chapter pres - ents both an approach to addressing these questions and some an swers in the form of baseline results from a global economic model. It also looks at what some plausible changes in future scenarios might entail for world milk and meat. Chapter 5 examines the pro jected impact of the Livestock Revolution on world trade in meat and milk and world food prices under different scenarios. Global economic models are subject to many uncertainties and are typically specified at such a high level of product aggregation (meat and milk are usually lumped in with food ), that they are not very useful for the purpose at hand. For tu nately, the authors have at their disposal a model developed at IFPRI (Rosegrant, Agcaoili-Sombilla, and Perez 1995; Rosegrant et al. 1997; Rosegrant, Leach, and Gerpacio 1998; and Rosegrant and Ringler 1998) that is particularly appropriate for looking at these issues and assessing the sensitivity of results to different assumptions. The tool in question is the International Model for Policy Analysis of Agricul - tural Commodities and Trade (IMPACT), June 1998 ver sion. 7 (For further information on the model, see the box.) Projected Consumption Trends to 2020 in the Baseline Scenario The base line sce nario rep re sents the most re al is tic set of as sump tions gov ern ing in ter na tional and na tional econo mies. With the sole ex cep tions of beef in the de vel oped coun tries and milk in the developing coun tries, con sump tion of food prod - ucts of ani mal ori gin is pro jected to grow at a sub - stan tially lower an nual rate over the pe riod than it did in the pe riod (Ta bles 16 and 7). The pro jected rates of growth to 2020 are ex pected to be about half those ob served in the last 15 years in most cases. Three fac tors pro duce these lower growth rates to First, re cent rapid growth in con sump tion means that the base for pro ject ing growth be yond 1993 is larger than that in Thus a given ab so lute an nual in cre - 7 The June 1998 ver sion of IMPACT in cor po rates pa rame ters and as sump tions that re flect lowe r ex pected over all eco nomic growth in Asia rela tive to the as sump tions in prior ver sions, in ad di tion to up dated pa rame ter es ti mates for Af rica (Rosegrant and Ringler 1998). De mand and sup ply pa rame ters for milk have also been ex ten sively re viewed and re vised in this ver sion; milk was in cluded pre vi ously, but not re ported on sepa rately. Read ers in ter ested in the str uc ture of model equa tions, which have not changed, are re ferred to the ap pen dix of Rosegrant, Agcaoili- Sombilla, and Perez (1995 ), pub lished in the same se ries as the pres ent pa per. 21

31 22 The Baseline IMPACT Model IMPACT is a global food model that divides the world into 37 coun tries or country groups. Its baseline version represents the most realistic set of assumptions accord - ing to the model team. The countries and groups can be conveniently aggregated into regions that are compati - ble with FAO definitions (see the Appendix). Fan and Agcaoili-Sombilla (1998) compared the results of early versions of the model and other international models for cereal production and consumption in China in 2010 and They found that the projections from the IMPACT model are middle of the road in outlook and neither pessimistic nor bullish with respect to the issues raised at the beginning of this chap ter. The IMPACT model covers 18 commodities, in - cluding beef, pork, poultry, sheep meat, goat meat, bo - vine milk, and eggs. The base data used in the current version are averages of the annual data from the FAO Statistical Database (the same source used for the tables in previous chapters, with 1993 data exactly equivalent to the IMPACT base year). Since each of the 37 country groups produces and/or consumes at least some of each commodity, literally thousands of supply and demand parameters had to be specified (income, price, and cross-price elasticities of demand; production parameters including crop area, yield growth trends, and herd size and productivity; price response parameters; initial levels and trends in feed conversion; trade distortion parameters; and so on). Parameter es ti mates were drawn from econometric analysis, assessment of past and changing trends, expert judgement, and synthe - sis of the existing literature. The myr iad assumptions are too detailed to report here, but attention is given to those parameters that matter the most, such as the de - tailed structural parameters of shifting meat demand in China, taken from Huang and Bouis (1996). Na tional in come, popu la tion, and ur ban growth rates are also as sumed for each coun try group, along with an tici pated changes in these rates over time. The model uses the re vised United Na tions mediumvariant pro jec tions for 1996 for demo graphic as sump - tions. Na tional in come pro jec tions are es ti mated based on a re view of pro jec tions drawn from sources such as the World Bank. The model is solved on an an nual basis by link ing each coun try model to the rest of the world through com mod ity trade. The market- clearing con di tion solves for the set of world prices that clears in ter na tional com mod ity mar kets, so that the to tal im - ports of each com mod ity equals to tal ex ports. World prices of com modi ties thus act as the equili brat ing mecha nism and main tain the model in equi lib rium. When an ex oge nous shock is in tro duced in the model, such as an in crease in crop yields from higher in vest - ment in crop re search, the world price will ad just and each ad just ment is passed back to the ef fec tive pro - ducer and con sumer prices. Changes in do mes tic prices sub se quently af fect the sup ply and de mand of the com modi ties, ne ces si tat ing their it era tive re ad just - ments un til world sup ply and de mand are in bal ance and world net trade again equals zero. The outcome of this annualized iterative process is an estimated annual series of projected market-clearing prices, consumption levels by commodity and country ment ac counts for an in creas ingly smaller per - cent age in cre ment. Sec ond, slow downs in the rate of over all in come and ur bani za tion growth will occur for the same rea son. Third, con sum ers begin to get sa ti ated as the im por tance of meat in their diets in creases. Even by 2020, per capita consumption of milk products in developing countries is expected to be on average only one-third that of developed coun - tries (up from less than one-fifth in the early 1990s). Per capita consumption of meat in developing countries is pro jected to be 36 percent of that in developed countries in 2020, up from 28 percent in the early 1990s. Yet in aggregate terms 62 per cent of the world s meat and 60 percent of milk con - sumption will take place in the developing coun - tries in This is a major change from the early 1990s, when 52 percent of the world s meat and 59 percent of the world s milk were consumed by the developed world. The con sump tion trends by re gion and the annual growth rates to 2020 are given in Table 17. The pro jected con sump tion growth rates for China of 3 per cent for meat and 2.8 per cent for

32 23 group, feed-use levels, production area, yield and pro - duction levels by commodity and region, and net trade across country groups by commodity. The analysis ex - tends to the year The increasing globalization of agricultural markets is represented in the model by its set of endogenous world prices estimated through an - nual iterative solutions. Events affecting net exports from one country group will affect prices in others, in turn changing supply, demand, and net trade, eventually converging to a solution. An im por tant ad van tage of a mod el ing ap proach such as IMPACT is that it can be used to in ves ti gate the fea si bil ity of pro duc tion in creases si mul ta ne ously with the de ter mi na tion of pro duc tion costs and out put prices. Ac tual pro duc tion of com modi ties in the model re quires the use of suf fi cient quan ti ties of all needed in puts in the coun try and year con cerned. Par ticu lar attention is de voted to cereal- based feeds. Ce real feed de mand in IMPACT is driven by live stock pro duc tion, ce real feed ra tios, own- and cross- price re la tion ships among feed crops, and an ex oge nously speci fied ef fi - ciency pa rame ter that can be used to model ex oge - nous tech ni cal prog ress or other secu lar changes af - fect ing feed de mand. The mix of feeds used for a specific livestock prod - uct starts from actual averages in the base period. For each livestock product, the feeding ratio for each main feed commodity in the model maize, other coarse grains, wheat, oilcakes, cassava, sweet potatoes, and potatoes is specified for the base period. What hap - pens to the amount of each commodity fed after the base period is modified by the relative price movements of feeds, which change in the model depending on both human and animal demand and by the specified rates of change in feeding efficiency due to technical progress. Browse, backyard slops, and other non ce real, nonoilcake feeds are implicitly costed as free, and are thus not explicitly modeled. Reporting focuses on cereals used as feed, since this is the aspect of feed use that is controversial and it is also in all likelihood the binding constraint in producing adequate mixed feed rations. The approach has the draw back that where pro - duc tion sys tems are shift ing from low cereal use sys - tems (as in back yard poul try or range- fed rumi nants) to indus trial feed lots, cur rent ratios of cereal feed to spe cific meat prod ucts may under es ti mate future ratios. The exoge nous feed ratio effi ciency parame ter in the feed demand equa tion is speci fied to com pen sate for this in some coun tries. It also allows fur ther sen si - tiv ity test ing in this area. The ra tio of to tal ce real feed use to to tal meat pro - duc tion (with feed use for milk and eggs net ted out) in the early 1990s was 1.40 to 1.00 in China and 3.64 to 1.00 in the United States. Be tween 1983 and 1993, feed con ver sion ef fi ciency in the United States in - creased by about 15 per cent across all meats, with the in creases for poul try out strip ping those for beef (CAST forth com ing). The pro por tion ately greater use of natu ral pas tures, house hold wastes, roots, tu bers, and by prod ucts for feed ing in de vel op ing coun tries explains why their ce real feed ra tios are lower than those in de vel oped coun tries. milk are on the low side of the lit era ture (Ke 1997). 8 They are fully com pa ra ble to those pro - jected for other parts of Asia, but are sig nifi cantly above the 0.6 and 0.2 per cent av er ages pro jected for de vel oped coun tries as a whole. Per cap ita meat con sump tion in 2020 is pro jected to re main 8 As noted in Chapter 2, the FAO consumption and production figures for meat in China in the ea rly 1990s, used here for the base, may overstate actual consumption and production by up to 30 percent (Ke 1997). Ke studiedthe discrepancy between food-balance-sheet and survey estimations of meat consumption in China in detail. He concludes that actual total demand for meat is only likely to grow at 3 to 5 percent per year in China in the foreseeable future, a lower rate than that predicted by some (unspecified) persons. While the IMPACT-estimated level of meat demand in China in 2020 might be seen as somewhat high because o f a base period estimate of meat consumption that is too high, the IMPACT estimation is also the result of projected annua l growth over 27 years that is low because of the conservative assumptions built into the model. There is also little concern about the effect of an overestimate of Chinese livestock pro - duction in the base period ( ) on imports in IMPACT because the overestimate of produ ction, if there is one, is balanced by an overestimate of consumption. There does not appear to be a compelling reason to revise the estimates for China given here.

33 24 Table 16 Projected trends in the food consumption of various livestock products, Pro jected an nual growth of to tal con sump tion, To tal con sump tion An nual per cap ita consumption Re gion/product (per cent) (mil lion met ric tons) (kilo grams) De vel oped world Beef Pork Poul try Meat Milk De vel op ing world Beef Pork Poul try Meat Milk Sources: To tal and per cap ita con sump tion for 1993 are cal cu lated from FAO Pro jec tions are updated fig ures fol low ing the same for mat as that re ported in Rosegrant et al Notes: Con sump tion re fers to di rect use as food, meas ured as un cooked weight, bone in. Meat in clude s beef, pork, mut ton, goat, and poul try. Milk is cow and buf falo milk and milk products in liq uid milk equiva lents. Met ric tons and kilo gra ms are three- year moving av er ages cen tered on the two years shown. low in Sub- Saharan Af rica, par tially vege tar ian India, and other coun tries in South Asia. The assumptions con cern ing tastes for meat in India will be tested below as part of the sen si tiv ity analy sis, as will as sump tions about pro duc tiv ity growth and the se ver ity of the Asian fi nan cial crisis. Projected Production Trends to 2020 Pro jected pro duc tion trends for meat to 2020 closely follow those pro jected for consumption, with the exception of WANA (Tables 17 and 18). Generally IMPACT proj ects that in 2020 deficit Table 17 Pro jected trends in meat and milk consumption, Pro jected an nual growth of to tal con sump tion, To tal con sump tion in 2020 Per cap ita con sump tion in 2020 Re gion Meat Milk Meat Milk Meat Milk (per cent) (mil lion met ric tons) (kilo grams) China Other East Asia India Other South Asia South east Asia Latin Amer ica WANA Sub- Saharan Af rica De vel op ing world De vel oped world World Sources: Pro jec tions are up dated fig ures fol low ing the same for mat as that re ported in Rosegrant et al Notes: Con sump tion re fers to di rect use as food, meas ured as un cooked weight, bone in. Meat in clude s beef, pork, mut ton, goat, and poul try. Milk is cow and buf falo milk and milk products in liq uid milk equiva lents. Met ric tons and kilo gra ms are three- year moving av er ages cen tered on the two years shown. WANA is West Asia and North Africa.

34 25 Table 18 Pro jected trends in meat and milk production, Pro jected an nual growth of to tal pro duc tion, To tal pro duc tion in 2020 Per cap ita pro duc tion in 2020 Re gion Meat Milk Meat Milk Meat Milk (per cent per year) (mil lion met ric tons) (kilo grams) China Other East Asia In dia Other South Asia South east Asia Latin Amer ica WANA Sub- Saharan Af rica De vel op ing world De vel oped world World Sources: Pro jec tions are up dated fig ures fol low ing the same for mat as that re ported in Rosegrant et al Notes: Meat in cludes beef, pork, mut ton, goat, and poul try. Milk is cow and buf falo milk and milk prod ucts in liq uid milk equiva lents. Met ric tons and kilo grams are three- year mov ing av er ages cen tered on the two years shown. WANA is We st Asia and North Af rica. coun tries will import feed rather than meat. This con tra dicts the con ven tional wis dom that it is cheaper to trade the commodity with the higher value-added (meat as opposed to bulk cereals). But it is consistent with current trade patterns and with the ex pe ri ence of rapidly developing countries such as Taiwan. These livestock trade patterns may re - flect the realities of relative overall costs and bene - fits of producing and trading strategies better than a sim ple comparison of value to bulk. Com pari son of pro jected milk production and consumption in 2020 shows a somewhat different story. Unlike meat, milk is itself a major input into domestic livestock production. The consumption fig ures in Table 17 in clude only what is consumed by humans, but milk production fig ures include milk used as feed. Milk production in 2020 in the developed countries is pro jected to exceed milk consumption by 108 million metric tons (or 29 per - cent of pro jected production). Seventy-seven mil - lion metric tons of milk will be used as feed and the remaining surplus will be exported to developing countries. Only 41 million metric tons (10 percent of projected production) are likely to be used as feed in developing coun tries, despite a herd size larger than that in the developed countries. In developed countries the annual growth rate of production through 2020 is projected to be 0.7 percent or less for each of the major livestock food commodities other than poultry (Table 19). In the developing countries the projected annual rates of growth are 2.7 percent for meat and 3.2 percent for milk. The majority share of livestock production will take place in developing countries, even though per capita production levels will be much higher in the developed countries. Projected Cereal Feed Use to 2020 The trends in ce real feed use since the early 1980s (Table 15) highlighted the fact that the growth rates of ce real feed use ex ceeded ce real pro duc tion growth rates in all re gions of the world ex cept WANA. Comparison of projected and his tori cal growth rates of cereal feed use shows a slowdown through 2020 in China, Other East Asia, South east Asia, and Sub-Saharan Af rica (Tables 15 and 20). But feed use accelerates in India, Other South Asia, and WANA, largely due to fast-growing milk pro - duc tion. Per capita cereal use as feed increases by only 8.1 percent in aggregate from the early 1990s to 2020 in developed countries, but rises by 44 percent in developing coun tries. Given this stagnation in

35 26 Table 19 Projected trends in production of various livestock products, Pro jected an nual growth of to tal pro duc tion, To tal pro duc tion Per cap ita pro duc tion Re gion/product (per cent) (mil lion met ric tons) (kilo grams) De vel oped world Beef Pork Poul try Meat Milk De vel op ing world Beef Pork Poul try Meat Milk Sources: To tal and per capita pro duc tion for 1993 are cal cu lated from FAO Pro jec tions are upd ated figures, fol low ing the same for mat as that re ported in Rosegrant et al Notes: Meat in cludes beef, pork, mut ton, goat, and poul try. Milk is cow and buf falo milk and milk prod ucts in liq uid milk equiva lents. Met ric tons and kilo grams are three- year mov ing av er ages cen tered on the two years shown. WANA is We st Asia and North Af rica. developed countries, which presently have high ce - real feed use, global cereal feed use is projected to increase by only 46 percent by This translates to a 1.4 percent compounded annual rate of growth, noticeably higher than the 0.7 per cent annual growth rate observed from the early 1980s to the early 1990s. Cereal production is pro jected to grow by 1.3 percent per year through An additional 292 million metric tons of cereals will be used as feed in 2020 compared to the early 1990s. For further comparison, a normal U.S. maize crop in the early 1990s totaled around 200 mil lion metric tons of grain. The in crease in grain use as feed will be met primarily through expansion of yields in the traditional ex port ing countries and ex - pansion of cultivated area in South and East Asia. Table 20 Pro jected trends in use of cereals as feed, Re gion Pro jected an nual growth rate of to tal ce real use as feed To tal ce real use as feed Per cap ita ce real use as feed (per cent) (mil lion met ric tons) (kilo grams) China Other East Asia India Other South Asia South east Asia Latin Amer ica WANA Sub- Saharan Af rica De vel op ing world De vel oped world World Sources: To tal and per capita use for 1993 is cal cu lated from FAO Pro jec tions are up dated figu res fol low ing the same for mat as that in Rosegrant et al Notes: Ce re als in cludes wheat, maize, rice, bar ley, sor ghum, mil let, rye, and oats. Met ric tons and kilo grams are three- year moving av er ages cen - tered on the two years shown. WANA is West Asia and North Af rica.

36 27 Table 21 Changes in IMPACT s baseline assumptions: A severe Asian crisis and high Indian meat consumption Sce nario Phe nome non being mod eled Mecha nism Na ture, mag ni tude, and du ra tion of changed pa rame ters Se vere Asian crisis En dur ing de pre cia tion of Asian ex change rates Lower non agricultural in come growth in Asia In ser tion of ad di tional wedge be tween do mes tic and world com mod ity prices for Asian countries De crease in ex oge nously speci fied growth rates of GDP for Asia Last ing one- shot in crease in wedge of 5 to 13 percent of world prices de pend ing on coun try Last ing de crease of 30 to 45 percent in GDP growth rates, de pend ing on coun try High In dian meat con sump tion Shift of In dian tastes to ward ani mal foods in clud ing beef In come elas tic ity for ani mal foods raised for In dia Last ing rise in elasticity to 1.5 to 2.0, de pend ing on the com mod ity Pro duc tion re sponse of In dian herds Per ma nent in crease in the trend of In dian herd growth rates Fixed in ter cepts shift upward by 0.3 to 0.7 percent by com mod ity In crease in ce re al feed use in In dia Pro gres sive up ward shift in feed con ver sion ra tios (kilogram of ce re al/kilogram of ani mal food) By 2020, In dia has ra tios higher than most other de vel op ing coun tries, but lower than de vel oped countries Source: The sce nario for a se vere Asian cri sis is de scribed in Rosegrant and Ringler Feed grain cultivation has been of rela tively minor im por tance in South and East Asia compared to food grain cultivation, but maize production is in - creasing rap idly while rice production is slow ing. Sensitivity of Projections to Changes in Assumptions Four experiments that test some of the assumptions in IM PACT and take into ac count some major changes that might occur in the world are discussed here: (1) a prolonged decline in economic growth in Asia; (2) a structural change in tastes in India to - ward increased consumption of milk and meat; (3) a broad, secular increase over time in feed conversion ef fi ciency (due to technological progress, perhaps); and (4) a broad secular decrease in cereal feed con - version efficiency over time (due perhaps to in - creasing use of cereal feeds as livestock production in ten si fies). What Happens in the Event of a Long-Run Economic Crisis in Asia? Because demand from developing countries, pri - marily in East Asia, drives the Livestock Revolu - tion, a prolonged Asian economic cri sis could have a major effect on livestock trends through The scenario for a more severe outcome in Asia is laid out in Table 21. The scenario includes an en - during de pre cia tion of Asian exchange rates and a lasting de crease in income growth rates. Depending on the coun try, price wedges be tween domestic and world prices are in creased by 5 to 13 percent. An - nual GDP growth rates are cut by 30 to 45 percent. 9 The June 1998 base line used here al ready in cor po rates less op ti mis tic as sump tions about Asian growth than pre vi ous ver sions of IMPACT. See Rosegrant and Ringler (1998) for a de tailed dis cus sion. The cur rent base line as su mes that long- term non ag ri cul tural GDP will grow at 5.5 per cent per year in China, 4.5 per cent in In do ne sia, 5 per cent in Ma lay sia, 3.5 per cent in Ko rea, 5 per cent in In - dia, and 5 per cent in Thai land.

37 28 This scenario, presented in detail in Rosegrant and Ringler (1998), is a worst-case pessimistic sce - nario, especially because the ef fects are assumed to last until The results are presented here to il - lustrate the robustness of the Livestock Revolution, even in the face of a last ing slowdown in Asia. A comparison of the results of the severe Asian scenario to those of the baseline model are given in Table 22. A severe Asian cri sis would cause meat, milk, and feed consumption to fall, most notably in China and India. But even where consumption de - clines by 20 percent relative to the baseline, the baseline projections of percent growth for meat and milk in India and China by 2020 mean that consumption will grow per cent in those countries, still a large increase. Even with a severe Asian crisis, the pros pects for long-term livestock expansion in Asia and the world are quite robust. In Latin America and Sub- Saharan Africa the severe Asian scenario increases meat and milk consumption slightly because of price effects (cheaper world prices for meat and feed). For the world as a whole, consumption of livestock commodities declines by 8 per cent or less relative to the baseline, a negligible change consid - ering it is spread over 27 years. What Happens if People in India Dramatically In crease Their Meat Consumption? Another major structural change that could affect the global livestock econ omy is a shift in Indian tastes that accelerates meat consumption (Bhalla, Ha zell, and Kerr 1998). Ur bani za tion, in come growth, and secularization could cause people in India to increase their meat consumption at a rate simi lar to high milk con sump tion growth rates. Total milk consumption in India grew by 53 percent between the early 1980s and 1990s (Table 6). This sce nario assumes that Indian in come elas - ticities in crease to be tween 1.5 and 2.0, depending on the product (Table 21). It also assumes that Indian production systems change in tan dem, with permanent in creases of per cent in the trend of Indian herd-size growth rates. Finally, the sce - nario assumes that livestock production in landscarce India in creases primarily through intensifi - Table 22 Difference between baseline projections and projections of aggregate consumption in 2020 due to changes in assumptions about the Asian crisis and Indian consumption Region Beef and mut ton Se vere Asian crisis High In dian meat con sump tion Pork and poul try Milk Ce real used as feed Beef and mut ton Pork and poul try (per cent dif fer ence be tween new sce nario and base line) Milk Ce real used as feed China India Other Asia (in clud ing WANA) Latin Amer ica Sub- Saharan Af rica De vel op ing world De vel oped world World Notes: The se vere Asian cri sis in cor po rates lower pro jected in come growth and de pre cia tion in ex change rates for coun tries in Asia. De pend ing on the coun try, in come growth pro jec tions are per cent lower than in the base line sce nario, and ex change rate de pre cia tion re sults in 5 13 per cent higher do mes tic prices. The high In dian meat con sump tion sce nario in cor po rates a shift in tastes to ward con sump tion of ani mal foods and in creases in pro duc - tion and feed use ra tios by In dian live stock pro duc ers. In come elas tici ties for ani mal pro d ucts rise to be tween 1.5 and 2.0, de pend ing on the com mod ity. The trend growth rate of In dian herd size rises by per cent (de pend ing on the com mod ity), and feed con ver sion ra tios rise above those typi cal in de vel op ing coun tries. Mut ton in cludes sheep and goat meat. Milk in cludes all dairy products in liq uid milk equivalents. The large per cent age changes for meat and feed in India re flect a low initial base. Pro ject ed beef con sump tion in 2020, for ex am ple, is still only 31 kilo grams per capita un der the high meat sce nario, less than in China to day. WAN A is West Asia and North Af rica.

38 29 ca tion and that the amount of ce real feed required per kilogram of meat rises as a consequence. The high Indian meat consumption scenario pulls in the opposite direction from the severe Asian crisis scenario. The effect on the growth of Indian consumption is huge in both absolute and percent - age terms, but still relatively modest in per capita terms (Table 22). Milk consumption and cereal feed use rise the most in absolute terms. For the world as a whole, milk consumption in 2020 would exceed the baseline by 34 percent and feed use by 8 percent. Scenarios with Different Rates of Feed Conversion Efficiency Feed can make up to three-quarters of the variable cost of livestock production in intensive systems (Sere and Ste in feld 1996). Changes in the feed requirements of meat and milk production play an im por tant role in de ter min ing the final cost of live - stock production. Technological innovations that in crease the amount of meat obtained per unit of high energy feed and intensification of production (substitution of ce re als for browse or slops) both can change the amount of ce real used per unit of meat and milk produced. Two op po site sce nar ios are presented: an in crease in the rate that feed use ef fi ciency improves and a decrease in that rate. These are both modeled in somewhat extreme form to test the sensitivity of re sults to changes in the assumed conversion ratios in either direction. The baseline scenario basically assumes that these two effects can cel each other out. In the first, optimistic scenario, feed conver - sion ratios improve progressively. About 1 per cent more meat per year is pro duced per kilogram of feed in developing countries, with a compounded effect over time. This mirrors the rapid technologi - cal progress observed in the developed countries from the early 1980s to the early 1990s. Under the optimistic scenario, feed conversion efficiency in developed countries improves by only 0.5 per cent per year. This lower rate reflects less scope for adopting technology from other regions. The re sult is that in 2020 developing countries pro duce ap - proximately 60 percent more meat per kilogram of feed than they do in the baseline projections. The effect is half as large in developed countries. In the second, pessimistic scenario, feed con - version ratios worsen progressively. About 1 per - cent less meat per year is produced per kilogram of feed in developing countries, with the effect com - pounding over time. This scenario reflects increas - ing shifts from backyard production to more inten - sive feed ing in lots. Because intensified feed ing practices have already taken hold in developed countries for the most part, the worsening conver - sion ratio for developed countries is assumed to be only 0.5 per cent per year. The result is that in 2020 Table 23 Difference between baseline projections and projections of aggregate consumption in 2020 due to changes in assumptions about feed conversion Region In creas ing feed con ver sion ef fi ciency Beef and mut ton Pork and poultry Milk Ce real used as feed De creas ing feed con ver sion ef fi ciency Beef and mut ton Pork and poul try Milk Ce real used as feed (per cent dif fer ence be tween new sce nario and base line) China In dia Other Asia (in clud ing WANA) Latin Amer ica Sub- Saharan Af rica De vel op ing world De vel oped world World Notes: The in creas ing feed con ver sion ef fi ciency sce nario as sumes an in crease in the ef fi ciency of con vert ing maize to meat. This re sults in a de - creased rate of in crease for con ver sion ra tios in re gions where they are in creas ing, and an in creased rate of de crease for con ver sion ra tios in re gions where they are de creas ing. The de creas ing feed con ver sion ef fi ciency sce nario as sumes a de crease in the ef fi cienc y of con vert ing maize to meat. This re sults in an in creased rate of in crease for con ver sion ra tios in re gions where they are in creas ing, and a de creased rate of de crease for con ver sion ra tios in re gions where they are de creas ing. Mut ton in cludes sheep and goat meat. Milk in cludes all dairy prod ucts in liq uid milk equivalents. WANA is West Asia and North Af rica.

39 30 de vel op ing coun tries pro duce ap proxi mately 60 percent less meat per kilogram of feed than they do in the baseline projections. The ef fect is half as large in developed countries. Table 23 shows the effects of the optimistic and pessimistic feed conversion scenarios on consump - tion in The most striking result is that large changes in either direction have virtually no impact on livestock product consumption. Large changes, however, are associated with differences in the amount of cereal used to produce livestock prod - ucts. Although not shown, changes in feed conver - sion ratios also cause changes in the location of live - stock production in a competitive market system. A crucial point to note in Table 23 is that the amount of cereal used for feed in 2020 changes by only 2 percent in developed countries and 13 to 16 per - cent in developing countries, relative to the baseline. The change is small because increased feed effi - ciency leads to falling cereal feed prices, which encourages substitution back into cereal feeds among all producers, lessening the overall effect of changes in efficiency. Progressively lower feed efficiency raises the world price of cereal feed to the point where substi - tutes become cost-effective. Production shifts from regions and commodities that cannot undertake these substitutions at low enough cost to those that can. Countries such as Argentina, with large production capacity on ranges, are favored in the pessimistic scenario because they can compete more easily, with more expensive lot-fed beef, for example. The reverse is true under the optimistic scenario. Higher feed efficiency (lower conversion ratios) tends to encour - age increased use of cereals as feed and favor those countries where cereal supply is relatively cheap and cereal feeding practices are well-established. A striking result is that as long as cereals are available worldwide in relatively elastic supply, feed conversion does not play a critical element in deter - mining human consumption of livestock products, although it does affect the competitiveness of indi - vidual producers of livestock product. Feed efficiency and relative cereal prices, therefore, are likely to be quite important in determining the geographic direction of trade.

40 5. Implications of the Livestock Revolution for World Trade and Food Prices An emerging, central feature of world markets for meat, milk, and feed is that they are increasingly in - ter linked. IMPACT implicitly takes this interlink - age into account with its annual market-clearing feature, which allows prices to move until sup ply and demand are in bal ance. Domestic markets are cleared in the model through back ward and forward it era tions be tween sets of do mes tic and world prices. World prices differ from domestic ones by means of fixed price wedges specified for each coun try group that catch the ef fect of protectionist policies or major transport costs to remote markets. Domestic prices in equilibrium may al ways be above or below world prices for meat and feed, de - pending on the country group in question, but they are always affected in the model by move ments in world prices. This interlinked movement of prices is a better approximation of reality than delinked markets. In IMPACT, changes in demand for live - stock products in Asia, for example, affect livestock and ce real feed prices everywhere. No part of the world will be unaffected by the events in Asia or India or changes in feed use efficiency. Trade flows are modeled in IMPACT as the net annual residual between production and consump - tion at world market-clearing prices for each country group and commodity, leading to either net exports or net imports (negative net exports) for that com - modity and country group in the year in question. The model does not determine trading partners, but the worldwide sum of net exports for a given com - modity is zero for each year in equilibrium. Projected Trade in Livestock Food Products and Feed to 2020 Net exports of specific commodities by re gion are given in Table 24, for 1993 and World beef trade was minimal in the early 1990s. Roughly 0.4 million metric tons flowed on a net basis from the developed to the developing world. WANA im - ported the most, while Latin America accounted for 18 percent of net world exports of beef. De vel oped countries imported a net total of 0.7 mil lion met ric tons of pork from developing countries in the early 1990s, much of it from China. Developed coun tries had net exports of 0.5 million met ric tons of poul - try, almost 19 million metric tons of milk, and a lit - tle more than 93 million met ric tons of ce re als. Beef is pro jected to become the most significant meat import of developing countries in 2020, at 2.7 million metric tons net. Pork will remain a net export of developing countries, though only mar - ginally. Poultry imports will rise to 1.8 million met - ric tons. Milk will almost double in size as a net ex - port of the de vel oped world. Cereals will continue to be the most significant net agricultural export from the developed to the developing world. Com - pared to 1993, net exports from developed to devel - oping countries are pro jected to rise by 133 million metric tons, an amount equivalent to approximately 60 per cent of the en tire U.S. av er age corn crop in the early 1990s (FAO 1998). Changes in Net Exports under Changed Asian Assumptions The live stock and feed trade pic ture in 2020 changes significantly under the severe Asian cri sis and high In dian meat con sump tion sce nar ios (Table 25). The extreme assumptions in the Asian crisis scenario do not change aggregate livestock consumption by much. How ever, they do promote large changes in projected world cereal feed flows. The changes in feed flows are in fact the most sig - 31

41 32 Table 24 Net exports of various livestock products in 1993 and 2020, baseline scenario Beef Pork Poul try Milk Ce re als Region (mil lion met ric tons) China Other East Asia India Other South Asia South east Asia Latin Amer ica WANA Sub- Saharan Af rica De vel op ing world De vel oped world Source: Pro jec tions are from IM PACT. Notes: Net trade in 2020 is pro jected pro duc tion mi nus con sump tion for the com mod ity and re gions hown. Met ric tons are three- year moving av er - ages cen tered on the two years shown and, for meat, re fer to car cass weight. Milk is cow and bu f falo milk and milk prod ucts in liq uid milk equiva lents. Ce re als in clude wheat, maize, rice, bar ley, sor ghum, mil let, rye, and oats. Net export fig ures may not sum to zero overall be - cause of round ing. WANA is West Asia and North Af rica. Mi nus signs in di cate im ports. Table 25 Difference between baseline projections of net exports in 2020 and projections with changes in assumptions about the Asian crisis and Indian consumption Se vere Asian cri sis High In dian meat con sump tion Region Beef and mut ton Pork and poul try Milk Ce re als Beef and mut ton Pork and poul try Milk Ce re als (per cent dif fer ence be tween new sce nario and base line) China In dia , ,038 2,719 55, Other Asia (in clud ing WANA) Latin Amer ica Sub- Saharan Af rica De vel op ing world De vel oped world Notes: The se vere Asian cri sis in cor po rates lower pro jected in come growth and de pre cia tion in ex change rates for coun tries in Asia. De pend ing on the coun try, in come growth pro jec tions are per cent lower than in the base line sce nario, and ex change rate de pre cia tion re sults in 5 13 per cent higher do mes tic prices. The high In dian meat con sump tion sce nario in cor po rates a shift in tastes to ward con sump tion of ani mal foods and in creases in pro duc - tion and feed use ra tios by In dian live stock pro duc ers. In come elas tici ties for ani mal pro d ucts rise to be tween 1.5 and 2.0, de pend ing on the com mod ity. The trend growth rate of In dian herd size rises by per cent (de pend ing on the com mod ity), and feed con ver sion ra tios rise above those typi cal in de vel op ing coun tries. Mut ton in cludes sheep and goat meat and edi ble prod ucts. Milk in cludes all dairy prod uctsi n liquid milk equiva lents. The large per cent age changes for meat and feed in India re flect a low ini tial base. WANA is West Asia and North Af rica.

42 33 nifi cant re sult of the severe Asian crisis as sump - tions, especially because the absolute amounts of feed traded in the baseline scenario are already large. Baseline livestock trade is relatively modest, which should be borne in mind when interpreting the large percentage changes shown for livestock items in most cases. Geographically the severe Asian crisis scenario sharply decreases projected net imports of livestock foods and decreases projected net exports from Latin America and Sub-Saharan Af rica. 10 Pro jec - tions of net imports of feedgrains by Asia also de - cline appreciably, by as much as 27 percent in China. Net ce real feed imports by developing coun - tries decline by 4 percent. Net Chinese meat exports rise by 3.4 mil lion met ric tons and milk exports rise by 0.3 million met ric tons. For Asia other than China and India, the se vere Asian crisis sce nario changes the re gion from a net meat importer in 2020 to a net exporter of 3.2 mil - lion met ric tons. The region s net milk imports de - crease by 5.3 million met ric tons. The ef fects of the Asian crisis decrease domestic demand and in - crease competitiveness in world markets. India re - mains a minor participant in world trade of live - stock products in 2020 under the baseline and Asian crisis scenarios. Countries outside Asia tend to increase their imports of livestock products under se - vere Asian crisis assumptions because of lower world prices. The high Indian meat (and milk) consumption scenario turns India into a major world im porter of meat, milk, and ce real feed in 2020, a substantial shift from its minor trad ing role in the baseline pro - jections (Table 25). Other regions of the world in - crease their net exports of meat and milk, although China and Latin America actually marginally in - crease their imports of ce real feed in response to the expanded meat and milk export opportunities. The very large percentage changes for India are caused by the very low projected trade levels in the base - line projection. Baseline net exports of 77,000 met - ric tons of liquid milk equiva lents in 2020 turns into 42.6 million met ric tons of net imports in the high In dian meat consumption scenario. Even in the face of the unrealistic assumptions of the high Indian scenario, the world system is flexible enough to ad - just with out major dislocations in consumption. Changes in Net Exports under Changed Assumptions about Feed Efficiency The pre vi ous chapter assessed the sen si tiv ity of baseline results to assumptions about feed conver - sion ratios and found that consumption patterns of livestock products did not change much, but cereal use as feed rose or fell depending on whether effi - ciency de creased or increased. The results are dif - ferent for trade, as shown by the wide geo graphic variation in trade projections relative to the baseline (Table 26). An equal percentage increase in feed conversion efficiency applied to all developing countries leads to differing results in different countries, includinga 25 percent increase in net exports of beef from India and a 9 percent decline in net beef exports from China. The price changes that result from decreasing feed conversion efficiency work to increase net ex - ports of cereal feed from the developed countries, India, and Sub-Saharan Africa, and increase net im - ports of cereal feed by China and Latin America. The small percentage of trade in total baseline production and consumption causes the large percentage trade responses seen in some cases. Past Trends in Real World Prices for Crop and Livestock Products and Projections to 2020 under Different Scenarios Debates over the use of cereals as feed need to be cast in the context of stead ily lower returns to feed - ing cattle for meat production over the past 25 years. Real world agricultural prices have slipped steadily relative to manufactured goods prices since the early 1970s (Table 27). Clearly, live stock 10 The con cept of net ex ports could equally well be ex pressed in this case as in creas ing net e x ports from Asia or de creas ing net imports by Latin Amer ica and Sub- Saharan Af rica.

43 34 Table 26 Difference between baseline projections of net exports in 2020 and projections with changes in assumptions about feed conversion efficiency Region In creas ing feed con ver sion ef fi ciency Beef and mut ton c Pork and poultry Milk Ce re als De creas ing feed con ver sion ef fi ciency Beef and mut ton Pork and poul try Milk Ce re als (per cent dif fer ence be tween new sce nario and base line) China In dia , , Other Asia (in clud ing WANA) Latin Amer ica Sub- Saharan Af rica De vel op ing world De vel oped world Notes: The in creas ing feed con ver sion ef fi ciency sce nario as sumes an in crease in the ef fi ciency of con vert ing maize to meat. This re sults in a de - creased rate of in crease for con ver sion ra tios in re gions where they are in creas ing, and an in creased rate of de crease for con ver sion ra tios in re gions where they are de creas ing. The de creas ing feed con ver sion ef fi ciency sce nario as sumes a de crease in the ef fi cienc y of con vert ing maize to meat. This re sults in an in creased rate of in crease for con ver sion ra tios in re gions where they are in creas ing, and a de creased rate of de crease for con ver sion ra tios in re gions where they are de creas ing. Mut ton in cludes sheep and goat meat and edi ble prod ucts. Milk in cludes all dairy prod uctsi n liq uid milk equiva lents. WANA is West Asia and North Af rica. Table 27 Past trends in real prices of selected crop, feed, and livestock products Year Wheat Rice Maize Soy beans Soy meal Fish meal Beef Pork Poul try Lamb Milk (con stant 1990 US$/met ric ton) ,144 n.a. n.a. 3, ,536 2,344 1,474 3, ,585 1,781 1,139 2, ,761 n.a. 1,113 2, World Bank pro jec tions n.a. 1,773 n.a. n.a. n.a. n.a n.a. 1,629 n.a. n.a. n.a. n.a. Sources:Past data are from USDA 1997a and b, IMF 1997, and World Bank World Bank pro jec tions and th e Manu fac tur ing Unit Value in dex used for ex press ing val ues in con stant 1990 U.S. dol lars are from World Bank Notes: Wheat is U.S. no. 1, hard red winter, or di nary pro tein, ex port price de liv ered at Gulf ports for ship ment within 30 days. Rice is Thai 5 per - cent bro ken, WR, milled, in dica tive sur vey price, gov ern ment stan dard, f.o.b. Bang kok. Maiz e is U.S. no. 2, yel low, f.o.b. U.S. Gulf ports. Soy beans are U.S. c.i.f. Rot ter dam. Soy meal is any ori gin, Ar gen tine percent ex trac tion, c.i.f. Rot ter dam, prior to 1990, U.S. 44 per - cent. Fish meal is any ori gin, percent, c.i.f. Ham burg, n.f.s. Beef is Aus tra lian/new Zealand, cow fore quar ters, fro zen bone less, 85 per cent chemi cal lean, c.i.f. U.S. port (East Coast), ex- dock. Pork is Euro pean Com mu nity pork, slaugh ter whole sale price. Poul try is broil ers, twelve- city com pos ite whole sale price, ready- to- cook, de liv ered. Lamb is New Zea land, fro zen whole car casses, whole sale price, Smith field mar ket, Lon don. Milk is U.S. whole milk sold to plants and deal ers, U.S. De part men t of Ag ri cul ture. n.a. in di cates that compa - ra ble prices for those years are not avail able. producers have felt the pain in re cent years. Beef in was priced at only 34 per cent of its inflation-adjusted level in , while maize was 54 per cent of its inflation-adjusted price in the same period. Furthermore, the 10 per cent global expansion of cereal feed use by weight be tween the early 1980s and 1990s (Table 15) occurred at a time when maize and soy beans declined in price by more than one-third. This lends support to the argument that additional concentrate feeds will be supplied with little real in crease in price. This argument is tested by the IMPACT model, which produces a se - ries of market-clearing world prices in equilibrium

44 35 (Table 28). For comparison, single-equation price projections to 2010 by the World Bank are reported at the bottom of Table 27. Compared to the World Bank projections to 2010, the IMPACT baseline projections show 38 percent higher maize prices and 3.5 percent higher beef prices. The global food supply and demand ap - proach of IMPACT captures the effect of the Live - stock Revolution on cereals prices, whereas singleequation methodology does not. Even so, IMPACT projects that real world maize prices in 2010 will be only about 10 percent above actual prices, which were historically low. Thus, the Livestock Revolution prevents cereal prices in the baseline pro - jections from falling further from their currently low levels, and perhaps even increases them slightly, but nowhere near their level in the early 1980s. The severe Asian crisis assumptions decrease real world prices in 2020 by 7 per cent for maize and 5 percent for beef. These are significant effects, but the assumptions for this scenario are extreme be - cause they posit that the cri sis lasts though The high Indian meat scenario increases world maize prices by 13 percent and world beef prices by 9 percent. Chang ing tastes in India have even greater ef fects on world livestock markets than does a severe economic cri sis in Asia, but in the op po site direction. Increasing feed conversion efficiency low ers real world maize prices by 17 per cent relative to baseline projections for Decreasing feed con - version efficiency increases maize prices by 21 per - cent. Livestock prices, on the other hand, are hardly affected. Ce real producers and consumers clearly have a lot at stake in feed conversion efficiency. Livestock producers in individual countries have a lot at stake as well, even if tech nol ogy is shared by all producers, because increasing feed efficiency fa - vors some producers while de creased feed efficiency favors others. Livestock consumers have surprisingly little at stake, at least as far as the cost of livestock food products is concerned. Why Is the Livestock Revolution Not Likely to Raise World Cereal Prices Significantly? Com pari son of the IM PACT price pro jec tions under various scenarios with the historical rate of decrease of real food prices in the last quar ter cen - tury suggests that the rate of decline of food prices Table 28 Real prices of se lected crop and livestock products as projected by the IMPACT model Year Wheat Rice Maize Soy beans Beef Pork Poul try Lamb Milk (con stant 1990 US$/met ric ton) Base line prices ,023 1,366 1,300 2, Base line projections ,835 1,260 1,175 1, ,768 1,209 1,157 1, Se vere Asian cri sis sce nario projections ,676 1,104 1,074 1, High In dian meat con sump tion sce nario pro jec tions ,927 1,287 1,259 2, In creas ing feed con ver sion ef fi ciency sce nario pro jec tions ,738 1,188 1,134 1, De creas ing feed conversion ef fi ciency sce nario pro jec tions ,802 1,233 1,183 1, Sources:The updated IMPACT baseline projections and the severe Asian crisis scenario are from Rosegrant et al and Rosegrant and Ringler Notes: The scenarios are independent of each other. The IMPACT baseline prices in are fully comparable to the actual series given in Table 27.

45 36 during the next quarter century is likely to be much weaker than in the past. This is undoubtedly a result of the Livestock Revolution. Real ce real prices, however, are not likely to rise very much by 2020, contrary to the fears of some reported in Chapter 1. The primary explanation for IMPACT s pro - jection that cereal prices will continue to be low even as demand for both food and feed in creases is that the world is thought to have considerable re - serve capacity for additional ce real pro duc tion. This assumption not only fits the evidence of the past 25 years, during which world production out - put changed in response to price, but also accords with the dozens of price response parameters for ce - reals (for 37 countries and regions times a half dozen crops) built into the model and mostly taken from independent sources (Rosegrant, Agcaoili- Sombilla, and Perez 1995; Pinstrup- Andersen, Pandya-Lorch, and Rosegrant 1997). The traditional explanation for the high supply responsiveness of cereals found in the empirical lit - erature is that the large grain-exporting countries, such as Australia, Canada, and the United States, have the ability to bring large amounts of land typi - cally not sown to grain into cereal production as prices rise. Furthermore, cereal cultivation by the large grain exporters usually is less input-intensive than in many importing countries. Average wheat yields in Britain, for example, are much higher than in the United States. This leaves considerable scope for exporting countries to increase production through higher fertilizer use, which becomes profit - able when cereal prices are high. The tremendous productivity increases in cereals in recent years also attest to the spur of prices. These increases have come about to a large extent in response to the higher cereal prices that made investing in production inno - vations economic (Hayami and Ruttan 1985). Another explanation of the high sup ply respon - siveness of ce re als is that in a system of global mar - kets, where actors all over the world re spond to changing price incentives, individual shocks are smoothed out over time through myriad adjust - ments through out the system. In other words, world supply will be more price-responsive than individ - ual country supply, a phenomenon well-captured in IMPACT. A final phenomenon of di rect relevance to ce - real sup ply is that in areas containing a sig nifi cant share of the world s poor, the rise in the consump - tion of calo ries from animal products is matched by a decrease in calo ries from starchy sta ples. People in China s rural areas, for ex am ple, con sumed nearly 200 kilograms per capita of grain di rectly as food in 1991, while people in the richer urban areas consumed an average of 130 kilograms per capita, a figure much closer to average consumption levels elsewhere in the developing world (Huang and Bouis 1996). Rice and wheat are the grains typi - cally consumed in China. These grains have signifi - cantly lower average yields per hectare than maize, a feed grain increasingly cultivated by Chi nese farmers. Thus, substitution of meat and milk for grain in the diet liberates some grain from direct consumption as food, and the consequent increase in aggregate grain supply is amplified by the rela - tively higher yields of feedgrains per hectare. All of this suggests that the Livestock Revolution is inti - mately wrapped up with nutritional and food secu - rity, the subject of the next chap ter.

46 6. Nu tri tion, Food Se cu rity, and Poverty Al le via tion The trends noted in the previous chapters strongly suggest that livestock consumption patterns in de - vel op ing coun tries are rap idly con verg ing with those in developed countries, putting severe pres - sure on production sys tems in developing countries to do the same. The considerable controversy in both the popular and scientific literature about the desirability of livestock consumption and produc - tion patterns in the richer countries raises concerns about what the Livestock Revolution portends for human welfare in the poorer coun tries. It seems prob able, for ex am ple, that mas sively larger amounts of cereals will be used as feed to pro duce items consumed primarily by better- off urban peo - ple in countries where out right lack of food is still common (Brown and Kane 1994; Goodland 1997; Pimentel 1997). These concerns raise complex nutritional, food security, and poverty alleviation issues. Nutritional is sues in this context include the ef fect of con sump - tion of specific animal food products on health and well- being in specific situations. Food security is - sues encompass the ability of people to se cure enough food on a regular basis for healthy and pro - ductive lives. Pov erty alleviation issues in clude the ex tent to which the production and sale of animal products might lead to widespread net im prove - ment in the livelihood of the rural poor. The IMPACT projections shed light on likely trends in ce real and animal product prices under dif - ferent scenarios for the Livestock Revo lu tion. The impact of livestock on the purchasing power of the poor, the other side of the cereal affordability issue, must be assessed with highly disaggregated data. As will be seen below, evidence from household stud ies around the developing world suggests that in many cases the rural poor, especially women, get a larger share of their in come from livestock sources than do the rela tively wealthy. These find - ings raise questions about the morality of blanket anti-livestock positions in policymaking. But whether the traditional livestock enterprises of the rural poor can coexist with increased industrializa - tion of livestock production is an open question. Fi - nally, increasing intensification of production raises other ethical issues, including concerns about animal welfare and the unpleasantness suffered by those who live downwind from major industrial hog farms. As with other structural changes in the food sector that are important to human wel fare, such as the Green Revolution in cereals, popular discussion of the effect of the Livestock Revolution on devel - oping countries is occasionally highly emotional and often imperfectly grounded in facts. The objec - tive of this chap ter is to show how the research pre - sented in the rest of this paper relates to the discus - sion of welfare is sues. The Livestock Revolution and Nutrition in Developing Countries The discussion of nutritional issues in this section does not ad dress the health ef fects of consuming contaminated food products. Those ef fects are dis - cussed in Chapter 8. Even if contamination can be dealt with, is in creased consumption of meat and milk a good thing? Concerns about medi cal prob - lems clearly associated with very high meat and milk consumption in societies such as the United States must be taken seriously (Barnard, Nicholson, and Howard 1995). But some times these concerns are ex trapo lated di rectly to developing countries in fairly blanket fashion (Goodland 1997; Pimentel 1997) and some times selectively, as in the case of China s cities (Geissler forth com ing). Scientific conclusions about the ef fects ani mal products can have on nutrition in developing coun - tries not only depend on the demographics and in - come levels of target groups and the com modi ties 37

47 38 under study (CAST 1997a), but they vary also because of the methodologies employed (Hu and Wil - lett 1998). And randomized clini cal endpoint trials or other forms of investigation designed to control for spurious correlations when comparing longterm before and after conditions may be diffi - cult to conduct. One often-cited approach to study ing the link between meat consumption and health re lies on cor - relations be tween disease rates and pat terns of live - stock product consumption across locations. A prominent example is a study that looks at such cor - relations across 65 counties of rural China (Chen et al. 1990). Yet while this approach raises issues quickly and exploits large amounts of data, its re li - ability is open to question as Chen et al. (1990) themselves point out. The China study could not fully control for other variables that might also ex - plain the results (Hu and Wil lett 1998). Hu and Willet recently (1998) conducted a thor - ough review of the relationship between consump - tion of animal products and the risk of chronic dis - ease for the World Bank. The goal was to sort through conflicting evidence in order to provide guidance to the World Bank s investment policies in developing countries. They drew in evidence from all over the world, assuming that while diets and nu - tritional needs change across environments and work regimes, human biology probably does not. Hu and Willett found that red meat (beef, pork, lamb) consumption beyond a low thresh old level probably increases the risks of coronary heart dis - ease (CHD); dairy products may also do so but to a lesser extent; eggs are probably unrelated to CHD up to one egg a day; and poultry and fish proba bly decrease CHD. Moderate red meat intake, however, may re duce the risk of hemorrhagic stroke in cases where ini tial intake levels are very low. High lev els of red meat intake may increase the risk of various forms of cancer, but substitution of poultry and fish for red meat proba bly reduces the risk. Dairy prod - ucts may be a risk factor in prostate can cer. Hu and Willett con clude that health policy in developing countries should distinguish poultry and fish from beef and pork because the former proba bly pro vide greater nutritional bene fit than the latter. Hu and Willett also see bene fits from expansion of egg and dairy consumption where consumption levels are as low as they are in developing countries. Authoritative lit era ture on human nutrition in the developing world stresses the widespread prevalence of mild to moderate protein-energy mal - nutrition affecting up to one-third of all chil dren and perhaps a higher share of pregnant or lac tat ing women. The lit era ture em pha sizes the critical role adequate balance and ade quate levels of bioavail - able protein, calo ries, and key micronutrients (such as vitamin A, iodine, and iron) play in mental and physical development (Calloway 1995; Sharma et al. 1996; Latham 1997; Neumann and Harris 1999; Geissler forthcoming). Research also shows that adequate, balanced nutrition helps prevent morbid - ity. Animal products are portrayed in this literature as excellent sources of ab sorb able forms of iron, zinc, vi ta min B 12, and re ti nol. Certain meats and milk products are cited as vari ously being good sources of thiamin, calcium, vi ta minb 6, riboflavin, vitamin A, and other min er als required in higher amounts during growth periods (Calloway 1995; Latham 1997; Neumann and Harris 1999). Although a large com bi na tion of crop- based nutrients could also provide the necessary amino acids and trace nutrients to meet nutritional needs, securing such a balance through out the year with vegetable matter alone is not easy for the rural poor in developing coun tries. On the other hand, in - creased consumption of even a rela tively small ad - ditional amount of meat and milk would supply the necessary protein and micronutrients and a fair share of needed additional calo ries, especially to children, and would do so with a much less var ied vegetable-matter diet than using crops alone (Latham 1997; Hu and Willet 1998; Geissler forth - coming; Neumann and Harris 1999). For all these rea sons the Livestock Revolution appears to have many potential bene fits for nu tri - tion in developing countries. At present these po - tential bene fits proba bly outweigh the potential nu - tritional costs. Whether nutrient balance is secured through a wide variety of crops or a smaller variety of crop and animal prod ucts, good nutrition clearly requires the overall in take of an ade quate amount of food. The primary nutritional issue for most poor people in most developing countries probably re - mains securing both an adequate amount of food and a balanced diet. Once a per son regularly consumes excess food calories, the sorts of health problems as so ci ated

48 39 with excess consumption of cholesterol and satu - rated fatty acids in the developed countries will probably be come more prevalent in developing countries, especially among the rela tively wealthy in urban areas. However, average per capita con - sumption of meat and milk in developing countries in 2020 are pro jected to be less than half the pres ent developed-country av er age (see Table 16). At lev - els that low in 2020, the majority of people on the planet are un likely to face the problem of excess meat and milk consumption for quite some time. The pos si bil ity that the people who could most bene fit from increased meat consumption may not share in the Livestock Revolution should be a greater concern than overconsumption. Whether they do bene fit will depend principally on the evo - lution of food prices and the incomes of the needy, top ics discussed in the following sec tion. The Livestock Revolution and Food Security of the Poor Both ecologists and animal scientists, unlike econo - mists, tend to view the ef fect of increased animal production on food sup plies in developing coun - tries as a trade-off between using ce re als (and the land and water used to produce them) as food or feed. Cal cu la tions are then pre sented to argue whether extra production of animal products adds or subtracts from a hypothetical calorie bal ance available for humans (CAST 1994; Pimentel et al. 1997; Goodland 1997; Brown and Kane 1997). Pro- livestock authors tend to stress that ru mi - nant ani mals in de vel op ing coun tries mostly use natu ral grasses and other feed with lit tle use as food. They also stress the im por tant non food uses of live stock (Fitz hugh 1998; CAST forth com - ing). Anti- livestock authors em pha size that monogas tric live stock ac count for much of the growth of pro duc tion under the Live stock Revo - lu tion, that these ani mals re quire high en ergy feed such as ce re als, and that they do not fully re - place the ce real calo ries used to pro duce them. These authors also argue that because live stock food prod uct con sump tion increases rap idly with in come, the rich proba bly will bid away the food - stuffs of the poor in the mar ket place (Pi men tel 1997; Brown and Kane 1997). Economists tend to reduce the issue to whether increased animal production increases or de creases cereal and meat and milk prices relative to the in - comes of poor people, other things being equal. This approach has the merit of defining food secu - rity in terms of the ability people have to purchase food staples. But it does not address fully whether all members of the house hold have physical ac cess to food at average world prices or whether people who are sick can use fully absorb that food at all times. Assessing the im pact of in creased livestock production on household incomes and food prices is an improvement over nonentitlement approaches and about the best that can be done here. The pre vi ous chapter showed that the simple in - ference that in creased livestock consumption will significantly raise cereal prices by 2020 does not mesh with the rather different and complex picture drawn by the IMPACT projections. Recall that baseline, inflation-adjusted rice and wheat prices in 2020 are pro jected to be 8 to 10 per cent below lev - els in the first half of the 1990s. Maize prices are projected to decline by only 2 percent. Furthermore, average world cereal prices in the mid-1990s were only about two-thirds (maize) to half (rice) their av - erage inflation-adjusted prices in the early 1980s (Table 27). In the worst-case sce nario investigated by IMPACT, rice and wheat prices exceed their inflation-adjusted levels in by only 8 11 percent (Table 28). The price of maize goes up 21 percent. IMPACT also projects modest long- term declining price trends for various meats and milk. The consumption patterns of the rich may prevent livestock products from becoming even more af - fordable to the poor, but they do not appear to be likely to raise the price of livestock products much above their current lev els. In sum, food prices have been decreasing over the long term, despite rapid in creases in the use of cereal feeds. The Livestock Revolution is likely to slow this decreasing trend somewhat by But the trend reverses only under extreme con di tions, and even if it does, the price increases are expected to be small relative to the real price declines seen since the early 1980s. The Livestock Revo lu tion s effect on the food security of poor peo ple, through cereal prices, is likely to be far less important than its ef fect on the income of the poor.

49 40 The Livestock Revolution and Incomes of the Poor Livestock are central to the livelihood of the rural poor in developing countries in at least six ways (Livestock in Development 1998). First, they are an important source of cash income. Second, they are one of the few assets avail able to the poor, es pe - cially poor women. Third, livestock manure and draft power are vital to the preservation of soil fer - tility and the sustainable intensification of farming systems in many developing areas facing increasing population den sity. Fourth, livestock allow the poor to exploit com mon property resources, such as open grazing areas, in order to earn income. Fifth, live - stock products enable farmers to di ver sify in comes, helping to reduce income variability, es pe cially in semiarid sys tems characterized by one cropping season per year. Sixth, livestock provide a vital and often the only source of income for the poorest and most marginal of the rural poor, such as pastoralists, sharecroppers, and widows. A broad variety of anecdotal evidence from case studies in Africa, Asia, and parts of Latin America shows that the poor and landless derive a higher share of their household income from livestock sources than do the relatively better-off in the same rural communities. Estimates of the share of house - hold income coming from livestock for households with different income levels, farm sizes, and dietary adequacy from all over the world are presented in Table 29. In Pakistan in the late 1980s, for example, Adams and He (1995) found that about 25 percent of the income of the poorest 20 percent of rural house - holds in their sample came from livestock. The rich - est 20 percent received only 9 percent of their in - come from livestock. In Egypt in the mid-1970s, Fitch and Soliman (1983) found that an average of 63 percent of the income of landless or near landless households came from livestock. Only 14 percent of the income of large landowners came from livestock. Von Braun and Pandya-Lorch (1991) identify four countries where the malnourished get more of their incomes from livestock than those who are not mal - nourished. Vosti, Witcover, and Carpentier (1998) show an exception to this trend in their study of Bra - zil. In parts of Latin America, such as the Amazon and Argentine Pampas, successful animal grazing re - quires control of large amounts of land. Poor people have few opportunities to increase their incomes because of limited access to land and capital. Small- scale and backyard livestock produc - tion enables the poor to earn income from animals grazed on com mon property pastures or fed house - hold waste. Livestock production of fers one of the few rapidly growing markets that poor, rural peo ple can join even if they lack substantial amounts of land, training, and capital. The importance of livestock for women s in - comes in developing countries has been widely em - Table 29 The place of livestock in the income of the rich and poor Country Wealth/poverty in di ca tor Stra tum Per cent of house hold in - come from live stock Pe riod/size of sample Source Bra zil (West ern Ama zon) House hold in come stra tum Low est 1 /5 High est 1 /5 37 a 1994, 154 ru ral 64 a house holds Vosti, Wit cover, and Car pen tier 1998 Ethio pia House hold in come stra tum Very poor Poor , 550 rural house holds Webb and von Braun 1994 Kenya House hold in come stra tum Low est 1 /5 High est 1 /5 61 b 1998, 310 dairy 38 b farm ers Staal and Bal ten weck 1998 Paki stan House hold in come stra tum Low est 1 /5 High est 1 / , 727 ru ral house holds Ad ams and He 1995 Phil ip pines House hold in come stra tum Low est 1 /5 High est 1 /5 23 c 10 c , 500 ru ral house holds Bouis 1991 (continued)

50 41 Table 29 Continued Country Wealth/pov erty in di ca tor Stra tum Per cent of house hold in - come from live stock Pe riod/size of sample Source Sene gal Sa he lian (dri est) zone House hold in come stra tum Low est 1 /3 High est 1 / , 29 ru ral house holds Kelly et al Su da nian (tran si tion) zone House hold in come stra tum Low est 1 /3 High est 1 / , ru ral house holds Guinean (for ested) zone House hold in come stra tum Low est 1 /3 High est 1 / , ru ral house holds Sudan House hold in come stra tum Low est 1 /5 High est 1 / , 240 rural house holds Teklu, von Braun, and Zaki 1991 Egypt Land hold ings Landless or near landless Largest landholders , 165 households Fitch and Soliman 1983 In dia (Andhra Pradesh and Ma harash tra) Land hold ings Low est 1 /5 of land distribution Highest 1 /5 of land distribution , 699 households Kerr 1998 In dia (Andhra Pradesh and Ma harash tra) Land hold ings Landless Largest landholders , 240 households Singh, Asokan, and Walker 1982 Mo zam bique Monapo Landholdings Lowest 1 /4 of land distribution Highest 1 /4 of land distribution , 343 smallholder households Mozambique MOA/MSU/UA Research Team 1992 Ribaue Landholdings Lowest 1 /4 of land distribution Highest 1 /4 of land distribution 6 5 Angoche Landholdings Lowest 1 /4 of land distribution Highest 1 /4 of land distribution 3 2 Pakistan Landholdings Landless Largest landholders , 727 households Adams and He 1995 Brazil Dietary adequacy Malnourished Not malnourished , 384 rural households von Braun and Pandya-Lorch 1991 Pakistan Dietary adequacy Malnourished Not malnourished , 1,082 rural households von Braun and Pandya-Lorch 1991 Philippines Dietary adequacy Malnourished Not malnourished , 792 rural households von Braun and Pandya-Lorch 1991 Sri Lanka Dietary adequacy Malnourished Not malnourished , 480 rural households von Braun and Pandya-Lorch 1991 a Per cent of in come from cat tle. b Per cent of in come from dairying. c Per cent of in come from live stock, fruit, and vege ta bles.

51 42 phasized (Quisumbing et al. 1995; Valdivia, Dunn, and Sherbourne 1995). Dairy cooperatives have in fact been a major means of bringing women in poor areas successfully into the cash econ omy in East Africa (Brokken and Sey oum 1992), India (Schnei - der 1995), and Bo livia (Valdivia, Dunn, and Sher - bourne 1995). A pattern that shows that the poor earn a higher share of their income from livestock than do the wealthy raises the pos si bil ity that the Livestock Revolution will be good for the poor. The revo lu - tion of fers two main reasons for optimism. First, the poor can more easily improve their incomes when they have a major stake in a sector that is growing. Second, the current rapid intensification of ani mal production comes at a time when the rural poor des - perately need higher returns to their shrink ing land than field crops alone can offer. The main reason for concern is that increased intensification might make small operators uncom - petitive compared to large producers. But true economies of scale in livestock production may not be great once explicit and im plicit government sub - sidies to larger producers are taken into account. Large producers in many areas enjoy capital sub si - dies, tax holi days, free government services, exon - eration from certain pollution and health require - ments, and sub si dies on public graz ing land rented in large units. Elimination of subsidies or their re di - rection toward small- scale producers could shift the market in favor of the poor. A less trac ta ble problem is that large producers often find it eas ier to con tract or vertically integrate with processors than do small producers in developing countries, and there are major economies of scale in the processing of perishable products. Trade in perishables bene fits greatly from process - ing arrangements that standardize quality and make the quantity supplied plen ti ful and re li able. Large producers also bene fit greatly from marketing infra - structure that alleviates the need to sell per ish ables the same day to the end user, as is traditionally the case in the developing tropics. Small op era tors can over come these bar ri ers by join ing in sti tu tions of col lec tive ac tion, such as out grower schemes or par tici pa tory pro ducer co op era tives (Staal, Del gado, and Nichol son 1997; Del gado 1998). But the es tab lish ment of such in sti tu tions re quires or gani za tion and investment that does not cur rently exist in most de vel op ing coun tries. Opportunities for rapid growth are rare in poor rural areas. Livestock production may provide one such opportunity. The poor around the world have shown their ability to produce livestock, and the fu - ture for the sector as a whole looks good. However, policymakers and researchers urgently need to find the best market-oriented means for ensuring that small operators benefit from growth in the livestock sector. To accomplish this, policies will have to focus on rural organization. Livestock production may provide one of the major operational themes in effective rural poverty alleviation during the next 20 years, but things could also go the other way. Fail ure to address how policies have tended to skew live - stock development in favor of overly large produc - tion units, and failure to promote the vertical coordi - nation of small operators with processors, will lead to a major missed opportunity. Worse, those who need the activity most could be driven out of live - stock production. Other Ethical Issues Raised by Trends in Livestock Production Some nonfood ethical issues associated with the Livestock Revolution cannot be neglected. To date these issues have manifested themselves primarily in developed countries, where intensification has pro - ceeded the most. But there is no reason to think that these concerns will not show up elsewhere soon. Animal welfare is a grow ing ethi cal concern in the era of massive hog factories and industrial chicken houses (CAST 1997b). As production in - tensifies in developing coun tries, concerns over animal welfare will surely surface. Evidence for this is suggested by cultural attitudes toward cows in India, by the strong religious views on rit ual slaughter held in many parts of the world, and by the esteem that traditional stockraisers eve ry where hold for their cat tle. The air and water pollution that intensive ani - mal industries occasionally create for their neigh - bors, especially in periurban areas with little partici - patory government, is also likely to bring increased conflict. Pure market forces in the absence of effec - tive po liti cal backlash could create hog lagoons

52 43 alongside residential neighborhoods. Ad vance planning and appropriate regu la tion by accountable government authori ties can help over come the fact that markets do not always reflect the full costs borne by all par ties, including neigh bors. Finally, genetic engineering could push the lim - its of ethical debates in the next 20 years (see Chap - ter 9 for a discussion of the technology). Cloning of animals raises understandable concerns about possi - ble abuses, particularly given the temptation to work next on humans. Yet the insertion of human genes into transgenic livestock in order to mass produce human proteins in animal milk may be essential for lowering the production costs of numerous pharma - ceuticals that remain out of reach for all but the rela - tively rich. Such experiments may also lead to the development of new drugs, for example for the treat - ment of cystic fibrosis (Gillis 1999). Regardless of the viewpoint adopted, few people anywhere who are aware of the issues will remain morally indifferent.

53 7. Environmental Sustainability Rap idly in creas ing live stock pro duc tion can cause se ri ous dam age to the en vi ron ment, but it can also be har mo ni ous with or even bene fi cial to the en vi - ron ment when ap pro pri ate types and lev els of pro - duc tion are in place. 11 Tech no logi cal prog ress can fur ther re duce dam ag ing ef fects while in creas ing out put. This chap ter will iden tify the en vi ron - mental prob lems that are now or likely to be come the most se vere and the poli cies that ex ac er bate these prob lems. It will also iden tify tech nolo gies and poli cies that can en hance the en vi ron mental sus tain abil ity of live stock pro duc tion as the Live - stock Revo lu tion un folds. Livestock-Environment Compatibility Historically, livestock have played a critical role in the pro cess of ag ri cul tural in ten si fi ca tion. Live - stock recycle nutrients on the farm, pro duce valu - able output from land that is not suit able for sus - tained crop production, and provide energy and capital for successful farm operations. The in te gra - tion of livestock and crop operations is still the main avenue for sustainable intensification of agri - culture in many regions of the developing world. This is especially true in semi arid and subhumid sa - vanna areas receiving 600 to 1,200 millimeters of annual rainfall. Much of the interior of West, East, and South ern Africa, northeast Bra zil, and much of South Asia belong to this agroclimatic cate gory. Livestock can help maintain soil fer til ity in soils lack ing ade quate organic content or nutrients (Ehui et al. 1998). Adding ma nure to the soil in - creases the nutrient retention capacity (or cationexchange capacity), improves the soil s physical condition by increasing its water-holding capacity, and improves soil structure. Animal ma nure also helps maintain or create a better climate for micro flora and fauna in soils. Graz ing animals improve soil cover by dispersing seeds, controlling shrub growth, breaking up soil crusts, and removing bio - mass that otherwise might be fuel for brush fires. These activities stimulate grass tillering and im - prove seed germination, and thus improve land quality and vegetation growth. Livestock en able farm ers in the resource-poor areas of developing countries to allocate plant nu tri - ents across time and space. Land that can not sustain crop production can be used for grazing to pro duce manure that can make other land more productive. Grazing livestock can ac cel er ate transformation of nutrients in crop byproducts to fer til izer, speed ing the process of land recovery be tween crops. Large parts of the de vel op ing world, es pe - cially in sub hu mid Af rica, are only now be gin - ning to gain the bene fits of farm ing that mixes crops and live stock. As dis ease con straints are re - moved, large live stock ani mals can be in te grated into crop op era tions, pro vid ing farm power and ma nure. In other parts of the world, such as Asia, high crop ping and land- use in ten si ties have been sus tained over cen tu ries by in te grat ing crop and live stock ac tivi ties. Live stock con tinue to be kept for ma nure and power in these areas, but food pro duc tion is be com ing more promi nent with in - creas ing com mer ciali za tion. Mixed livestock and crop farm ing takes on a different form in the more intensified production systems in both developed and developing countries. Crop and livestock operations are integrated into a local system where waste from each operation is proc essed and transported to become a cheap 11 This chapter draws on Ste in feld, de Haan, and Black burn (1997) and de Haan, Ste in feld, and B lack burn (1997). 44

54 45 input for the other. Regionwide integration of live - stock and crop operations emerges fairly soon in mixed farming. Small-scale rural in fra struc ture, such as feeder roads and light motorized or animal trans port, facilitate this integration. In more inten - sive industrial farming systems, the potential for overloading fields with nutrients from farm ma nure be comes a problem. Environmental Problems in the Low-Intensity Livestock Systems of Developing Countries Tra di tional, low- intensity live stock pro duc tion meth ods remain in many regions of the world. Pro - duction levels in these sys tems are determined by locally avail able resources. Increased demand pres - sure can push these sys tems to pro duce beyond their ca pac ity. This can bring them into conflict with the en vi ron ment, necessitating changes in traditional practices to reduce damage. Livestock graze on about 26 percent of the world s land area. Grazing systems in developing re - gions mainly rely on native grassland and are only partially mixed with crops. These systems usually do not involve inputs from outside the system. Over - grazing can cause soil compaction and erosion, and can decrease soil fertility, organic matter content, and water infiltration and storage. Overgrazing in hilly environments can accelerate erosion. The United Na tions En vi ron ment Pro - gramme (UNEP) es ti mates that since 1945 about 680 mil lion hec tares, or 20 per cent of the world s graz ing lands, have been sig nifi cantly de graded (Olde man, Hak keling, and Som broek 1991). Re - cent evi dence sug gests, how ever, that graz ing sys tems are more re sil ient than once thought, even in the worst cases, where drought has ex - tended des ert mar gins. Sat el lite im agery shows re cent vege ta tion grow ing in the West Af ri can Sahel at the same north ern lim its where it once grew be fore the big droughts of the 1970s and 1980s (Tucker, Dregne, and New comb 1991). Arid grazing sys tems have extremely lim ited potential for increasing productivity and great potential for suffering last ing damage. Production in these areas has adapted continuously to highly variable rainfall and feed availability (Behnke, Scoones, and Kerven 1993). Where irrigation or crop production have interfered with livestock resources and movement patterns, ecologically sound sys tems often have been disrupted. Popula - tions have become sedentary around water points in many cases. The result ing overgrazing and land degradation have threat ened the livelihood of pas - toral com mu ni ties. Flexibility and mobility are essential for achieving sustainable rangeland use in arid areas. Unfortunately, both were se ri ously im paired in the past by poli cies that settled pas tor al ists and at - tempted to regulate stocking rates from above rather than in consultation with stock raisers. Wellintentioned changes often disrupt traditional sys - tems and sometimes make them unsustainable. For example, new water points in duce settlement of large animal and human populations in dry areas. They also make possible year-round graz ing instead of allowing stock ing levels to fluc tu ate so that they are low dur ing the dry season. The resulting over - load of ani mals on the range se verely degrades grazing resources around the new source of water. Semiarid zones can sustain more intensive agri - culture than arid zones, mak ing pos si ble greater human and livestock populations. Crop encroach - ment on pastures, deforestation through fuelwood collection, and over graz ing of remaining pas tures can then ensue. Crop encroachment on marginal land not only exposes the soil directly to the ero sive effects of winds and heavy rains, but it ham pers the flexibility of animal movement by obliterating pas - sages between wet- and dry-season graz ing areas. Drought emer gency programs that hand out subsi - dized concentrate feed further contribute to range degradation by enabling too many ani mals to be maintained on the range and preventing natu ral re - generation of the range vege ta tion after drought. These feed sub si dies increasingly have become an entitlement for pastoralists, especially in North Af - rica and the Middle East. Human popu la tion pres sure is a key contributor to environmental deg ra da tion in many areas where livestock are kept. When institutional failure al lows people to extract private goods (livestock production) from public goods (com mon rangeland) with - out limit, the degradation is even greater. The situa - tion is aggravated further when stock num bers can be kept high at all times because of water develop -

55 46 ment and local cropping in previously pastoral areas. These well-intentioned but ecologically harmful policies often explain why degradation tends to be more severe in semiarid zones than in arid rangelands. Tropical rainforests cover about 720 million hectares and contain approximately 50 per cent of the world s biodiversity. More than 200 million hectares of tropical rainforest have been lost since Contributing factors include ranching, crop cultivation, and forest ex ploi ta tion. Ranchingassociated deforestation has been linked to the loss of some unique plant and animal species in South and Central America, the world s richest source of biodiversity. In Central Amer ica the area under pas - ture has in creased from 3.5 mil lion to 9.5 million hectares since 1950, and cattle populations have more than doubled from 4.2 million to 9.6 million head (Kaimonitz 1995). Clearing forest and sa vanna to es tab lish pas - tures in humid areas causes soil nutrients to leach out rapidly under high rainfall and high tempera - tures. Weeds soon displace grasses and artificial pastures can only be sustained for a period of up to 10 years. More than 50 percent of the pasture areas in the Amazon are now ungrazed fallow, with a sig - nificant por tion being aban doned because of deg ra - dation. Natu ral regeneration of forests is difficult, especially when the cleared areas are large. Policies that make titling of land easy and pro - vide financial in cen tives for large ranches have been the main rea sons for ranch- induced deforesta - tion (Kaimonitz 1995). In the late 1960s and 1970s, Brazil subsidized agricultural loans and beef ex - ports, play ing an important role in ranch expansion. These policies have now been phased out and investment in large ranches by ab sen tee own ers has declined, and so has the rate of deforestation. In Central America in the 1980s rainforests dis ap - peared at an annual rate of 430,000 hectares per year. In that rate was 320,000 hectares an - nually. The les son of the 1960s and 1970s is that subsidizing horizontal expansion of livestock pro - duction can cause great environmental damage and create disincentives for intensification. Increasingly evident in the Amazon today are small crop farm ers who switch their cleared-forest fields over to livestock grazing only after the soil nutrients nec es sary to raise crops have been ex - pended (Faminow and Vosti 1998). How these farmers will survive on land that is increasingly de - graded is uncertain. No clear alternatives exist. In many regions farm sizes may shrink because of population pressure, urban encroachment, and subdivision among heirs. Expanding farm opera - tions into communal or new land under these condi - tions often leads to deforestation or overgrazing. As communal grazing and new land become increas - ingly scarce, whole farm ing systems may lose their livestock com po nent. First to go are large stock such as cattle, jeopardizing the nutrient balance in farms along with farm ers livelihoods. Re ported nutrient defi cits range from about 15 kilograms of nitrogen per hec tare per year in Mali, to more than 100 kilograms of nitrogen per hectare per year in the highlands of Ethiopia (de Wit, Westra, and Nell 1996). In virtually all tropi cal highland areas (for ex - ample, the Himalayan hills, Af ri can highlands, An - dean coun tries, and Java) relatively high human population densities are traditionally sustained by complex mixed farm ing systems. Further popula - tion growth in many of these regions has made it impossible for the traditional mixed systems to sur - vive. Modified mixed smallholder farming is possi - ble when market development permits investment in intensive tech nolo gies and in puts. Environmental Problems of High-Intensity Industrial Livestock Production As live stock pro duc tion in ten si fies, pro duc ers adopt tech nolo gies that minimize overt di rect costs associated with land and labor and take maxi mum advantage of free access to environmental public goods and capital subsidies. These highly in ten sive industrial production meth ods are the rule in devel - oped countries and grow ing rap idly in importance in the developing world. Escalating demand for animal products leads to animal concentrations that are out of balance with the waste ab sorp tion and feed sup ply capacity of available land. High concentrations of ani mals close to human agglomerations often cause enor - mous pollution problems. Large areas of West ern Europe (Netherlands, northwestern Ger many, Brit -

56 47 tany [France], the Italian Po valley), the north east - ern United States, and, increasingly, coastal South - east Asia and large plain areas in China now show enormous nutrient surpluses that range from 200 to more than 1,000 kilograms of nitrogen per hec tare per year (Steinfeld, de Haan, and Blackburn 1997). Globally pig and poultry industries produce 6.9 mil lion tons of ni tro gen per year, equivalent to 7 percent of total in or ganic nitrogen fertilizer pro - duced in the world. Ex cess nitrogen and phosphorus leach or run off the land, affecting ground wa ter qual ity and damaging aquatic and wetland eco sys - tems. Tests in Pennsylvania have shown that about 40 per cent of the soil samples from mixed dairy and crop farms exhibited excessive phosphorus and po - tas sium lev els. Sur plus nutrients from satu rated soils leach into surface water and pollute the en vi - ronment (Nar rod, Reynnells, and Wells 1994). A simi lar scenario is un fold ing in Brittany, where one in eight districts had soils with nitrate levels of more than 40 milligrams per liter in the 1980s. Now all eight districts report such nitrate lev els, which can cause extensive dam age to the region s aquatic sys tems (Brandjes et al. 1995). Ex cess concentrations of livestock and live - stock waste also pro duce gases. Some, such as am - mo nia, remain local. Others, such as carbon dioxide (CO 2 ), methane (CH 4 ), and nitrous oxide (N 2 O) af - fect the world s atmosphere by trap ping the sun s energy and contributing to global warm ing. There are three main sources of livestockrelated carbon dioxide emissions. First, do mes ti - cated ani mals emit carbon dioxide as part of basic metabolic functioning or respiration, at an es ti - mated level of 2.8 billion metric tons annually. Sec - ond, carbon dioxide emissions result from bio mass burn ing, part of which can be attributed to land clearing and bush fires on pasture used to enhance pas ture growth. Third, carbon dioxide is re leased when fossil fuels are consumed for livestockrelated manufacturing and transportation. Livestock and ma nure man age ment con trib ute about 16 percent of the global annual production of 550 million tons of methane. Ruminants mainly produce the meth ane as a by-product of digesting large amounts of grasses and other fibrous feeds. Pigs and poultry emit relatively low amounts of meth ane because they cannot digest these fibrous feeds. Meth ane emissions per unit of product are highest when feed qual ity is low, which is common, especially in the lowland tropics and subtropics of developing coun tries. Twenty per cent of meth ane emanating from animal production comes from ma nure stored under anaerobic con di tions, such as in holding ponds (USEPA 1995). The high levels of meth ane ema - nating from anaerobic conditions are usually as so - ciated with high levels of productivity and in ten sity and large production units. Animal ma nure also produces nitrous oxide, the most damaging greenhouse gas (320 times more so than carbon dioxide). Animal waste contributes about 0.4 mil lion tons of nitrogen per year, or 7 per - cent of the total global emissions (Bouwman, Bat - jes, and Bridges 1992). The feed requirements of expanding meat and milk production exceed what can be sustained by traditional feed re sources such as graz ing land and crop by-products. Increasingly the world livestock sector resorts to external inputs, notably highenergy feed such as cereals and oil cakes. Roughage is decreasing in importance as feed and being re - placed by ce real and agro-industrial by-products. A corresponding shift to ward producing monogastric animals, mainly poultry and pigs, is tak ing place. While ru mi nant meat accounted for 54 percent of total meat production in the developing countries in 1970 (FAO 1995a), it accounted for 35 percent in the early 1990s. This species shift is driven in part by the bet ter conversion rates for concentrate feeds offered by monogastric ani mals. Feedcrops differ in their pesticide needs and propensity to deplete soil moisture, water, and nu - trients. In general, cereal crops (maize in par ticu lar) have the potential to cause greater environmental damage than other crops. Ce re als require heavy fer - tilizer and pesticide use and a great deal of water and offer poor ground cover in the early stages of plant development. Legumes, such as soybeans and pulses, gen er ally have the least potential for dam - age. Maize and wheat deplete nitrates and phos - phates the most, while cas sava and sweet potatoes deplete the most soil nutrients. The Environmental Challenge Industrial livestock production is rap idly spring ing up close to urban centers in developing countries,

57 48 because of weak infrastructure, high transport costs, and weak regulation. Like many cities in East and Southern Africa, Dar-es-Salaam, the capital of Tan - zania, now has 20,000 dairy cows kept within the city lim its. Urban pig ger ies are increasingly com - mon in Asia, especially coastal China. Large- scale poul try op era tions are found in pe ri ur ban areas throughout the developing world. Industrial and intensive mixed farm ing sys tems present the most severe environmental challenge in the livestock sector. These sys tems have often benefited from policy distortions and the absence of regulations or their lack of en force ment. The regu - latory vacuum has often given this type of produc - tion a competitive edge over land- based sys tems. Furthermore, some policies have misdirected re - source use and encouraged the development of technologies that are inefficient outside the dis - torted context. Many developing countries not only provide di rect subsidies for feed but also for energy and capi tal, which constitute some of the major direct costs of industrial production. Econo my wide policies that offer sub si dies for energy and credit often end up favoring industrial production over less-intensive mixed farm ing and grazing. Technology can offer solutions to many en vi - ronmental problems, especially under industrial conditions. But most policy frameworks enable the cheap sup ply of animal products at the ex pense of the environment. Self-sufficiency in animal prod - ucts and continuous sup ply of high- value food com - modities to urban popu la tions are often the overrid - ing policy objectives, particularly in developing countries. In the developed world the pollution of land, water, and air has raised acute awareness of the en - vironmental prob lems as so ci ated with industrial livestock production. In many cases this has trig - gered the establishment of policies and regulatory measures that address these prob lems. Developing countries, on the other hand, typically exhibit an ab - sence of appropriate and enforceable regulations, together with a surge in demand and a lack of effec - tive political expression of concern about grow ing environmental and health hazards. Concerns about the long-term productivity of natural resources, including land, water, air, and biodiversity, will not be reflected in market prices unless governments and international organizations de fine and establish mechanisms to reflect the pres - ent and future value of natural resources. Institu - tions that provide regulatory frameworks need to be developed, local groups need to be empowered, and a legal authority that implements environmental policies needs to be established or reinforced. Prices should be adjusted through taxation to correct for un - charged environmental costs and encourage efficient resource use. Appropriate technological change, the key to solving environmental problems, must be fa - cilitated by government support.

58 8. Public Health Livestock production is a source of risk to human health in both low- and high- intensity production systems. Risks exist not only from the uncontrolled en demic diseases found in developing regions, but also from those that appear in highly developed pro - duction sys tems when animal con cen tra tions are high, feeds contain contaminants, or meat and milk are improperly handled. Humans are exposed to these risks through several pathways. Zoonotic dis - eases, those shared by humans and animals, can mutate and spread in animal hosts before passing to hu mans. Animal wastes can carry disease or chemi - cal toxins into the environment. And milk and meat can expose humans to disease and toxins contained in the animals or produced by improper handling and processing. Al though great progress has been made in con - trolling endemic diseases of animals, in ten si fi ca - tion of both traditional and mod ern livestock pro - duction sys tems has brought about new risks. High concentrations of animals, often moving between locations for different stages of production, can be - come breed ing grounds for disease. Proximity of these facilities to high human popu la tions can mag - nify the potential dam age of an outbreak. Livestock pose a particular risk in developing re gions, where animal concentrations are often lo - cated near and around cities because of limited transportation facilities and infrastructure. The risks are compounded by inadequate or nonexistent health infrastructure, regulations, monitoring, or enforcement. Zoonotic diseases such as tu ber cu lo - sis and brucel lo sis, which are nearly or entirely con - trolled in developed regions, continue to pose major problems in these regions. Health risks in developing countries are still often monitored only at the household level. As livestock production levels rise, the ability of peo - ple to gauge the quality of the animal food products they purchase in market places becomes increasingly difficult. The classic worry in developing countries is the microbial contamination of food. Bacilli or bac te ria such as Salmonella, Escherichia coli, Clostridium botulinum, and Staphylococcus are the most frequently observed causes of foodborne dis eases. They are usually related to improper food preparation or inadequate refrigeration. The World Health Or gani za tion (WHO) re - ports that hun dreds of mil lions of peo ple world - wide suf fer from dis eases caused by con tami - nated food and that prod ucts of ani mal ori gin rank at the top of the list of causes (WHO 1997). More than 3 mil lion chil dren under five years of age die each year be cause of di ar rhea. Con tami - nated water and food- borne patho gens cause much of this di ar rhea. Sal mo nella in fec tions are also on the rise and threaten to be come major pub lic health con cerns, es pe cially in big Asian cit ies where large bird flocks are kept for food and fecal con tami na tion is hard to con trol. Risks from the in tense industrialization of live - stock production are also ap pear ing in developed countries. Movements of animals for birth ing, weaning, and fattening have aggravated health risks because animals from different locations are ex - posed to each other and to humans. Risks of trans - mission are further increased by greater interna - tional trade of livestock and livestock products. Intensive livestock production units can also breed new and more virulent strains of zoonotic dis - eases. Antibiotics used in intensive animal produc - tion of poultry have led to the emergence of Salmo - nella, Listeria, and E. coli re sis tant to antibiotics. There is increasing concern about new strains of in - fluenza developing in pigs and chickens that could be transmitted to humans, such as the avian flu strain that forced eradication of chick ens in Hong Kong in Some researchers go so far as to say that the next lethal flu pandemic might emerge from Europe s crowded pig barns (MacKenzie 1998). 49

59 50 Despite long-established food quality assurance systems in developed countries, new food contami - nation risks have emerged. According to WHO, seven food-borne pathogens (Campylobacter jejuni, Clostridium perfringens, E. coli O157:H7, Listeria monocytogenes, Salmonella, Staphylococcus au - reus, and Toxoplasma gondii) are responsible for an estimated 3.3 to 12.3 million infections and 3,900 deaths annually in the United States (WHO 1997). Furthermore, global surveys by WHO indicate that food-borne diseases may occur times more frequently than reported. Salmonellae are blamed for more than 50,000 cases of bacterial food poisoning in the United States every year (WHO 1997). Transmission of this microbe usually occurs through insufficiently cooked meats and eggs. Chickens are a major res er - voir of salmonella. In gest ing foods contaminated with significant amounts of salmonella can cause intestinal infection. The in creased size of production units and fre - quency of contact be tween animals greatly in - creases the overall im pact of outbreaks of ill ness. Six million pigs were destroyed in Holland to eradi - cate classical swine fever in As this report was being written, Malaysians were in the process of destroying a mil lion pigs in their largest pork producing re gion to stem an outbreak of a new form of viral encephalitis that has killed more than 100 people in six months (Washington Post 1999; ProMed 1999). Use of new feed re sources has also brought new risks. Insufficient temperatures used in rendering animal tissue into feed has been clearly linked to the appearance of BSE (bovine spongiforme encepha - lopathy), or mad-cow disease, in cattle. The infec - tious pri ons involved are similar to those that cause CJD (Creutzfeldt-Jakob disease). More than 20 human victims in the United King dom are thought to have contracted the disease through ingestion of animal nerve tissue. Infection with Escherichia coli O157:H7 (E. coli) was first described in E. coli has emerged rapidly as a major cause of di ar rhea and acute renal failure. The in fec tion is sometimes fatal, particularly in children. Out breaks, generally as so - ciated with beef, have been reported in Aus tra lia, Canada, Japan, the United States, various European countries, and south ern Africa (WHO 1997). Beef that was contaminated in the slaughter - house is the principal cause of E. coli infection in humans. Bacteria are transmitted when infected meat is consumed raw or undercooked. Ground meats, such as hamburgers, are particularly associ - ated with infections because the infected material is mixed through out the product dur ing the grind ing process. Hygienic slaughtering practices will reduce contamination of carcasses but will not guarantee the absence of microbial contamination from prod - ucts. Simi larly, the contamination of raw milk on the farm can not be completely prevented. The only effective method of eliminating dangerous mi - crobes is to heat (thor oughly cook or pasteurize) or irradiate food. Listeria monocytogenes (Lm ) has been recognized as a risk only recently. It in fects cheese and meat that has been refrigerated for a long time. Lis - teria monocytogenes infections can cause miscar - riage in women and septicemia (blood poisoning) and meningitis in in fants and persons with weak - ened immune systems. Nonmicrobial contamination of food also poses a risk. Food-borne chemi cal toxins increasingly prevalent in rapidly developing countries include pesticide residues (often containing mer cury or ar - senic), metals (zinc, cad mium, and copper), and heavy metals (especially mercury from pigs eat ing fungicide-treated corn). Livestock feeding is partly to blame as well for the accumulation of toxic levels of heavy metals in the environment. Trace ele ments are often added to animal feeds to sup ply micronutrients and enhance feed conversion efficiency. Cop per and zinc are de - liberately added to a variety of animal feed concen - trates, while heavy metals like cadmium are intro - duced in vol un tar ily via feed phosphates. Dur ing digestion the ele ments are concentrated, resulting in manure and slurries that can contain high levels of the toxic elements. Soils on which pig and poultry manure are regularly applied at high rates can accu - mulate large amounts of heavy metals, which can in turn contaminate crops and pose a health risk to hu - mans. High concentrations of toxic ele ments can also accumulate in the meat of ani mals fed feeds with trace metals. Residues of growth hor mones, antibiotics, and insecticides are increasingly found in the tissues of

60 51 animals raised in industrial production sys tems. The presence of antibiotics in animal food products can cause allergies. Overdoses of antibiotics are often used illegally in feed to promote growth where enforcement sys tems are weak. Considerable debate (and trade dispute) also exists about the safety of growth hormones such as BST (bovine so - matotropin). The illegal use and misuse of growth promoters such as DES (diethyl- stilbetrol) and clen buterol can also create prob lems. Tra di tion ally the health risks from live stock and live stock prod ucts have been borne by con - sum ers and farm ers. With in ten si fi ca tion has come rec og ni tion that many risks can not be con - trolled at the house hold and farm lev els alone. Con sum ers can not ade quately judge the safety of food that was pro duced and proc essed far from the house hold. Farm ers act ing in di vidu ally can - not fully pro tect their ani mals from dis eases that spread from farm to farm. In many cases in sti tu - tions are re quired to de velop, moni tor, and en - force qual ity stan dards across the mar ket ing chain. Un for tu nately, gov ern ment serv ices are being cur tailed in this area in many poor coun - tries as the size of the over all pub lic sec tor is being re duced.

61 9. Technology Needs and Prospects Increases in the productivity of animal food produc - tion come from the development and transfer of ani - mal production technologies, particularly for animal health; improved feed and feed use; genetic en - hancement; and better postharvest handling. Live - stock technology policy faces two challenges in its efforts to raise productivity. First, appropriate exist - ing and new technologies and production systems have to be adapted and disseminated to the develop - ing world to eliminate low productivity. Second, the limits of livestock production technology and sys - tems have to be extended to increase efficiency fur - ther and the environmental and public health prob - lems that have appeared in high-intensity livestock production have to be solved. This chapter surveys the technologies and policies available or in development to meet these challenges. Addressing Animal Health Constraints Infectious and parasitic diseases af fect ing livestock remain important constraints to profitable livestock operations in many developing regions. Diseases reduce incomes directly by causing considerable live stock losses and in di rectly by ne ces si tat ing health restrictions on exports. In some areas (in - cluding the former socialist coun tries) the problem is worsening because of weak veterinary and ad - ministrative services, the absence of accountable local government, and civil strife. Infectious diseases such as rinderpest, foot and mouth disease (FMD), contagious bovine pleuro - pneumonia (CBPP), and peste des petits ruminants (PPR) still pose major threats to livestock produc - tion in developing countries. These epizootic dis - eases, so- called because they often mani fest them - selves as epidemics affecting large num bers of animals of the same spe cies in a given area, are most prevalent in production sys tems in which ani - mals move uncontrolled and unmonitored over large distances. Vaccination and surveillance pro - grams are needed to keep these diseases in check. The global eradication of rinderpest by 2010, for example, remains an achiev able and important goal for developing coun tries. Livestock disease con trol has undergone a paradigm shift in re cent years. More flexible con - trol strategies that focus on regions of highest re - turns within a country are replacing countrywide eradication pro grams. Risk analysis and animal health eco nom ics help determine where disease control investment will have its greatest bene fit. The acceptance of disease-free or low-risk status for regions (rather than for entire coun tries) in international agree ments such as the sanitary and phyto - sanitary (SPS) agreement of the World Trade Or - ganization (WTO) illustrates this trend. The treaty makes pos si ble export of meat and other livestock products from a country where a disease such as FMD exists, as long as the disease is either not pres - ent in the re gion where the meat is produced or the risk of transmission through multiple controls is ex - tremely low. Bio tech nol ogy of fers prom ise for the im - proved di ag no sis and treat ment of ani mal dis - ease. Even as the in ci dence of zoono tic dis eases rises be cause of in creased con cen tra tions of ani - mals near peo ple, live stock health re search bene - fits from the greater re sources avail able to human health re search (Fitz hugh 1998). For ex am ple, ge nom ics is a new sci ence ap pli ca ble to hu mans and live stock that per mits se quenc ing and map - ping of the ge nome (a ge netic map of a liv ing or - gan ism). Ge nom ics takes ad van tage of the work on the ge nomes of dis ease or gan isms and per mits the de vel op ment of new gen era tions of vac cines, in clud ing those that use re com bi nant an ti gens to patho logi cal agents. Live stock dis ease or gan isms 52

62 53 can also pro vide use ful mod els for study ing human health (Ole Moi- Yoi 1995). African swine fever is a major constraint to ex - panding pork production in Africa. In a series of re - cent out breaks, pig numbers have been reduced by between 30 and 70 percent in a wide range of coastal Af ri can coun tries. Movement and sanitary control can limit future outbreaks but require more ef fec tive veterinary in sti tu tions. Farm ers in developing re gions typically lack low- cost, easy-to-use diagnostics, vaccines, and control strategies for disease or gan isms and vec - tors. Among the parasitic dis eases, trypanosomiasis (sleep ing sick ness) transmitted by tsetse flies, poses an enormous constraint to cattle production in most of the humid and subhumid zones of Africa. Combinations of aerial insecticide sprays, ad - he sive pyretheroid insecticides, impregnated screens and traps, sterile insect mating, and try - panocide drugs hold the promise of gradually re - cov er ing infested areas for mixed farming and in - creased livestock output. These strategies also are likely to improve crop out put. Other important parasitic disease groups in - clude helminthiasis and tick-borne diseases. Hel - minths are rarely fatal, but they limit productivity in many production systems. They become a limiting factor in the intensification stage but can be con - trolled. Ticks have the capacity to transmit diseases, notably east coast fever in East ern and Southern Af - ri can countries. An effective vaccine for this dis - ease may soon be available, with a potentially large impact on ruminant productivity in these countries (ILRI 1998). Improving Feed Quantity and Quality A large number of the world s livestock, particu - larly ruminants in pastoral and low-input mixedfarming systems, suffer either permanent or sea - sonal nutritional stress. In many re gions these pres - sures have been alleviated through better storage of locally available resources. Storage and conserva - tion of forage, use of high-protein leguminous fod - ders and fod der trees in ra tions, treatment of crop residues, and addition of min eral nutrients to feed all offer ways to im prove forage in some areas. The potential to generate locally available fod - der and cereal feed re sources is great. But govern - ments may need to create the scientific and trans - portation in fra struc ture necessary to reap the benefits of world feed resources and new feed tech - nologies as they become available. The pro jec tions in Chapter 4 indicate that the nec es sary supplies of feed concentrates will be available on world mar - kets without undue price rises. These projections depend on maintaining trends in technological progress that raise yields of major feedgrains such as maize. But even if aggregate quantities are available, ensuring that hundreds of mil lions of small produc - ers have access to feed markets under developingcountry conditions will be no small challenge. Chi - na s port and grain-importation infrastructure indi - cates the kinds of problems requiring remedy. In 1995 China imported an additional 15 mil lion met - ric tons of grain, put ting considerable stress on han - dling and distribution facilities (Pinstrup-Andersen, Pandya-Lorch, and Rosegrant 1997). Sig nifi cant bottlenecks occurred. Yet the baseline projection for 2020 indicates that China will import 45 mil lion metric tons more cereals than in 1993 (Table 24). Both developed and developing regions must continue to use rations more efficiently. The re - quirements and the qual ity and quantity of feed re - sources used for ra tions differ across species, breeds, systems, and regions. Re search to reduce costs and improve efficiency will have to be highly targeted, but even so it will have spillover effects. Research that defines chemical composition and di - gestibility characteristics will contribute to cropbreeding strategies, particularly the need to change the phytochemistry of primary crop products and residues fed to livestock (Fitzhugh 1998). New technologies that enhance the quantity and quality of avail able tropical feed resources are being assessed through nutrition research. The identification of suitable traits and their molecular markers help improve the qual ity of tropi cal feeds derived from foodcrops. Breeders use the mark ers to develop dual-purpose crops with improved grain yields and protein content for humans and nonrumi - nants and higher-quality crop residues for rumi - nants. Plant genomics and phytochemistry will tackle antinutritional factors (ANFs) in plants. Some of

63 54 these ANFs can be poi son ous to ruminants. Mi cro - biological techniques will help enrich ruminant ecosystems with microbes that can better detoxify ANFs. Maize with reduced phytic acid content has recently been reported to im prove feed conversion for chicks by up to 11 per cent (CAST forthcoming). The ability to in crease starch content in feed - grains already evident in the developed world may become more attractive to developing countries by But these tech nolo gies for maize and sor - ghum are un likely to extend feeding value per unit by more than 15 percent, even in developed coun - tries. Pul ver iz ing grain with steam before feed ing probably will offer a more fea si ble and economical means for improving conversion efficiency (CAST forthcoming). In de vel oped coun tries, and in creas ingly also in in ten sive pro duc tion sys tems in de vel op ing coun tries, a wide range of pro bi otic and an ti bi - otic feed ad di tives are part of the ra tion fed to live stock. Mi cro bial ac tion can help break down oth er wise hard- to- digest rough age so that nu tri - ents are bet ter ab sorbed. Finding bet ter ways to use the vast abun dance of fibrous biomass available in the world of fers a particularly ex cit ing area of research. Rumen mi - crobiology research fo cuses on the iso la tion of fiber-degrading enzymes. Bet ter use of fibrous feed materials will in crease the avail abil ity of feed re - sources inedible to humans. Chang ing the capacity of the rumen to digest high-fiber fod ders would dra - matically improve the prospects of ruminant pro - duction in the subhumid savannas of Af rica and Latin America, where extremely large quantities of biomass of low feed qual ity are produced. Inserting enhanced cellulase-producing capacity into rumen bacteria should be pos si ble in the not too distant fu - ture (de Haan, Steinfeld, and Blackburn 1997; Cun - ningham 1997). Microbial genomics will in crease the pace of prog ress in this area of research (Wal - lace and Lahlou-Kasi 1995; Odenyo, Osuji, and Ne - gassa 1999). With the great advances tak ing place in genet - ics, more progress should also be made in the feed conversion of monogastrics. Dur ing the past decade feed conversion rates for pigs and poultry have im - proved by percent, in part through breed ing and in part through addition of enzymes to feeds. Still, monogastrics capture only 25 to 35 per cent of the nutrients in their feed. Genetic improvement and better balancing of feed will en able this trend to continue. Pre ci sion in animal feeding is foreseeable in developed coun tries. Nutrients excreted by ani - mals will be greatly reduced, so that nutrients needed and supplied will be fairly equal (CAST forthcoming). Finally, using growth hormones, such as bovine somatotropin (BST), with high-energy feeds has the potential to increase milk yields. But the technology is likely to benefit farms in developed countries more than those in developing countries. Estimated yield responses for BST vary widely, favoring farms with feeds, breeds, and man age ment practices that are already extremely productive (Jar vis 1996).The harsh conditions in developing countries are unlikely to provide the environment nec es sary for large-scale bene fits from BST. This will change in the long run, however, once livestock productiv - ity in developing re gions has benefited from other, less sophisticated tech nolo gies (Jarvis 1996). Improved Reproductive and Genetic Technologies Artificial insemination has been used for more than 50 years in developed countries, primarily on com - mercial dairy herds. An established technology, its further spread is likely to occur primarily through market processes. In the early 1990s, no more than 17 percent of the 50 million first in semi na tions given annually took place in developing countries. But usage is advancing rap idly in Asia, es pe cially India, where grow ing milk demand has made it eco - nomical (Chu pin and Thibier 1995; Chupin and Schuh 1993). Artificial insemination has considera - bly spurred genetic upgrading as large- scale test ing of the prog eny of bulls and the subsequent use of valu able breed ers has be come pos si ble. Wide - spread adoption of artificial insemination is likely to occur in the more favored production environ - ments of developing coun tries, such as temperate highlands and peri-urban commercial production areas. The demand for milk will provide returns for its introduction and the necessary tech nol ogy and infrastructure are becoming available. The use of embryo trans fer, allowing cows of high genetic potential to pro duce a much larger

64 55 number of calves than with normal reproduction, is currently limited to only a small part of the com - mer cial herds in some developed coun tries. This form of reproduction probably will not become widespread in the developing countries within the next 20 years (Cunningham 1997). Crossing of local breeds in developing countries with highly productive varieties from the developed countries has become commonplace for dairy cattle in the tropics. Considerable gains in productivity per animal (25 percent) have been obtained. Those gains can be maintained with judicious interbreeding or ro - tational breeding. However, the gains are typically lost in subsequent generations (Cunningham 1997). Other authors report gains of up to 50 percent, but stress the one-shot nature of the transfer and the re - stricted number of breeds that can be drawn upon (CAST forthcoming). Selection from local breeds, especially for mutton and goat meat, may hold con - siderably more promise. The characterization, conservation, and use of tropi cal animal breeds are vital to the abil ity to re - spond to inevitably changing production environ - ments. Adapted livestock are more resistant to dis - ease and environmental challenges. They can maintain productivity without the need for highvalue inputs, in crease farm income, and con trib ute to poverty alleviation (Rege 1997; Hammond and Leitch 1995). Advances in genetics also offer new means to improve live stock. Marker-assisted selection and de tec tion of quantitative trait loci, for ex am ple, combine results from molecular and quan ti ta tive ge netic research. Interactions between genetic traits and the environment need to be addressed in order to employ adaptation traits, such as genetic re sis - tance to parasites, as production traits. As with dis - ease resistance, insights from human genetics re - search can be brought to bear on the genetic improvement of livestock (Fitzhugh 1998). It be came pos si ble dur ing the past dec ade to pro duce maps of ge netic link ages in order to iden tify the gene lo ca tions of eco nomi cally im - por tant traits (dis ease re sis tance, per form ance). This tech nol ogy, which is being de vel oped for a large range of traits by a number of re search in sti - tutes world wide, car ries the prom ise of a short cut to ge netic im prove ment in de vel op ing coun tries. Live stock can be bred for spe cific pro duc tive traits and the abil ity to adapt to harsh cli mates and re sist dis eases. Genetic research in developed regions fo cuses less on producing the hearty ani mals that are neces - sary in stressful developing-country en vi ron ments and more on making ani mals that pro duce higher quality products at minimum cost. Understanding the genetic make-up of ani mals has allowed par - ticular product traits, such as low cholesterol levels or the ability to produce high concentrations of a pharmaceutical, to be added to animals. Recent advances in cloning of embryos could potentially have a large impact on livestock production, par - ticularly of dairy cattle in developed countries. But this is still an area where a number of complex ethi - cal and sci en tific issues have yet to be resolved (Cunningham 1997). Postharvest Technology: Protecting Public Health and Increasing the Value of Livestock Output In the next 20 years the transfer of meat and milk processing tech nol ogy to developing countries by the private sector under public regu la tion is likely to be es pe cially im por tant for food pro duc tion. Growth rates for the out put of processed products will probably be even higher than the growth rates for meat and milk production in developing coun - tries. An increasing share of total food production is expected to pass through marketing and processing channels. The establishment of dairy plants and slaugh - terhouses in producing areas, to gether with mar ket development, will play an important role in stimu - lating market-oriented production. The increasing importance of trading meat and milk over long dis - tances in tropical climates will also encourage tech - nology development and transfer for food com - modities such as ultra-pasteurized dairy products and vacuum-packed meat. Food safety is likely to provide the major impetus for technology develop - ment over time. Food safety concerns will occasionally conflict with the objective of small opera - tors to remain competitive. Current debates over milk pasteurization in East Af rica bear witness to

65 56 this conflict. East Af ri can consumers usually boil unpasteurized fresh milk col lected earlier in the day because pasteurization makes products much more expensive (Staal, Del gado, and Nicholson 1997). In the developed countries risk analysis is typi - cally used to help evalu ate existing programs for food safety. The trend to ward globalization of trade makes this kind of analy sis increasingly important. Risk analysis will have to be widely introduced in developing countries over the next two decades. It involves an iterative process with three sets of ele - ments. First is risk assessment, estimating the prob - ability and potential severity of dam age resulting from food hazards. Second is risk management, the development of policy for food safety and food safety programs. Third is risk communication, pro - ductive interactions between policymakers and stake hold ers. Hazard Analy sis Criti cal Con trol Points (HACCP) analysis is presently the tool of choice for handling the risks noted above. It identifies critical areas in the food chain that must be monitored to ensure food safety. Four steps are involved: assessment of risks in the food chain, determination of the critical control points and criti cal lim its for ensur - ing food safety, development of moni tor ing sys - tems, and implementation of procedures for verifi - cation. Postharvest meth ods that a short time ago seemed fea si ble only in the context of developedcountry industrial processing are now becoming commonplace in the shrimp and high-value fish er - ies export sector of developing coun tries. Similar procedures for high-value meat and milk products should follow suit in the next two dec ades. Technology to Improve the Environmental Effects of Livestock Production Livestock are often cited as the source of environ - mental woes (Chapter 7). Not all of this negative publicity is merited, especially under developingcountry conditions. Where the problem does exist, it is often a matter of fundamental economic structures and institutions that must be addressed through pol - icy change rather than technology per se. Environ - mental degradation from deforestation and over - stocking on the commons are cases in point. Yet technological development can offer some hope in developed countries, and will be increasingly useful in this regard in developing countries. Livestock are cited as cul prits in global cli mate change because they emit greenhouse gases. In de - veloped countries livestock methane emissions can be re duced through the use of treated feeds and a ra - tion closer to nutritional requirements. While emis - sions will continue to grow in absolute terms in de - veloping coun tries, intensification of production will enhance the digestibility of feed, reducing emissions per unit of out put. Livestock also affect the environment by com - pacting the soil structure, which results in acceler - ated run-off and soil erosion. High stock ing rates and uncontrolled grazing cre ate this problem, espe - cially in the hilly areas of developing countries. In order to manage the biomass needs of animals at varying grazing in ten si ties and maintain a criti cal vegetative cover to minimize soil erosion, graz ing options and pas ture species have to be defined (Mwendera and Mohamed Saleem 1997; Mwen - dera, Mohamed Saleem, and Woldu 1997). Graz ing systems will remain an important source of animal products for the foreseeable future. To some extent these systems can sustainably intensify production with stronger institutions, local empowerment, and regulation of access to re sources. Mixed farming systems around the world will continue to intensify and grow in size. Grazing sys - tems may evolve into mixed farming systems where there is potential for mixed farming, as there is in the semiarid and subhumid tropics. Important productiv - ity gains can be achieved in mixed farming by fur - ther enhancing nutrient and energy flows between crops and livestock. In mixed systems livestock substitute for natural and purchased inputs, in addition to producing meat and milk. The environmental and economic stability of mixed systems make this form of farming in developing countries a prime candidate for technology transfer and development. Novel con cepts are being devel oped to inte - grate crop and live stock pro duc tion in a farm ing area rather than on indi vid ual farms. Are awide crop- livestock inte gra tion allows indi vid ual, special ized enter prises to oper ate sepa rately but energy for farm ing and flows of organic and min - eral mat ter to be linked by mar kets and regu la - tions. This pro duces the high est effi cien cies at the

66 57 enter prise level while maxi miz ing social bene fits. A form of are awide mixed farm ing is already fairly com mon in devel op ing coun tries, where manure is bar tered for feed. Industrial sys tems usually have a com peti tive edge over land-based systems. But in areas with high animal densities, industrial systems will have to absorb in creased production costs as a result of more stringent regulations and pollution lev ies. In some cases, this will remove the competitive edge of industrial production. Technology will play an important role in the proc ess ing of animal wastes into useful prod ucts. Such technologies, for the production of dry- pellet fertilizer from chicken waste, for ex am ple, are be - coming fairly com mon in developed countries (CAST 1996). The eco nom ics of waste disposal in crowded developing countries are likely to evolve in this direction as well, though probably not in the next 15 years. Likely Pathways for the Transfer of Livestock Technology to Developing Countries A number of important technological developments are tak ing shape, particularly in genetics and repro - duction, feeding, and animal health. By 2020 these de vel op ments proba bly will be widely in use. Demand-driven production systems in developing coun tries will likely adopt these tech nolo gies fairly rap idly. Most of these sys tems will be in East Asia, periurban India, and Latin Amer ica outside the An - dean areas. Where de mand is grow ing less quickly most of South Asia, Sub-Saharan Af rica, and the An dean countries technology uptake will be slower and important pockets of technological stagnation will remain. Public- sector research and extension for livestock will have a high payoff in the fast-growing areas if they complement privatesector activity and facilitate ac cess to small farmers. In the slow-growing areas public- sector research and extension will provide the main technological ve hi cle for addressing these issues. In demand-driven settings, adoption usually oc - curs through market forces, as long as input prices re flect the relative scarcity of inputs and create the appropriate incentives. In particular, technologies for increased production of pork and poultry will be largely transferable. Issues relating to livestock and the environment cannot be solved with technical innovations alone. A comprehensive policy framework is needed to fa - cilitate the adoption of effective technologies. Technology re mains the key component be cause future development, including that of the livestock sector, will depend upon land- and water-saving technology to substitute for use of natural re - sources. This trend to ward knowledge-intensive systems can be widely observed. Smart technolo - gies, supported by astute policies, can help to meet future demand while main tain ing the integrity of the natural resource base. Better information on which to base decisionmaking is, therefore, ur - gently required. New forms of commercial and specialized pro - duction that are based upon the resource endow - ments of a re gion and that maintain nutrient bal - ances will have to be established. Intensive sys tems need to be integrated into a wider framework for land use in order to blend resource-saving technolo - gies with the absorptive capacities of the surround - ing land. This is particularly necessary for pig and poultry production. New organizational arrange - ments will have to be found to allow specialized units to capi tal ize on econo mies of scale. The future is likely to bring a transformation of family- based mixed farms into specialized and com mer cial enter - prises in rural areas. Policies will need to promote areawide integra - tion (as opposed to individual farm integration). This kind of production organization is a long- term objective of environmentally sustainable agricul - ture in high-potential zones. In the developed world, excessive animal concentration is being con - trolled through quan ti ta tive lim its on animal num - bers and relocation of animal production to areas of lower den sity. Regulations for industrial production systems in urban and pe ri ur ban environments need to enforce virtually zero greenhouse gas emis sions and restrictive licensing. To maintain the nutrient balance in nutrientdeficit mixed farming and to enhance croplivestock integration in developing countries, poli - cies need to provide in cen tives and services for technology uptake. To re duce nutrient surplus in mixed farming systems, regulations to con trol ani -

67 58 mal densities and waste discharge and incentives for waste reduction are required. Often this implies that subsidies on concentrate feed and inputs used in the production of feed need to be removed. To address environmental degradation in the grazing areas of developing countries, policies need to facilitate local empowerment and create propertyrights instruments, while allowing for the flexibility of movement of pastoralists. Land-tenure arrange - ments can also help limit the expansion of ranching into the rainforest frontier in Latin America. Lack of market access also degrades the land and needs to be addressed. Other incentives may help to reduce grazing pressure in the semiarid zones, for example, the introduction of full cost recovery for water and animal health services. Grazing fees would provide incentives. Similarly, taxation for pasture and crop - land in rainforest areas can discourage forest conver - sion. This needs to be accompanied by regulations protecting the most valuable areas in terms of the environment or biodiversity. Fi nally, as poli cy mak ers and de vel op ment part ners be come in creas ingly aware of the key pov erty al le via tion role of live stock in de vel op - ing coun tries, agen cies charged with fa cili tat ing in creased live stock pro duc tiv ity are likely to put pov erty al le via tion con cerns higher on their agenda. This in turn is likely to bind tech nol ogy de vel op ment more tightly with co op era tives and other small- producer in sti tu tions that help small op era tors over come the trans ac tion costs of entry into a major com mer cial ac tiv ity.

68 10. Taking Stock and Moving Forward Truly it is not inappropriate to use the term Livestock Revolution to de scribe events in world agri - cul ture in the next 20 years. Like the well-known Green Revolution, the label is a simple and conven - ient expression that summarizes a complex series of interrelated processes and outcomes. As in the case of cereals, the stakes for the poor in developing coun tries are enor mous. Not un like the Green Revo lu tion, the revolutionary as pect comes from the participation of developing countries on a large scale in transformations that had previously oc - curred mostly in the temperate zones of developed countries. And like the gradually but stead ily ris ing ce real yields in the 1970s and 1980s that typified the Green Revolution, the Livestock Revolution started off gradu ally and in creased its rate of growth. But the similarities end there. The Green Revolution for ce re als was a supply-side phenomenon; it rested on fundamental technological change and the adaptation and exten - sion of seed-fertilizer in no va tions in developing countries. The Livestock Revolution is demanddriven. With notable exceptions for milk and poul - try in the de vel oped countries, where tech no logi cal prog ress arguably preceded and precipitated changes in demand through lower prices, the sup ply side of the Livestock Revolution until now has mostly responded often under distorted in cen - tives to rapid in creases in de mand. This paper shows that the Revolution has seven specific characteristics, each of which of fers both dangers and positive opportunities for human wel - fare and environmental sustainability. The seven are: (1) rapid worldwide increases in consumption and production of livestock prod ucts; (2) a major in crease in the share of developing countries in total livestock production and consumption; (3) ongoing change in the status of livestock production from a multipurpose activity with mostly nontradable out - put to food and feed production in the context of globally integrated mar kets; (4) increased substitu - tion of meat and milk for grain in the human diet; (5) rapid rise in the use of cereal- based feeds; (6) greater stress put on grazing re sources along with more land-intensive production closer to cit - ies; and (7) the emergence of rapid technological change in livestock production and processing in industrial sys tems. The dan gers and opportunities raised by each of the seven characteristics of the Livestock Revolution will be examined in turn. Then four major pil - lars on which to base forward-looking policymak - ing for the livestock sectors of developing countries will be suggested. Many of the specific actions are discussed in more detail in the conclusions to Chap - ters 6 through 9 of the report. Characteristics of the Live stock Revolution Rapid Increases in Demand That Affect Production Patterns and Trade Rapid demand growth in developing countries pro - pels the global Livestock Revolution. Expanding demand is the result of a combination of high real income growth, swelling populations, rapid urbani - za tion, and the on go ing di ver si fi ca tion of developing-country diets away from very high lev - els of starchy staples. Milk consumption has grown more than 3 percent per year in developing coun - tries since the early 1980s and is projected to grow even faster through Meat consumption has been grow ing about 5 per cent per year and is ex - pected to grow 2.8 percent per year through These developing- country growth rates can be com pared to the slow fore cast for con sump - tion growth in the de vel oped world: 0.7 per cent per year for meat and 0.4 per cent per year for milk through This low growth in de vel oped 59

69 60 coun tries is largely ex plained by slow popu la tion growth, slow ing ur bani za tion, sa tia tion of diets, and grow ing health con cerns about high in takes of cho les terol and satu rated fatty acids from some ani mal prod ucts. The rapid growth in consumption of food from animals has not been and is not likely to be evenly distributed across re gions or even within countries. Since the early 1980s, most growth in consumption of meat and milk has occurred in the rapidly devel - oping countries of East and South east Asia and to a lesser extent in Latin America. Af rica has lagged behind, as has India in the case of red meat, al - though India has recently witnessed rapid growth in milk and poultry consumption. Production trends in the developing countries are fol low ing consumption trends. By 2020 the de - veloping countries are expected to pro duce 95 mil - lion met ric tons more meat per year and the devel - oped countries 20 million metric tons more compared to production levels observed in the early 1990s. This production level equals an additional 15 kilograms per capita of meat in the developing world, given expected popu la tion in The value of the annual in crease in animal food produc - tion in developing countries currently far exceeds that of the growth in production of all the major ce - reals combined. The caloric value of animal live - stock food product increases will exceed the ca loric value of ce re als some time in the next 10 years. The developed countries are also expected to add an ad - ditional 15 kilograms per capita of annual meat pro - duction by 2020, much of which will be sold to the developing countries. Such rapid change is creating new op por tu ni - ties for livestock producers in developing countries, where some of the world s poorest people live. The increase in livestock food products also holds promise for re liev ing widespread micronutrient and protein malnutrition, while mak ing positive con tri - butions to the sustainable intensification of small - holder agriculture. Yet, significant new dangers are also aris ing. Some forms of livestock production encouraged by policy distortions are lead ing to seri - ous environmental and health risks. Furthermore, increasingly global livestock and feed markets are sharing economic pains faster and more di rectly, even as they share economic prosperity. Un der - standing the stakes involved helps motivate those who seek to meet the emerg ing challenges. World Market Share Steadily Shifts to Developing Countries A steady in crease is under way in the share of de - veloping coun tries in the world s production of meat and milk. Shares for the latter commodities amounted to only 31 and 25 percent, respectively, in the early 1980s. The baseline projections esti - mate that developing-country shares in 2020 will be 60 per cent and 52 percent. Clearly the brunt of the bene fits and costs ex pected from the Live stock Revolution will accrue to the developing coun tries. Sensitivity analy sis suggests that these pro - jected trends are robust. Even under the assumption of prolonged economic crisis in Asia, the growth of aggregate consumption of livestock products re - mains strong in developing countries. Furthermore, if tastes in India shift toward in creased red meat consumption, as they already appear to have done for chicken, the negative ef fects of a severe Asian economic cri sis on world livestock markets are wiped out. Change in Status from a Local Multipurpose Activity to a Global Food Activity Tra di tion ally, live stock in both the de vel oped and de vel op ing coun tries were kept on- farm for a va ri ety of pur poses, in clud ing food, sav ings, ani mal draft power, fiber, hides, and so forth. In de vel oped coun tries the use of live stock has be - come spe cial ized. The same trend is being ob - served in de vel op ing coun tries be cause the op - por tu nity for sell ing meat and milk has in creased and the share in pro duc tion of spe cial ized food ani mals, such as pigs and poul try, has risen in re - sponse to food de mand. Livestock food sectors traditionally a major forum for non tar iff barriers are now undergoing rapid changes in national policies, including trade liberalization; investment in trade infrastructure (roads, ports, refrigeration facilities); privatization of production and marketing; deregulation of inter - nal mar kets; and reduced government spend ing on research, extension, and inspection. These changes

70 61 have spurred consumption of livestock products and increased trade. The expansion and globalization of world mar - kets for feed and livestock products increases the ex tent to which demand and supply shocks, and the over all effects of economic boom or bust, are spread to feed and meat prices through out the world. Major ex port ing countries such as Argen - tina, Australia, and United States need to pay close attention to Asia. The 50 per cent fall in prices for feedgrains and meat during 1998 in the midwestern United States was largely attributable to mac - roeconomic events in Asia and the former Soviet Union. Even persons solely interested in the course of fu ture livestock prices in East Af ri can coun tries, for example, can not neglect events af fect ing live - stock in Asia at the present time, although doing so would not have been so unthinkable only a short time ago. Substitution of Meat and Milk for Grain in the Human Diet Widespread evidence exists that as societies grow wealth ier they sub sti tute higher- priced live stock calories for lower-priced starch calories, at a de - creasing rate as the substitution proceeds. In rural China, for example, where meat and milk con sump - tion is still very low, people may well re duce their di rect annual per capita consumption of ce re als over the next few dec ades by 20 to 30 kilograms. Their ce real con sump tion lev els will ap proach those in the wealth ier seg ments of developing so - cie ties today. On the other hand, the annual per cap - ita use of cereals as feed is pro jected to rise by about 60 to 70 kilograms in China by This widely re pro duced trend in developing countries will be hard to stop if income and urban popu la tion growth con tinue. Contrary to the situa tion in developed coun - tries especially the United States, where livestock foods are heavily consumed even small increases in the consumption of meat and milk would be beneficial for most women and chil dren in develop - ing countries, at least outside the richest urban areas. Protein and micronutrient deficiencies re - main widespread in developing countries, as Chap - ter 6 points out. Some evidence exists that in creased poul try and fish consumption would be pref er able to increased red meat consumption above a certain level. As in come growth and urbanization proceeds, the diseases of affluence associated with ex cess cholesterol intake could well become more of a problem, as they already are in much of the devel - oped world. Rapidly Rising World Demand for Purchased Feed Concentrates Available evidence, both from historical trends and from in-depth econometric studies, suggests that price responsiveness is considerable in world cere - als production. Simulations under vari ous scenarios indicate that the net ef fect of the Livestock Revolu - tion on cereal prices in 2020 would be to prevent them from falling further from their currently low levels. Under pessimistic assumptions prices may increase by 10 to 20 percent, but nowhere near the high levels of the 1980s. This view of cereal prices is confirmed further by events in world markets during the past 25 years. Demand in creases for meat and milk have largely been met through expansion of feed production or imports at world prices that are declining in real terms. Historically, the livestock sector has helped stabilize world ce real supply. Evidence from cereal price shocks in the 1970s and 1980s suggests that reductions in cereal sup ply were largely ab sorbed by reductions in feed for livestock. In any event, IMPACT proj ects that an addi - tional 292 million metric tons of cereals will be used annually as feed by 2020, with minimal impact on cereal prices (a 2 per cent in crease in 2020 rela - tive to the early 1990s in the baseline simulation). In the worst case scenario, maize prices rise 21 per - cent above the baseline projections for Simulations testing the effect of changes in the efficiency of grain conversion to meat or milk show that efficiency and cost matter greatly to the relative competitiveness of individual countries. Livestock exports in countries with ample graz ing resources, such as Ar gen tina, did well when feed grain prices were high because they use less feed to pro duce a unit of meat. Countries with ample feedgrain pro - duction and feed-intensive production practices, such as the United States, exported more livestock when feedgrain prices were low. Feed conversion efficiency also mat tered to the composition of specific feeds used, ce real demand generally, and world trade pat terns, but it barely affected the level

71 62 and distribution of livestock consumption across countries. In a price-responsive global system of markets, increased feed demand will be met with increased supply, with minimal changes in the final supply of meat. Yet the soar ing feed de mand pro jected under the Live stock Revo lu tion also raises a major ca - veat. Just be cause world maize and other feed - grain yields ex panded stead ily under sig nifi cant pub lic and pri vate in vest ment in the past, does not guar an tee that this will con tinue in the fu ture, es pe cially if pro duc tiv ity re search stops or pub lic pol icy dis cards the yield po ten tial of bio tech nol - ogy. IM PACT pro jec tions show that an nual growth in maize yields for most coun tries av er - ages just above 1 per cent through 2020, a rate sig nifi cantly below his tori cal trends. If fu ture yield growth rates fall below those base line pro - jec tions, ce real prices would be higher than pre - dicted. Fur ther more, an un fore seen melt down in global maize pro duc tion, per haps due to dis eases spread be cause of de creased ge netic di ver sity in maize va rie ties, would in crease grain and meat prices in the im me di ate term be cause of the Live - stock Revo lu tion. Greater Stress on Extensive Resources and More Intensive Livestock Production Closer to Cities Demand-led increases in livestock production have led to the intensification of production near major urban markets and areas with plentiful supplies of high en ergy feed. These increases have degraded production resources, such as pasture. To date, the highest levels of intensification have occurred pri - mar ily in the de vel oped coun tries. Developedcountry experiences may provide examples of pit - falls that developing countries can avoid. The past expan sion of live stock food pro duc - tion in devel op ing coun tries has come pri mar ily from increased herd sizes. Range deg ra da tion has been observed in exten sive pro duc tion areas, such as graz ing land in the Sahel. In for est areas such as the Ama zon, per verse incen tives led to irre versi ble defor es ta tion by large cat tle ranches in the 1970s. As the Live stock Revo lu tion pro - ceeds, incre ments to pro duc tion will have to come increas ingly from higher pro duc tiv ity of meat and milk per unit of land to avoid fur ther deg ra da tion of exten sive resources. Thirty-seven per cent of global livestock pro - duction already occurs under industrial farming conditions. Increasing the level of industrial pro - duction in many cases is lead ing to difficult prob - lems of manure disposal and nutrient overloads in adjoining soils and bodies of water. While these problems have raised concerns primarily in devel - oped countries, they will soon become serious prob - lems in a number of fast-growing developing coun - tries as well. Growing con cen tra tion of ani mals and people in the developing world s major cities (Addis Ababa, Beijing, Lima, and Mum bai, for example) are lead ing to rapid increases in food safety prob - lems. Infections from salmonella and E. coli, and emerging diseases such as the avian flu observed in Asia, give much cause for concern. Pesticides and antibiotics are also build ing up in the food chain be - cause of livestock production practices in the devel - oped countries and in countries where moni tor ing and enforcement are lax. Furthermore, as the con - sumption of livestock products increases in tropi cal climates, especially among those populations for whom everyday use of such products is rela tively new, food safety risks from microbial infection be - come more prevalent. While the list of dan gers above may seem uni formly nega tive, this is also the ap pro pri ate place to note that the pros pects for sus tain able in - ten si fi ca tion of small holder ag ri cul ture under rain fed con di tions would be much more dif fi cult with out a dy namic live stock sec tor. Fami lies liv - ing on a hec tare or two can not sur vive eco nomi - cally with crops alone, es pe cially in pe ri ur ban areas. More in ten sive live stock pro duc tion on these farms pro vides both a higher re turn to farm - ers labor and land and a source of or ganic ma te - rial and soil nu tri ents gen er ally lack ing in such sys tems. Women s small holder dairy de vel op - ment in East Af rica il lus trates the prom ise that a new live stock ac tiv ity can offer to a farm ing sys - tem under eco nomic stress. An Era of Rapid Technological Progress, Especially for Industrial Livestock As set out in detail in Chap ter 9, the last two or three decades have seen rapid technological progress in

72 63 in dus trial livestock production, mostly in devel - oped coun tries. Progress has come in the form of improved feed conversion, higher out put per ani - mal, and higher qual ity of final prod uct. In the developed countries, technological prog - ress for both ruminants and monogastric animals in - volved reproductive and genetic technology, includ - ing advances in biotechnology; feed improvement through blending, processing, genetic means, and chemical treatment; use of growth hormones; and improvements in animal health maintenance. Some of these industrial technologies, especially for pigs and poultry, have been fairly easily transferred to de - veloping countries. The private sector has played an important and often dominant role in boost ing livestock produc - tivity and solving environmental prob lems in in dus - trial systems. While livestock sys tems and productivity levels in some developing countries have begun to converge with those in developed coun - tries, some whole regions, such as Sub-Saharan Af - rica, have fallen behind. This raises the question of how productivity increases in those areas are best developed and propa gated. Strategic Elements for Livestock Policy in Developing Countries Taken together, the many opportunities and dangers of the Livestock Revolution discussed above suggest that it would be foolish for developing countries to adopt a laissez faire policy for livestock develop - ment. Many specific recommendations for concrete action are given in the individual conclusions to Chapters 6 9. The focus here, however, is on the four broad pillars on which to base a desirable live - stock development strategy for developing coun - tries. These are (1) removing policy distortions that artificially magnify economies of scale in livestock production; (2) building participatory institutions of collective action for small-scale farmers that allow them to be vertically integrated with livestock proc - essors and input suppliers; (3) creating the environ - ment in which farmers will increase investment in ways to improve productivity in the livestock sector; and (4) promoting effective regulatory institutions to deal with the threat of environmental and health cri - ses stemming from livestock. Removing Policy Distortions that Promote Artificial Economies of Scale in Livestock Production The po liti cal econ omy in de vel op ing coun tries often favors sys tems that significantly bene fit a few targeted individuals or institutions rather than pro - viding small increments for large numbers of peo - ple. Inappropriate livestock development patterns, such as high-cost and highly capitalized in dus trial pig, milk, and poultry production in the pe ri ur ban areas of developing coun tries, are often the result of de lib er ate pol icy choices. Ar ti fi cially cre ated economies of scale in production add to technologi - cal econo mies of scale that may exist for poultry and pigs (though they proba bly do not exist for dairy or ruminant meat). The result may be a live - stock industry dominated by a few large pro duc ers, with few opportunities for poor farm ers and little control of environmental or health risks. Even in the absence of specific tax breaks or subsidies, distortions in domestic capital markets that provide cheap capital to large enterprises and limited or expensive loans to small- scale opera - tions, favor the large over the small and the substi - tution of capital for labor. Policies dealing with in - frastructure and access to natural resources can unintentionally bene fit large- scale producers at the expense of smaller ones. Urban piggeries and dairies that do not ade - quately dispose of waste materials often operate in poor regulatory environments, under distortions in the marketing chain that prevent competition from rural areas, and without legal accountability for pol - lution. Overgrazing often results from in ade quate property rights development and enforcement mechanisms as well as politically motivated subsi - dies to large producers. The point is that there is a degree of choice in how governments promote live - stock development, and the deck is often stacked in favor of systems that harm the environment and provide lesser bene fits to large numbers of poor rural people. Al ter na tives to large, in dus trial pro duc tion sys tems might be de vel oped through ver ti cal co - or di na tion of spe cial ized crop and live stock ac - tivi ties in high- potential areas. This would per mit spe cial ized en ter prises to per form ef fi ciently while main tain ing the bio physi cal links be tween

73 64 crops and live stock. Such con tracts be tween spe - cial ized feed and live stock pro duc ers are more likely to emerge if ver ti cally in te grated com pa - nies in the in dus trial sys tem have to bear the full costs of their use of the en vi ron ment. The main alternative to an industrial production system in many developing countries is one that uses the labor and quality-control of many small farmers in production, but also bene fits from the ex - pertise, tech nol ogy and assets of large- scale com pa - nies that are under contract for input pro vi sion, processing, and distribution of output. Such ar - rangements in fact characterize the poultry industry in the United States and correspond to contract farming of high-value crops in many developing countries. As discussed above, many apparent economies of scale are in fact located in input sup - ply and output processing and distribution. This suggests that institutional innovations can allow the poor to enjoy a greater share of the benefits of the Livestock Revo lu tion. Building Institutions for Incorporating Poor Producers into the Benefits of the Livestock Revolution Considerable evidence from field studies around the world shows that the rural poor and landless presently earn a higher share of their income from livestock than better-off rural peo ple. Poverty alle - viation policies must find a way to help the rural poor participate in the growth made possible by the Livestock Revolution. The al ter na tive might be that the poor are driven out by industrial livestock pro - ducers, and the one grow ing market they presently compete in will be closed to them. Small producers face many hid den costs under developing-country con di tions. They find it diffi - cult to gain access to productive assets such as credit and refrigeration facilities and to information such as knowledge of mi cro bial contamination pre - vention procedures. In addition, the small pro ducer of perishables in the tropics typically is at a bargain - ing disadvantage with marketing agents, be cause the product must be moved immediately or lose its value. Contract institutions restore the balance and also bene fit dis tribu tors by assuring qual ity and re - liable supply. The probable existence of genu ine economies of scale in input sup ply to livestock en - terprises and in processing and distribution of per - ishable commodities generally, suggests ways should be found to integrate small producers verti - cally with livestock food processors who are also in a position to man age input supply. In de vel oped countries this has been accomplished through con - tract farm ing or participatory producer coopera - tives, especially in the case of milk and poul try. Gov ern ments and de vel op ment part ners seek ing to in vest in eco nomic capacity- building, while fa cili tat ing the par tici pa tion of the poor in com mer cially vi able ac tivi ties, need to fol low the Live stock Revo lu tion closely. The stakes are high and grow ing, and the rap idly ris ing de mand for out put in creases the prob abil ity of suc cess. The worst thing that well- motivated agen cies can do is to pre vent pub lic in vest ments that could fa - cili tate sus tain able and market- oriented live stock pro duc tion by small pro duc ers. This will not stop the Live stock Revo lu tion, but it will help en sure that the form it takes is less fa vor able for pov erty al le via tion and sus tain abil ity. Creating Urgently Needed Public Goods for Livestock Production Creation in Developing Countries The bene fits provided by technology de vel op ment and extension in the industrial livestock sectors of developed countries largely accrue in the market - place. The private sector, therefore, will continue to play the lead ing role in fur ther livestock tech nol ogy development and diffusion in developed- country industrial systems. Industrial technologies for pigs and poultry are largely transferable to developing countries, suggesting that the need for public goods provision for these items is mod est. The problem is that tech nol ogy development and extension are also required for cattle and other types of livestock pro - duction. The role of the public sector becomes an issue here, es pe cially in de vel op ing coun tries, where large pri vate companies rarely operate out - side the industrial livestock sector. As the stakes rise with the Livestock Revolu - tion, policy regarding the costs of livestock produc - tion in developing countries be come even more critical than before. Educational, veterinary, re - search, extension, and input pro vi sion are not yet fully pri vat ized and in many cases can not yet be pri -

74 65 vat ized at pre vail ing stages of development. The public goods aspect of livestock development in de - veloping countries has always existed. The differ - ence now is that because the market is growing, cre - ating opportunities and risks, the public goods as pect really mat ters, es pe cially in disease-control for smallholder-produced animals in vertically inte - grated industrial systems. Meat and milk presently contribute more than 40 percent of the value of food and agricultural pro - duction in the world, but receive a disproportion - ately small allocation of public investments for fa - cilitating production. Greatly increased attention must be given to livestock productivity issues in de - veloping countries, including post har vest process - ing and marketing. Policy not only needs to fa cili - tate the shift from increasing herd size to increasing productivity, but it needs to steer this development away from overintensification and environmental degradation. Above all, publicly funded research and exten - sion should focus on agricultural resource manage - ment that comprehensively furthers policy goals that relate to human needs. Rather than emphasizing out - put maximization above all else, research and exten - sion should find ways to use a dynamic livestock sector to improve food security and alleviate poverty and at the same time minimize adverse effects on public health and the environment. The design of public investment must therefore go beyond a strict technical orientation and consider the social, eco - nomic, and ecological dimensions of the interaction of livestock with the betterment of livelihoods. En hanc ing the design of public investment in the livestock sector of developing countries re - quires sub stan tial improvements in the crea tion, dissemination, analysis, and use of policy-relevant information concerning livestock. Specifically, an improved inventory and monitoring system of the changes in the availability, use, and management of the agricultural resource base worldwide has to be created. Differences and overlaps between the eco - logical and economic efficiency of livestock pro - duction need to be defined. These steps will require the compilation and dissemination of extensive ecological and economic data pertaining to live - stock production to complement the extensive tech - nical data available. Regulating Environmental and Public Health Concerns In the present phase of livestock development in the more dynamic developing countries, the size, com - position, and end destination of livestock produc - tion arguably have outgrown the limited institu - tional capacity of min is tries to cope with resulting environmental and public health is sues. Regulatory agencies need to function in a way that is commensurate with the kinds of prob lems arising. For ex - ample, meat hy giene needs to be better enforced in urban China and graz ing bet ter managed in West Af rica. Generally, tech nolo gies that deal with envi - ron mental and pub lic health dan gers stem ming from the Livestock Revolution will not work unless regulatory enforcement backs them up. Such insti - tutional developments will likely occur only when the political demands for bet ter regulation become strong. Such was the case in an earlier era in the de - vel oped coun tries. In de vel op ing coun tries, an ounce of prevention may eliminate the need for a pound of cure. In sum, it is unwise to think that the Livestock Revolution will somehow go away in response to moral sua sion by well-meaning development part - ners. It is a structural phenomenon that is here to stay. How bad or how good it will be for the popula - tions of developing countries is intricately bound up with how countries choose to approach the Live - stock Revo lu tion. Poli cies can significantly im - prove pov erty alleviation, environmental sustain - ability, and public health, but only if new ac tions are undertaken. Failing to act risks throw ing away one of the few dynamic economic trends that can be used to improve the lives of poor rural people in de - veloping coun tries.

75 Appendix: Re gional Clas si fi ca tion of Countries Used in this Paper Re gion Mem ber coun tries China Other East Asia In dia Other South Asia South east Asia Latin Amer ica West ern Asia and North Af rica Sub- Saharan Af rica De vel oped De vel op ing World Main land China Hong Kong, Macau, Mon go lia, North Ko rea, and South Ko rea In dia Af ghani stan, Bang la desh, Bhu tan, Mal dives, Ne pal, Paki stan, and Sri Lanka Brunei, Cam bo dia, East Timor, In do ne sia, Laos, Ma lay sia, My an mar, Phil ip pines, Sin ga pore, Thai land, and Viet Nam South and Cen tral Amer ica and Carribean Al ge ria, Bah rain, Cy prus, Egypt, Gaza Strip, Iran, Iraq, Jor dan, Ku wait, Leba non, Libya, Mo rocco, Oman, Qatar, Saudi Ara bia, Syria, Tu ni sia, Tur key, United Arab Emir ates, Western Sa hara, and Yemen Af rica south of the Sa hara ex cept for South Af rica Aus tra lia, Canada, East ern Europe, Euro pean Un ion, other West ern Euro pean countries, Is rael, former So viet Un ion, Ja pan, New Zealand, South Af rica, United States All other coun tries in FAO Sta tis tics Da ta base All coun tries in cluded in FAO Sta tis tics Da ta base Sources: Re gional group ings were cho sen based on FAO 1998, which is con sis tent with clas si fi ca tion in Rosegrant et al Note: Data from some small coun tries were not avail able in all se ries in all years. Miss ing val ues for very small coun tries are ig nored without note. 66

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81 72 Wash ing ton, D.C.: In ter na tional Food Policy Research In sti tute. Vosti, S. A., J. Witcover, and C. Carpentier Convenio de cooperacion tec nica regional no reembolsable No. ATN/SF-4827-RG-Programa 1994 de tecnologia agropecuaria regional en America Latina y El Caribe. Final report to the Inter-American Development Bank (IDB)/ International Food Policy Research Institute (IFPRI) Project No International Food Policy Research Institute., Washington, D.C. Wal lace, R. J., and A. Lahlou- Kasi Ru men ecology re search plan ning. Pa per presented at a workshop held at the In ter na tional Livestock Research In sti tute, Ad dis Ababa, Ethiopia. March Washington Post Ma lay sia says deadly virus out break over, April 10. Webb, P., and J. von Braun Famine and food se cu rity in Ethio pia: Les sons for Africa. New York: John Wiley. Westlund, L Ap par ent his tori cal con sump - tion and fu ture de mand for fish and fish ery prod ucts ex plora tory cal cu la tions. Pa per pre sented at the In ter na tional Con fer ence on Sus tain able Con tri bu tion of Fish er ies to Food Se cu rity, De cem ber 4 9, Kyoto, Ja pan. Williams, M The tran si tion in the contribu - tion of living aquatic resources to food se cu rity. Food, Ag ri cul ture, and the Environment Dis - cussion Paper No. 13. Wash ing ton, D.C.: Inter - na tional Food Policy Research In sti tute. World Bank Price pros pects for ma jor primary commodities, , volume 2. Washington, D.C.: World Bank Commodity markets and the develop - ing countries, No. 4. Washington, D.C.: World Bank. WHO (World Health Or gani za tion) World health statistics quar terly 50 (Nos. 1 2). Christopher Delgado and Mark Rosegrant are senior re search fel lows and Claude Cour bois is a research analyst at the In ter na tional Food Policy Re search Institute. Hen ning Ste in feld is sen ior officer for livestock de vel op ment plan ning at the Food and Ag ri cul ture Or gani za tion of the United Na tions. Sim eon Ehui is coordinator of the Livestock Policy Analy sis Pro ject at the In ter na tional Livestock Re search In sti tute.

82 Recent Food, Agriculture, and the En vi ron ment Discussion Papers 27. Soil Deg ra da tion: A Threat to Developing- Country Food Se cu rity by 2020?, by Sara J. Scherr, Fostering Global Well- Being: A New Paradigm to Re vi tal ize Agricultural and Ru ral Development, by David D. Bathrick, Pest Man age ment and Food Pro duc tion: Look ing to the Future, by Mon ta gue Yudel man, Annu Ratta, and David Nygaard, Food from Peace: Break ing the Links between Con flict and Hun ger, by Ellen Messer, Marc J. Cohen, and Jashinta D Costa, Seguri dad Ali men taria y Estrate gias Socia les: Su Con tribu ción a la Seguri dad Nutri cional en Areas Urbanas de Amé rica Latina, by María Inés Sánchez- Griñán, The Non farm Sec tor and Rural Devel op ment: Review of Issues and Evi dence, by Nurul Islam, Chal lenges to the 2020 Vision for Latin Amer ica: Food and Agri cul ture since 1970, by James L. Gar rett, Water Resources in the Twenty- First Cenu try: Chal lenges and Impli ca tions for Action, by Mark W. Rosegrant, Chi na s Food Econ omy to the Twenty- First Cen tury: Sup ply, Demand, and Trade, by Jikun Huang, Scott Rozelle, and Mark Rosegrant, Rus sia s Food Econ omy in Tran si tion: Current Pol icy Issues and the Long- Term Out look, by Joachim von Braun, Euge nia Serova, Harm tho Seeth, and Olga Melyukh ina, The Role of Fer til iz ers in Sus tain ing Food Secu rity and Pro tect ing the Envi ron - ment, by Balu L. Bumb and Car los A. Baan ante, Man ag ing Inter ac tions between House hold Food Secu rity and Pre schooler Health, by Law rence Had dad, Saroj Bhat ta rai, Maar ten Immink, and Shubh Kumar, Poten tial Impact of AIDS on Popu la tion and Eco nomic Growth Rates, by Lynn R. Brown, Land Deg ra da tion in the Devel op ing World: Impli ca tions for Food, Agri cul ture, and the Envi ron ment to the Year 2020, by Sara J. Scherr and Satya Yadav, The Tran si tion in the Con tri bu tion of Liv ing Aquatic Resources to Food Secu rity, by Meryl Wil liams, Mid dle East Water Con flicts and Direc tions for Con flict Reso lu tion, by Aaron T. Wolf, Struc tural Changes in the Demand for Food in Asia, by Jikun Huang and How arth Bouis, Over com ing Mal nu tri tion: Is There an Ecore gional Dimen sion? by Mano har Sharma, Marito Gar cia, Aamir Qure shi, and Lynn Brown, Agri cul ture, Tech no logi cal Change, and the Envi ron ment in Latin Amer ica: A 2020 Per spec tive, by Edu ardo J. Trigo, Major Natu ral Resource Man age ment Con cerns in South Asia, by Ger ard J. Gill, 1995 Note: For titles of ear lier papers within this series, please con tact IFPRI.

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