A few thoughts by John Nalivka: Grain fed beef – Absolute competitive advantage
February 3, 2015
Producing grain-fed beef versus beef produced strictly from forage has been debated for years. Opposing arguments in this debate range from producing grain for animal consumption versus human consumption to the healthful aspects of grass-fed versus grain fed. Between 90% and 95% of the steers and heifers slaughtered in the U.S. are grain-finished.
Global feed grain production is integral to feeding the 7 billion people living in the world. Of the world's supply of feed grains, 74% is used to feed livestock and poultry to produce a supply of animal-based protein. The United States produces 30% of the world's total feed grains. Corn accounts for 96% of that U.S. supply.
As the world's population continues to grow, the demand for food and animal protein will also grow. Production efficiency is integral to meeting that demand as scarce resources (land and water) are allocated to produce food. Comparative advantage becomes a strategy rather than just another economic concept in the economic text books. While this is big picture stuff, the reality is that the same holds true for decisions in farming and ranching every day in the U.S.
So, what does all of this have to do with producing grass-fed versus grain-fed beef? On the scale that grass-fed beef is produced in the U.S. today it's probably of little or no consequence. Grass programs have become increasingly popular with consumers and it's a ranch decision to raise cattle to market into a grass program. However, when the question is applied to the industry, then production efficiency, comparative advantage, and competitiveness are quickly brought to the front burner.
Natural resources, technology, and government policy give the U.S. a global comparative advantage to produce corn. That feed grain production coupled with our feedlot technology which is un-paralleled in the world give the United States an absolute comparative and competitive advantage to produce grain-fed beef.
While the size of U.S. cattle herd is at a 60-year low, we are still producing 24 billion lbs. of beef compared to 9 billion lbs. in 1952 with the same number of cattle. In 2014, there were about 10½ million cattle on feed compared to a third that many in 1952. Both slaughter weights and carcass weights are at least 300 lbs. heavier today than they were 60 years ago. Just from the standpoint of production efficiency, I think the answer is clear which industry is more competitive.
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While grass-fed beef has definitely gained popularity and for many producers it makes sense given their resources to produce grass-fed beef, the economics of comparative and competitive advantage, both globally and in the U.S., still of support producing grain-fed beef in the United States.