DEMAND FOR LIVESTOCK PRODUCTION

Introduction:

Livestock productivity in the developing world in the context of growing demand for livestock products and substantial changes in the structure of food demand, commercialization of production, and growing importance of international markets.

Issues related to the roles of the various partners in livestock research are also considered and modalities to ensure more effective linkage between research and development agencies to improve technology transfer and impact are discussed.

• The global importance of livestock and their products is increasing as consumer demand in developing countries expands with population growth, rising incomes, and urbanization. This rapid worldwide growth in demand for food of animal origin has been called “Livestock Revolution” (Delgado ,1996).

• To date, overall growth in livestock production has been sufficient to meet increases in demand without significant price increases, and relative to the long-term downward trend in prices for cereals, oils, and fats, the prices for livestock products have remained relatively stable.

• However, developing countries, as a group, have become net importers of livestock products from industrial countries, revealing structural constraints for a sustained expansion of livestock production.

Factors affecting livestock development:

Livestock production structure and organization evolves with economic growth and development. Income growth and urbanization impact traditional patterns of consumption increasing demand for value added food and livestock products.

• During this process, structural changes occur in consumption patterns, transport and transaction costs and in the relative availability of resources, all of which result in output and input market development and the transformation of institutions.

• Puts consumer preferences and demand as the main forces driving the process of commercialization of the livestock sector through output markets.

• Changes in consumption patterns are mainly associated with income growth and urbanization but several other factors affecting market development and supply of livestock products would determine the possibilities of the sector to keep pace with demand.

These factors are transaction costs, institutions, policies, input and labor markets, and technology availability for improving productivity and disease control.

• Transaction costs, institutions and policies affect development of output and input markets. Transaction costs are among the main factors determining maturity of input (e.g., feed) and output markets and can be affected by local infrastructure conditions, including distances to the nearest grain market, road conditions, transportation, frequency of local farm fairs. Local policies affect market maturity as well. At the regional level, regions with better infrastructure commonly enjoy advantageous terms of trade shifts.

• Policies and government interventions can also facilitate or retard the transition to new stages of development by favoring certain institutions and agents. They can contribute to define winners and losers of structural changes in the sector, enhance market participation of smallholders, employment generation or development of large-scale operations.

• In the long run, changes in consumption patterns, economic growth, infrastructure and macroeconomic changes will impact on factor and resource availability and transaction costs, affecting relative prices in input markets.

• As changes in feed and labor markets play a key role in the development of the livestock sector, increases in crop production and productivity could contribute to the development of the feed industry and of feed markets, reducing prices of feed relative to other inputs.

• With respect to labor markets, growth of off-farm employment reduces the advantages of backyard livestock production and promotes specialization and commercialization of livestock production.

Vertical Coordination of Livestock development:

Three main biological characteristics determine the incentives to vertical integrate or coordinate the industry, affecting the degree of asset, space and time specificity of the three species: Biological production cycle, Industry stages, and Geographic concentration in production.

• The main determinant of vertical integration in livestock production is the speed with which biological changes such as genetic improvements can be made.

• There is more incentive to vertically integrate in an industry which has a shorter biological process and in which genetic changes can be made more quickly.

• Making quicker genetic changes also affects efforts to reduce production costs and increase consistency of products for consumers.

Ward (1997) compares the genetic base for poultry with that of hogs and cattle in order to explain differences in production coordination between species.

According to Ward (1997), the biological process, the number of stages in the production process and the spatial organization of the beef chain are major disincentives for vertical coordination in the industry.

• The biological process is a serious constraint to quickly changing the genetic base in beef production given that a cow produces only one calf per year, and it takes about 24 months to learn whether or not the breeding process resulted in beef with more or less desirable characteristics.

The significant land and forage base required for cattle production is what determines, according to Ward, that cattle stocker or growing operations are diverse and usually not concentrated in the same geographic regions as cow-calf production.

• Geographic dispersion combined with an added production stage, results in significant costs for moving animals from dispersed cow-calf operations to more concentrated stocker or growing areas and to still more concentrated cattle feeding areas.

The egg industry is the only livestock sector where vertical integration is important due to transaction costs and significant site specificities. Technological breakthroughs in the 1960s led to high-speed, in-line grading, in which eggs are conveyed directly from laying cages to grading and packing machines making on-farm egg processing the norm.

BY KHAS.