Technology and evolving supply chains in the beef and pork industries

That's the title of a new article in Food Policy written by Josh Maples, Darrell Peel, and me.  The paper will ultimately be part of a special issue on technology and supply chains. 

Here is part of the lead in.

The structural shifts in the beef and pork industries have occurred alongside (and perhaps because of) technological innovation and its effect on the flow of these meats through their respective supply chains. Technology innovations have been a major factor in the changing economics of the beef and pork industries. Improved nutrition, growth promotion technologies, better genetics, and economic conditions have all played a role in livestock becoming more efficient (Lusk, 2013). The values of improved technologies between 1977 and 2012 in the beef and pork sectors have been estimated at $11 billion annually and $7.6 billion annually, respectively (Lusk, 2013).

We discuss the nature and causes of different market structure in the beef and pork industries.

Even with the presence of marketing agreements, the beef industry is easily the least vertically integrated of the big three protein industries (Ward, 1997). The key reasons for this revolve around the aforementioned asset specificity as well as the biological makeup of cattle. There is a greater incentive to vertically integrate or engage in contracting in livestock industries in which genetic changes can be made more rapidly (Ward, 1997). The biological production cycle is about two years for cattle, which is twice as long as that of hogs and the genetic base of cattle is relatively diverse and is not narrowing (Ward, 1997). Alternatively, market coordination has allowed the pork industry genetic base to narrow toward the most efficient hogs for production. The number of hogs marketed today is 29 percent greater than in 1959 from a breeding stock that is 39 percent smaller (Boyd and Cady, 2012). Geographical concentration also plays an important role. During the cow-calf stage, cattle are scattered throughout the U.S. due to the required land and forage needed while hog production is centered in the Midwest (and more recently the Southeast) near the heaviest corn-producing states. These factors create significant barriers to integration in the beef industry.

And, we discuss the impacts of various technologies on the industries.  Here's a segment on effects of pharmaceutical innovations in the cattle industry.

Vaccinations, parasite control, ionophores, antibiotics, growth promotant implants (often referred to as growth-promoting hormones), and beta-agonists have been the most widely-used of these innovations (Arita et al., 2014 ; APHIS, 2013). The productivity and economic impacts of these technologies are large. Lawrence and Ibarburu (2007) estimated that the cumulative direct cost savings of the technologies was over $360 per head for cattle over the lifetime of an animal while Capper and Hayes (2012) estimated that the increased cost of U.S. beef production without growth enhancing technologies would be the equivalent of an 8.2 percent tax on beef. Elam and Preston (2004) discussed each of these technologies at length in their summary of the technological impact in the beef industry. They found that growth implants increase rate of gain by 15–20 percent and improve feed efficiency 8–12 percent. Growth-promoting hormone implants are believed to be used on approximately 90 percent of cattle in U.S. feedlots (Johnson, 2015). Elam and Preston (2004) also found ionophores increase average daily gain by 1–6 percent and improve feed efficiency by 6–8 percent. Lawrence and Ibarburu (2007) used a meta-analysis approach to find estimates for the farm level economic value of these five technologies in the beef industry. They estimated that beta agonists improve feedlot average daily gain by 14 percent and that the combination of implants, ionophores, antibiotics and beta-agonists account for a 37 percent increase in average daily gain in feedlots. These increases in feed and gain efficiency have direct effects on the profitability per animal. Lawrence and Ibarburu (2007) estimated that sub-therapeutic antibiotics impact cattle profitability by $5.86 per head, ionophores have an $11–$13 impact, and the use beta-agonists impacts per head profitability by $13.02 per head. The use of growth promoting implants has the largest impact on cattle profitability at between $68 and $77 per head ( Lawrence and Ibarburu, 2007; Wileman et al., 2009).