How Obama may impact feed industry and animal agriculture
The U.S. president's success in stimulating the economy will affect the feed/animal agriculture industries.
As the new editor of Feed Management, let me take a moment to let you know what you can expect each month on these pages. In my view, Feed Management is the business magazine for the feed industry. We'll cover everything that's new from products to money-making strategies. Given the global recession and the troubled times some of you and your customers are facing, not in decades have strategies for how to survive and prosper been more important. And we'll do our best to share real-world examples of money-making strategies each month.
An important part of making money is anticipating the environment in which you'll be operating over the next few years and one important piece is trying to understand how decisions of U.S. President Barack Obama — and those from the new Congress — could impact the U.S. feed industry. For starters is the extent to which he is successful in revitalizing the U.S. economy. Analysts are mixed on whether the mammoth $787 billion comprise economic stimulus package will jump start the economy, and if so by how much. Obama himself has said that the measure is only a first step.
Why economic growth is important for the industry is because many consumers have reduced their consumption of meat, milk and eggs. Some economists note that while in some recessions, consumers move from beef to pork to chicken, in this one, some Americans may be moving out of animal products entirely to staples such as rice and beans.
How much of a hit has animal protein taken? It's hard to say precisely, says Jarrod Kersey, director of legislative affairs for the American Feed Ingredients Association. One measure, he says, is the number of livestock, and on that score, there is no question but that livestock and poultry numbers are down. Some of that may be due to cyclical factors, while others are due to lower demand for end products. On Jan. 1, 2009, cattle on feed were down 7% from year-earlier levels. The U.S. hog inventory on Dec. 1 was down 2%, layer numbers were down 1%. And broiler-type chickens were down in December versus the previous year. Even aquaculture numbers were down, with farm-raised catfish in December — 16% lower than the preceding year.
While it's hard to pinpoint how much of this decline is due to the economy, some obviously is, and a growth in jobs and incomes that leads to more demand and therefore more feed use creates a more growing and vibrant industry.
Economic growth is clearly linked to the growth of the feed/animal agriculture industries, and than holds not only for the United States, but global markets as well, and it's not just the United States, but the entire globe that is in a recession. Large quantities of both livestock and poultry are exported, as are animal feed and ingredients.
It's not all gloom and doom, Kersey says, far from it.
That said, it's not all gloom and doom, Kersey says, far from it. He has spoken with some exporters of feed ingredients, for instance, who because of prices and gains in efficiencies over the past two years "have had the two best years they've ever had," he states.
There are two additional ways the Obama administration and new Congress will impact the feed industry and animal agriculture. The first is the extent to which lawmakers will be focused on reducing global trade barriers, which may be tougher to do during a recession. It's not clear yet how focused Obama — and the new Congress — will be on expanding ag exports.
The last way Obama will impact the industry is through regulation. The two components of legislation AFIA thinks will have the biggest impact are the Food & Drug Administration Amendment Act of 2007, and the Animal Feed Safety System, which has been under development for years. FDA has until Sept. 28 for implementation of the following three components:
- Ingredient standards and definitions,
- Processing controls and,
- Nutrition and labeling of pet foods.
"This is the direct result of Congressional action in light of melamine," Kersey says. The details of this Animal Feed Safety System (AAFS) plan are here: www.fda.gov/cvm/AFSS.htm.
"Notice the AFSS is intended to be a more risk-based approach," Kersey states. "We support this approach."
Lastly, Obama, if anything is likely to take a sterner eye than his predecessor towards regulating large CAFOs (confined animal feeding operations) based on positions spelled out on his Web site during the campaign, but on specifics, it's far to early to say.
But that said, President Obama already is moving forward to try and forge a new global greenhouse gas treaty, and that could involve animal agriculture due to the simple fact that livestock emit methane gases. But tougher rules on methane could also benefit producers who capture and use methane to power generators. Already, some producers who are capturing methane and using it as an energy source to ultimately make electricity are receiving credits that they can trade on the Chicago Climate Exchange.