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The economics of animal ag add up

The economics of animal ag add up

Every growing season, from planting to harvest, crop production tends to dominate the attention of farmers and others in Iowa and other Corn Belt states. Nearly every year there’s concern about the pace of planting, the potential for extreme heat during corn pollination and the need for August rains to help soybeans load up with pods.

Not as much attention, however, gets paid to farmers’ steady work to care for and market pigs, cattle, poultry and other food animals. That’s unfortunate, says Chris Hurt, an agricultural economist at Purdue University, because animal agriculture nationally contributes nearly as much to farmers’ income as crops, and more than crops in many states, including Iowa.

"The animal agriculture sector is vitally important in the United States and has a lot of potential for growth, especially in exports," Hurt said last week. "It tends to get overshadowed in the news, particularly in a year like this with lots of weather problems."

Livestock production is very valuable in rural communities because it tends to add more jobs and overall economic activity, Hurt said. Raising livestock also provides a tremendous local, and very steady, market for corn and soybean crops, he said. "Commodity organizations that promote corn and soybeans are well aware of its value," the Purdue economist said.

Animal agriculture fits

In addition, raising livestock fits well with multi-generation family farms because it can help them diversify their operations to stay competitive, Hurt said.

"Livestock production allows them to bring sons and daughters back into the operation because they need the labor," he said. "They can also utilize manure for crop nutrients, which can add a lot of value."

The total production value of animal agriculture across the United States in 2019 is projected to be just over $180 billion, not far behind the $195 billion value for crops, according to projections from the U.S. Department of Agriculture. That ratio has held steady for the past few years, after moving heavily in favor of crops earlier this decade when corn and soybean prices soared.

But the ratio is very different from state to state, Hurt noted.

In Iowa, the crop and livestock values are nearly balanced, with livestock making up 52% of the total in 2017 and crops representing 48%. That’s a sharp contrast to big ag states east of the Mississippi River.

In Illinois, crops accounted for 85% of the production value and animals just 15% in 2017. Crop production also dominated in Indiana, with 64% of production value in 2017 compared to only 36% for livestock.

In contrast, states to the west of Iowa, including Nebraska and Kansas, are livestock dominated with large cattle feeding operations. Animal ag also dominates the value of ag production in Wisconsin because of the state’s big dairy industry.

History and geography are behind the sharp contrast be­­tween crop and livestock values in Iowa and Illinois, Hurt noted. Because of the inland water ways on the Illinois and Mississippi rivers, farmers in Illinois have enjoyed higher prices for shipping corn and soybeans for exports and processing.

Building demand

In contrast, feeding pigs, cattle and poultry turned out to be a better deal for farmers in Iowa, especially those in central and western counties. "As you get away from the Mississippi River, the basis widens, and shipping grains doesn’t make as much sense," Hurt said. "As the old saying goes, ‘You need to walk your crop to market’ by raising livestock."

That ratio of crop to livestock value in Iowa and Illinois isn’t likely to change anytime soon, Hurt said. Iowa has built a large modern infrastructure around raising hogs, cattle and poultry that Illinois just doesn’t have anymore, he said.

"Farmers in Illinois say they can go for miles in every direction and won’t see any livestock production, and that just doesn’t happen in Iowa," Hurt said.