Ekonomiese impak van genetiese verbetering op die ... - Stamboek

Ekonomiese impak van genetiese verbetering
op die veebedryf
Stamboek Teeltsimposium
1 Mei 2013
Bloemfontein
Free State

Why we are in the business – or is it that
simple??
Red meat consumption is embedded in the South African culture…
Biltong
Pap en vleis
Indian lamb curry
Braaivleis

Menu
• Realities we must account for
• Evolving meat industry
• The value chain
• Genetics and its benefits

Billions
1950
1956
1962
1968
1974
1980
1986
1992
1998
2004
2010
2016
2022
2028
2034
2040
2046
Realities the global and local meat industry
faces
• Population, income growth and the
changing consumer base
10
8
6
4
2
4 %
2 %
0 %
5 % 9 %
34 %
30 %
9 %
0
6 %
1 %
World Population
U.S Census Bureau (International Data Base), 2010
7

Change in the composition of diets and nutritional
value and availability
Source: http://www.grida.no/publications/rr/foodcrisis/page/3559.aspx
The demand for grain for use in
intensive livestock production can
increase to more than 50% of total
grain production (Keyzer et al., 2005).

Scale of Importnace
We are not servicing a homogeneous consumer
group (Free State Consumer Survey)
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Price
Quality
Convenience
Health Cons
Food Safety
Traceability
Attributes
Cook time
Packaging
Brand
Tatste
Nut Info
Inferior Conumer (low nutrition) (34.8%) n = 282 At Home (Basics) (23.7%) n = 192
Balanced Consumer (26.6%) n = 216 Value Added Orientated (12.3%) n = 100
High Frequency Consumer (Broad Product Range) (2.6%) n = 21
Source: Botha, F., Taljaard, P., Jooste, A. & Pelser, A. (2007). UFS.
9

Per capita consumption (Kg)
The effect of the recession on meat
consumption
35
30
25
Meat, Beef and Veal
Poultry, Meat, Broiler
Before recession
Strong
increase
During recession
Slight
increase
After recession
Increase
20
15
Increase
Decrease
Constant
10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: USDA, 2011

Realities the global and local meat industry
faces
• Changing economic power position in the
global economy
• China, Brazil, India, Africa
130 000
120 000
110 000
100 000
90 000
80 000
70 000
60 000
50 000
International outlook for meat
consumption
Poultry
Pork
Beef
110 000
100 000
40 000
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Source: http://www.fao.org/economic/est/commodity-markets-monitoring-and-outlook/meat/en/, 2011; taken from US Meat Export
11
Federation
90 000
80 000
70 000
60 000
50 000
40 000
International outlook for meat
consumption – Excluding China
Poultry
Pork
Beef

Realities the global and local meat industry
• Climate change
• Resource availability
faces
• Arable land capable of sustaining intensive to
moderately well adapted cultivation amounts to
about 12.6 % of South Africa’s land
– Of this, only 2 % (2 446 million hectares) is
prime agricultural land
– A further 11% can be added
12

AT-25C
AT-30
DE-1100
DE-1400
FR-70C
FR-80
FR-85
ES-90
ES-180
IE-25
UK-40
UK-105
SE-60
SE-80
NO-45
HU-150T
HU-880T
CZ-350
UA-410
CA-170
US-240
US-500
AR-700
AR-1000
AR-730
AR-800
BR-400
BR-1070
CO-240
MX-120
CN-2
ID-2
ID-4
ID-3
ID-30
AU-500
AU-540C
AU-700
AU-1100
ZA-200
ZA-250
ZA-400
calves per 100 cows & year
120
International competitiveness: Calving
percentages
100
80
60
40
20
0
Source: Agribenchmark, 2009

Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Index Jan 2008 = 100
Realities the global and local meat industry
faces
• Changing cost relations (sustainability)
150
140
130
120
110
100
90
80
70
60
Primary agriculture inflation
Food manufacturing inflation
Food and non-alcoholic beverage inflation
Source: Stat SA, 2013
14

AT-25C
AT-30
DE-1100
DE-1400
FR-70C
FR-80
FR-85
ES-90
ES-180
IE-25
UK-40
UK-105
SE-60
SE-80
NO-45
HU-150T
HU-880T
CZ-350
UA-410
CA-170
US-240
US-500
AR-700
AR-1000
AR-730
AR-800
BR-400
BR-1070
CO-240
MX-120
CN-2
ID-2
ID-4
ID-3
ID-30
AU-500
AU-540C
AU-700
AU-1100
ZA-200
ZA-250
ZA-400
International competitiveness: Income
US$ per 100 kg live weight
700
600
500
Government payments
Weaner and transfer to beef receipts
Breeding livestock receipts
Cull animals and slaughter receipts
400
300
200
100
0
Source: Agribenchmark , 2009

BR-1070
AU-1900
AU-700
BR-400
AR-730
AR-1300
AU-500
UK-40
AU-540
CO-240
ZA-250
US-500
ZA-200
ZA-300
US-240
FR-70C
CN-2
FR-80
ID-SU-1C
HU-150T
FR-85
DE-1100
CA-170
DE-1400
ES-160
ES-90
HU-880T
AT-30
UK-100
IE-25
SE-80
ID-SU-2C
NO-45
AT-25C
SE-60
International competitiveness: Costs
800
US$ per 100 kg live weight
700
600
500
400
300
200
100
0
Source: Agribenchmark , 2008

Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Index 2008 = 100
Index 2008 = 100
Regulated prices and increasing food prices
240
145
220
200
180
Water and other services
Electricity and other fuels
135
125
Processed
Unprocessed
160
140
115
120
105
100
80
95
60
85
Price increase from February 2008 to December 2012
Water and other services – 49 % Processed food products – 46.7 %
Electricity and other fuels – 147.7 %
Unprocessed food products – 36.5 %
Stat SA, 2013
17

Dec-07
Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Crude oil (US$/barrel)
Fuel price (R/litre)
Fuel prices
160
140
120
100
80
60
Crude oil
Petrol 95 ULP Gauteng
Diesel 0.05% S Gauteng
13
12
11
10
9
8
Feb 2013 – Diesel price =
R11.29/l
18 cent increase from
January 2013 translate to
an additional R1.78 million
expenditure for farmers on
an annual base!!
40
20
7
6
Mar 2013 – Diesel price =
R11.88/l
0
18
5
58 cent increase from
February 2013 translate to
an increase of R5.84 million
in expenditure for farmers
on an annual base!!

2004
2005
2006
2007
2008
2009
2010
2011
2012
Transport costs
1.1.
1.2.3.
1.2.2.2.
Rand
1400000
1200000
1000000
Rand
4500000
4000000
3500000
3000000
Rand
4500000
4000000
3500000
3000000
800000
2500000
2500000
600000
400000
200000
0
Capital Cost Fixed Cost Running Cost
2004 2006 2008 2010 2012
2000000
1500000
1000000
500000
0
Capital Cost Fixed Cost
Running Cost
2004 2006 2008 2010 2012
2000000
1500000
1000000
500000
0
Capital Cost Fixed Cost Running Cost
2-axle vehicles: 6-axle vehicles: 7-axle vehicles:
Capital cost: 18.4 %
Fixed cost: 37.8 %
Running cost: 126.4 %
Source: Max Braun Consulting Services, 2013.
Capital cost: 38.3 %
Fixed cost: 53.3 %
Running cost: 133 %
Capital cost: 40.4 %
Fixed cost: 57.5 %
Running cost: 174.6 %
19

Percentage of total costs
Costs at retail level
100
90
1.45 0.61
3.63
1.63
80
70
60
50
40
30
20
10
0
51.46
9.69
2.78
12.04
16.71
Retailer costs
Other
Other consumables
Animal Transportation
Certification costs
Land costs (rental)
Packaging costs
Water and other utilities
Electricity
Labour costs
Bron: NAMC (2010)
Nota: Examples of other consumables are knives, blades, sharpeners etc.
20

New things on the radar…
Health concerns
Environmental
concerns
Animal care
Source: USDA, 2011

Evolving meat industry

2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
Percentage
Position of the red meat industry in South Africa
% contribution to gross value of agricultural production
60
50
40
30
20
10
0
ANIMAL PRODUCTS HORTICULTURE FIELD CROPS
Source: DAFF, 2011
23

2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
Rand (thousand)
Position of the red meat industry in South Africa
30 000 000
25 000 000
20 000 000
15 000 000
10 000 000
5 000 000
Gross value of selected livestock products
Catlle and calves Sheep and goats Pigs Milk Broilers
Source: DAFF, 2011
24

Per capita consumption (Kg)
Meat consumption, beef consumption vs
poultry consumption
35
30
25
20
2000 – 2011:
Per capita consumption of poultry
51 %,
per annum,
3.5%
2000 – 2011:
Per capita consumption of beef
1.05 %,
per annum,
0.1%
15
10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Meat, Beef and Veal
Poultry, Meat, Broiler
Source: Own calculation based on different sources

Transition of the industry (example of beef)
1970s 1980s 1990s 2000s
OPPORTUNITY
DRIVEN
PRODUCTION
DRIVEN
COST DRIVEN
CONSUMER
DRIVEN
- Low and inconsistent
quality meat.
-Grain farmers market
grains alternatively
and started feeding
younger animals.
-Trade in cattle
controlled by
auctioneers.
Source: Ford
-Movement towards
more intensive feeding
of cattle.
-Industry expanded
dramatically.
-Stakeholders start
taking cognizance of
consumer needs.
-Industry controlled by
three large companies.
-Industry experience
effects of deregulation
and liberalization.
-New environment
increased risk and
lowered prices.
-Three big companies
disinvested.
-Industry re-orientated
to produce more costefficiently.
-Movement towards
direct buying and selling
of animals.
Question is whether the industry has
become sufficiently value driven??
-Industry realized the
importance of the
consumer.
-Greater emphasis in
providing consistent
quality, adding value,
the development of
standards and
increased
involvement in chain.
-Feedlot industry
stimulated by
achieving better
economies of scale.

The value chain is the key!!

Source Roduner (2005)
28

Example of a value chain
Consumers
Input suppliers
Retailers
Producers
Marketing
Segments
Processors
Traders
Production
Segments
Abattoir
Feedlots
Product flow
Financial flow
Information flow
Source: Adapted from Schroeder, 2003

Dualistic value chains: Formal market
30

Dualistic value chains: Informal market
Source: Van Rooyen et al.
32

And somewhere we have to strike a balance
??!!??
Source: Photo at Groblershoop abattoir

Where does genetic
improvement fit in??

There has been progress, but also some
uncertainties
• Management
• Environment
• Externalities

Why genetic improvement? - Consumer
– Looking for value for money
• Willingness to pay
– Quality (e.g. tenderness)
– Changing consumer behaviour
• Buying cuts vs buying portions
• Positioning according to LSM groups
– Major question – does genetic improvement do
something for the poor consumer

Why genetic improvement? – Retailers
• Establishing brands
– Brand attributes, e.g.
• Optimal growth without growth stimulants
• Free range, i.e. adaptability, reproduction
• Procurement
– Early 2000’s: 80% carcass, 20 % in primary cuts, no value
added products.
– Currently: 50% carcass, 30 % in primary cuts, 20 % valueadded
products.
• Focus on productivity and sustainability
• Preference for certain breeds

Why genetic improvement? – Feedlots,
Processing
• Feed conversion ratio (Avg daily gains vs cost
of feed)
• Yield per carcass
– Focus on optimal carcasses

Why genetic improvement? - Producer
• Enhanced growth attributes
– Feed conversion
– Pre and post weaner growth
• Enhanced reproduction
– Number of calves per cow
– Survival attributes
– Milk production
– Longlivity

What does the evidence suggest?
• Earlier South African evidence
– Rate-of-return estimates (1994-92):
• General (1994-92): 5% (???)
• Animal Health (1947 -82) : >36%
• Animal production (1947 – 94): 11-16%
• Dairy, beef, mutton, and pig performance and progeny
testing schemes (1970 – 96):
– National Dairy Cattle Performance and Progeny Testing Scheme
51%,
– National Beef Cattle Performance and Progeny Testing Scheme
44%,
– National Mutton Sheep Performance and Progeny Testing
Scheme 54%
– National Pig Performance and Progeny Testing Scheme 14%.
Cited from Mokoena (1998) & Liebenberg, F (2012)

Case study:
Economic Value of Improvements in Beef
Tenderness by Genetic Marker Selection
Weaber, R.L. and Lusk, J.L. (2010) – Amer. Jour. of Agric. Econ.
• Over time much research focusses on postharvest
interventions
– Aging
– Electrical stimulation, etc
• However,
– Techniques as costly
– Consumer acceptance issues
• Research focus on pre-harvest strategies to
improve tenderness
– 12% to 43% of variation in steak tenderness is under
genetic control (Minick et al, 2004; Koots et al, 2004)

Case study:
Economic Value of Improvements in Beef
Tenderness by Genetic Marker Selection
• Methodology involve, amongst others,
– The Warner-Bratzler shear force (WBSF) method
• Correlation between variations in animals DNA and
WBSF at slaughter (Casas et al, 2006; Schenkel et al, 2006)
– Genetic simulation model
• Mean WBSF values projected over a 20-year period as a
result of six different strategies
Weaber, R.L. and Lusk, J.L. (2010)

Case study:
Economic Value of Improvements in Beef
Tenderness by Genetic Marker Selection
• Methodology involve, amongst others,
– Different strategies, for example
• Non Aggressive selection strategy (50% of good
performing bulls)
• Mild aggressive strategy (30% of good performing bulls)
• Aggressive strategy (10% of good performing bulls)
Weaber, R.L. and Lusk, J.L. (2010)

Case study:
Economic Value of Improvements in Beef
Tenderness by Genetic Marker Selection
• Different strategies: RESULTS
Item 50% 30% 10%
Year 1 4.61 4.61 4.61
Year 20 4.50 4.45 4.37
Reduction in mean WBSF (kg) 0.11 0.16 0.24
Reduction in mean WBSF (%) 2.5% 3.6% 5.4%
Monetary value (billion) $5255 Benefits $7603 can $11332 be
added through
post slaughter
interventions –
not permanent
• Benefits distributed throughout the chain:
– 31% to consumers
– 10% to retail
– 3% to packers
– 7% to feedlots
– 49% to producers
Weaber, R.L. and Lusk, J.L. (2010)

Performance changes in poultry and livestock
following 50 years of genetic selection
• Several sources of data used to illustrate:
– Changes in efficiency have:
• reduced the amount of feedstuffs
required to produce a unit of product
• the amount of waste produced,
compared to the inefficiencies in the
1950s.
Havenstein, G.B (2006)

Performance changes in poultry and livestock
following 50 years of genetic selection
- 85-90 percent of the change in growth rate has been due to genetic selection,
- only 10-15 percent of the change is due to improvements in nutrition and
nutritional management.
Havenstein, G.B (2006)

Performance changes in poultry and livestock
following 50 years of genetic selection
Cattle inventory and beef production
Havenstein, G.B (2006)

Concluding remarks
• Partnering
“You must earn with your partner, and not
from your partner”
- Ashish Thakkar (CEO KARA Group)
• Productivity Gap versus the Opportunity
Gap
“If you don’t lead change, you will become a
victim of change”
– Henry Ford

Thank you
Contact details:
Dr A Jooste
Tel: +27 (0) 83 307 3703
E-mail: andrej@potatoes.co.za
Acknowledgments:
Prof Esti Koster
Heiko Koster
Helena Theron
Gerhard Schutte
Frikkie Liebenberg

“Well-fed people have many
problems, hungry people only have
one”
Traditional Chinese proverb