sheep, black swans, and the future of...

Sheep, Black Swans, and the Future of Agriculture

John WalkerProfessor and Director of Research

Texas A&M AgriLife ResearchSan Angelo, TX

THIS IS THE PROBLEM!

0.0

5,000.0

10,000.0

15,000.0

20,000.0

25,000.0

30,000.0

35,000.0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Bree

ding

Ew

es (1

,000

hd)

Year

U.S. Sheep Inventory

Theories for the Decline inU.S. Sheep Numbers

• Predator

• Money

• Efficiency

• Labor

Predation

• Somewhat special problem of U.S. Sheep Industry.

• Some producers are able to cope with predation.

• Ultimately, it is a labor problem.

PredationProblem or Fact?

"If a problem has no solution, it may not be a problem, but a fact - not to be solved, but to be coped with over time."Shimon Peres

President of Israel.

Response of Stock Sheep Retention to Lamb Prices

0

1

2

3

4

3-year 5-year 10-year

Elas

ticity

1924 - 1983

Trend in ewe numbers

Source: Wipple & Menkhaus, 1989

Response of Ewe Numbers to Lamb Prices

0

1

2

3

4

Short-term 5-year 10-year

Elas

ticity

1961 - 1995

Trend in ewe numbers

Source: Jones & Schroeder ,1998

Ewe Inventory Is Less Responsive to Lamb Price Than in The Past

Wipple & Menkhaus, 1989

0

1

2

3

4

3-year 5-year 10-year

Elas

ticity

1924 - 1983

Jones & Schroeder, 1998

0

1

2

3

4

Short-term 5-year 10-year

Elas

ticity

1961 - 1995

Profit

0

20

40

60

80

100

120

-60

-40

-20

0

20

40

60

80

100

120

140

16019

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

87

Inve

ntor

y ch

ange

rela

tive

to 1

972

%

Rece

ipts

–Ca

sh E

xpen

ses

$/AU

SheepCattleStock SheepBeef Cattle

Source: Stillman et al., 1990& USDA-NASS

Effect of Economic Returns on Sheep & Cattle Inventories

40

50

60

70

80

90

100

110

120

-50 0 50 100 150

Inve

ntor

y ch

ange

rela

tive

to 1

972

%

Receipt – Cash Expenses $/AU

Data adapted from: Stillman et al., 1990& USDA-NASS

Increasing Demand

U.S. Per Capita Lamb Consumption

0.0

1.0

2.0

3.0

4.0

5.0

6.019

1019

1519

2019

2519

3019

3519

4019

4519

5019

5519

6019

6519

7019

7519

8019

8519

9019

9520

0020

0520

10

Bone

less

per

cap

ita co

nsum

ptio

n (lb

s) WW IIWW I

Korea

Vietnam

Meats Consumed in the U.S.

0.0

50.0

100.0

150.0

200.0

250.019

0919

1419

1919

2419

2919

3419

3919

4419

4919

5419

5919

6419

6919

7419

7919

8419

8919

9419

9920

0420

09

Bone

less

per

cap

ita c

onsu

mpt

ion

(lbs)

FishPoultryPorkBeefLambVeal

U.S. Lamb & Mutton Supply

100

200

300

400

500

600

700

1970 1975 1980 1985 1990 1995 2000 2005 2010

Carc

ass w

eigh

t (x

1 m

il. lb

s)

DomesticImportTotal

Lamb Demand: Price-to-Quantity 1975 - 1995

100120140160180200220240260

1 1.2 1.4 1.6 1.8 2

Consumption (Lbs/capita)

Cos

t (C

ents

/Lbs

GD

P D

efla

ted)

Money/EconomicsThat’s all I’ve got to say about that.

Production Efficiency

Improving reproductive efficiency has not increased ewe numbers.

80%

85%

90%

95%

100%

105%

110%

115%

0

5

10

15

20

25

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Lam

b cr

op (%

)

Bree

ding

ew

es (m

il. h

d)

Breeding Ewes Lamb Crop

Source: USDA, National Agricultural Statistics Service, 2013

Breeding Ewe Inventory Is Not Related to Percent Lamb Crop

100%

105%

110%

115%

120%

125%

130%

135%

Lam

b cr

op (%

) 9 States126% Increase12 States9% Decrease11 States37% Decrease

Source: USDA, National Agricultural Statistics Service, 2013

Liebig's Law of the MinimumProduction is controlled by the most limiting resource.

Labor or Lifestyle Norms

0.0

5,000.0

10,000.0

15,000.0

20,000.0

25,000.0

30,000.0

35,000.0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Bree

ding

Ew

es (1

,000

hd)

Year

U.S. Sheep Inventory

Labor Intensive vs. MechanizedCorn Production

634

4082

1721

11

82289400

0100020003000400050006000700080009000

10000

LaborIntensiveMechanized

Source: Pimentel, 2009

1940

Compared to most other agricultural enterprises, sheep have had fewer opportunities to mechanize and reduce labor.

Feeding Sheep 2013

Future of Agriculture

DRIVERS

• Food production & population growth

• Environmental conditions

• Farm policy

Growing Concerns About Food Production & The Enviroment

2006

1790

1890

Sir William CrookesChemist

W. O. AtwaterNutritionist

Jeremiah RuskSecretary of Agriculture

1920

Sir William CrookesChemist

1930

1940 – 1950

1960 – 1970

1980

1990 and beyond

The Environment

Environmental policy is about politics!

Many of one generation’s great fears are remembered by the next generation, if they are remembered at all. As quaint curiosities. Surely some of the concerns that we feel for the transformation of the biosphere or for the fate of its elements will baffle future generations. Predictions are not falsified only because the concerns were ill-founded or the hypothesized relationships were wrong. On the contrary, the gloomiest of forecast may not be realized because society takes them seriously and acts upon them.

Kates, Turner and Clark 1990

“Prediction is very difficult, especially if it's about the future. - Niels Bohr

The Black Swan

Funding of Conservation vs. Production in the Corn Belt

$0

$10

$20

$30

$40

$50

$60

Conservation Production

USD

A ex

pend

iture

s (bi

l. $) Federal policy now is

driving fencerow-to-fencerow farming again, just as it did in the 1970s.

Source: Environmental Working Group Losing Ground, 2011

A farm policy where the top priority is conservation and sustainability .

The Future According to Drucker 2009

In all developed countries, the strategy of all institutions will have to be based on the assumption of a shrinking population, and especially of a shrinking young population.

The New Labor Pool

3424 24 23

5663 57 57

10 13 19 20

0%10%20%30%40%50%60%70%80%90%

100%

1970 2009 2030 2050Under Age 18 Ages 18-64 Ages 65+

Source: Population Research Bureau, 2011

2 Potential solutions to declining sheep numbers

• More conservation oriented farm policy.

• Engage a growing labor force.

Contribution of the different size operations to animal numbers is similar in sheep and cattle.

36%

20%

31%

13%

28%

17%

38%

17%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Sheep < 100Cattle < 50

100-49950-99

500-4,999100-499

>5,000 Sheep> 500 Cattle

Perc

ent o

f Inv

ento

ry

Size of Operation (hd)

SheepCattle

Source: USDA, National Agricultural Statistics Service, 2013

The sheep industry has a much higher percentage of small operations than the cattle industry.

94%

5% 1% 0%

28%17%

38%

17%

0%10%20%30%40%50%60%70%80%90%

100%

Sheep < 100Cattle < 50

100-49950-99

500-4,999100-499

>5,000 Sheep> 500 Cattle

Perc

ent o

f ope

ratio

ns

Size of Operatioin (hd)

SheepCattle

Source: USDA, National Agricultural Statistics Service, 2013

A few sheep operations produce a much higher percent of the sheep than cattle operations.

0 4

31

130

1 1 1 10

20

40

60

80

100

120

140

Sheep < 100Cattle < 50

100-49950-99

500-4,999100-499

>5,000 Sheep> 500 Cattle

Conc

entr

atio

n Ra

tio

Size of Operation (hd)

SheepCattle

Percent of Sheep Operations by Size& ASI Survey Respondents

94%

5% 1% 0%

63%

24%

5% 6%

0%10%20%30%40%50%60%70%80%90%

100%

< 100 100-499 500-4,999 >5,000Size of Sheep Operation (hd)

NASS SurveyASI Survey Respondents

Source: USDA, National Agricultural Statistics Service, 2013& ASI 2010 Survey

Do family members plan to take over the sheep operation when you retire?

0%

10%

20%

30%

40%

50%

60%

70%

80%

Size of Sheep Operation (hd)

Perc

ent a

nsw

erin

g Y

ES

< 100100-499500-9991,000-4,999>5,000

Source: ASI 2010 Survey

Percent of Breeding Sheep Inventory in Large and Small Operations

85%93%

98% 99% 99%

15%

2% 2% 1% 1%0%

20%

40%

60%

80%

100%

120%

1995 2000 2005 2010 2012

<500>501

Source: USDA, National Agricultural Statistics Service, 2013

2012 Change in Breeding Sheep Relative to 2000

Washington

Oregon

California

Nevada

Idaho

Montana

Wyoming

ColoradoUtah

New MexicoArizona

Texas

Oklahoma

Kansas

Nebraska

South Dakota

North DakotaMinnesota

Wisconsin

Illinois

Iowa

Missouri

Arkansas

Louisiana

Alabama

Tennessee

Michigan

Pennsylvania

New York

Vermont

Georgia

Florida

Mississippi

Kentucky

South Carolina

North Carolina

MarylandOhioDelaware

Indiana West Virginia

New Jersey

Connecticut

Massachutes

Maine

Rhode Islad

Virginia

New Hampshire

Increase avg. = 130%

Small decrease avg. = -9%

Large decrease avg. = -37%

2000 - 2012 Breeding Ewe Population Dynamics

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

Increase SmallDecrease

LargeDecrease

Change in Breeding Ewes

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%

Percent of Total Breeding Ewes

20002012

That’s My Story

Well that’s my storyand I’m sticking

to it!