Is the cow a silo of option value?

by on February 15, 2011 at 5:32 am in Economics, Food and Drink | Permalink

I was struck by this argument, which I had never heard:

The overriding advantage of meat is that demand for it is elastic.  People don't need it but they like it, and up to a point, however much you produce, they'll keep on buying it.  The demand for cereals for human consumption, on the other hand, tends to be inelastic.  People need their pound of grain a day, but they don't need much more, and they won't buy any more unless they have sufficient wealth to invest the grain in animals, either to produce higher value food, or else to keep it "on the hoof" for a rainy day (or a drought).

The existence of meat means that a farmer can sow wheat, barley, oats, beans, maize, and so on with reasonable confidence that, in the event of a good harvest, someone will buy it, because even if everybody has sufficient, it can be fed to animals.  This dynamic is not restricted to a money economy.  It works exactly the same for Melanesian subsistence farmers who can sow enough sweet potato and manioc to cover a bad year knowing that it is not a waste of effort, because in a good year the surplus can be fed to pigs.

Take the animals, the elastic element, out of the equation and the business of sowing grain suddenly become far more risky…This elementary matter of the need for a feed buffer fails to feature in most of the literature that is written about meat-eating and vegetarianism…

That quotation is from Simon Fairlie's quite interesting Meat: A Benign Extravagance

As they used to say on the U. Chicago Ph.d. qualifying exams, true, false, or uncertain?  And under what conditions?

1 David Riffer February 15, 2011 at 2:07 am

It's a good point. It's worth noting that the demand curve for meat can shift substantially with disposable income, so from the grain farmer's perspective there is an exchange of one harvest risk for macro risk.

2 Andrew February 15, 2011 at 3:14 am

On the home economics scale, I want to buy more fresh fruits and veggies, but they go bad so quickly. But if I raised chickens I could feed the over-ripe stuff to them.

3 endorendil February 15, 2011 at 3:25 am

False. The amount of animals is not that elastic, so the idea that you can always feed your surplus grains to your animals is incorrect. If I have 10 pigs to feed, I will aim to provide cheap food for 10 pigs, and no more. I will not give them expensive, human-quality food as that would be wasteful. I will rather trade or store the expensive food, and keep feeding my pigs the cheap food I have anyway. Of course, if I end up having continuous surpluses of cereal (perhaps because I've switched to more productive agricultural methods, or I've increased my total acreage under cultivation), I'll start reducing my acreage dedicated to it (unless I can find bigger markets or more storage) and start growing less productive but more valuable crops (potatoes, peas, carrots, apples, …), or crops that I can trade/store easier (olives or tobacco for instance). I might even switch some acreage over to producing feed crops for my pigs, and increase my meat stock. But that still depends on my ability to use, sell or trade the extra meat.

Now, if there were no meat at all, I would still do all of the above – I'ld store and trade surpluses and adapt my cultivation to provide more variety of products. If I'ld be stuck on a paradise island, where I couldn't trade, and I'ld have only one crop to grow, I'ld spend less time doing agriculture and more time hunting, fishing or sunbathing.

In short, this argument seems fairly hare-brained. And no, I'm not a vegetarian or vegan: I figure that as long as you're going to kill things in order to live, it doesn't matter whether they can move or not…

4 Arun February 15, 2011 at 3:37 am

I doubt that the peasant farmers of Asia ever fed their livestock grain. The practice of growing corn to feed cows and poultry is modern, I think.

5 Master of None February 15, 2011 at 3:54 am

I thought this was obvious… Which part of this is a ground-breaking revelation?

FWIW, there are also examples of subsistence cultures destroying animal populations to expand the theoretical human population limit. Tikopia in the Solomon Islands is a good example:

In these cultures, some excess starch/grain can be preserved by other methods, such as in-ground fermentation, but on net the trade-off is a higher population, with a riskier food supply.

6 Pavel February 15, 2011 at 4:11 am

Sounds quite reasonable. In a vegetarian world we would have to fatten up people instead which is likely to have bad effects on health….

7 Robert Speirs February 15, 2011 at 4:43 am

" … up to a point, however much you produce, they'll keep on buying it."

??? Isn't this statement true, trivial and self-contradictory all at once? If someone would buy however much you produce, at no point would someone not buy it, but "keep on" buying it??

Improving my diet would mean excluding all grain. We don't need it. We only really want it if it's covered in sugar.

8 rpl February 15, 2011 at 4:54 am

Whether this is an increase in the aggregate social value of the human-bovine-society is at least debatable.

That assumes there is such a thing as "human-bovine society," which seems questionable. The definition of "society" that seems closest to what you're getting at is:

a community, nation, or broad grouping of people having common traditions, institutions, and collective activities and interests (

Even if you strike the "of people" as being prejudicial, the cows don't seem to fit the definition very well. In short, they do none of the things you would expect a member of a society to do. And if you're going to exclude cows from the "traditions, institutions, and collective activities and interests" in the definition then on what basis do you declare the existence of a human-X society? Can we have a human-mosquito society? A human-maize society? A human-granite society?

endorendil, you seem to be focused on the role of animals as a buffer for surplus, but the article is treating them as a buffer for shortage. The idea is that you grow enough that even in a really bad year you have enough to feed everyone. If you do that, then in normal years you use the extra to raise livestock. In the shortage years you don't get the meat, but people can live without that, so nobody starves. If you do it your way (i.e., reducing acreage under cultivation), then in the lean years you don't have enough food to go around, and you have a famine.

9 charlie February 15, 2011 at 5:07 am

False. Animals are fed corn, not grain.

And in the old days,, pigs just ate whatever. That is why certain cultures avoid them.

10 Andrew February 15, 2011 at 5:24 am

Whiskey Rebellion as opposition to Keynesian anti-saving policy?
"Additionally, cash was always in short supply on the frontier, and so whiskey often served as a medium of exchange. For poorer people who were paid in whiskey, the excise was essentially an income tax that wealthier easterners did not pay."

It's comforting to know that the government has been doing dumb things from the very beginning.

Anyway, does economics properly account for these 'derivative' products? As in, you don't get whiskey or meat without a robust agriculture. Maybe I'm not clear on what he means, but it's mildly shocking that Tyler hadn't heard of this reasoning before.

11 derek February 15, 2011 at 5:33 am

I think that endorendil vastly underestimates the costs of switching crops. In addition, it's rather difficult for farmers to predict whether the year will be a surplus or shortage year in advance.

12 Six Ounces February 15, 2011 at 5:55 am

You're all providing great information, but the main points here are that owning animals is complementary to farming grains. It's called Economies of Scope.

Farming both animals and plants acts as an insurance policy. If you have a bad crop year, you have animals for income. A bad crop for humans is OK to feed to animals. A good crop year produces a surplus which, deending on prices, can either be sold on the market (if prices are high) or fed to the livestock as cheap food (if prices are low). The fatter animals might bring in more revenue than that from selling surplus or stored grain.

13 spencer February 15, 2011 at 6:06 am

In the US if you have a bad crop, especially of feed grains the rising price of animal foods makes it unprofitable to raise meat.

So farmers sell off their herd, causing the price of meat to drop. this also causes the demand for feed grains to fall.

this continues until the excess meat is consumed. At this point meat prices soar so that it becomes profitable to expand meat production — even with the more expensive feed grains.

that is why in the US the first impact of rising grain prices is generally a weaker increase in the CPI because meat has a much bigger weight in the food basket than grains or grain based products.

14 Yancey Ward February 15, 2011 at 7:05 am

That assumes there is such a thing as "human-bovine society,"

I call it Burger King.

15 dirk February 15, 2011 at 7:56 am

You had me at "it tastes good".

16 Right Wing-nut February 15, 2011 at 8:10 am

I grew up on a farm in Kansas, so here's a few points about what I remember:

1) Cows calve basically 1/year. You sell almost all bulls, so the herd can grow 50%/year. Actual demand is more flexible, because you can sell that bull calf almost at birth around 200 lbs, or you can wait a few months & sell @ 600.

Sheep lamb 1 1/2 /year. 75%/yr. Pigs (yuck) 8-12 squealers. That's 400-600% growth year over year.

2) A bad year in KS is not a bad year in TN. A bad year in US is not a bad year in Argentina. Occasionally, we could sell our hay to the racehorses. We bought hay those years for our cows. If one region has a drought, they sell their herds. Sometimes they are bought by not-too-distance regions with a lot of rain.

3) Cow graze on winter wheat (it doesn't hurt the wheat–it gets fertilizer) and in corn fields after the harvest — even if we cut the field for silage. In other words, there is season-by-season flexibility in consumption.

4) Farmers forward-sell their crops (even in the 70's) & then insure the crops. The large corporate farms make direct deals with foreign powers. The market for grain was global even then. Argentinian beef is in the US in a big way now, so I'm guessing that the market for meat is pretty well global now.

17 Lord February 15, 2011 at 9:33 am

Grain fed is more modern, 20th century, and ruminants would normally graze on fallow fields and after harvest and hay. Pigs and chickens would more commonly be fed seed, corn, grain, and starches. The period over which smoothing is available is limited to a few years.

18 endorendil February 15, 2011 at 10:42 am

"I think that endorendil vastly underestimates the costs of switching crops. In addition, it's rather difficult for farmers to predict whether the year will be a surplus or shortage year in advance"

I stated you'ld only start switching crops if you find you're persistently overproducing in your existing crop. It would make no sense to keep overproducing once you've filled your storage.

And of course things are hard to predict, but bumper crops get stored or traded, not fed to animals unless there is really no other choice. It may even make more sense to not harvest all the product when there's a real oversupply. This still happens: farmers often let food rot in the fields when market prices are too low to justify the cost of bringing it in. Recently it was pointed out that much of the food crops in the developing world also go to waste because bumper crops cannot be brought to market due to lack of infrastructure. Farmers are amongst the most rational people in the world: they don't do things that are uneconomical.

19 endorendil February 15, 2011 at 11:11 am

@Bryan Larsen (BL)

E: "If I have 10 pigs to feed, I will aim to provide cheap food for 10 pigs, and no more."
BL: No, you will plant enough to feed 20 pigs in an average year, 40 pigs in a good year and 10 pigs in a bad year, and hope you have a surplus you can sell.

In reality, things are much more complex, that's true. I will plan to provide cheap food for whatever livestock I wish to raise. If I have good trading routes, I may grow only as much as I need in an average year, making up the shortfall in bad years by buying more feed from the market, and selling surplus (or storing it) in good years. All of that assuming that I have the acreage to spare for animal feed, and assuming I can grow the feed cheaper than buying it. In any case, I won't be using human feed as cattle feed.

E: "I will not give them expensive, human-quality food as that would be wasteful."
BL: It actually works the other way around. Excess animal-quality food is turned into stuff like high-fructose corn syrup and fed to humans.

Well, that wasn't the question. But it's true that lower quality food is used for humans when the need is high. When crop yields are way down, of course people will slaughter livestock and eat animal feed. But that's not what you'ld normally do.

E: "I will rather trade or store the expensive food."
BL: "Trade" is right. My Dad grows barley for his pigs and cows. But some years the quality is high enough that he can sell it to the brewer's. In which case he has to buy low-quality barley or corn. Which he's happy to do, because malting barley goes for twice the price of feed barley.
But "store" is wrong. Storage is expensive, and turns high quality grain into low quality grain.

Well, it depends on the circumstances. If your dad has easy access to large markets, it may not pay to store vast quantities, but if you're marooned on an archipelago where all local crops tend to fail simultaneously, and trade is impossible or expensive, you'll want to store as much of the food as you can. But I agree that in almost all other circumstances you'ld try to trade rather than store.

20 David L February 15, 2011 at 3:35 pm

This was a really interesting comment thread to read. Either a lot more people that I would have expected are really knowledgeable about agriculture and livestock, or you're all completely full of shit.

21 Eric Jaffa February 16, 2011 at 7:38 am

It's in the interest of grain-farmers to have millions of farm animals to feed.

But that isn't in the interest of feeding all the world's people as the population rises.

Feeding grain to people without it going through the life cycle of a farm animal is more efficient.

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