UNL Report: 'It is Time to Act' on Expanding Livestock Industry in State

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June 9, 2014

LINCOLN, Neb. — Nebraska's uniquely intertwined agricultural economy, although still the engine of the state's economy, may not be operating to its full potential, says a new University of Nebraska-Lincoln report that outlines the potential impact of several livestock-industry expansion scenarios.

"It is time to act," said the report, titled "Nebraska Animal Agriculture: Economic Impacts of Cattle, Hog, Dairy, and Poultry Industry Changes." Primary investigators of the study were Bruce Johnson, professor emeritus in UNL's Department of Agricultural Economics, and Eric Thompson, UNL economics professor. The research was funded by the Nebraska Soybean Board and the Nebraska Corn Board.     

Ronnie Green, vice president of the University of Nebraska and Harlan vice chancellor of the university's Institute of Agriculture and Natural Resources, said the report is a key analysis of where the state's agricultural economy now stands and how it might be strengthened.

"We know Nebraska is among the nation's leaders in many facets of crop and livestock production," Green said. "But we also know that it's no time to rest on our laurels either. We must plan for how best to strengthen and expand our bioeconomy, and this report outlines some reasonable options that would result in significant impacts in communities and households across our state."

The report notes that the total value of Nebraska's agricultural production topped $25 billion in 2012, ranking it fourth among states. The net value-added of that production was $8.8 billion, representing nearly 10 percent of Nebraska's total gross state product, the third highest percentage among the 50 states.

Key to Nebraska's agricultural economy is its combination of crop and livestock sectors and associated processing industries.

"In what could be called the Nebraska Advantage," the report says, "there is in place an interrelated system of crop, livestock and biofuel production capacity that is basically unmatched anywhere else in the nation."

Perhaps nothing represents this interrelation more than the development of corn-based ethanol, which not only produces fuel but also distillers grains, the report notes. Once considered a marginal waste product, DGs are now a critical coproduct of the biofuels industry and used as a high quality livestock feed, especially for ruminants. Also, soybean meal, a coproduct of soybean processing, is produced in abundance and is a very cost-efficient ration ingredient for many animals.

"In short, the livestock industry of the state plays a pivotal role in utilizing the major crops produced in the state, as well as the coproducts of further value-added processing of those crops.

Substitution of animal manure for commercial fertilizer is another element of the production cycle.  

The report notes that the strength of this agricultural system relies on all of its components' thriving, "and there are concerns that this state's current situation is not operating to its full potential and may even be slipping in rigor in recent years."

Among its observations:

– Nebraska still exports out of state a high percentage of its crops – more than one-third its corn crop, more than 80 percent of its soybean crop and more than one-half its distillers grains. These would have more economic impact if they flowed into in-state, value-added processing.

– While nearby states have seen significant growth in livestock production in the last 10 years, Nebraska has not kept pace, particularly in the cases of hog and dairy production.

In light of these trends, Johnson's team analyzed several livestock-expansion scenarios that industry leaders consider quite possible, taking into account the economic multiplier effects that ripple through the state's economy from agriculture, especially in rural areas.

The report envisions the following expansion scenarios and estimates both direct and indirect economic impacts.

– A 25 percent expansion of hog finishing volume in Nebraska, scattered across three regions of the state and 15 counties. About 270 on-farm units, each with a 2,400-head capacity and a twice-per-year turnover rate added.

Total economic impact: 2,676 new jobs; $6.1 million in local tax revenue

– More than a doubling of the state's current dairy herd numbers of 60,000, divided across three regions of the state and 18 counties. A total of 24 new dairy operations, each with a 2,500-head capacity and two new milk processing plants added.

Total economic impact: 3,128 new jobs; nearly $6.2 million in local tax revenue.

– A 10 percent increase in fed cattle production in the state, with expansion distributed geographically in similar proportion to current patterns of production.

Economic impact: 11,661 new jobs; $16 million in local tax revenue

– A tripling of poultry (egg-laying) production in the state.

Economic impact: 1,640 new jobs; $9.8 million in local tax revenue.

Other report authors are Anil Giri, graduate research assistant, agricultural economics; and Tshepelayi Kabata, research associate, agricultural economics.

The report acknowledges there are environmental and societal implications to any expansion of livestock production and said community leaders and residents will have to be part of any discussions of these expansions. But, the report adds, change in the industry is inevitable and the changes outlined in the report could help rural Nebraska thrive.

"Any one of the possible expansion scenarios analyzed here represents thousands of potential jobs and associated earnings distributed widely within and across Nebraska communities and households," the report concluded. "And with that additional value added economic activity, developed in an environmentally and socially responsible manner, comes the potential for enhanced quality of life for all Nebraskans into the future.

"In sum, the economic challenges posed, as well as the associated economic opportunities afforded, are simply too weighty in Nebraska's economic future to ignore. It is time to act," the authors wrote.

The full report is available at http://agecon.unl.edu/livestockimpact.

Bruce Johnson, Ph.D.
Professor Emeritus
Agricultural Economics

Dan Moser
IANR News Service

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