03Economic asessment of improving nutritional characteristics of food grains

Brennan, J.P. and Singh, R.P. 2000, Economic Assessment of Improving Nutritional Characteristics of Feed Grains, Report prepared for Grains Research and Development Corporation, Economic Research Report No. 3, Wagga Wagga.

Executive Summary 

The use of modern scientific practices such as biotechnology in agriculture has made it possible to introduce a specific characteristic in a particular grain that can improve its efficiency as a livestock feed. A wide range of options has been put forward by scientists and industry specialists as potential means of improving the nutritional composition of feed grains that would address the specific needs of different livestock industries.

In assessing research priorities in the area of feed grains quality improvement, there has been a lack of information on the economics of the various research options. In recognition of that knowledge gap, the Grains Research and Development Corporation (GRDC) funded a project, “Economic assessment of improving nutritional characteristics of feed grains (DAN331A)”. The project was a collaborative one under the leadership of NSW Agriculture, involving the Australian Bureau of Agricultural and Resource Economics (ABARE) and ACE Livestock Consulting Pty Ltd. That project aimed to provide for the first time a  comprehensive set of information on the value of improving different characteristics of feed grains for animal nutrition, and information on who was likely to receive the benefits of the research. The objective of the analysis undertaken in this study was to assess those potential new feeds and determine the economic merit of research to develop those feeds.

A comprehensive set of options for new feed types has been evaluated, to establish the options with the highest priorities for research. In addition, to provide a benchmark for the value of the nutritional improvements, other forms of feed grains improvement were also assessed. The options analysed are classified as follows:

• Feeds involving change in protein content
• Feeds involving change in amino acid profile
• Feeds involving improvement in feed digestibility and efficiency
• Feeds involving reduction in anti-nutritional factors
• Feeds involving increase in yield
• New crop options

The nutritional value of each of the new options was compared to the “standard” or unimproved feed grain. In some of the options, the nutritional quality of the grain can be changed without affecting its yield, and without any change in agronomic practices or the cost of production. In others, there were associated yield changes or changes in the level of inputs that would be needed to produce the nutritionally improved feed grain.

In assessing the relative benefits from alternative forms of improvement of nutrition of feed grains, the cost-reducing impacts of the different options have been analysed in a linear programming model that determines the least cost feed rations for the different livestock industries. The aggregate model considers 43 feed ingredients and estimates the least cost feed rations for the 12 livestock industries simultaneously. The cost-reduction from the new feeds was identified for each livestock industry. Economic welfare analysis was then used to estimate the size and distribution of the benefits of research from the feed grains quality-improving research between the producers (including input suppliers such as grain producers) and the consumers (including processors and final consumers) of those livestock products. The analysis also identified which of the livestock industries were likely to receive the benefits from each of the new feeds.

All of the new feeds were analysed using the aggregate feed demand model, to give a comparative analysis of all the feeds. A selected subset of the new feeds was then analysed using ABARE’s regional model. That analysis allowed some of the key potential new feeds to be examined in detail, while still being comparable to the full set of options. The analysis also reveals that the aggregate national analysis provides a valuable assessment of the overall value of the new feeds.

When the feeds were analysed to assess the economic benefits, a large number of the options were found to have small or very small returns that would not justify a significant research input. The analysis reveals that there are some opportunities to improve the productivity and competitiveness of Australia’s livestock industries by improving the nutritional characteristics of some feed grains. The feeds that provide the largest welfare benefits are: High oil lupins and Naked oats. The potential benefits from several other feeds are also sufficient to make them worthwhile research targets in the feed grains area, including: High oil sorghum, High protein lupins, Low arabinoxylan wheat, Hull-less barley, High oil oats, Low seed coat content barley, and High seed coat digestibility barley.

However, there are a large number of technically feasible potential new feeds that are not likely to produce sufficient benefits to make them a reasonable research target. Of the 25 feeds with improved nutritional characteristics that were analysed, 10 had total welfare benefits of less than $0.3 million per year and a further 6 less than $1.2 million per year. Given the expected research costs, probabilities of success and the time lags involved in developing these feeds by plant breeding, it is unlikely that these options could be expected to provide a satisfactory rate of return on the research funds required. Research funds used for these projects could well be applied to more productive projects. Several of those leading options for nutritional improvement had negative impacts on some  livestock industries, so that none were able to provide universal benefits to all the industries included in the analysis. As a result, different livestock industries would rank the potential new feeds in different ways, often markedly differently.

An alternative would be to aim for yield improvement rather than seek to improve the nutritional quality of the feeds. That direction for research funding would provide economic benefits of similar or greater size than from nutritional improvement, and the evidence from the analysis in this study is that those benefits may well be more evenly spread across the different industries.

Clearly, the selection of which new feeds to develop needs to be undertaken carefully, to ensure that scarce research and development funds are used to provide the best returns. The analysis in this study enables those feeds to be identified, so that research priorities for feed grains can be developed with improved knowledge of the economic consequences.