Abstract:
1 ENERGY RESOURCES AND THE ANIMAL AND FEED INDUSTRIES G.L. McCLYMONT* SUMMARY Key factors in the energy supply-cost situation in relation to agriculture are reviewed and implications for costs and markets It is concluded that while pred.ictions are hazardous, considered. increased prices of grains, increased supplies and reduced markets for red meats, and so reduced markets for pig and poultry meats and so for the. feed industry are possible outcomes. Increased inteqration of grain production and intensive animal production may increase the.demand for supplements f.or grain formulated to reduce.potential deleterious effects . of excreta on the soil and crops. INTRODUCTION This p'aper discusses the potential effect of the future energy supply and cost situationon agriculture, and on the'anirnal industries in particu&ar, and so on the feed industry. THE ENERGY SUPPLY-COST SITUATION . The key factors as they are likely to affect Australian agriculture are these: - liquid fuels are and for the foreseeable future will be irreplaceable for long distance heavy road transport, long distance travel and tractors, and so will continue to be the main energy need in agriculture. the only foreseeable economic and quantitatively important sources of liquid fuels are oil, natural gas, coal, shale and plant matter. the sources of oil and natural gas are rapidly depleting, and a ,fall in potential rate of supply below the . potential demand is inevitable-in at most the nextdecade; and civil strife, political action or rational economic decisions by the major oil producers which control a large part of the known oil reserves could. . precipitate a major qap between supply and demand at any time; most major producers have in factsaid that they will not continue to increase supply to meet demand, but will reduce it to conserve their oil as a better investment for the future than cash or investments held in the developed world. present Australian oil production is meetinq some 70%. of local demand, but unless there are major new oil discover,ies in Australia, and the possibilities of this are not regarded as high, this proportion is expected to fall below 35% by 1990 and-to continue to decline; that is, unless by 1990 Australia progressively provides alternative fuels for some 65% or more of its oil it will be likely to be increasinqly dependent on imported oil at a time when *Department of Biochemistry and Nutrition, University.of New Enqland, Armidale, NS.W., 2351. 2 potential world production is declining and supplier's will be . L restricting output. the potential rates of supply of liquid fuels from coal and shale -will be restricted by the vast amounts of capital required, uncertain economics of the processes, availability. of water and environmental considerations; and it is not expected that these sources vi11 make any major contribution to the liquid fuel problem until the late 1990s at the earliest. production of liquid fuels from plant matter 'will be restricted by availability of land of sufficient quality for expansion .of cropping and theuncertain economics and environmental effects of using straw or other plant residues for liquid fuel production.' costs of oil will continue to rise as oil resources are depleted. liquid fuels may be produced from coal, shale and plant matter .at a lower cost than projected prices of oil, but the limitations a on the rate of supply of liquid fuels from these sources will probably not prevent world oil price rises: and the higher the price goes the less oil is likely to be produced; also restricted rates of supply of both oil and alternative fuels in relation to the demand for liquid fuel will mean that oil prices will,not put a ceiling L on prices tihich can be asked for alternative fuelsc and vice versa; i.e. it will 'from here on in' be a sellers market for liquid fuels. on-farm production of ethanol from fermentation of starch crops (roots and grains) and sugar crops (sugar cane and suqar and fodder beet) is unproven as a practical and economic activity; production of vegetable oils could be a more convenient on-farm source of .energy for diesel engines if farmers wish to ensure supplies; however on-farm stockpiling of fuel,will for the foreseeable future be a more economic form of insurance. IMPLICATIONS FOR COSTS AND MARKETS FOR AGRICULTURE The net effect ,of,the future energy situation on agriculture will depend on a wide range of interacting factors. fuel costs are less than 4 per cent of.total o*osts of most agricultural production, but before recent price rises they accounted for about 843%. of cash costs, the highest being for grain production; they. are also a higher proportion of costs ,than for all 'other indu.stries except road transport. . . adaptation in agriculture to increasing fuel costs, such as lighter personal transport and reduced tillage will reduce the impact of fuel price rises on costs but the remain'ing effects on costs of ',production and transport of inputs and.products mean that fuel costs. must be an increasingly significant factor in costs, 'especially on farms distant from railhead. the effect of mineral and coal exports and oil imports on Australia's balance'of payments, and so on the value of the A&ralian dollar (i.e. on the price of foreign currencies) and so on prices received by'producers for agricultural exports will probablv be..more important 3 in determining profits for export industries than the direct effects of increased fuel costs, increased oil and coal prices-for countries importing both energy and food may cause them to protect or further protect their own agriculture against imported foods (as most can ,produce more food, : at a cost, but may not be able to produce liquid fuels) and so reduce export markets for Australian agriculture. any substantial diversion of grain to alcohol or land use for crops for production of fuels is likely to increase grain prices. oil and gas price rises are likely to have a significantly greater effect on the cost of nitrogenous fertilizersthan superphosphate; coupled with growing recognition .of the effects of cropping without a pasture phase on soil structure and fertility this will be likely to lead'to increased legume pastures and so increased sheep and cattle production, and decreased grain produotion and so possibly higher grain prices. higher road transport costs of grain and fertilizers may stimulate s integration of intensive animal production and crop production, the excreta being used to replace fertilizers. IMPLIC'le;TJONS FOR THE FEED INDUSTRY . . Predicting the net impact of the above complex of factors on the feed industries is hazardous. However no dramatic immediate impacts Possible long term trends are that the price of grain may seem'likely. increaser, and so the costs of pig and poultry production increase relative and the export market for and so prices of red meats may to red meats; Both factors would depress the demand for poultry and piq meats decline. * and so affect the feed industry.. The possible trend to integration of pig and poultry production with grain production could result in an increase'd demand for proteinmineral-vitamin supplements for mixing with grain or for free choice. feeding, .and for formulatinq supplements to minimize.~otenti%l deleterious -. effects of the excreta.on the soil and crops. REFERENCES STOECKEL, A. (1980). 'Energy and Implications for Australian Agriculture' Quart. Rev- .of Rural Econ.#- 2: 68. ' CSIRO Division Land Resources Management (1980). Proc. of Workshop on 'Impact of Changes iri Energy .Costs on the'Rura1 Sector of theAustralian Economy' (in press).