The Effect of Energy Price Increases on the U.S. Livestock Sector

Summary This study is unique and crucial to the current time period because of the recent high energy price escalation. The uniqueness of this study pertains to the void in energy impact research of the agricultural sector, more specifically to livestock. The U.S. Department of Energy has models estimating economy‐wide impacts, but not the specific impacts on agriculture. The Iowa State study concentrated on the grain sector. The results presented here indicate that energy price increases will have substantial effects on livestock prices and production. Energy price increases will also result in differential impacts on livestock commodities (with poultry and eggs having the largest price and production effects). Furthermore, the multi‐period framework enables the livestock model to capture lagged production responses. Noticeable is the higher impacts occurring in the third and fourth years. In the future, higher energy costs may induce changes in U.S. production, processing and distribution patterns of livestock commodities. The highly vertically integrated poultry and egg industries may begin shifting production locations away from the colder northern regions to areas with more temperate climates. For industries like beef, pork and dairy, there may be increased range production to reduce impacts from higher feed costs. For all industries, closer proximity of processing plants to major livestock producing areas may occur.