• TABLE OF CONTENTS
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 Title Page
 Introduction
 Technological change and produ...
 New technologies
 New animal related technologie...
 Crop and forage production
 Potential impact on production
 Economic implications
 Bibliography






Group Title: Staff paper - Food and Resource Economics Dept., University of Florida - 263
Title: Technological changes that will affect the cattle industry
CITATION PAGE IMAGE ZOOMABLE PAGE TEXT
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Permanent Link: http://ufdc.ufl.edu/UF00054785/00001
 Material Information
Title: Technological changes that will affect the cattle industry an economic perspective
Series Title: Staff paper
Physical Description: 20 p. : ill. ; 28 cm.
Language: English
Creator: Simpson, James R
Publisher: Food and Resource Economics Dept., Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville Fla
Publication Date: [1984]
 Subjects
Subject: Beef industry -- Technological innovations   ( lcsh )
Cattle -- Economic aspects   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Includes bibliographical references (p. 19-20).
Statement of Responsibility: by James R. Simpson.
General Note: "September 1984."
Funding: Electronic resources created as part of a prototype UF Institutional Repository and Faculty Papers project by the University of Florida.
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Bibliographic ID: UF00054785
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved, Board of Trustees of the University of Florida
Resource Identifier: aleph - 001732541
oclc - 26074748
notis - AJE5189

Table of Contents
    Title Page
        Title Page
    Introduction
        Page 1
    Technological change and productivity
        Page 2
        Page 3
        Page 4
    New technologies
        Page 5
    New animal related technologies
        Page 6
        Page 7
        Page 8
        Page 9
    Crop and forage production
        Page 10
        Page 11
        Page 12
    Potential impact on production
        Page 13
        Page 14
    Economic implications
        Page 15
        Page 16
        Page 17
        Page 18
    Bibliography
        Page 19
        Page 20
Full Text




















TECHNOLOGICAL CHANGES THAT WILL AFFECT
THE CATTLE INDUSTRY: AN ECONOMIC PERSPECTIVE

by

James R. Simpson


Staff Paper 263


September 1984


Staff Papers are circulated without formal
review by the Food and Resource Economics
Department. Content is the sole responsibility
of the author.


Food and Resource Economics Department
Institute of Food and Agricultural Sciences
University of Florida
Gainesville, Florida 32611













TECHNOLOGICAL CHANGES THAT WILL AFFECT
THE CATTLE INDUSTRY: AN ECONOMIC PERSPECTIVE

by

James R. Simpson*


A virtual revolution has taken place in cattle production and

marketing techniques in much of the world over the past two decades.

The European Economic Community (EEC) has moved from being a major beef

deficit region to a net exporter. Japan, while continuously increasing

beef imports, has made great improvements in its production and

marketing structure. In the United States beef production per head of

all cattle inventory increased from 55 kilos in 1950 to 70 kilos in

1960--and is now about 90 kilos.

The changes during the past few decades have been spectacular but

pale in light of potential developments over the next two decades. The

purpose of this report is to describe some of the innovations related to

feed production and storage, techniques of direct applicability by dairy

and beef cattle producers, and changes in the beef and milk marketing

system. Many of the techniques discussed are now beginning to be

applied; others are still in their most basic stages. Together they

represent a fascinating array of fruits from modern science. In an

effort to place these technologies in perspective, the technological





*James R. Simpson is Professor, Food and Resource Economics Depart-
ment, University of Florida. Prepared for distribution at the Southern
Regional Outlook Conference, Atlanta, Georgia, October 1-3, 1984.












change process is first described. Then, after the technologies are

reviewed, a critical analysis from an economic perspective is provided.


Technological Change and Productivity


Technological change in agriculture is now increasing at an

increasing rate as we are in what Lu, Cline and Quance (1979) termed the

era of "science power" (Figure 1). This new era follows the previous

rather short one of mechanical power and a slightly longer one called

horse power.

Technology, a human-made resource which can be increased through

research and development, has begun to be recognized as a resource

because of the complementary relationship among various technologies.

This means that imagination, time lag in adoption, and institutional

constraints are the major limits to growth in livestock productivity,

rather than the traditional three: land, labor and capital. In effect,

whereas previous technologies such as mechanization of agriculture were

heavily capital intensive, the new ones are more knowledge intensive-a

new dimension which is especially uncomfortable to economists since

coefficients are not generally available for projections.

Productivity is a measure of the technological efficiency with

which resources are converted to commodities and services. There are

two types of productivity: partial productivity, and total factor pro-

ductivity. Partial productivity can be measured by ratios of output to

a single input in which both the numerator and denominator are measured

either in physical units or constant money values. Total factor produc-

tivity presumably is most useful, but difficulties abound due to dis-









Hand power


120


100 -


80


60


Mechanical Science
power power

WWI WWII


I


40 ....i*


20-


I
10 tIll !F 1_ ii IF I III I ii
1775 1800 1825 1850 1875 1900


F!


1925


950 1975


Year


Figure 1 U.S. Agricultural productivity growth
Source: Lu and Quance, 1979, p. 3.


.3

o

Y2

y1


Yg
"0


d

b7


(I
~ I


Input mix ($)


Figure 2 Impact of technological change on output


Horse power


Civil War


1












parate quantities of inputs. One way economists have overcome this

difficulty is by using real monetary value as a common unit of input

measure. Two means used for computing total factor productivity are

through index numbers and production functions (Lu, Cline, and Quance,

1979). The latter is most useful for the theoretical approach in this

section.

A production function describes the physical relationship between a

firm's input of resources and its output per unit of time under a given

state of technology. As technological change takes place the production

function coefficients also change. Because the changes are not contin-

uous, smooth, nor necessarily neutral, it is difficult to specify the

functional form. However, it can be conceptualized by considering a

more abstract concept of input mix on the horizontal axes, rather than

the usual single input being varied with the rest held constant as is

typically depicted in a production function.

The production function for livestock, shown in Figure 2, has a

production function P0 using input mix x0 yielding output Y0 by

producing at point a. Another alternative is use of x2 input to produce

Y2 output. The impact of technological change can be considered in its

simplest form as a movement from point a to point b on a new production

function, P1, at some later time by changing the mix of inputs. As an

example, output Y1 could result from purchase and use of a home computer

tied to an individual cow ration distribution system wherein the dis-

counted capital and maintenance cost is offset by a reduction in feed

cost. An even higher output than Y2 can be obtained by increasing the

input mix. For example, if in addition to the home computer and feed












distribution system, heat (estrus cycle) detectors were tied to the

computer (X3) and output of Y3 at point e might be obtained. The impor-

tant factor here is knowledge and careful manipulation of feedstuffs to

optimize feed use.

A crucial point to understand livestock industry technological

change during the 1980s and 1990s is to recognize that new production

functions will not be smooth, but rather will have "blips," as

represented in Figure 2 by the segment d to e. In this case a rather

large output increase from Y2 to Y3 can take place at some point in the

future with very little additional total input use, again because of

expanded knowledge. As an example, before 1990 some dairy farmers will

learn embryo transfer techniques, implant cows with twin male beef breed

embryos, background (i.e. prepare for final feedlot finishing) the

calves using anabolics and feed enhancers, determine optimum feed use by

a supplement optimization computer program, and carry the animals to

slaughter weight through a cooperatively owned feedlot. More than twice

as much beef could be produced per cow under this system.


New Technologies


The last example is somewhat extreme and, clearly, costs and adop-

tion rates, i.e. management, have to be taken into account. But the

example serves to point out the importance which knowledge and informa-

tion management will play in the next decade and a half in livestock

production. Furthermore, the rate of adoption can be expected to

increase at an increasing rate as farm size increases and younger

farmers, who are trained and psychologically motivated for change, take

over both management and ownership of cattle operations.












Technological changes related to livestock and meat production are

occurring so rapidly that even scientists closely associated with each

field of endeavor have a difficult time to assess the implications for

commercial application (Bonnen, 1983; Butler, 1973; McElroy and Krause,

1982). The objective of the next several sections is to provide an

understanding of the range and breadth of new technologies which have

recently been developed or can be expected to have commercial

application to the year 2000.


New Animal Related Technologies


Numerous genetic oriented technologies are being developed or have

recently been made available. Examples are heat period control, also

known as estrus synchronization, which is used to improve overall preg-

nancy rate, artificial insemination (AI) efficiency, and to shorten the

breeding season by using hormones. Embryo transfer has as one objective

speeding up herd improvement via selection. Multiple calving, the

process of a cow delivering more than one calf, is being investigated.

Current problems of calving difficulty can be overcome using embryo

transfer in a program by emphasizing selection of donors with low birth

weights and through careful selection of sires. Embryo sexing in cows

by the sixth day using non-surgical techniques is now known and being

commercially used on a limited basis. Genetically superior beef calves

will be produced through emphasis on breeding programs.

Bovine growth hormone (bGH) is a naturally produced hormone which,

when given in daily injections, results in dairy cow milk yield

increases of perhaps up to 40 percent regardless of the base level.












Parasite resistance has been bred into some sheep through selective

breeding. It is expected that this type of genetic engineering (GE)

will be used in breeding cattle specifically selected for parasite and

disease resistance. The hormone HCG, which is a human produced hormone,

has been shown to increase pregnancy rates in dairy cows by 11

percent. Sire evaluation programs will increase in scope as demand

increases for animals with specific traits.

In the area of animal health, recombinant DNA (rDNA) developed

vaccines, another product of GE will soon be common. The first rDNA

vaccine has been developed for foot-and-mouth disease, a problem endemic

to many countries. Others are being developed against colibacillosis

and infectious diarrhea. Bovine interferons, naturally-occurring

proteins of the immune system in cattle, will be manufactured using rDNA

techniques for many broad applications such as management of many viral-

related diseases like shipping fever (bovine respiratory disease).

Electronic mastitis detection is a recently developed method for con-

trolling one of the most costly health problems in dairy herds.

Implanted identification (ID) tags are a newly developed tool mainly for

use in dairy herds at present. The small, match size tags, permanently

lodged in the stomach, are read electronically and thus permit contin-

uous monitoring of a cow's performance indicating, for example, body

temperature change. An Ivermectin (tradename IVOMEC), released in late

1983, is the first commercial parasiticide effective against both inter-

nal and external parasites. A monoclonal antibody developed by GE

techniques to reduce losses from E. coli scours was introduced recently

for commercial use. Fly control methods are receiving extensive

research emphasis.












Nutrition is another major area in which significant advances are

expected. For example, anabolics, such as IMC's Ralgro, are a major

means of increasing growth in calves and cattle. It is expected that

new types of even more effective growth enhancers will be developed.

Feed additives to improve feedstuffs digestibility are increasingly

being used. Sodium bicarbonate in rations has been shown experimentally

to increase weight gain by 14 percent through increasing feed intake by

8 percent and maintaining a neutral rumen pH. Straw, hay and crop resi-

dues treated with hydrogen peroxide have been shown to improve digesti-

bility of these low-value feeds dramatically. The use of ammonia is now

well known and increasing being adopted. Plastic pellets can be used as

a substitute for roughage. Experiments have shown that 50 grams of the

pellets compare favorably with 1.9 kg of hay, and they can be recy-

cled. Wastes from animals such as poultry litter, hog excrement and

cattle manure are increasingly being used as cattle feedstuffs. Recent

attention given to ensiling these wastes with other material such as

corn forage or grass hay has yielded promising results.

Other nutrition related advances include supplement selection based

on measurements of pasture, hay and crop residues to provide balanced

rations for grazing cattle. By-products from a variety of non-agricul-

tural industries will be used to a greater extent as replacements for

grains. Rumen-regulating drugs to improve feed digestibility and

absorption along with expanded feed intake are being worked on. Micro-

flora developed through genetic engineering will be used to metabolize

raw feedstuffs into nutrients more efficiently. Computerized feeding

control to provide individual daily determined rations for dairy cattle












will be used increasingly in an effort to reduce feed costs, veterinary

expenses and death losses. Milking machine equipment linked to a com-

puter will relate ration formulation to milk yield as well as general

recordkeeping.

Processing and marketing improvements will continue to help reduce

costs to consumers. Some of them are on-farm extraction of water from

milk to reduce transportation costs, and irradiation of meat by an

ionizing process to sanitize it and extend shelf life. These methods

will be in general use by the 1990s. Robots will be used to a much

greater extent in agribusiness, especially in meat slaughter and

processing plants. A natural use of them is to fabricate restructured

meats designed to resemble high quality cuts. This is especially

important for Europe and other areas where most meat is from lean type

animals. In addition, about 70 percent of a beef carcass is of low

quality meats. Electrical stimulation of carcasses, now used in the

United States, will be adopted in all the developed world by 1990 as it

greatly improves tenderness of lower quality carcasses and alleviates

need for chilling. Mechanical tenderizing performed at the supermarket

is a new method for greatly improving tenderness of lower quality meat

and cuts.

Another technique in advanced research stage is hot carcass

processing. Still another is carcass grading by computers through the

incorporation of TV cameras. Blended beef using about 25 percent of a

new generation of soy analogs can be expected to make a major impact in

the U.S. market. The analogs are already common in Europe. It is

expected that the market for these products will grow, especially in












restructured meats. Beef snacks from lower quality irradiated meat may

soon be found in vending machines. Finally, boxed beef will

increasingly replace carcasses in the delivery system from packing plant

to supermarket in countries outside the United States.


Crop and Forage Production


Biotechnology opens the door for rapid increases in plant improve-

ment through recovery of desirable plant genotypes from tissue culture,

protoplast fusion, and cloning. Recombinant DNA facilitates the direct

manipulation of an organism's genetic material to produce offspring with

desired characteristics. Although use of rDNA is still in early stages

of development, major advances will be made.

Some plant breeding work includes increased photosynthetic effi-

ciency which will probably happen first with maize. It is estimated

that an increase of only 1-2 percent in photosynthetic efficiency will

double yields. Nitrogen fixing organisms will be used to a greater

extent as their biochemistry becomes better known. Maize seed produced

by genetic engineering will result in plants growing to maturity even

with early or premature frost. GE will be used to speed up development

of new hybrids over conventional plant breeding techniques.

Seed treatment to protect seeds from seed-borne, soil-borne, and

mobile organisms are being worked on. In addition, emphasis is being

given to treating seeds with plant growth regulators for weed control,

and with fertilizers. Plant growth regulators of brassinosteroids, a

hormone still in the developmental stage, are expected to have wide-

spread impact on crop yields. They now are being used in Europe to












decrease wheat height. Salt tolerance has been bred into more than 50

crops including forage grasses and legumes, cereal crops and oilseeds.

Fertilizer efficiency will be improved greatly. One area involves maize

which will provide its own nitrogen and use fertilizer more effi-

ciently. Chemicals for agricultural use are now being synthesized by

computer modeling to spot active compounds. This technique will greatly

speed up production of new ones. Polyacetylenes are a recently dis-

covered group of plant chemical insecticides that absorb sunlight and

literally burn insects to death.

Some of the more exciting agronomic practices include increased use

of double cropping as shorter maturing varieties are developed.

Computer controlled planting in which proper depth and spacing is

automatically selected to improve uniformity will become common. No-

till (zero-tillage), the practice of reducing the number of tillage

passes, will be used to a greater extent where labor and tillage are

problems. Custom prescribed tillage, a dynamic system using information

feedback to modify tillage practices throughout the year, will be possi-

ble as farmers purchase computers and software becomes available.

Forage quality will be improved through plant genetics and management.

Included will be more use of legumes in grass swards to decrease nitro-

gen fertilizer requirements. Hydroponics, a controlled environment

agriculture in which plants are grown without soil, has considerable

potential in more densely populated areas, especially for vegetables.

This will release land for grain and forage production. New water

conservation practices are also developing rapidly.












Mechanization is an important new area for reducing costs of animal

feedstuffs. Innovations include solar bin-buildings to air dry grain to

20-24 percent moisture. Bale silage bags which provide oxygen-free

storage for round-baled forage have been developed recently and will be

improved in response for more treatment using ammonia. Controlled

traffic is a technique in which fixed rows are developed to reduce soil

compaction. Automatic guidance mechanisms are forthcoming, especially

for grain harvesting. Engine, draft and tractive efficiency will

continue to be improved greatly. This will improve fuel efficiency,

extend machinery life, and optimize work rate. Integrated control

harvesting is a new system in which sensors on grain combines

automatically adjust settings for optimal harvesting, and for

information recording and analysis.

Data management and coordination techniques, perhaps the most

important aspect in the new scientific revolution, are being developed

with bewildering rapidity. A virtual information explosion has taken

place in the past five years due to greatly expanded use of computers

for data analysis and dissemination of information. This expanded

hardware and software has led to considerable psychological change among

farmers and others related to agribusiness vis-a-vis knowledge as a

major farm input.

Microcomputers, which improve data management capability, open up a

variety of linkages to production level equipment. One major area for

animal agriculture is rapid and accurate identification of individual

animals. For example, a passive transponder has been developed which,

when implanted or incorporated in a neck collar, can be linked to a












microcomputer to monitor animal health. Automatic milk yield recording

devices are available now which can be linked directly to

microcomputers. Automatic individual cow ration formulation and

distribution already is possible by linking a distribution device to a

microcomputer. In addition, video cameras are being tested for 24 hour

continuous inspection of cattle, especially related to calving and

health problems. Soon they will be interfaced with computers to provide

a permanent record.

Coordination is an area that will receive increasing emphasis.

Cooperative production links will increase between dairy producers and

feedlots to take advantage of benefits from controlled breeding pro-

grams. Cooperative marketing programs will become joint ventures among

selected producers, feeders and packers as benefits of forward and

backward integration become increasingly apparent.


Potential Impact on Production


An idea of the potential impact that technological change will have

on livestock production can be obtained by review of the Executive

Summary from an RCA Symposium titled "Future Agricultural Technology and

Resource Conservation" (English, Maetzold, Holding and Heady, 1983). In

the expert's opinion, meat production per breeding cow and per breeding

sow will increase 25 percent by the year 2000, and 60 percent by the

year 2030. Milk production per cow is expected to increase to 7,275 kg

annually by 2000, and 9,090 kg by 2030. In contrast, it is now about

5,590 kg.












Production per female sheep or goats is expected to increase 35

percent by 2000 and 70 percent by 2030. Broilers, already the target of

vast productivity improvements, are expected to have a 30 percent

improvement in production efficiency by the year 2000. Age-to-market

weight efficiency of catfish is expected to increase 20 percent by the

year 2000 and 200 percent by 2030.

Consideration of individual technologies is useful, but the

synergistic effects, i.e., that the total effect of two or more

technologies in combination is greater than the sum of the individual

ones, must also be taken into consideration. For example, a combination

of embryo transfer and genetic engineering in the United States could

increase milk yield up to 20,500 kilos per cow annually on selected

dairies by the first part of the next century. The same holds true for

targeting breeding to larger-frame cows especially for ease of calving

twins.

The technologies just described are impressive as to scope and

potential for both yield enhancement and cost reduction. It is obvious

that their adoption, as well as the multitude of technologies now avail-

able but not being used, will vary from country to country and even from

farm to farm within a district. No attempt is made to to make project

of adoption or even of success in commercial development of various

technologies now in their embryonic stage. Rather, the salient point is

that some farmers will leap at opportunities and, through their early

adoption, will benefit to a great extent. The slower adopters will

eventually drop out.












Economic Implications


The demand for meat products in the OECD (e.g. Canada, Western

Europe, Japan, United States) is not likely to expand to any appreciable

degree in the foreseeable future. In effect, the livestock and meat

industry has matured, at least in terms of per capital consumption. At

the same time population in the OECD countries will only increase

slightly to the year 2000. Thus, the bottom line on the demand side in

the so-called developed countries is total consumption of all meat

products will only increase slowly, perhaps at 1-2 percent annually

during this time period. There will be surges or contractions of

consumption in each commodity; beef, pork and poultry, during the next

decade and a half due to supply side factors, advertising campaigns,

fads, economic conditions and consumer preference changes. But,

overall, the trend is clear.

Population will continue to expand rapidly in the less developed

countries but, despite uneven economic conditions between them, in

general, there is relatively little potential for additional shipments

of livestock products to them. Rather, these countries will prefer to

spend their limited foreign exchange on GNP generating imports rather

than what is widely conceived as being "luxury goods." Consequently,

the second message on the demand side is that countries with meat

surplusses will have difficulty in selling their commodities abroad.

The multitude of new technologies described earlier clearly

indicate that the supply curve for OECD countries as a whole will

potentially be able to shift out to a great extent, say from S to S1 in

Figure 3. If, as projected, demand only shifts slightly, from D to Dl,























S (Current)


S2(Equilibrium)




2 Sl(Potential)


1 --



I \ D1 (Longer term)
Si D (Current)



I


Q Q2 Q1 Ouantity



Figure 3 Projected impact on supply and demand in livestock
products, OECD countries, to the year 2000.












then it would be expected that total quantity consumed would increase

from Q to Q1 while price would fall from P to P1.

The above theoretical scenario is unlikely. Rather, because of

projected subsidy cutbacks in OECD countries, or because producers are

already at the economic margin, there will be continuous pressure to

shift the curve, but it will only shift to a small extent, for example

to Q2 at which point output price will be P2. The important point is

that the long-term potential supply curve is much further to the right

than the equilibrium curve. The net result is that output prices will

hover very close to costs and, in fact, few producers will do much

better than cover cash expenses.

The economic pressures described above imply continued exodus of

producers and marketing firms with the result that a bimodal

distribution (by size) will be increasingly apparent at all points from

primary production through distribution channels. Early adoptors of new

technologies will not only survive, but many will thrive. However, for

every one of the aggressive operators there will be several who will be

unable to compete either by keeping costs down, expanding output, or a

combination of them.

There are benefits of course. Because the new technologies, at

least in beef and dairy cattle production, are largely knowledge based

there is more scope than ever for bright, aggressive young people who

only have limited economic resources to enter the business and grow

rapidly to a large size. There will be cyclical price and inventory

fluctuations, but these will be mitigated to a large extent compared

with the last three decades. That means less price risk.












Society is, of course, the big winner through lower cost

products. Furthermore, there can and will be greater choice available

to consumers from an expanded array of products. Perhaps most

significant to society is the challenge for wise use of natural

resources. The new technologies mean that more output is possible from

an ever reduced land base. One alternative is to simply predict the

dismal effect on producers from reduced, or only marginally increasing

land prices. Another approach, and one which has not received any

attention, is to take a positive approach and advocate greater national

and state purchase of land for reserve and recreational purposes. Such

a general philosophy would lead to consumers being winners on the

supply--as well as demand--side.












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20



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