I recently ran across this publication from the USDA-Economic Research Service back in 2008. The piece, written byEphraim Leibtag, is mainly about the high costs of corn at the time (they subsequently went much higher), and the potential impacts on the cost of food.
That publication had a little back of the envelope calculation that I found very interesting, as it relates to the argument that meat production is wasteful - a topic I've discussed before.
Here is Leibtag:
To avoid downplayingpotential impacts, this analysis usesupper-bound conversion estimates of 7pounds of corn to produce 1 pound ofbeef, 6.5 pounds of corn to produce 1pound of pork, and 2.6 pounds of corn toproduce 1 pound of chicken. Using these ratios and data from theBureau of Labor Statistics, a simple passthroughmodel provides estimates of theexpected increase in meat prices given thehigher corn prices. The logic of this modelis illustrated by an example using chickenprices. Over the past 20 years, the averageprice of a bushel of corn in the U.S. hasbeen $2.28, implying that a pound ofchicken at the retail level uses 8 centsworth of corn, or about 4 percent of the$2.05 average retail price for chickenbreasts.
I don't know about you, but 8 cents doesn't seem like a lot. If that corn is "wasted" (I've previously argued that "waste" is the wrong word here), that's not much waste.
I don't know exactly how Leibtag made his calculation, but I'll make an even cruder one using current figures. The price of corn today is around $4.15/bushel. There are 56lbs in a bushel, so corn costs $0.074/lb. So, if a steer requires 7 lbs of corn to make 1 lb of beef, then the cost of the corn in a pound of beef is: $0.074*7 = $0.519. The retail price of beef today is around $5/lb, so about 10.3% of the retail price of beef is feed corn. That means about 90% of the retail price of beef is due to other stuff.
Similar calculations show that for a pound of pork $0.48 of the retail cost is due to corn and for chicken it is $0.19 (this is higher than Leitbag's numbers because, among other things, the cost of corn today is much higher and because my calculation also underestimates the costs of feed in a pound of retail product because it doesn't take into account the ability of farmers to substitute toward cheaper feeds). Given retail prices of for pork and chicken are $3.8/lb and $2/lb, that means that 12.8% and 9.9% of the retail prices of pork and chicken.
So, the vast majority of the cost of meat - around 90% - is due to non-feed factors.
Sometimes a little context is useful in these debates.
