LIVESTOCK SUPPLY AND FEED DEMAND IN TURKEY:  AN EVALUATION OF THE CURRENT  SITUATION AND ALTERNATIVE POLICY SCENARIOS

Oğuz YURDAKUL, Darnell SMITH, Ali KOÇ, Frank FULLER, Haydar ŞENGÜL ve diğerleri

The livestock sector plays a significant role in the Turkish economy.  It constituted approximately 23.3 percent of agricultural production value in 1996 (SIS, 1998).  The sector’s contribution to farm income is substantial, and activities related to livestock production and product marketing are important to the economic health of rural areas in Turkey.  The stability and growth of the feed manufacturing and veterinary service sectors also depend on growth and change in the supply of livestock products.  These market interrelationships make it difficult, however, to design policies for the livestock sector.  Moreover, effective policy evaluation requires simultaneous supply and demand analysis across the various market segments.

Recognizing the importance of the meat supply, demand, and feed demand interconnections, the authors of this study seek to increase understanding of the Turkish livestock sector by describing the current state of production, consumption, and policy as well as by analyzing selected alternative policies.  The current status of the livestock sector in Turkey is characterized in the first two chapters.  The remaining chapters describe a policy simulation model developed as part of this project and discuss the results of applying this model to the analysis of four trade and domestic policy changes.

Chapter 1 describes recent trends in consumption of meat and dairy products. The demand for meat, dairy products, and eggs has the potential to increase rapidly in Turkey as per capita real income and population rise. In recent years, Turkish livestock supply has struggled to keep pace with the current growth in demand. This is particularly true in the red meat sector. Both cattle and sheep inventories have declined significantly in the last two decades; however, average slaughter weights and milk yields have increased over the same period. According to the Turkish Ministry of Agriculture and Rural Affairs (MARA, 1994), the breed composition and feeding practices are two important factors affecting yield growth in Turkey. Nevertheless, the supply of feed and nutrients for the livestock industry is a major limitation for continued productivity and production increases.  MARA estimates that Turkey’s domestic supply of protein feeds in 1991 was 1,965 thousand metric tons (tmt), but demand for protein feed in that same year was 2,597 tmt. Without significant increases in the production of foodstuffs, the gap between the supply and demand for protein feeds and other nutrients will widen rapidly as livestock numbers and meat production increase.  Ultimately, Turkey may have to rely more heavily on imported meats and feeds (MARA, 1994).

At one time or another over the last 75 years, the Turkish government has been involved in virtually every facet of livestock production and meat marketing.  State-owned marketing institutions dealing in meat and dairy products have existed in the past or currently exist in Turkey.  The Meat and Fish Organization (EBK) and the State Milk Industry (SEK) process only a modest share of the total number of animals slaughtered and of the milk marketed in Turkey; nevertheless, they have established industry standards for product quality and they support producers through their influence on market prices.  The state is also involved in feed production, producing 17 percent of total compound feed output in its 26 mills (YEMSAN).  This feed has periodically been sold to livestock producers at subsidized prices.

In addition to direct production and marketing activities, the Turkish government offers technical and financial assistance to producers for artificial insemination, breeding herd improvement, veterinary services, and investment credit.  These policies have been implemented from time to time to aid Turkish producers in improving their production practices and efficiency.  Price supports and incentives have also been used to encourage meat, milk, and wool producers to increase their output and product quality.  The domestic price policies are facilitated by substantial import tariffs and periodic import restrictions on meat and dairy products.

The second chapter presents some stylized facts concerning feed use and production costs obtained from a survey of livestock and poultry producers across Turkey.  In the summer of 1998, a research team in Turkey administered a series of six surveys on nearly 1,200 farms.  The surveys collected livestock production, cost, price, and feed use data in the nine major regions of Turkey.

It is clear from the survey results that production methods and, hence, costs and returns vary greatly among livestock producers in different regions of Turkey.  This is particularly true for cattle and sheep producers because most farm operations in these sectors are quite small.  These farms are diversified, deriving their income from crop production in addition to one or more livestock products.  In the cattle sector, feed efficiency and net returns vary also by the type of cattle raised: domestic, cultured, or crossbred.  This is most evident in the dairy sector where milk yields and feed efficiency for cultured cattle are significantly greater than for either domestic or crossbred cattle.

Results from the broiler and egg surveys differ from cattle and sheep surveys, because commercial producers dominate the poultry industry.  This fact is readily seen in the share of broiler or egg production in total farm income.  In most regions this share is more than 80 percent, and in some regions it approaches 100 percent.  This is in stark contrast to the 40 to 70 percent of total income derived from cattle or sheep production in the cattle and sheep sector.

Information from the livestock surveys was incorporated into the model of livestock supply and feed demand described in Chapter 3.  The simulation model was used to generate a set of baseline projections.  The outlook for the Turkish livestock sector suggests that broiler and beef production will grow significantly over the next decade, increasing, respectively, 70 and 42 percent over the 1998 levels.  Mutton, milk, and egg production will increase between 20 and 35 percent.  The growth in livestock output will just keep pace with increases in consumption, except in the beef sector.  Once the import ban on beef is lifted, Turkish beef purchases from international markets are expect to rise to 284 tmt by 2007.  In 2007 the additional meat, egg, and dairy output will require 32 percent more feed grain and 64 percent more in oilseed meal for feed than in 1998.

Chapter 4 present the results from four policy simulations: a return to 1996 tariff levels, 10 percent annual tariff reduction, Turkey’s accession to the European Union (EU), and a reduction in the share of domestic cattle in the total cattle inventory.  The common theme of the first three scenarios is that liberalizing Turkey’s livestock markets will reduce domestic prices for livestock products and, consequently, meat, egg, and milk production.  At the same time, lower prices induce greater consumption of livestock products, which are purchased on international markets.  Lower livestock output significantly reduces the need for Turkey to import feed grains and oilseed meal, particularly corn.

The policy implications of the simulations are threefold.  First, if domestic producers are going to survive in a more competitive price environment, they will have to adopt production techniques that reduce costs and enhance productivity.  Government policies that help producers invest in and adopt improved production and management practices will speed the adjustment to a more efficient livestock industry, one that can better compete in the international marketplace.  Price supports and import barriers enable inefficient producers to remain viable and slow agricultural adjustment.  Second, if Turkey joins the EU under a reformed Common Agricultural Policy (CAP), Turkish livestock producers will be devastated unless reforms of the domestic market that improve productivity are already in place.  Third, agricultural support policies that increase consumer prices greatly slow the improvement of Turkish diets through greater animal protein consumption.  Though the welfare measurements in this study indicate that the gains to consumers following liberalization of livestock markets are trivial compared with the losses of producers, these calculations do not incorporate the value of better health and longevity that is generally associated with more protein-rich diets.

The fourth simulation analyzed the impact of increasing the share of cultured and crossbred cattle in Turkey’s beef and dairy herds.  The simulation results indicate a policy that encourages herd improvement will increase both beef and dairy output while reducing feed input.  Domestic prices may decline with greater meat and milk supplies, enabling consumers, as well as producers, to enjoy benefits from this policy.  Given the feed conversion coefficients found in the livestock survey, greater feed efficiency and production increases would occur if use of cultured cattle were promoted over both domestic and crossbred cattle.

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