How the JD.com Deal Could Boost the U.S. Pulse and Barley Sectors

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Key insights:

  • The recent deal between Chinese-based online retailer JD.com and the Montana Stockgrowers Association would increase demand for cattle finished in Montana
  • Finishing cattle in the northern United States has historically been cost-prohibitive because corn and soybeans cannot be readily produced in the region and are expensive to ship from the Midwest
  • Using a combination of barley and pulse crops could provide a reasonable alternative feed to the traditional corn–soybean diet used for finishing cattle 
  • Developing an appropriate barley–pulse ration could significantly boost local demand for the growing pulse industry and established barley sector in the northern Great Plains 

The AgEconMT.com team has written and chatted about the recent agreement between the Montana Stockgrowers Association (MSGA) and the Chinese retailer JD.com to supply Montana-branded beef to Chinese consumers. Despite the tremendous promise this agreement provides to the economic development of Montana’s cattle industry, there are also significant uncertainties about whether there exists a sufficient infrastructure for finishing and processing cattle in Montana to meet the increased local demand. As Dr. Eric Belasco notes in a previous post, the northern Great Plains region currently has a comparative disadvantage in both producing traditional feed components (corn and soybeans) and processing fed cattle.

The Montana-based processing constraint may be overcome with constructing a strategically-located facility, for which the JD.com/MSGA agreement includes provisions for up to a $100 million investment in such a facility. However, there still remains the issue of developing an infrastructure for finishing cattle. One of the largest barriers to this is the fact that corn and soybeans—the primary inputs into modern feed—are not produced in sufficient quantity in Montana or in surrounding regions. For example, in the past ten years, the northern U.S. region of Idaho, Montana, western North Dakota, and Wyoming produced approximately 0.3% of all corn grown in the United States (USDA National Agricultural Statistics Service). As such, feed would need to be delivered from the Midwest and central Great Plains, which could simply be too cost-prohibitive.

But what if there were alternative feed ingredients that could be produced in sufficient quantities in the northern United States? There is research that suggests this may be the case (for example, here, herehere, here, and here). Specifically, there is some evidence that a feed ration comprised of barley and pulse crops could offer an alternative to the traditional corn–soybean diet. For these crops, the northern U.S. already has a large production comparative advantage, with Idaho–Montana–North Dakota producing, on average, over 70% of all U.S. barley and 87% of U.S. peas and lentils over the past decade (USDA National Agricultural Statistics Service).

If a cost-effective barley–pulse feed alternative were to be developed, it could provide several important benefits to both the northern U.S. livestock and crops industries. Several examples include:

  • Reduction in transportation and other marketing costs (and possibly uncertainty) for procuring feed.
  • Enhancing branding opportunities for cattle raised on non-GMO feed, because neither barley nor pulse crops are currently produced using genetically modified varieties. This could increase marketability in markets where consumers place particularly high value on this beef characteristic (including China, Europe, and the growing and increasingly influential U.S. millennial market).
  • Reduction in the uncertainty of marketing pulse crops and barley that does not make malting grade. Diversifying the marketing portfolio for these crops may be particularly helpful given recent uncertainties and market uncertainties in both the pulse and barley markets.
  • Increased demand and, likely, prices for northern U.S. pulse crops and feed barley.
  • Possible demand increase for local pulse and barley processing services for developing optimal feed.
  • Potential agronomic, soil health, and environmental improvements from intensifying traditional wheat–fallow cropping systems, which are still prevalent in the northern U.S. region.

Certainly, additional research is needed to identify potential opportunities and trade-offs associated with implementing alternative cattle feeding strategies in the northern U.S. region. However, these innovations could significantly reshape and increase synergies among the region’s numerous agricultural sectors.

What are your thoughts about this potential? Have you had experience using barley and pulse crops in animal feed or marketing your small grains and pulse crops for use in feed?

(Photo by UnitedSoybeanBoard is licensed under CC BY 4.0)

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About Author

Dr. Anton Bekkerman is an associate professor in the Department of Agricultural Economics and Economics at Montana State University, joining the faculty in 2009 after completing his PhD at North Carolina State University. Bekkerman's primary areas of research are grain marketing, basis and price forecast modeling, understanding how grain prices are affected by changes in supply chain infrastructures and quality demands, and analyzing the economic trade-offs of adopting alternative dryland cropping systems in Montana. One of his current projects is an investigation of how new grain loading technologies are affecting prices that Montana farmers receive for their wheat. Bekkerman is also examining the economic impacts that Montana's rapidly expanding dry pulse industry will have on the state's crop industry. Although Bekkerman grew up on the east coast, he has recently made a small step toward production agricultural after acquiring three backyard chickens.

3 Comments

  1. Great article,
    I think more cattle feed lots would set a price floor for farmers of all commodities in the state. Montana has very few outlets for feed quality grain if it does not make food grade. Unfortunately corn is so much cheaper relative to any other feed source that it can be imported into the state at a lower cost than what a farmer would raise feed barley for instance here.

  2. While barley and pulses may be a viable feed option, to state that Montana cannot raise corn or soybeans is false. Advancements in seed technology has shortened maturity and given us very good varieties that produce well. Im in very northern Montana and both corn and soybeans have been grown with great success. Granted, we have not grown much in the past but what was the market? If feedlots sprung up and there was a market for corn and soybeans for feed, we could absolutely grown them efficiently.

    • That’s a very good point. It will be really interesting to see whether technological advances in corn production (i.e., short-season varieties), corn prices, and transportation costs will result in increased production of corn in Montana, increased imports of corn to Montana, or (as the possibility that I’ve proposed) an alternative feed ration developed to take advantage of the established crop industries in Montana. Historically, Montana has not had a comparative advantage in producing corn. Since 1980, for example, the most corn acres planted in Montana were 120,000 in 2014. This represented approximately 0.75% of total Montana acres in crop production and 0.14% of total U.S. corn acres that year. Now, it’s hard to know whether this was because corn is simply not very suitable for growing in Montana or there isn’t a big market for it (probably some combination). It could certainly be the case that an in local Montana demand for corn would lead to increased research into short-season varieties and an expansion in corn production (as you point out). What’s perhaps more interesting is this: would there be a greater demand for research into how to make Montana-specific corn varieties (in order to conform to existing feed formulas using corn) or research into developing Montana-specific feed formulas (in order to take advantage of existing research and progress in dryland pulse and barley production)? I don’t know the answer, but it’s one that I’m looking forward to keeping an eye on.

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