Chinese feed mills, looking to minimize their costs, are adjusting their feed recipes to use a higher ratio of wheat to corn. The report says mills are generally replacing about 20-40% of corn with wheat, and in parts of
This is a reminder of the power of price. Even in one of the last self-proclaimed “socialist” countries, prices convey vital information about the economy—where resources are needed and where they are abundant. When corn is scarce and expensive, feed mills cut back on corn and substitute wheat. This ensures that the surplus wheat spilling out of warehouses gets used up faster (instead of rotting or serving as rat food) and scarce corn gets conserved.
Most people tend to think of the economy like engineers—that things are always produced according to fixed recipes. For example, an often-cited “statistic” is that it takes 7 lbs of grain to produce 1 lb of meat. Therefore (so the story goes), if every Chinese citizen increases his/her meat consumption by 1 lb,
There are many recipes for animal feed. The 7:1 grain-meat ratio is for beef feedlots in the Midwestern U.S. where they send cattle for their last few weeks of life for an eating binge to fatten them up for the butcher’s knife. This kind of animal feeding is virtually nonexistent in
Economies are much more flexible than most people realize. People like to think of economies as being like a machine, but an economy is more like an organic being. Different parts are always changing, growing, interacting, and sending messages to each other. Sometimes new parts grow; sometimes unneeded parts die and drop off, leaving the rest of the body with more resources to grow stronger.
There are many recipes for producing things and the recipe can be adjusted with incredible speed based on what ingredients are plentiful and which are scarce. Prices are like messages sent through the nervous system at lightning speed with instructions to buy/sell/conserve/binge whatever is in abundant/short supply. Don’t be fooled into thinking we’re going to run out of this or that. Prices will send the right signals—as long as governments don’t cut the nerves with misguided policies like price controls or subsidies.