Sunday, May 15

Week 254 - Cattle (Bos taurus) vs. Row Crops as a Protein Source

Situation: The total mass of humans on earth recently passed 1.0 Trillion pounds. That seems like a lot until you consider that the total mass of cattle recently passed 1.8 Trillion pounds. On average, one member of Bos taurus helps to nourish and allay the hunger of 6 Homo sapiens. Then further consider this information about processing that animal for meat: 

“...carcasses are generally 63 to 65% of the 1,250 pounds, or approximately 790 pounds. Some of that carcass is fat that is not consumed, and some is bone (15% or so). Therefore, edible meat cuts and ground beef may be 600 pounds. So, with the example above of 50 bushels of corn fed to a finished animal, now 4.67 pounds of corn were required for each 1 pound of beef...” 

While the world population has been increasing at the rate of 1%/yr for the past two decades, the number of people living in poverty has been falling by almost 20 million per year over that period, and is now less than 900 Million. Now that they can afford it, what is the best way to achieve an adequate protein intake for the 20 Million people coming out of poverty each year? Nutritionists have determined that a “Dietary Reference Intake” of 0.8 grams of protein per kilogram of body weight (i.e., 0.36 grams per pound) is needed. This results in a need for 60 grams of protein per day for a sedentary man/woman weighing 165 pounds. 

Mission: Determine the most efficient way to achieve a 60 gm/d protein intake without neglecting essential amino acids, lipids, vitamins and vitamin-like substances. 

Execution: That mission can be accomplished by eating a 0.6 pound hamburger per day at an estimated cost of $3.00/d at the average US supermarket. That’s too expensive for people living an emerging market economy like China, where in October, 2015, the World Bank updated the International Poverty Line to $1.90/d. 

Returning to our earlier example of beef cattle, a steer weighing 1250 lbs has 600 lbs of muscle available for making hamburger that is 85% lean meat and 15% fat. Each pound (16 oz) has ~100 grams of protein and costs ~$5.00 (31 cents/oz). For comparison, a liter of whole milk (34 oz) has 34 grams of protein and costs ~$3.40 (10 cents/oz). A liter of lactose-free milk (Fairlife brand) has 54 grams of protein and costs ~$3.70 (11 cents/oz). A pound of white corn has 44 grams of protein and costs ~$2.50/lb (16 cents/oz). A pound of soybeans has 50 grams of protein and costs ~$3.20/lb when purchased in 10-pound containers (20 cents/oz). A pound of peas has 26 grams of protein and costs ~$0.66/lb when purchased in 20-pound containers (4 cents/oz). A pound of long-grain white rice has 12 grams of protein and costs ~$0.45/lb when purchased in 20-pound containers (3 cents/oz). A pound of whole wheat bread has 58 grams of protein and costs ~$1.95/lb (12 cents/oz). 

Cost per gram of protein
Beefsteak                               $0.130 
Whole milk                              $0.100
FairLife lactose-free milk           $0.069
Soybeans                                $0.064
White corn                               $0.057
Hamburger (85% lean)             $0.050
Long-grain white rice                $0.038
Whole wheat bread                   $0.034
Peas                                        $0.025

As you can see, beefsteak is the most expensive way to meet the 60gm/d protein requirement (13 cents/gm). Whole milk is next most expensive at 10 cents/gm. But when lactose is filtered out of milk (and the remaining constituents are reconstituted), there are 13 grams of protein in a 240 ml serving vs. 8 grams in 240 ml of whole milk. That lactose-free product is marketed by Coca-Cola under the “Fairlife” brand and costs ~10% more than whole milk. 

As the sole source of a 60gm/d protein intake, Fairlife costs $3.87/d, 85% lean hamburger costs $3.00/d, whole wheat bread costs $2.07/d, and peas cost $1.52/d. An adult male living at the poverty line ($1.90/d) could be adequately nourished with peas and have 38 cents left for needs like clothing and shelter. 

Wheat protein (gluten) and rice protein are among is the least expensive sources of protein. However, both are deficient in one of the essential amino acids. Pea protein is the least expensive source and contains sufficient amounts of all 9 essential amino acids. Milk protein (casein) is deficient in the essential amino acid histidine but histidine is only essential for infants. Corn protein (zein) is deficient in another essential amino acid (threonine). Hamburger, milk, peas and soybeans have all 8 of the amino acids that are essential for adult humans. But only hamburger and milk contain adequate amounts of all of the essential amino acids, vitamins and minerals, and other vitamin-like molecules (carnosine, docosahexaenoic acid, and creatine). Plants lack Vitamin D (except for mushrooms and lichens), Vitamin B12, creatine, carnosine, and docosahexaenoic acid (except for algae and seaweed sources). 

In summary, a balanced diet requires that we consume milk and/or meat daily in addition to vegetables, fruit, and cereal grains. Milk and/or meat can be eliminated from the diet only by taking a multivitamin supplement each day that includes Vitamin D, Vitamin B12, creatine, docosahexaenoic acid, and carnosine. A vegetarian also would need to consume peas and/or soybeans every day to ensure that adequate amounts of all 8 essential amino acids have been consumed.

Administration: Create a spreadsheet of publicly-traded companies that package beef and dairy products for sale in grocery stores, and companies that package row crops for sale in grocery stores (see Table). Include only those companies that have a) stock traded for at least 16 yrs, and b) annual revenues sufficient for inclusion in the Barron’s 500 List.

Bottom Line: When it comes to meeting protein requirements in a cost-effective way, companies that package and sell beef and milk products should be at a disadvantage compared to companies that package and sell row crops. Why? Because using row crops as animal feed to produce meat or milk is inefficient. For example, 5 pounds of corn are needed to produce a pound of hamburger meat, given that a 600 lb steer is taken to a “finishing lot” and fed ~2500 pounds of corn over 170 days to gain the 600 lbs of weight needed to be ready for slaughter. However, vegetarians must supplement their diets with vitamin B12, vitamin D, carnosine, docosahexaenoic acid (DHA) and creatine. Once the cost of those supplements is considerable, a vegetarian’s diet has only a minor cost advantage over a diet that includes meat and dairy products. The trend is away from vegetarianism. Since 2002, ~20 Million people a year have emerged from poverty and the demand for meat and dairy products has grown dramatically. This is evident from the 5-year total returns/yr for the 3 meat-packing companies in this week’s Table (see Column F): Hormel Foods (HRL), Tyson Foods (TSN), and Pilgrim’s Pride (PPC). 

Risk Rating is 7 on a scale where 1 is a 10-yr US Treasury Note and 10 is gold.

Full Disclosure: I own stock in GIS, HRL, KO, and PEP.

NOTE: Metrics are current for the Sunday of publication; metrics highlighted in red denote underperformance relative to the Vanguard Balanced Index Fund (VBINX at Line 18 in the Table). Long-term total returns in Column C of the Table date to 9/1/2000, which is our reference peak for the S&P 500 Index (1520.77). There have been two peaks since then: October 9, 2007 (1565.15) and May 21, 2015 (2130.82).

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