The economics of moving to higher welfare farming

There is a widespread assumption that moving to higher welfare systems and outcomes for farm animals invariably entails a substantial increase in production costs. However, analysis of industry data shows that in certain cases, such as changing from battery to free-range eggs or from sow stalls to group housing, higher welfare farming adds little to the costs of production. In addition, higher welfare farming practices can achieve economic benefits as compared with intensive production. In better welfare systems, animals will tend to be healthier. This can lead to savings in terms of reduced expenditure on veterinary medicines and lower mortality rates. The provision of straw and/or additional space for finishing pigs can result in better feed conversion ratios and improved growth rates. Similarly, compared with high-yielding dairy cows, lower yielding but healthier cows with better fertility and longevity can deliver higher net margins due to lower heifer replacement costs and higher sale prices for the calves and cull cows. Economic drivers that could stimulate higher welfare include:

(i) the mandatory labelling of meat and dairy products as to farming method to enable consumers to make informed choices;

(ii) more ambitious use of those measures in the CAP Rural Development Regulation that enable farmers to be given financial support for improved welfare; and

(iii) the use of fiscal measures to reduce the cost for farmers of implementing higher welfare production or to reduce the price paid by consumers for higher welfare food.

Livestock production, in particular industrial production, produces negative externalities including environmental degradation, greenhouse gas emissions and loss of biodiversity. These negative externalities represent a market failure in that the costs associated with them are borne by third parties or society as a whole and are not included in the costs paid by farmers or the prices paid by consumers of livestock products. The negative externalities of livestock production should be internalised in order to avoid market distortions and provide incentives for their reduction.

By Peter Stevenson

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