The economics of animal welfare regulations proposed for Ohio

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By LUTHER TWEETEN

(Editor’s note: The following is reprinted from the June 2009 issue of the Ohio Ag Manager newsletter published by Ohio State University Extension.)

The Humane Society of the United States seeks to phase out battery cages for Ohio’s laying hens, gestation crates for its pregnant pigs and crates for veal calves in favor of group housing.

Major stake

As the nation’s second largest producer of eggs (27 million laying hens) and a major producer of swine and dairy cattle, Ohio agriculture has a major stake in the outcome of this Humane Society of the United States effort.

The Humane Society of the United States is likely to put its proposal before Ohio voters next year if poultry and livestock producers don’t cooperate with them to write legislation changing the way producers operate.

No idle threat

This is no idle threat. Last year, California voters approved a similar measure (Proposition 2) mandating as of Jan. 1, 2015, that it shall be a misdemeanor for any person to confine a pregnant pig, calf raised for veal or egg-laying hen in a manner not allowing the animal to turn around freely, stand up, lie down and fully extend its limbs.

At least four other states have passed laws similar to California’s Proposition 2. Is such legislation a good idea? The following discussion is especially focused on laying hens, the enterprise likely to be most affected in Ohio.

The following analysis addresses animal welfare dimensions of Proposition 2-type regulations before addressing the economic dimensions.

Animal welfare

First, it is important to recognize that nearly everyone, including persons associated with large confinement feeding operations, supports humane treatment of animals. At issue is what constitutes humane treatment.

On the one hand, large confinement cage or crate operations would seem to reduce animal welfare by inhibiting the freedom of animals for nesting, sex and exercise.

Proponents contend that Proposition 2-type legislation will enhance animal welfare, provide healthier food because animals will contract fewer air-borne diseases and will reduce soil, water and air pollution.

On the other hand, confinement is associated with protection of animals from extreme temperatures, predators and soil-borne diseases and parasites.

Animals in confinement can be monitored closely for health. Confinement systems deliver fresh, clean eggs to consumers. Confinement operations use less land, labor and other resources per animal unit.

The public looks to objective scientific findings to narrow differences of opinion between supporters and opponents of Proposition 2-type measures.

That strategy has met with only partial success as apparent from studies measuring how specific engineering-type provisions (such as space provided per animal) affect animal welfare.

Austria

In Austria, for example, Zaludik et al. (2007) evaluated the usefulness of the government’s Animal Needs Index, auditing how hen welfare is affected by floor space, feeder space and the like for organic laying hen production.

No relationship was found between a good score on the Animal Needs Index and hen welfare as assessed by mortality, injury, measures of abnormal behavior and footpad and breast lesions.

This and other empirical studies give conflicting results regarding the contribution of a “favorable” environment to animal welfare.

Economic implications

The economic implications of Proposition 2-type regulations imposed on Ohio’s agriculture are more clear than the foregoing animal welfare implications.

Market forces help protect animals to the extent that abused and diseased animals reduce profits, forcing animal producers to use more humane practices.

In part, out of concern for animal product demand and profit, the livestock (including poultry) industry has voluntarily changed production practices.

Experts on animal welfare and ethics, though noting the absence of federal regulation of animal production, cite the recent voluntary development and enforcement of animal care standards by producer groups and retailers.

Animal welfare scientists conclude that “These standards have resulted in some striking improvements in animal welfare…” along the entire supply chain of animals and their products.

Public’s values

Socially acceptable production practices for animal welfare ultimately rest on the public’s values and attitudes and not just on science.

Such values range from indifferent observers to animal rightists who object to animal confinement and would end use of animals as sources of food, clothing (leather), fiber, draft-power or companionship (pets).

Even among those who make animal products a part of their diet, the range of preferred animal production practices stretches from conventional to organic, to free range.

Markets can serve discriminating consumers over this broad range of preferences. The key is to label animal products by production practices.

Preferred animal welfare practices may be more costly to producers, but consumers can “vote” their preferences with dollars in the market.

Ideal solution

Labeling, a means for producers to receive premium prices for humane and more costly animal welfare practices, seems an ideal solution because it allows each consumer to uniquely express demand for traditional or enhanced animal welfare practices in the market.

But at least one researcher has noted that such labeling has attracted few customers.

That is, animal welfare enhanced products remain a small niche market, suggesting either that consumers are not well informed or they place little value on these enhanced production practices.

Public intervention

Disappointed with outcomes, the Humane Society of the United States seeks public intervention in Ohio with government regulation to reach its animal welfare objectives well beyond what market labeling and voluntary industry reforms have achieved.

Animal welfare and environmental regulations are unlikely to eliminate the current cost advantage of large farms over small farms.

Numerous studies indicate the cost of producing a unit of animal products is lower on large farms than on small farms. Most such studies can be faulted for including only costs to farms.

That is, the economic studies ignore full incremental cost of production which includes environmental or animal welfare costs accruing to society but not to farms (externalities in economist’s jargon).

However, other experts conclude that unit production costs would be lower on large farms than on small farms even if all externalities were internalized.

Other things equal, risk increases with scale of operations. But economies of size provide the wherewithal for larger farms to afford the able management required to cope with risk.

Similar

Proposition 2 for California is similar to the Humane Society of the United States’ proposal for Ohio. In addition, livestock production conditions in Ohio are sufficiently similar to those in California, so that economic analysis for California provided a strong basis to begin assessing the situation in Ohio.

Scientists at the University of California-Davis concluded that under Proposition 2 “variable costs of production [for eggs in California ] would rise by at least 20 percent and perhaps substantially more. Underlying these higher costs per dozen eggs are higher feed use per bird, higher cost per pullet, lower average productive life of a hen, higher mortality rates, fewer eggs of premium size or acceptable marketability, fewer birds per facility and higher labor costs.”

Other studies have estimated total cost per dozen eggs are 26 percent higher for barn production and 45 percent higher with free range production compared to conventional cage egg production.

Surrounded

Ohio is surrounded by states with competitive laying hen enterprises. Indiana’s 24 million average number of laying hens and Pennsylvania’s 21 million hens were not far behind Ohio’s average inventory of 27 million hens in 2007.

Eggs produced under conventional cage systems in surrounding states would have a 20 percent or more cost advantage over Ohio’s farms producing under Proposition 2-type regulations. Ohio laying hen producers would not be competitive.

To protect its producers, California has proposed trade barriers to egg imports from other states. Such barriers seem unachievable because they conflict with the interstate commerce clause of the U.S. constitution and likely would be ruled unconstitutional.

In short, according to Sumner et al. (2008): “Our analysis [of Proposition 2 regulations applied to California agriculture] indicates that the expected impact would be the almost complete elimination of egg production in California within the six-year adjustment period.

“Noncage production costs are simply too far above the costs of the cage systems used in other states to allow California producers to compete with imported eggs in the conventional egg market.”

Exception

The authors noted the exception of a very small residual of local specialty producers that would supply part of the California market for eggs produced in noncage systems.

Sumner continues: “The elimination of most of the California egg industry would have broader economic implications. The loss of about 3,000 jobs in the industry would be multiplied by a factor of about 0.9 to imply a statewide loss of jobs of about 5,750 jobs.

“The loss in overall economic activity in the state is also larger than the gross [egg] sales of about $370 million in 2007 because of the ripple effects that affect upstream and downstream industries.”

Conclusions

Who would be the economic gainers and losers from imposition of Proposition 2-type regulations on Ohio’s agriculture? Ohio would lose: laborers, livestock and crop producers, and the economy as a whole.

Ohio’s laying hen enterprise, second only in the nation to that of Iowa and 38 percent greater than that of California in 2007, would be decimated.

Applying the latter percentage to the available estimate of job loss in California, Ohio’s loss from Proposition 2-type legislation would total 7,928 jobs and associated income.

Diminished animal agriculture means diminished crop agriculture in Ohio — less demand for livestock means less demand for corn and soybeans.

The state’s livestock agriculture directly consumed 22 percent of the state’s corn crop and a sizable percentage of the soybean crop in 2008.

Including distillers’ grain byproducts (from corn feedstocks for ethanol production) and corn silage, some 30 percent of the state’s corn crop is fed to livestock.

Ohio’s consumers

Ohio’s consumers would lose as workers and income-earners, but Ohioans would face little if any higher food prices with imposition of Proposition 2-type regulations as surrounding states supply low-cost animal products.

Thus other states would gain jobs and income at Ohio’s expense as animal products consumed in Ohio would be produced elsewhere.

Those products would be produced using current practices, so overall animal welfare would be unaffected.

National legislation

To avoid interstate trade that abrogates the intended animal welfare gains from Proposition 2-type regulations, the Humane Society of the United States can be expected to pursue national legislation to impose regulations on all U.S. livestock producers.

Even if such measures were enacted, they would be severely undermined over time by livestock product imports from Canada, Mexico and other countries — often under animal welfare conditions below Ohio’s standards.

(Luther Tweeten is an emeritus professor, Department of Agricultural, Environmental and Development Economics at Ohio State University.)

7 Comments

  1. Nancy says:

    Great article! These are facts that need to be impressed upon the voting public BEFORE HSUS gets a chance to try to sway public vote. I hope Ohio Ag businesses continue to stand fast against HSUS. To compromise in any way will cost Ohio farmers/ranchers whatever they give up. The HSUS gains anything you lose and they lose nothing in compromise. Compromising with them only encourages them to come back with more and more onerous measures until they have won and the animal industry has lost.

  2. Tom says:

    The HSUS has absolutely nothing positive to contribute in any area whatsoever. What it wants is destructive to agriculture and it gives nothing in return for what it wants. They come to the table with demands and nothing but a false morality that is designed with hatred of humans in mind.

  3. Jan says:

    A little late to start swaying. The animal rights movement has been in existence since 1890s in the USA. The problem and watch this closely, HSUS shoves emotional attitudes and not facts, so be prepared. Much of the sources they use are their own. If you think that HSUS is all warm and fuzzy toward any animal, you are mistaken. I challenge anyone to read any animal rights agenda book and after reading it, I will guarentee that you will find these activists are nuts, putting a child and a rat as the same value in society. Everyone supports animal welfare and I as a cattle producer am proud of the product I sell and yes cattle prefer standing in the rain or snow to being in a barn. If you do not believe HSUS is trying to move toward a vegan nation, just read some of their blogs where this is being discussed. It is all related people, believe it or not, but would advise people to become more aware in what Animal Rights is and how it differs from Animal Welfare and please pass it on to our government respresentatives. Also give me an egg in a shell, not one which can be contaminated with human e coli….talk about food safety!

  4. Mike Jones says:

    Animal welfare is not what HSUS is about. They portray any animal use as wrong and abuse, so they can gather donations from those who think they are providing shelter and care for unwanted and abused animals. Their ( HSUS ) main agenda is political power and will go to any lengths to obtain that power. Lately the facts of how HSUS does business is coming to light of the public and in some case is not a pretty picture. There is many questions that need to be answered as to their ethics on such things as gathering of signatures to get initiatives on ballets so as they say the public can make the choice, and that may be the case if not for the lies and half-truths they tell on public forms. Not only animal use but tradition, culture and heritage are under attack from these high powered animal rights zealots, and America needs to see the facts as to what and who these people are, and what it is doing to not only the economy but the moral standards of our nation. M Jones

  5. Bill says:

    As a long time poultry producer, I’ve watched with dismay the power, money and influence that has slowly been gathered and wielded by the Humane Society of the US. The unwitting public believe that the HSUS is still the animal welfare organization that it was originally chartered to be, instead of the radical animal rights organization it has become.
    Wayne Pacelle, a former lieutenant of Ingrid Newkirk’s PETA, is now the president of the HSUS and he has imported former Animal Liberation Front and Cleveland Amory Fund for Animal alumni as officers in the organization. Some, believe it or not, are convicted terrorists and the HSUS itself has been caught funneling money to these groups.
    How do they get away with this? They are always riding the razor’s edge of legality, and many times step over the line. They mail out literature with wonderfully cute and sad pictures of puppies and kittens, implying, but not stating that a donation will be used to save them. They milk every disaster, begging for for contributions to “save the animals” as they did in the aftermath of hurricane Katrina. In that instance, they collected $34 million in contributions, of which only $4 million was ever accounted for. The Louisiana Attorney General opened a fraud probe into the HSUS’s practices, but it all went away after the group agreed to spend a couple of million to build a dog pound in Louisiana and grease the right politicians “campaign funds”.
    Putting it quite simply, this group commits fraud to gain funds to buy off YOUR senators and representatives and you can bet that their lobbyists are stalking your state house armed with cash to buy away your rights!

  6. Jane says:

    Just because you hold an opinion and back it up with other similar opinions doesn’t make wacky a fact. It’s really quite disturbing that giving animals welfare protection is an affront to your “rights.” If so, then I question any moral standard you claim to have. Claiming the HSUS is corrupt because you fear that, oh gee, the price of eggs goes up by 2 cents is the surest sign of corruption. Keep drinking the paranoid kool-aid, guys.

  7. sam says:

    This should never have been on the ballot. How a group like the hsus can come into Ohio and tell it how to run its business is unbelievable. Decisions like this, that affect people’s lives, jobs and our food supply, should be left to people using facts and logic. We do not want to be another California. Something needs to be done to keep special interest groups from putting whatever they want on the ballot. The hsus knows nothing about animal farming and does not care about the people of Ohio! Remember this in the future!

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