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Scientific, Ethical, and Economic Aspects of Farm Animal Welfare

That's the title of a new report put out by the Council for Agricultural Science and Technology.  Nicole Widmar and I helped contribute to the section on economics.  

A lot is covered in a mere 40 pages.  The main section heads include: 

  • Roles of Science and Ethics in Evaluating, Understanding, and Improving Animal Welfare
  • Economics and Markets for Animal Welfare
  • Regulation of Animal Welfare
  • Assessment of Welfare
  • Advances in Animal Welfare and Outstanding Challenges
  • Emerging Topics
  • Future Neets

It’s an honor to join such a prestigious group of scientists in pulling together this multidisciplinary report.  

Are animal welfare and profits well aligned?

I recently ran across a claim I've heard many times in the past about animal protein production and animal welfare.  It goes something like the following: happier animals put on weight more efficiently because they aren't stressed by disease and discomfort. So, a producer can't make money unless they takes care of their animals, meaning the profit motive and improving animal welfare are aligned.  

There is an element of truth to this line of reasoning.  But, it's not the whole story.  I discussed this issue in a paper entitled Animal Welfare Economics published back in 2011 with Bailey Norwood.

Here is a key paragraph describing the problem:

It is instructive to consider the trade-off between animal well-being, productivity, and profitability using a simple example. Imagine an egg producer facing the short-run problem of deciding how many hens to stock in a barn with a fixed amount of space. Suppose the animal scientists’ arguments are correct and each hen tends to produce more eggs when they are happier and fewer eggs when sadder. If hens are too densely stocked—for example, so tightly caged that they cannot move or turn around—they will clearly be unhappy and unproductive. Thus, providing a bit more space per hen will increase both welfare and output. At some point, however, too much space is undesirable from both a production and a welfare standpoint. A single isolated hen is likely to be lonely (visitors to egg farms will notice that hens often prefer to flock in groups even in a free-range environment), and as chickens expend energy roaming about, they will be less productive compared to hens more tightly confined. Of course, productivity and welfare are not perfectly aligned and it is probably true that hens would prefer more space than would maximize their individual egg output.

We then walk through a numerical example showing that even when animal welfare and animal output are very highly correlated, a producer will tend to stock hens more hens than would be given by the stocking density that would maximize animal welfare. The main insight is that the producer aims to maximize the profit from the BARN not the ANIMAL.  

The figure below shows the particular example we walk through.  The rest of the details are in the paper.

animalwelfareprofit.JPG

We write:

Though many producers care passionately about the well-being of the animals under their care, few would argue that the goal of commercial agriculture is to maximize animal well-being. Nevertheless, many in the agriculture community want to argue that animals are most happy when producers are most profitable. A little economic reasoning shows that this is not the case. In a competitive environment, producers who wish to stay in business face incentives to adopt production systems and practices that maximize profit, and profit-maximizing outcomes are not the same as animal welfare-maximizing outcomes. Thus, the real question of interest is not whether profitability must be sacrificed to achieve higher levels of animal welfare, but rather how much.

Market Potential for Cage Free Eggs

Many food manufacturers and retailers have made pledges to go "cage free."  In fact, if all the pledges are maintained, about 75% of the entire egg laying flock will have to be converted to cage free by the year 2025, as the graph below suggests.     

eggmarketshare.JPG

Is there sufficient consumer demand to support this level of commitment (particularly when one acknowledges that, according to USDA data, cage free eggs are currently selling at about a $1/dozen (or 68%) premium to conventional)?

I recently completed a study for the Food Marketing Institute, Animal Agriculture Alliance, and the Foundation for Food and Agricultural Research on the market potential for cage free eggs to help provide some insights into these issues.

The study was conducted with more than 2,000 consumers.  The core of the study involved people making a series of simulated retail shopping choices like the one below.  

CE_egg.JPG

Answers to these questions allow us to infer consumer willingness-to-pay, market shares, and more.  In fact, if you want to run your own market share simulations, I created this handy downloadable spreadsheet.

The main finding is the following:

When provided no additional information, choices imply half of consumers are willing to pay no more than a $0.30/dozen premium for cage free eggs; however, the mean premium is $1.16/dozen, suggesting a small fraction of consumers are willing to pay sizeable amounts for the cage free label. Almost 60% of consumers have a willingness-to-pay for cage free less than $0.40/dozen, but 33% have a value greater than $1.00/dozen.

and

Ultimately, the results suggest there is potential for the market-share for cage free eggs to rise above the current state even at premiums as high as $1.00/dozen. However, even at much more modest price premiums, the potential for cage free eggs to attain majority market share is unlikely, particularly if conventional eggs advertise other desirable attributes. Completely removing more affordable conventional eggs will significantly increase the share of consumers not buying eggs.

Here are a couple key graphs:

WTP_hist_egg.JPG

and

eggmarketshare2.JPG

 

There is much, much more in the full report, and you can also download the market share simulator here.

I Will Give You My Vote but Not My Money: Preferences for Public versus Private Action in Addressing Social Issues

That's the title of a paper by Bailey Norwood, Glynn Tonsor, and myself that was just released by the journal, Applied Economic Perspectives and Policy.

We start the paper as follows:

Social issues in agriculture such as animal welfare and food insecurity pose two primary concerns: whether any action is going to be taken and, if it is, the extent to which action is taken in the private or public realm. Those who are concerned about animal welfare in conventional egg production can take private action by purchasing cage-free eggs, or they can encourage public action by voting for bans on the use of cages in egg production. Private action to mitigate food insecurity includes donating to food banks, while its public counterpart is government programs like the Supplemental Nutrition Assistance Program

A summary of the study and findings:

This study explores the extent to which individuals will support public action but, in its absence, will not commit their own voluntary efforts. An internet survey was administered to over 3,500 individuals with hypothetical scenarios in which they could donate their own money toward a cause and/or support government action. When asked to choose between public or private action, most chose a combination of the two, suggesting that public and private partnerships are the preferred vehicle for solutions to social problems. Close to 20% indicated they would vote for laws to confront an issue but not contribute their own private donations.