What does an animal-friendly livestock sector cost?

‘The Animal Act requires that rules be established aimed at achieving an animal-friendly livestock sector in the Netherlands by 2040. In doing so, livestock farming must comply with six principles as formulated by the Council on Animal Affairs. These principles, enshrined in law, are:

• The intrinsic value and integrity of the animal must be safeguarded;
• Respect must be shown for the inherent worth of the animal as a sentient being that can experience pain and pleasure;
• Farmers may no longer carry out physical interventions, such as tail docking or beak trimming, unless discontinuing them would be detrimental to the animal;
• Animal-friendly farming provides for three basic needs: good nutrition, good environment and good health;
• Animals must be given sufficient opportunities to display essential natural behaviours and fulfil their needs;
• Animals must be able to achieve an emotional state that they themselves experience as positive; they must therefore be able to respond to conditions in their environment.

These guiding principles will initially be applied, through new regulations, to dairy cattle, calves, poultry and pigs. The principles are not prescriptive rules in themselves but serve as guidelines for developing such rules and for designing new livestock systems. They have been translated into a General Administrative Order (AMvB), which sets out the behavioural needs of the animals and the measures required to meet them. The Ministry of Agriculture, Nature and Food Quality has now prepared a draft AMvB on animal-friendly livestock farming, which will at some point be opened for online consultation.’ 

‘WUR and Connecting Agri & Food carried out an economic impact analysis of this AMvB. In other words: they calculated the financial compensation required to implement the proposed additional measures for improved animal welfare, both at farm level and sector level. This compensation is derived from the additional costs farmers will incur. The researchers distinguish between recurring annual costs and (one-off) investments needed to meet the higher welfare standards.

The measures are grouped into five categories:

1. Living space
2. Reduction of interventions
3. Nutrition
4. Young animals
5. Other 

Table 1 provides an indication of the relative economic impact (colour coding) and illustrations (text) of the aspects of the analysed welfare options. Legend: red = high impact; orange = medium impact; green = low impact; white = no general assessment possible. It may be that a measure in itself has low impact, but that other (expensive) measures are required to mitigate undesirable side effects of discontinuing interventions. This is, for example, the case with long pig tails. 

Subsequently, the costs of the various measures were determined, both as average per farm and as total per animal category. Table 2 shows the estimated annual costs per farm, based on the requirements for 2040.’

Table 2 Indicative calculation of the annual costs per farm of the animal welfare measures under an AMvB. The range depends on the calculation of different options. The amounts include both annual operating costs and the annualised costs of investments. Source: authors 

Table 2 Indicative calculation of the annual costs per farm of the animal welfare measures under an Order in Council. * The range is related to the calculation of different options. The amounts include both annual operating costs and the annual costs of investments. Source: authors

Dairy cattle: 

‘Three packages of measures have been calculated. One of these includes the “free-life barn”, a new and costly housing system. The extra costs per farm for the package with the lowest economic impact (only expansion of barn capacity) amount to €34,000 per year. The package with the greatest economic impact (all proposed measures, excluding grazing) amounts to €136,000 extra per year.’

Poultry:

‘For broilers, the extra costs concern increased living space. At a maximum stocking density of 39 kg/m² the additional costs per farm are €23,000–24,000 per year; at a maximum density of 30 kg/m², this rises to €74,000–79,000 per year.

For laying hens, lower stocking densities also lead to higher costs. Reducing to 8 hens per m² results in €30,000–47,000 extra costs per farm per year. A further reduction to 7 hens per m² more than doubles the additional costs compared with 8 hens per m².’

Pigs: 

‘For finishing pigs, living space is increased to 0.9 m² per pig. The extra costs amount to €236,000 per farm per year. Additional temperature regulation at 0.8 m² per pig costs €235,000 per farm per year. Measures relating to the cessation of tail docking, space and housing climate have the greatest economic impact.

For sow farms, the proposed measures cost €399,000–404,000 per farm per year. Here, the most costly measures are related to tail docking, free-farrowing pens, stocking density, weaning age and flooring systems.’

Calves: 

‘In calf farming, measures include more living space, welfare floors, daylight, outdoor access and long-fibre roughage. For rosé veal calves, the costs are €62,000–68,000 per farm per year, depending on whether farmers expand barn capacity or keep fewer animals in existing barns. The increase in living space to 3 m² (instead of the current 1.8 m²) and the installation of welfare floors are the main cost drivers.

For white veal calves, the additional costs are €155,000–171,000 per farm per year, largely due to increased space to 3 m² and the installation of welfare floors. This subsector also aims for higher haemoglobin levels, but these costs cannot be quantified and are therefore marked as “pending” (PM).’ 

How do you calculate the cost and revenue effects of animal welfare measures? 

‘In terms of methodology, we opted to use the same calculation method as that applied in analyses of the economic impact of other animal welfare standards (such as the Better Life label). The advantage is that this is a tried and tested method. To determine the required financial compensation, we take as a reference point the current situation (and production method) and a typical farm, and calculate the additional costs involved in implementing measures at farm level to meet higher welfare standards.’ 

What do the annual costs mean for average farm income in the various sectors? 

‘To put the calculated additional annual costs (including potential loss of revenue) of animal welfare measures into perspective, we compared them with a reference income – the “average income” realised by an average farm. This shows that the required financial compensation is higher than the reference income, particularly for pig farming and white veal calf farming.

This means that average farm income in these sectors is insufficient to cover the additional annual costs of animal welfare measures. In the other sectors, the required compensation varies considerably; it is lowest in poultry farming. For most sectors, financial compensation is required for the additional costs, whether in the form of one-off investment subsidies, fiscal measures, market premiums, etc.’ 

Which is usually more costly: expanding housing or reducing livestock numbers? 

‘If farmers expand housing capacity, they face (complex) permit procedures and investment costs; if they create more space per animal in existing barns, livestock numbers are reduced. In one case the farmer incurs higher costs, in the other case they earn less income. Often, expansion of housing capacity so that herd size does not have to shrink proves to be the more favourable option overall. Each farmer must decide what works best for their own situation.’ 

What assumptions underlie this economic outlook? 

‘In this impact analysis, it is assumed that in half of the cases expansion of housing capacity is possible, and in the other half it is not. For that reason, we calculate with herd reduction. As it is uncertain to what extent this will occur, two scenarios are used: 20% or 30% reduction in livestock numbers and/or farms. On this basis, investment requirements for Dutch livestock farming are estimated at €5.9 to €8.4 billion up to 2040. Investments are relatively high in the dairy sector (almost €4 billion), as well as in pig farming (over €2 billion).

What do these costs mean for consumers, assuming they pay for an animal-friendly livestock sector? 

‘We have calculated that the extra annual costs, including loss of revenue, amount to €1.3 to €2.1 billion per year. That is a lot of money for the farming sector, but when translated to consumer level, it equals €52 to €88 per Dutch household per year. On average, retail prices would rise by 6 to 9 per cent. However, this could be partly offset by reduced consumption of these products.’ 

How does this study relate to nitrogen and climate policy?

‘In this study we take into account a national reduction in livestock numbers of 20% to 30% as a result of nitrogen and climate policy. In addition, implementing the analysed welfare measures will also lead to fewer animals on farms, as long as expansion of housing (restricted by spatial and environmental policies of provinces and municipalities) is not possible. The welfare measures require investments that many older and smaller farms will no longer make. On conventional livestock farms, in order to recoup investments in both animal welfare and sustainability, scaling up will often be necessary.’ 

This is a follow-up study. What are the differences compared to the previous one? 

‘First of all, costs have increased, both investment costs and annual costs. This applies to all sectors, but especially dairy and pig farming. In addition, some assumptions have been adjusted. For example, the previous study assumed an average dairy farm with 110 cows, whereas this study assumes 120 cows. Furthermore, investments are now more often planned between now and 2030, rather than up to 2040, because in this study’s calculation of the AMvB, most of the major measures (investments) are taken before 2030. This results in higher costs.’ 

How do these measures affect the organic sector?

‘The proposed measures will also apply to organic livestock farming. In most cases, the rules are no stricter than the requirements of the EU organic regulation.’

What do the average costs say about the actual situation per farm?

‘Whether our calculation method is realistic for a specific farmer depends on many factors. First of all, on whether the necessary permits for renovation or new construction can be obtained to implement the adjustments. The depreciation period of existing buildings also plays a role. If new construction results in premature depreciation (and thus early capital loss), this creates additional costs. It is also worth noting that in practice, farmers may look for other solutions, such as purchasing a barn from a retiring farmer (sideways expansion). Within the timeframe of this study, it was not feasible to analyse all these options and assess their relevance.’