Factory Farming: A Risky Investment

Many animal advocates are aware of the cruelty inherent in factory farming, but it’s not often that advocates are able to see behind the scenes when it comes specifically to the economics of factory farming. While undercover investigations tend to focus on animal cruelty and the daily suffering that farmed animals endure, the financial implications of the industry are often hidden from view. That said, it could be useful for animal advocates to know more about the economic aspects of the industry as there are numerous ways that this kind of information could help to strategize on new forms of advocacy.

To this end, a recent report from Farm Animal Investment Risk & Return (FAIRR) should be of great interest to farmed animal advocates. Written from the perspective of potential investors, the report thoroughly outlines the various ways that factory farming can be a risky investment. The authors describe animal factory farming as “a new phenomenon that has established itself as the predominant mode of livestock production” and that it accounts for approximately 70% of world animal agriculture (99% in the United States). They also note that there is a “knowledge gap” among investors about the potential risks of factory farming among investors, and wrote the report to help fill that gap.

The document outlines in detail “at least” 28 different environmental, social, and governance (ESG) risks that may undermine the potential performance and returns on investments in factory farms. For each of the key areas, they also provide case studies that illustrate the risks. For environmental issues, they note that disease outbreaks, water pollution, and resource scarcity make factory farming risky, but they also provide an example that notes “a warming climate is set to make factory farming less viable,” because of heat stress on animals, noting that “the US dairy industry already loses $897 million/year from heat stress on cattle.”

When it comes to social issues, the authors list social backlash, human rights, and loss of rural jobs as some of the risks. In their case study, they noted that a swine flu outbreak in 2009 caused a key food index “to plunge 1.5%” while Smithfield Foods lost more than 12% of its share value. They also note that over 150,000 people died from the virus outbreak. On governance issues, the authors list weak oversight, potential policy changes, and weak corporate governance as investment risks, and note that factory farming in the U.S. receives about $4 billion in subsidies per year. Should policy change or shift, this could dramatically change the structure of the industry and impact investments.

This report provides an interesting inside look at the industry and, perhaps more importantly, what the people who fund the industry are thinking about. The paper reveals that there are literally dozens of potential concerns with investing in factory farming. For advocates, the paper presents a range of opportunities to see potential weak points in the animal farming industry that could go beyond the investing world and may influence advocacy. It’s important as advocates to be able to process and incorporate this type of data into our advocacy, though these types of resources tend to be even starker than much of what we see coming from animal rights circles. While reading material written from the relatively amoral point of view of investing may seem distasteful, the data can be invaluable.