Domination And Exploitation: Understanding Industry Costs For Chicken, Egg, And Fish Products In The United States, Brazil, And China
Background
As animal advocates know, mass torture and death are hallmarks of the animal agriculture industry. Such immense suffering would not exist without a market for animal products, requiring both buyers and sellers. A growing body of research explores the demand side of this market, with factors like price, taste, health, convenience, and social norms driving consumers’ purchases (see Faunalytics, 2021; Rethink Priorities, 2023; Good Food Institute, 2023). However, far less research has examined the supply side of the market. In order for customers to have animal products to purchase, there must be companies creating those products in the first place.
The simplest way of understanding the horrors carried out in animal agriculture is through a consideration of the industry’s profit motive. Like all businesses operating under global capitalism, the goal of the companies involved in the chicken, egg, and fish industries is to make money. By investigating the factors that shape profit-seeking actions by these industries, particularly the factors affecting their production costs, advocates can gain crucial knowledge about the industry they seek to change.
Industry Overview
Large animal agriculture corporations set their prices based on a variety of factors, the most important of which are supply and demand. The supply side consists of companies creating products while the demand side is made up of consumers who might buy those products. These two sides interact to create a market price that satisfies both groups.
Companies must also be able to cover the costs needed to make their products, otherwise they will not earn enough money to stay in business. So it’s also possible to think of the price of a product as the sum of all of the costs of making that product plus some amount of profit for the company. Provided a company has a market for the product at that price, it can then determine how much consumers are willing to pay, which can affect the exact profit margin they receive. This can be seen in the recent rise in the price of eggs, which is due to various factors like increased feed costs, but also the continued demand for eggs even as prices rise.
Through this simplified lens, it can be easier to see the incentive companies have to reduce their costs. For example, if it costs a company $1.07 to produce a dozen eggs and grocery stores are willing to purchase eggs from producers at $1.25 per dozen, the egg company makes $0.18 per carton sold (Cal-Maine Foods Inc, 2023; USDA, 2023). If the company is able to lower its costs such that it only costs $1.00 to produce a dozen eggs, it will make $0.25 per carton sold. For companies selling over a billion cartons of eggs each year, like industry leader Cal-Maine, this small difference would add up to a staggering increase in profits.
Animal agriculture is a fairly low-margin industry, meaning companies make only a small bit of profit per dollar compared to many other large companies (Pi et al., 2014; Damodaran, 2023). For instance, experts often look at how much profit a company has left over after paying for things like wages and materials (i.e., operating margin). Using this measure, the 500 largest companies in the U.S. averaged 17 cents in profit for every dollar they earned in 2022. By comparison, animal agriculture giant Tyson only kept 6 cents in profit per dollar earned (CSIMarket, 2023; Murphy, 2022; Tyson Foods, Inc., 2022). The remaining 94 cents of each dollar Tyson received in sales went to covering costs like labor and animal feed. Because its margins are already low, the industry is further incentivized to cut costs as much as possible in order to maximize profits. This desire to keep costs down is easily visible in animal agriculture. In most cases, the horrific conditions experienced by animals in industrial agriculture exist because companies have cut everything they can to increase their profit margin. Put another way, companies don’t want to increase chickens’ quality of life because it would cost too much.
Scope of Report
This report details many aspects that affect the cost of production in the broiler chicken, egg, and aquaculture industries in order to provide critical context for animal advocates. We focus on the ins and outs of these industries in three of the countries most central to animal agriculture: the U.S., Brazil, and China.
We hope that this report will provide a useful foundation for advocates to identify industry pressure points that could ultimately be used to increase production costs and improve animal welfare. Although outside the scope of this report, pairing these strategies with ongoing efforts to promote plant-based alternatives could lead to a decline in the power of the animal agriculture industry and the creation of a global food system no longer based on animal suffering.
Because of the global nature of animal agriculture, much of the basic economic structure of the industry is consistent across the countries covered in this report. As a result, this analysis will begin with a discussion of the broader industry on a global scale, then by considering the U.S. industries, for which most information is publicly available. We then turn to Brazil and China, whose industries resemble those of the U.S., but contain several key differences.
Terminology & Topic Coverage
The following report adopts industry and economic terminology, including phrases that obscure the realities of widespread animal suffering (e.g., “processing” animals). We chose this approach for two primary reasons. First, these terms are often more succinct ways of describing complex concepts or processes, especially where no commonly used alternative terms exist. Second, this may help advocates familiarize themselves with the language used by producers, processors, government officials, and other industry players, making them more formidable opponents.
This report discusses economic concepts at a level intended for people who are new to them. Thus, experts may note that rather than a comprehensive exploration of terms, we provide simplified overviews to highlight the most relevant aspects and to provide direction to advocates who may be interested in exploring certain topics further. These terms are used more frequently in the beginning of the report where we provide an overview of the global animal agriculture industry.
In addition, this report does not go into significant detail about the countless welfare issues that exist throughout the animal agriculture industry. Although some are discussed, most are outside the scope of this report and have already been excellently detailed in other publications. Instead, we widen our view to touch on as many aspects of the industry as possible in order to highlight more potential points of intervention for animal advocates.
Key Findings
- The fight against animal agriculture is an antitrust fight. Competition is low in the global animal agriculture industry, with a small number of giant companies that control most of it. Corporations like Tyson or JBS are highly “vertically integrated”: in addition to slaughtering billions of animals a year, they often own the mills that grind corn into feed, the genetics companies that breed fast-growing chickens, hatcheries where chicks are born, flocks comprising millions of birds, slaughterhouses, processing plants, and trucks that deliver products to stores. Integrating all of these stages under one giant corporation makes the production process cheaper and enables these companies to create staggering amounts of animal suffering. These megacorporations have also consolidated their markets by absorbing competitors or driving them out of business, producing a consumer landscape in which seemingly different brands—Jimmy Dean, Hillshire Farm, Ball Park, Sara Lee, and more—are actually all Tyson products. Other companies simply can’t compete, leaving global giants like Tyson and JBS to dictate the rules and giving farmers little choice over which companies they work with.
- The U.S., China, and Brazil are key to the chicken, fish, and egg industries. Not only are they global leaders in production, imports, and exports of animal products, they also literally feed the animal agriculture industry. As one example, Brazilian soybeans are used to feed Chinese fish that are ultimately eaten by U.S. consumers. An understanding of how the animal agriculture industry functions requires advocates to be familiar with the role these three countries play.
- The aquaculture industry hasn’t yet consolidated or standardized as much as the broiler chicken and egg industries have, but it will. Intensive aquaculture is relatively new and uses a wider variety of animals and production methods so it hasn’t yet achieved the same level of efficiency as some other animal agriculture industries. However, this advancement will almost certainly happen in the coming years if nothing is done to stop it. With this intensification comes bigger, more concentrated operations, leading to even more animal suffering. Around the world, many governments consider aquaculture the future and are creating programs and initiatives to support its continued rise. Without intervention, aquaculture companies will consolidate, vertically integrate, and intensify their operations.
- Governments have not only allowed but also encouraged animal agriculture to grow to this point. In the U.S., companies have benefited from indirect subsidies that lower the cost of animal feed, as well as a regulatory environment that has allowed megacorporations to emerge and have considerable influence over the policies that are supposed to regulate them. In Brazil and China, the governments have directly supported animal agriculture with money and programs to promote the growth of companies they favor.
- Animal agriculture corporations’ profits are sensitive to many risks. Despite their power, these corporations are subject to a number of risks. In the U.S., current regulations require the ones that are publicly traded to disclose these risks as potential threats to their business so we have some insight into them. Those potential threats include consumer demands for better animal welfare, strengthened environmental policies, having to increase employee wages, and the loss of companies that are major customers.
- The modern model of animal agriculture even hurts the farmers that work for it. Contract “grow-out” farmers (who raise the chickens that the megacorporations own) must often take out massive loans to meet those companies’ increasing demands. Even if they wanted to change industries, these farmers get trapped in debt and have little choice but to keep working for that industry. In the U.S. and Brazilian broiler chicken industries, a “tournament system” also pits these farmers against each other and lowers the pay for many. Some experts also fear that the rise of aquaculture could lead to further international exploitation of farmers.
- Animal feed is the biggest cost the animal agriculture industry has to cover. While this always tends to be true, it has become more extreme over time: Feed now often makes up two-thirds of the money corporations spend to make animal products. Feeding the animals is a necessity, but because it is so costly for them, companies are looking for ways to make animals grow larger or produce more eggs with smaller amounts of food. They also benefit from government policies that make feed ingredients cheap. However, just because feed is the industry’s biggest expense doesn’t mean it’s the only thing advocates should focus on. These companies constantly look for cost-saving measures in every aspect of their business, from animal housing to labor costs to slaughter methods. Welfare-focused reforms like cage-free and slower slaughter line speeds aim to help animals but also reduce the industry’s profits. Higher wages for employees and tougher environmental regulations can do the same.
Recommendations
For All Animal Advocates
- Learn the basics of how animal agriculture makes its money. The complexity of economic systems can make this intimidating, but the colossal amount of suffering animals experience every day comes as a direct result of the industry’s pursuit of profit. A basic familiarity with the factors that affect the cost of production for various animal products gives animal advocates a map of the industry. Through a careful examination of this map, we can identify points of intervention.
- Act now to prevent aquaculture from becoming as concentrated and abusive as other animal agriculture industries. The chicken and egg industries, for example, have already become highly efficient, industrialized, and standardized animal exploitation machines. Because aquaculture companies will try to model themselves after the companies that already dominate other industries, advocates can predict the paths they will take. For instance, one of the main ways this could happen is if seafood processing companies acquire their feed suppliers. This knowledge provides a rare opportunity to take action to prevent expansion rather than respond to an already entrenched industry.
- Think of aquaculture as a collection of subindustries rather than a single industry. There are major differences between aquaculture methods across species. What is important to salmon production, like moving fishes from freshwater to cages in the ocean as they mature, may not have any relevance in the tilapia industry. These subindustries work with very different animals and must use different practices as a result. In order to help the fishes raised in these systems, advocates need to learn about the ways particular species are raised.
- Use what we know about supply and demand in the global economy to create change, and think beyond animal products. Because the animal agriculture industry is globalized, customers in one country can make demands of companies in another. Advocates living in major producer countries like the U.S., Brazil, and China, or those living in regions with large amounts of purchasing power, like the E.U., can and should seek to change industry practices around the globe. One approach leverages consumer preferences in a country like Germany to demand higher welfare standards for imported animal products from other countries. Another is to focus on the cost and availability of feed—typically corn and soybeans—which is also highly globalized, perhaps finding other markets for those products or working to influence import tariffs.
- Demand stronger, actionable antitrust regulations from governments. Industry concentration has allowed a small number of megacorporations to dominate animal agriculture. Antitrust laws exist to encourage competition, protect consumer welfare, and keep prices low. Demanding tougher regulations that limit giant corporations’ continued growth, or even require existing megacorporations to be broken up, could weaken their stranglehold on the economy, including the global market for animal products.
- Work to increase subsidies for plant-based products and their supply chains. Governments around the world directly and indirectly support animal agriculture corporations in their countries with subsidies, cheap loans, and more. Similar support for plant-based agriculture that is intended for human, not animal, consumption would make produce and plant-based products more affordable as well.
- Work with regional governments or labor groups to be more impactful. Advocates working to change particular industries may have more success if they target the areas where those industries have a strong presence instead of only working at the federal level. For example, the Brazilian broiler industry is concentrated in the South region, but the egg industry is more active in the Southeast. In the U.S., the South is home to both the broiler industry, as well as the country’s young aquaculture industry. In China, the broiler industry is growing in Shandong Province, but egg production is spread across the North and Northeast, while aquaculture practices vary in different parts of the country. Rather than taking a one-size-fits-all approach, advocates could be more effective by focusing on areas where each industry has the largest presence.
For Researchers & Funders
- Fund, conduct, and translate research on the animal agriculture industry. There is a lack of high-quality information on the ins and outs of the animal agriculture industry that is written by or for animal advocates. Much of the existing research focuses on vertical integration, consolidation, and feed, is available in a single language (often but not always English) and is either academic or written by industry insiders, making it less useful to advocates. Advocates need more research about the specific processes and costs involved in the production of animal products, for existing research to be made available in languages including Portuguese, Chinese, and English, and for advocates with knowledge of the industry to create short, simple resources describing industry pressure points. These recommendations are particularly pertinent to aquaculture, which employs many different methods to exploit a wide range of animals, making it more difficult to develop high-impact strategies.
- Collaborate with other groups that have shared goals. Organizations focused on climate change and the environment often have similar goals as animal advocates. For example, both groups would like to see the industry pay to limit and address the effects of its environmental destruction. Increased government oversight would also increase animal agriculture companies’ costs. Labor groups and exploited contract farmers are more potential allies, as improving worker pay, benefits, and conditions through unionization and regulation would also increase costs for the animal agriculture industry.
- Research ways that the importance of feed can be leveraged to help animals. Animal agriculture companies spend most of their money on feed, so any policy change that affects the feed industry will also affect the chicken, fish, and egg industries. How can advocates use this fact to change industry practices? Policies related to fertilizers, monocultures, and the environmental effects of the grain industry may be places to start. The dominance of companies like Bayer, DuPont, and other giants in the genetically engineered seed industry could also be worth exploring.
- Explore how price affects purchases for conventional, cage-free, and free range eggs. Demand for eggs is relatively “inelastic”: Increases in their price don’t greatly affect the number of eggs consumers buy. However, there is limited research on how that applies across different types of “speciality” eggs so we don’t know how egg consumption will be affected by new welfare practices increasing prices. Research on the cross-price elasticity of different egg types could help advocates determine which strategies might be most effective at decreasing animal suffering.
- Analyze how future industry changes could affect animals. Each animal agriculture subindustry researches ways to cut their costs, especially with new technologies or practices. The animal advocacy movement can conduct its own research to anticipate how these innovations will affect chickens, fishes, and other animals. This knowledge could ultimately help advocates prevent harmful practices from being implemented.
Applying These Findings
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Behind The Project
Research Team
The project’s lead author was Zach Wulderk. Dr. Jo Anderson reviewed and oversaw the work.
Acknowledgements
We would like to thank the Food System Research Fund and an anonymous donor for their generous support of this research. We would also like to thank Bruno Link, who provided invaluable support.
Research Terminology
At Faunalytics, we strive to make research accessible to everyone. We avoid jargon and technical terminology as much as possible in our reports. If you do encounter an unfamiliar term or phrase, check out the Faunalytics Glossary for user-friendly definitions and examples.
Research Ethics Statement
As with all of Faunalytics’ original research, this study was conducted according to the standards outlined in our Research Ethics and Data Handling Policy.
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Citations:
Wulderk, Z. & Anderson, J. (2023). Domination And Exploitation: Understanding Industry Costs For Chicken, Egg, And Fish Products In The United States, Brazil, And China. Faunalytics. https://faunalytics.org/industry-costs/
