The Transformation Of U.S. Livestock Agriculture: Scale, Efficiency, And Risks
From report: U.S. livestock production has shifted to much larger and more specialized farms, and the various stages of input provision, farm production, and processing are now much more tightly coordinated through formal contracts and shared ownership of assets. Important financial advantages have driven these structural changes, which in turn have boosted productivity growth in the livestock sector. But structural changes can also generate environmental and health risks for society, as industrialization concentrates animals and animal wastes in localized areas.
U.S. livestock production is shifting to much larger enterprises, in part because of scale economies. Between 1987 and 2002, the production locus (the farm size, in annual sales, at which one half of national production comes from larger farms and half from smaller) increased by 60 percent in broiler, 100 percent in fed-cattle, 240 percent in dairy, and 2,000 percent in hog production. Recent surveys indicate that production has continued to shift to larger operations since 2002.
While most large livestock and poultry farms are family owned and operated businesses, they are becoming more closely linked to input providers and processors through formal contracts, joint ownership of animals, and vertical integration. Tighter vertical coordination can ease management of financial risks and speed the diffusion of innovations.
Structural change has led to increased productivity and, through that, to lower commodity costs of production. For example, the largest dairy farms (1,000 cows or more) had average costs of $13.59 per hundredweight in 2005, 15 percent below the average for farms in the next largest size class (500-999 head) and 35 percent below the costs for farms with 100-199 head (estimated $20.82 per cwt). Lower costs of production typically lead to lower wholesale and retail prices. However, structural change in livestock agriculture has had less felicitous effects as well.
Livestock wastes are becoming more geographically concentrated in the United States, and excessive applications of the nutrients contained in manure pose risks to air and water resources. There is a clear association between farm size and the concentration of manure—larger operations are more likely to ship manure to other operations and apply manure to their own fields more intensively. However, the cost to large farms of removing manure is still modest in relation to their production cost advantages, and there are a variety of ways to mitigate the risks from the concentration of manure. One such example is to reformulate the feed to reduce the amount of nutrients excreted by the animals.
Many hog and broiler operations provide subtherapeutic doses of antibiotics routinely in feed and water to promote animal growth and to prevent disease.
The commercial value of such practices appears to be substantial in some stages of production, like nursing in hogs, but marginal in others. Other technologies, including expanded sanitation and testing procedures, can be substituted for subtherapeutic antibiotics in some stages of production.
Individual producers may have little incentive to take costly actions to mitigate the harmful effects of livestock industrialization. Livestock production is highly competitive, and operations with high costs may jeopardize their own survival in policing themselves. However, steps can be taken, at modest cost, that preserve the benefits of industrialized livestock production while limiting its harmful effects.[Abstract excerpted from report]