The Future of Animal Agriculture in North America - Farm Foundation

The Future of Animal Agriculture in North America 

Contents 

Executive Summary 1 

Chapter 1 Introduction 15 

Chapter 2 Economics of Production, Processing and Marketing 23 

Chapter 3 Consumer Demand Issues 39 

Chapter 4 Global Competitiveness and Trade 57 

Chapter 5 Food Safety and Animal Health 81 

Chapter 6 Environmental Issues 97 

Chapter 7 Community and Labor 115 

Chapter 8 Animal Welfare 133 

Chapter 9 A Look to the Future 151 

Farm Foundation 

1301 W. 22nd Street, Suite 615 

Oak Brook, IL 60523 

Tel (630) 571-9393 • Fax (630) 571-9580 

© 2006 Farm Foundation

Acknowledgements 

This report benefited from the active participation of more 

than 150 people from Canada, Mexico and the United States. 

These people are leaders of industry, government agencies, 

universities and other nonprofit and educational institutions. 

They represent a variety of professional and academic 

backgrounds. Their listing here acknowledges their 

participation in the process and is not an endorsement 

of every statement or finding in the report. 

Project Steering Committee 

Walt Armbruster, Co-chair, Farm Foundation 

Charles Stenholm, Co-chair, Olsson, Frank and Weeda, P.C. 

Jeff Armstrong, Michigan State University 

Lewis Bainbridge, United Soybean Board 

Tom Buis, National Farmers Union 

Jon Caspers, National Pork Producers Council 

Roger Cryan, National Milk Producers Federation 

Bob Dickey, National Corn Growers Association 

Enrique Domínguez, Confederación de Porcicultores 

Mexicanos, A.C. 

Janice Dyer, Agriculture and Agri-Food Canada 

Doug Hedley 

George Hoffman, Restaurant Services, Inc. 

Jeffrey Max Jones Jones, Senado de la República Mexicana 

Carol Keiser, C-ARC Enterprises, Inc. 

Ron Knutson, Texas A&M University 

Dennis Laycraft, Canadian Cattlemen’s Association 

C. Manly Molpus, Grocery Manufacturers of America Inc. 

Eugenio Salinas Morales, Consejo Mexicano de la Carne 

José Luis Gallardo Nieto, Secretaría de Agricultura, 

Ganadería, Desarrollo Social, Pesca y Alimentación 

Janet Perry, U.S. Department of Agriculture 

Martin Rice, Canadian Pork Council 

William Roenigk, National Chicken Council 

Philip Seng, U.S. Meat Export Federation 

Dan Smalley, Red Hill Farms 

Tracy Snider, United Soybean Board 

Bob Young, American Farm Bureau Federation 

Animal Welfare Working Group 

David Blandford, Chair/lead writer, Pennsylvania 

State University 

María de Lourdes Alonso Spilsbury, Mexican Coordinator, 

Universidad Autónoma Metropolitana 

Aline S. de Aluja, Universidad Nacional Autónoma de México 

Jeff Armstrong, Michigan State University 

Daniela Bals, National Milk Producers Federation 

Gail Golab, American Veterinary Medical Association 

Gene Gregory, United Egg Producers 

Isabel Escobar Ibarra, Universidad Autónoma Metropolitana 

Anna Johnson, Iowa State University 

Chuck Johnson, U.S. Department of Agriculture 

Francisco Galindo Maldonado, Universidad Nacional 

Autónoma de México 

Luis Fernando Morales, Asociación Mexicana de Veterinarios 

Especialistas en Cerdos, A.C. 

Ramiro Ramírez Necoechea, Comité Interinstitucional de 

Evaluación de la Educación Superior 

Daniel Mota Rojas 

Lewis Smith, U.S. Department of Agriculture 

Harry Snelson, American Association of Swine Veterinarians 

Paul Sundberg, National Pork Board 

Dave Trus, Agriculture and Agri-Food Canada 

Community and Labor Working Group 

Peter Goldsmith, Chair/lead writer, University of Illinois 

Félix Vélez, Mexican Coordinator, Instituto Tecnológico 

Autónomo de México 

Duane Acker, writer, TALYCOED II 

David Andrews, writer, National Catholic Rural Life Conference 

Jan Flora, writer, Iowa State University 

Steven Kirkhorn, writer, National Farm Medicine Center 

Philip Martin, writer, University of California, Davis 

Stephen Page, writer, Agriculture and Agri-Food Canada 

Armando Palacios, Instituto Tecnológico Autónomo de México 

Keith Heffernan, Farm Credit Administration 

Filipe Pereira, University of Illinois 

Dan Smalley, Red Hill Farms 

Don Villwock, Villwock Farms

Consumer Demand Working Group 

Helen Jensen, Chair/lead writer, Iowa State University 

Eugenio Salinas, Mexican Coordinator, Consejo Mexicano 

de la Carne 

Rex Barnes, U.S. Department of Agriculture 

Patricia Batres-Marquez, Iowa State University 

Susan Borra, International Food Information Council 

Louise Cantin, Federation of Pork Producers of Quebec 

Manuel Cardona, Asociación Nacional de Tiendas de 

Autoservicio y Departamentales, A.C. 

Jennifer Grannis, U.S. Department of Agriculture 

George Hoffman, Restaurant Services, Inc. 

Kathy Keeler, Beef Information Centre 

Oscar Mendoza, Consejo Mexicano de la Carne 

Mark Nelson, Grocery Manufacturers of America 

Steve Sapp, Iowa State University 

Wendy Umberger, Colorado State University 

Margaret Zafiriou, Agriculture and Agri-Food Canada 

Economics of Production, Processing and Marketing Working Group 

Mike Boehlje, Chair/lead writer, Purdue University 

Raúl Romo, Mexican Coordinator, Coordinadora Nacional 

de las Fundaciones Produce, A.C. 

Mike Duffy, writer, Iowa State University 

Luis Villamar Angulo, Secretaría de Agricultura, Ganadería, 

Desarrollo Social, Pesca y Alimentación 

Humberto Arenas, Unión Nacional de Avicultores 

Mark Bailey, U.S. Department of Agriculture 

Lewis Bainbridge, United Soybean Board 

Roger Cryan, National Milk Producers Federation 

Scott Daniel, American Farm Bureau Federation 

Janice Dyer, Agriculture and Agri-Food Canada 

Kathleen Erickson, Erickson Communications & 

Consulting, LLC 

Fernando Floriuk, Fideicomisos Instituidos en Relación 

a la Agricultura 

Doug Hedley, Douglas D. Hedley 

Lorraine Hope, Agriculture and Agri-Food Canada 

Javier Martínez. Universidad Autónoma de Chihuahua 

Gary McBryde, U.S. Department of Agriculture 

Joe Molnar, Auburn University 

Patti Negrave, Agriculture and Agri-Food Canada 

César Ocaña, Coordinadora Nacional de las Fundaciones 

Produce, A.C. 

Janet Perry, U.S. Department of Agriculture 

Warren Preston, U.S. Department of Agriculture 

Thelma Ramírez, Coordinadora Nacional de las Fundaciones 

Produce, A.C. 

Ted Schroeder, Kansas State University 

Fred Stokes, Family Farm Foods of Mississippi 

Brett Stuart, U.S. Meat Export Federation 

Alan Sutton, Purdue University 

Environmental Issues Working Group 

Charles Abdalla, Chair/lead writer, Pennsylvania 

State University 

Esther Girón, Mexican Coodinator, Confederación de 

Porcicultores Mexicanos, A.C. 

Don Albrecht, Texas A&M University 

Gary Baise, Kilpatrick Stockton LP 

Juventino Balderas Moreno 

Dwain Bankson, Iowa Select Farms 

John Copeland, John Brown University 

Esther Girón, Confederación de Porcicultores Mexicanos, A.C. 

Julie Grimard, Agriculture and Agri-Food Canada 

Ernestina Gutiérrez, Universidad Michoacana de San Nicolás 

de Hidalgo 

Richard Hegg, U.S. Department of Agriculture 

Janie Hipp, University of Arkansas 

Barton James, Ducks Unlimited 

Don Jones, Purdue University 

Sheldon Jones, Colorado Department of Agriculture 

Ron Knutson, Texas A&M University 

William Kuckuck, American Farmland Trust 

Jennifer L. Lawton, Pennsylvania State University 

Manuel Casas Pérez, Academia Veterinaria Mexicana, A.C. 

Wendy Powers, Iowa State University 

Ross Racine, Intertribal Agriculture Council 

Jon Scholl, U.S. Environmental Protection Agency 

Tracy Snider, United Soybean Board 

Max Starbuck, National Corn Growers Association 

John Starkey, U.S. Poultry and Egg Association 

Richard Swenson, U.S. Department of Agriculture 

Gregorio Villegas, Secretaría de Agricultura, Ganadería, 


Robert Wright, U.S. Department of Agriculture 

Food Safety and Animal Health Working Group 

H.L. Goodwin, Chair/lead writer, University of Arkansas 

Carlos Arellano Sota, Mexican Coordinator, Sistema 

Nacional de Investigación y Transferencia Tecnológica 

para el Desarrollo Rural Sustentable 

John Adams, National Milk Producers Federation 

Jones Bryan, Clemson University 

F. Dustan Clark, University of Arkansas 

Paul Clayton, U.S. Meat Export Federation

Kelley Donham, University of Iowa 

Cyril Gay, U.S. Department of Agriculture 

Roger Glasshoff, U.S. Department of Agriculture 

Monica Gonzalez, Grocery Manufacturers of America Inc. 

Juan Gay Gutiérrez, Secretaría de Agricultura, Ganadería, 


Sandy Hamm, University of Arkansas 

Carl Keen, University of California-Davis 

Carol Keiser, C-ARC Enterprises, Inc. 

Larry Miller, U.S. Department of Agriculture 

Joel Newman, American Feed Industry Association 

Everardo González Padilla, Consejo Técnico Consultivo 

Nacional de Sanidad Animal 

Pierre Perusse, Agriculture and Agri-Food Canada 

Juan Garza Ramos, Academia Veterinaria Mexicana, A.C. 

Mark Scholl, BASF/ENTIRA 

Paul Sundberg, National Pork Board 

Matt Taylor, Canadian Animal Health Coalition 

Alice Thaler, U.S. Department of Agriculture 

Dawn Thilmany, Colorado State University 

Terry Whiting, Manitoba Agriculture, Food and 

Rural Initiatives 

Global Competitiveness and Trade Working Group 

Hal Harris, Chair/lead writer, Clemson University 

Arturo Calderón, Mexican Coordinator, Secretaría de 

Agricultura, Ganadería, Desarrollo Social, Pesca 

y Alimentación 

Flynn Adcock, writer, Texas A&M University 

Bill Herndon, writer, Mississippi State University 

Darren Hudson, writer, Mississippi State University 

Parr Rosson, writer, Texas A&M University 

Gloria Abraham, Instituto Interamericano de Cooperación 

para la Agricultura-México 

Lucie Bourque, Agriculture and Agri-Food Canada 

Scott Brown, Food and Agricultural Policy Research Institute 

Catherine Fulton, U.S. Department of Agriculture 

Juan Garza, Universidad Nacional Autónoma de México 

Nick Giordano, National Pork Producers Council 

Monica Gonzalez, Grocery Manufacturers of America Inc. 

Ronnie Green, U.S. Department of Agriculture 

Thomas Hammer, National Oilseed Processors Association 

John Hardin, Hardin Farms 

Doug Hedley 

Dennis Laycraft, Canadian Cattlemen’s Association 

Thad Lively, U.S. Meat Export Federation 

Larry Martin, George Morris Centre 

Jim Novak, Auburn University 

Martin Rice, Canadian Pork Council 

William Roenigk, National Chicken Council 

Terry Stokes, National Cattlemen’s Beef Association 

Beth Watson, National Pork Producers Council 

Howard Wetzel, U.S. Department of Agriculture 

Emma Williams, Texas A&M University 

Kevin Wolfe, Texas A&M University 

Robert Yonkers, International Dairy Foods Association 

Bob Young, American Farm Bureau Federation 

Special thanks are extended to individuals providing expertise 

and input in Mexico, including Javier Trujillo Arriaga, Luis 

Fernando de Castro and Gerardo López Noriega, Secretaría de 

Agricultura, Ganadería, Desarrollo Social, Pesca y Alimentación; 

Octavio Jurado, Secretaría de Desarrollo Rural del Estado de 

Oaxaca; Rafael Trueta Santiago, Academia Mexicana Veterinaria, 

A.C.; Manuel García Garza, Confederación Nacional de 

Organizaciones Ganaderas; Andrés Piedra, Confederación 

Nacional de Organizaciones Ganaderas; and Laura Arvizu, 

Consejo Consultivo Nacional de Sanidad Animal. Assistance was 

also provided by Suzzane Hein and David Williams, U.S. 

Department of Agriculture. Thanks also to Asociación 

Mexicana de Secretarios de Desarrollo Agropecuario; Instituto 

Interamericano de Cooperación para la Agricultura-México; 

Consejo Nacional Agropecuario; Instituto Nacional de 

Investigaciones Forestales, Agrícolas y Pecuarias; and Asociación 

Mexicana de Engordadores de Ganado de Bovino, A.C. 

This report would not have been a success without the 

commitment of six individuals. Janet Perry of the U.S. 

Department of Agriculture encouraged Farm Foundation to 

undertake this work in early 2004 and championed the project 

throughout the U.S. Department of Agriculture. Lucie Bourque 

of Agriculture and Agri-Food Canada marshaled support and 

participation from government and industry leaders in Canada 

and oversaw the French translation of the report. Senator Jeffrey 

Jones of Mexico took a personal interest in this effort and 

encouraged participation from industry and government leaders 

in Mexico. Lizzette Argüello Rocha, special assistant to Senator 

Jones, spent countless hours organizing meetings, translating 

drafts and diplomatically shepherding this effort through to a 

successful conclusion. Rene F. Ochoa of Texas A&M University 

provided wise counsel and Spanish translation over many 

months. John Lawrence of Iowa State University integrated 

scores of divergent comments into the text. Our heartfelt 

thanks to all of you.

Foreword 

Farm Foundation is a catalyst focused on economic and 

policy issues facing agriculture, the food system and rural 

communities. Unlike many nonprofits and nongovernmental 

organizations, we do not advocate, lobby or press a point of 

view. We create opportunities for industry, community, 

government and academic leaders to meet, learn and converse 

in an agenda-free environment. Our 70-year history of 

objectivity gives us the ability to engage diverse viewpoints 

and encourage dialogue among individuals and groups with 

different agendas. 

In March 2004, Farm Foundation proposed a comprehensive, 

objective analysis of the future of animal agriculture in North 

America. Discussions with industry, government and academic 

leaders led to an industry roundtable in December 2004 and 

the initial project Steering Committee meeting in March 2005. 

These early discussions delineated four objectives for this effort: 

1. Provide industry, government and community leaders 

with useful information targeted to the issues the animal 

agriculture industry will face in the near future; 

2. Identify gaps in our knowledge and develop an agenda 

for research and education to fill those gaps; 

3. Communicate key findings to the media and opinion 

leaders to increase public awareness and understanding of 

these issues; and 

4. Engage private- and public-sector decision makers to 

address these challenges with innovative business 

strategies and public policies. 

This report examines the opportunities and challenges facing 

North America’s livestock sector, the driving forces behind these 

opportunities and challenges, and their potential consequences 

over the long term. This report proposes key policy alternatives 

and business strategies for change and analyzes their potential 

impacts on key stakeholders. It identifies the gaps in our 

knowledge and sets forth a research and policy agenda for 

the future. The objective is to give all stakeholders a clear 

understanding of the current state of the industry, a glimpse 

April 2006 | © 2006 Farm Foundation 

into the future, ideas for change and their potential 

consequences, and an inventory of issues that need further 

research, industry actions or government policy. 

This is a North American report examining the animal 

agriculture industry in all three NAFTA countries. It identifies 

issues that are common to all three countries and areas where 

there are different concerns and approaches. The report 

explores the integration of the industry across borders since the 

implementation of NAFTA and the factors that continue to 

enhance or impede trade. However, it does not recommend 

specific solutions to border issues. 

The focus is on major animal segments of the North American 

food system—beef, pork, dairy and poultry. There are references 

to sheep and goats in the report, but, due to the relative size of 

these sectors, they are not the subject of significant analysis. 

The emphasis is on domesticated animals in the food system, 

not companion animals or minor species raised for recreation 

or public display. 

This report results from a partnership between Farm 

Foundation, government agencies, industry groups, other 

nonprofit organizations and foundations, and the academic 

community. A diverse Steering Committee provided guidance 

and direction. Seven working groups headed by academic 

experts and composed of industry, government, nonprofit and 

academic leaders did the bulk of the analysis and writing. More 

than 150 individuals from Canada, Mexico and the United 

States actively participated in the development of this report. 

Financial support has been committed to this effort by the 

following government agencies, industry organizations and 

other foundations. 

Government Agencies 

• Agriculture and Agri-Food Canada 

• Secretaría de Agricultura, Ganadería y Desarrollo Social, 

Pesca y Alimentación (SAGARPA), Mexico 

• U.S. Department of Agriculture through seven agencies: 

Agricultural Marketing Service; Animal and Plant Health 

Inspection Service; Agricultural Research Service;

Cooperative State Research, Education and Extension 

Service; Economic Research Service; Foreign Agricultural 

Service; and Natural Resources Conservation Service 

Industry Trade Associations and Check-Off 

Funded Organizations 

• American Farm Bureau Federation 

• Canadian Cattlemen’s Association 

• Canadian Pork Council 

• Grocery Manufacturers Association 

• National Cattlemen’s Beef Association 

• National Corn Growers Association 

• National Farmers Union 

• National Pork Producers Council 

• U.S. Meat Export Federation 

• United Soybean Board 

Foundations 

• Joseph and Jeanne Sullivan Foundation 

• W.K. Kellogg Foundation 

We also thank all those individuals and organizations who 

helped write and review this report, representing various 

elements of the supply chain, government agencies, 

nongovernmental organizations and universities. We look 

forward to working with them for the future benefit and 

success of the North American livestock industry. 

We owe special thanks to Charles Stenholm, former U.S. 

Congressman from Texas, who joined this project as Co-Chair 

in January 2005. Charlie’s vision, enthusiasm and encouragement 

have kept us all on task through the peaks and valleys of 

this effort. 

This project would not have happened without the leadership 

and commitment of Farm Foundation Vice President Steve 

Halbrook. He brought clarity to the strategy and implementation 

of this project, keeping it moving through countless hurdles. 

Mary Thompson, the Foundation’s Director of Communication, 

had a key role in coordinating communication among the many 

project participants and editing this report. 

Walter J. Armbruster, President 


Farm Foundation Staff 

President, Walter J. Armbruster 

Vice President, Steve A. Halbrook 

Director of Communication, Mary M. Thompson 

Administrative Assistants, Laurie Marsh and Vicki Liszewski 




(630) 571-9393 

Fax: (630) 571-9580 

www.farmfoundation.org

Executive Summary 


Animal agriculture in North America constantly adapts to 

change. New products are developed to meet changing 

consumer preferences. New production systems reduce costs. 

Contracts increasingly replace open markets and redefine the 

relationships among the stakeholders in the system. 

Technological developments increase productivity and efficiency 

at the farm-level, in processing, distribution systems and 

marketing. Every facet of the animal food chain—from genetics 

to retail and food service outlets—is adjusting to the rapid pace 

of change. But with change and opportunities come controversy 

and challenges. 

Exploring opportunities and challenges requires going 

beyond matters of supply and demand, cost of production and 

transportation to examine basic institutions, customs of trade, 

law and social factors that underlie the production, distribution, 

transformation, sale and consumption of animal products. 

We look at shifting forces of change, try to anticipate their 

direction and impacts, and provide information that will allow 

farmers and ranchers, agribusiness, food retailers, taxpayers, 

policymakers and consumers to make more informed decisions 

about their future. 

This is a North American report. It examines the animal 

agriculture industry in all three NAFTA countries—Canada, 

Mexico and the United States. It identifies issues that are common 

to all three countries and areas where there are different 

concerns and approaches. It explores the integration of the 

industry across borders since the implementation of NAFTA and 

the issues that continue to disrupt or impede trade. However, this 

study does not recommend specific solutions to border issues. 

This report examines the major animal segments of the North 

American food system—beef, pork, dairy and poultry. The 

emphasis is on domesticated animals in the food system, not 

companion animals or minor species raised for recreation or 

public display. 

This project was a partnership between Farm Foundation, 

government agencies, industry groups, other nonprofit 

organizations and foundations, and the academic community. 

A diverse Steering Committee provided guidance and direction. 

Seven working groups headed by academic experts and 

composed of industry, government and nonprofit leaders did 

the bulk of the analysis and writing. More than 150 individuals 

from Canada, Mexico and the United States actively participated 

in the development of this report. 

Animal agriculture in North America faces opportunities and 

challenges in seven basic areas: 

• Economics of production, processing and marketing 

• Consumer demand 

• Global competitiveness and trade 

• Food safety and animal health 

• Environmental issues 

• Community and labor issues 

• Animal welfare 

This summary gives a brief overview of animal agriculture in 

North America, summarizes the seven basic challenges, explores 

options for the future, identifies key take-home messages, and 

ends with an agenda for future research and analysis. 

The Industry Today 

Beef – The North American beef cow herd was estimated at 

49.2 million head in 2004. North American beef cows account 

for 21 percent of the world total. U.S. beef cattle are two-thirds 

of the North American herd, while Mexico accounts for 23 

percent and Canada 10 percent. The most significant trend 

during the past 25 years is the growth in both the Canadian 

and Mexican beef cow herd and calf crop relative to those of 

the United States. North American beef production in 2004 of 

14.9 million metric tons (mmt) on a carcass weight equivalent 

(cwe) basis accounted for a quarter of world beef production. 

The United States produces about 80 percent of North 

American beef, while Mexico averages about 12 percent of 

production and Canada about 8 percent. 

Swine – The number of North American breeding sows has 

declined during the last two decades, but, due to improvements 

in reproductive efficiency, pig numbers have not. Sow numbers 

were estimated at 8.5 million head in 2004, compared with 

11.7 million head in 1980. The North American pig crop has 

been greater than 10 percent of the world total since the early 

1990s. The United States accounts for approximately 70 percent 

1

2 

of the North American pig crop, with Canada producing 20 

percent and Mexico about 10 percent. The most significant 

trend during the past 25 years is the growth in the number of 

Canadian sows and pigs relative to that of the United States. In 

2004, North American pork production was 12.4 mmt, or 10 

percent of total world pork production. While world pork 

production increased to 100.9 mmt in 2004 from 69.9 mmt in 

1990, North America has averaged 12 mmt production during 

the last five years and is behind only China at 47 mmt and the 

European Union (EU) at 21 mmt. Pork production in North 

America and the EU has remained relatively stable since 1999, 

while China’s production has more than doubled. 

Poultry – U.S. poultry production has increased threefold during 

the past two decades. The majority of this expansion was in 

fresh/frozen broiler and turkey meats. Production growth was 

spurred by the availability of low-cost feed grains, capital and 

technology for expansion, and a well-integrated, efficient 

production and marketing system. Poultry meat production in 

North America was 21.2 mmt in 2004, about 88 percent of 

which was broiler meat. The United States has seen a steady 

increase in poultry meat production to 17.8 mmt in 2004 from 

6.3 mmt in 1980. The United States accounts for 84 percent of 

North American poultry production, while Mexico accounts for 

11 percent and Canada the remaining 5 percent. 

The three North American countries accounted for 35 percent 

of world poultry meat production in 2004, down from a high 

of 39 percent in 1993. The main reason for the decline in 

North American world share was a 300 percent increase 

in Chinese production and a 257 percent increase in 

Brazilian production. 

Dairy – Cow’s milk production in North America was estimated 

to total 95.4 mmt in 2004, or 15.6 percent of the world’s milk 

output. U.S. production represented 81 percent of North 

American milk output, Mexico approximately 10 percent and 

Canada about 8 percent. The North American dairy herd 

totaled 16.9 million head in 2004—9.01 million head in the 

United States, 6.80 million head in Mexico and 1.08 million 

head in Canada. India is the world’s largest producer of milk 

(87.2 mmt), but almost 60 percent of this total consists of 

buffalo milk. North America trails the 25 EU countries that 

combine to produce 131.1 mmt of cow’s milk. During the past 

two decades, Mexican milk production increased by one-third, 

while the United States and Canada saw output grow 19 percent 

and 6 percent, respectively. In the United States and Canada, 

the increases in output have come from fewer cows and sharp 

improvements in milk productivity per cow, primarily from 

enhanced genetics. Mexico’s dairy herd has increased in number. 

Economics of Production, Processing and Marketing 

The trend to fewer and larger livestock and poultry operations 

is expected to continue. The economies of scale in production 

and processing are significant and will drive the optimal size of 


facilities, as well as the firm. Firm-level economies will be 

captured through effective supply-chain management that 

improves cost efficiency and control, food safety and quality, 

and the ability to respond to consumer demands. Quality concerns 

will also drive more systemized, micro-managed production and 

distribution processes to reduce product variability and improve 

conformance with quality standards and consumer expectations 

about uniform product attributes. Technology will provide new 

efficiencies and information to better manage the system. 

Concerns about food safety and a drive to qualified suppliers 

and traceback will increase pressures for and payoffs from 

tighter coordination along the production and distribution chain. 

Small and mid-size producers face serious survival challenges 

in determining how they can successfully fit into integrated 

supply-chain structures. Higher revenue may be possible in 

value-added niche markets where consumers pay high enough 

premiums for differentiated products to offset the increased cost 

of producing, processing and distributing in small quantities. 

Small and mid-size producers may be able to capture the 

market access and cost advantages of larger producers by joining 

a network or alliance that acts like a large producer. Both these 

options require a high level of cooperation and interdependence 

among producers. 

Optimal processing plant capacity can be very large, requiring 

significant capital outlays and adequate supplies of live animals 

for efficient operations. Producers are not expected to invest in 

production capacity if access is not assured to processing plants 

that can pay competitively for products. This interdependence 

will result in the development of production-processing centers 

and supporting infrastructure as the optimal strategy for growth 

and expansion in the industry. 

Livestock and poultry production and processing are increasingly 

mobile. Capital and technology can move anywhere in the 

world. North American firms can and have invested in productionprocessing 

centers in regions with a comparative advantage. 

Likewise, such production-processing centers in North America 

may have foreign ownership. The livestock production/distribution 

industries are clearly becoming global in their production and 

trade activities. In the future, it is likely that a few global 

livestock firms will dominate world production and processing 

and will source and sell products globally. 

Options for the Future 

Regulatory reform: Regulations can create benefits as well as 

costs for the industry. Environmental regulations, labor laws 

and tax rules are all costs of doing business. Inspections and 

animal identification systems may increase costs from producers 

to retailers, but may be critical to doing business in some markets. 

In general, more regulation increases private-sector costs, while 

less regulation reduces costs. But in most cases, the specific 

magnitude of those costs is not known. What is known in 

principle—if not in specifics or details—is that regulatory

The Future of Animal Agriculture in North America 3 

reform that limits economic activity and/or increases privatesector 

costs is disadvantageous to small-scale firms; decreases the 

innovation and adaptability of an industry to a changing business 

climate; discourages the private sector from investing and 

expanding; and undermines an industry’s global competitiveness 

unless other countries or locales adopt similar regulations. 

Differentiated product focus: Consumers have diverse preferences. 

Many consumers, particularly the more affluent, are demanding 

food attributes above and beyond food safety or quality 

standards. These attributes include animal welfare, organic, 

social responsibility, environmental responsibility, free-range 

production, locally produced, and no use of antibiotics, 

synthetic growth hormones, or genetically modified organisms. 

Some of these differentiated production practices increase 

production costs relative to traditional commercial methods. 

Many process attributes cannot be verified from the product 

itself. There are essentially two ways to ensure strict production 

practices that cannot be verified post-harvest: vertical production 

and marketing arrangements audited to ensure that practices are 

being met, or vertical ownership of production, processing and 

marketing. Where demand for such product differentiation 

originates (local markets or national food retailers) will largely 

determine whether it is scale neutral or favors large or small 

production, processing and/or marketing firms. 

Maintaining open markets and industry diversity: There are 

concerns that marketing agreements, contracts and similar 

business arrangements are more conducive to larger operations; 

reduce spot market liquidity; reduce the availability of market 

information needed for efficient price discovery; and adversely 

affect smaller operations. The substantial horizontal contracting 

growth in hog production, for example, suggests contracts 

enable large production operations to become larger. However, 

numerous other factors contribute to horizontal integration in 

livestock production, including profits that attract external 

capital, and advances in genetics, health, nutrition and 

production management that increase economies of scale. 

Contracting with integrators who provide services, capital and 

risk management has enabled many smaller operations to 

remain in livestock production and focus on production. 

Public-sector interventions that limit business arrangements or 

size would make it difficult to capture the efficiency and other 

benefits of these business strategies. 

A key argument for public-sector intervention is concern about 

monopoly or monopsony power in the livestock industry value 

chains. However, assessing the competitive conduct or behavior 

of firms in value chain relationships—where risks as well as 

rewards are shared—requires more complex measures and 

metrics than the traditional focus on prices and margins 

currently used in anti-trust and market power assessments. 

Public-sector interventions must carefully weigh costs and 

benefits throughout the food chain. Interventions designed to 

help one segment of the industry may not work and may have 

unintended consequences for others in the system. 

Consumer Demand 

Income, population growth and demographic changes are the 

key determinants of demand for animal products. Per-capita 

meat consumption in the United States and Canada is near 200 

pounds per year, while in Mexico it is 165 pounds per year. 

Rising levels of income, changing lifestyles, urbanization and 

other demographic changes have contributed to increased 

consumption of animal products, increased consumption of 

prepared foods and increased consumption of food away from 

home. More attention is being given to the problem of obesity, 

and how to integrate dietary guidance and science into 

recommendations and policies that work to improve the quality 

of diets consistent with the changes in income, demographics 

and the market for foods. 

Income is projected to continue to rise in all three North 

American countries. The faster growth of income in developing 

countries worldwide will lead to continued growth in demand 

for animal source foods. Slowing population growth and an 

older population mean that expansion in demand for total food 

calories will slow. 

Food safety will continue to be a paramount consumer 

expectation. While being relatively uninformed about the level 

of safety in food supplies, consumers will become increasingly 

intolerant of food safety failures. Regulation and product 

processing and packaging will continue to evolve to provide 

more guarantees of food safety. For some consumers, 

information on and the ability to trace product and process 

attributes will be key factors in product selection. 

As North American incomes continue to increase, consumers will 

choose products on the basis of varied attributes, including taste, 

variety and convenience. Animal-sourced food product and 

process attributes have become very important for North American 

consumers. Though consumers may not be familiar with 

production methods, higher income consumers may choose 

products on the basis of attributes related to production process— 

such as natural, organic, “family farm” or “animal-friendly”— 

associating that process with a measure of product quality. 

Labeling is an important tool to communicate product 

attributes, including food safety. To some extent, the increased 

use of labels reflects the public’s interest in informed choice 

regarding complex and sometimes controversial new agricultural 

technologies, and the growing market for imported foods. 

The U.S. country-of-origin labels might require onerous 

recordkeeping and operating procedures, and imply agreement 

with food safety concerns. Labels may provide large amounts of 

product information, but when the information is complex or 

requires understanding of nutritional relationships, consumers 

may not be fully informed.

4 

Continued concentration of large-scale processing, food 

distribution and retailing may reduce consumer choice in 

markets. Large retailers will offer a variety of foods although 

their market power presents the potential to restrict consumer 

choices and increase prices. Some newer retailers, such as Whole 

Foods and Wild Oats, have increased market share by offering 

alternative products to some—often high-end—consumer 

segments. It is important to recognize that not all stores will be 

larger stores; small producers and retailers may serve specific 

markets, especially in urban areas. Internet shopping may allow 

consumers access to specialty markets and products, but, to 

date, many consumers prefer to shop in-store locations. 


Make product standard and certification programs more uniform 

across North America: Food safety is a public good across national 

borders. Harmonization of food standards and processes across 

North America would enable firms within the three nations to 

operate on a level playing field with greater market transparency 

and maintain credibility within the integrated food systems. 

While governmental regulation may be costly, allowing firms 

the flexibility to develop their own food safety processes may 

reduce the economic impact of such regulations. 

It is important to recognize consumer preferences for food 

products differ in the three countries. Trade that takes 

advantage of differences in consumer preferences is likely 

to benefit consumers in all three countries. 

Enhance consumers’ ability to obtain information on products and 

make use of labeling information: There is increased competition 

in providing various food product and process attributes, but 

consumers may not understand the attributes. Lack of 

information leads to markets that do not work well, as well as 

consumers who may lose confidence and trust in the quality of 

the food system. A challenge is to present a large amount of 

information, both in quantity and variety, to consumers in 

forms they can understand. This includes information on health 

and nutrition attributes, food handling and warnings. Although 

much of the information is regulated through federal agencies, 

private companies and brands also have incentives to promote 

desired food attributes through labels and advertisement. 

Educate consumers about production agriculture and food: 

Consumers have become distant from production agriculture. 

Lack of information can lead to consumer misconceptions 

about production methods and techniques. At the same time, 

production agriculture is under increasing scrutiny from 

consumer groups. These two factors may threaten continued 

growth in animal product consumption and perpetuate a 

lack of understanding about issues surrounding production 

agriculture. Educating consumers about commercial agriculture 

and enhancing the public’s knowledge and awareness of food 

production methods may have long-term benefits in maintaining 

consumer confidence and growth in the demand for animal 

food products. Food companies, public officials and educators 


will be challenged to effectively communicate to consumers 

about food and production issues. 

Promote a competitive retail and distribution environment: 

Different food retailing environments exist within the North 

American market. The dominance of four or five large firms 

characterizes the markets in both Canada and the United States. 

Wal-Mart and other very large, nontraditional retailers are 

having a significant effect on retailing. This type of environment 

provides increased consumer product choice at low prices; 

however, it may reduce consumer access to other products that 

may serve smaller consumer segments. In some markets, the 

presence of large merchandisers coexists with smaller, niche 

segments. In other cases, the presence of larger firms may limit 

the ability of smaller market segments to survive. Some suggest 

that governments be more aggressive in preventing concentration 

in food retailing to preserve consumer choice. However, given 

rapid change in the industry, it is not clear that government 

action would actually result in more choice than is produced by 

an industry in rapid transition. 

Global Competitiveness and Trade 

Economic forces driving increased market integration and 

trade are complex and interrelated. Prices and trade flows are 

increasingly impacted by events, policies and forces outside of 

North America. Global animal product markets are consumer 

driven, with product safety, wholesomeness, quality and price 

being key determinants of international competitiveness. 

Processors, retailers and food service corporations are expanding 

and integrating this global market, bringing efficiency and 

affordable food to both developed and developing countries 

around the world. 

North America is both a leading exporter and importer of 

animal products. The EU is often a larger exporter, but the bulk 

of that trade is within the EU. While Canada and the United 

States are essential markets for each other, they also compete 

for export customers. Brazil is a rapidly growing competitor, 

particularly in poultry exports, but continues to be limited in 

pork and beef exports by the presence in that country of footand-mouth 

disease (FMD). China and Russia have significant 

potential as export customers, but have challenges that may 

slow the development of these markets. 

Two primary factors will shape the future of North American 

exports of animal products: income of developing economies 

and trade agreements. The growth of consumer income in the 

United States and Canada has slowed, as has the growth rate for 

animal product consumption. However, there is a successful 

track record of increasing demand for animal proteins as 

economies grow and consumer spending increases. 

The livestock, meat and poultry markets in North America are 

increasingly integrated. Live hog trade between Canada and the


United States is a good example. Canadian producers have 

increased farrowing and pig exports to the Midwest region of 

the United States. U.S. producers have invested in finishing 

facilities, have lower feed costs and are in close proximity to 

several large, efficient pork packers. The recent closure of the 

U.S.-Canadian border to live cattle due to bovine spongiform 

encephalopathy (BSE) encouraged Canada to invest more 

heavily in slaughter facilities. Coupled with cyclically low U.S. 

cow slaughter, this has resulted in closure of some U.S. slaughter 

plants. Animal health and food safety considerations will 

continue to impact border decisions, even within the NAFTA 

trade agreement. 

Worldwide, demand for North American-produced animal 

products is likely to continue to grow. Meanwhile, both 

governments and the private sector are facing greater requirements 

and responsibilities for assuring consumers about product safety 

and quality. In the future, private-sector decisions will play an 

increasing role if other countries follow China’s decision to 

approve individual plants for import rather than approve 

systems of entire countries. Market institutions that help 

to harmonize agricultural programs and Sanitary and 

Phytosanitary Standards (SPS) may lessen the confusion 

about trading rules and facilitate more trade opportunities. 


Policies that promote growth in developing countries: Consumer 

income growth in developing countries, such as India and 

China, may be the single most important factor in increasing 

North American meat exports during the next decade. The 

long-term payoff to policies aimed at growing the economies of 

developing countries is likely to be quite high. Such policies 

will be highly controversial. They go beyond potential 

concessions in the World Trade Organization (WTO), Free 

Trade Agreement of the Americas (FTAA) and/or the Central 

America-Dominican Republic Free Trade Agreement (CAFTA- 

DR), to renewal of food aid, and to economic and technical 

development through organizations like the United Nations 

and World Bank. Most controversial, some of these programs 

may be aimed at improving agriculture in the developing world 

as a first step in raising income levels. This strategy worked with 

three large customers for North American animal products— 

Japan, Korea and Taiwan. However, improving agriculture in 

developing countries will be viewed by some industry 

participants as creating competitors. Economic logic, however, 

suggests that the long-term impact is to create better customers 

and more stable markets. 

Engage Brazil: Brazil is already a major force in world animal 

product markets. Brazil is likely to increase market share during 

the next decade. This has several implications. First, if Brazil’s 

per-capita income grows fast enough, a large proportion of its 

increasing production will be absorbed internally rather than 

abroad. Second, pursuit of FTAA will give the NAFTA countries 

opportunity to integrate their markets with Brazil and the 

MERCOSUR trading bloc. As has been learned from NAFTA, 

it is easier to deal with issues of competition within an established 

framework. Hemispheric market integration may be achieved. 

Harmonization of trade and regulatory policies within NAFTA: If 

improving the efficiency of the North American animal industry 

is a goal, greater harmonization of policies, programs and 

regulations is required. This may include, but is not limited to, 

farm programs, environmental regulations, product safety and 

animal identification rules. Regular meetings of NAFTA and 

legislative policymakers to discuss regulations and rule making 

might help improve transnational harmonization, but the 

outcome is uncertain. 

Focus on value added: Future growth potential for North 

American animal product exports in value-added, branded, 

packaged products is important. To enhance the competitiveness 

of the products, government regulators and trade negotiators 

need to work closely with the food manufacturing and food 

service industries to assure a sound policy and regulatory 

framework to support future trade growth. 

Environmental Issues 

Despite improvements in technologies, manure management 

and new regulations, byproducts from animal agriculture 

production and processing can still result in negative impacts 

on the environment. Increasingly, questions arise about air 

emissions from livestock operations that may contribute to 

greenhouse gas (GHG) and potentially have human health 

implications. While new technologies to improve environmental 

performance and monitor progress will be developed, 

constraints on resources may limit implementation. 

Farms, regions or countries that import significant amounts 

of feed may contribute to surplus nutrients locally increasing 

the risk of water quality degradation if the nutrients cannot 

be effectively utilized. In the United States, the revised 

Concentrated Animal Feeding Operations (CAFO) regulations 

require phosphorous-based nutrient plans to address this 

concern. Innovative technologies, such as producing energy 

from manure, may be needed to economically manage the 

nutrients in operations with limited land application potential. 

As rural communities and agriculture change, animal production 

and other land uses will conflict over water, odor and related 

off-site impacts of animal production. The public’s perception 

of farmers is changing, and the public may be less tolerant of 

environmental and nuisance impacts of animal agriculture. The 

disputes are often complex and closely inter-related with other 

issues, such as traffic, noise, insects and property values. In the 

United States, litigation has an increasing role in air and water 

quality disputes and increases business uncertainty. Litigation is 

costly, time consuming and creates uncertainty about issues, 

potential solutions, policies and regulations. Failure to find a

6 

workable solution will delay investment and agricultural 

economic development. 

Environmental regulations differ across the three North 

American countries and, to some degree, across states and 

provinces within countries. State and local governments have 

become key players in environmental regulation in the United 

States. Regulatory differences across states may increase, 

creating additional uncertainty for producers and agribusinesses. 

Such changes may increase product prices and may adversely 

affect the competitiveness of the animal agricultural sector 

where these disputes occur. These implications appear to be 

the greatest for the U.S. industry due, in particular, to the 

prevalence of litigation. 

Finally, while there is diversity, there are many existing and 

developing similarities in the structure of the livestock and 

poultry production sectors in Mexico, Canada and the United 

States. Across the countries, there are different environmental 

and economic priorities, regulatory strategies and resources, and 

legal frameworks. Public policies and business strategies to 

address environmental issues of animal agriculture must be in 

the context of the country and industry in question, but 

diversity should not be an excuse for inaction. 


Strengthen the public-sector role: Establishing stronger federal, 

state or provincial policies to encourage responsible growth of 

the animal industry in locations with less environmental risk is 

one option. These policies could also create a uniform regulatory 

playing field across countries, states and provinces that could 

reduce overall environmental risk. The policy would allow 

industry to work more easily nationally or across North 

America. This option could include increasing commitment 

to implement regulatory and incentive programs, including 

adequate funding for staff. 

Expand systems research by the public and private sector: There is a 

need for more systems-oriented research on the environmental 

impacts of agriculture. Increased public funding for this type 

of research would give public- and private-sector leaders better 

information about the inter-relationships of environmental/ 

health, social, economic and legal/policy implications of the 

interface between animal agriculture and the environment. 

Results could identify solutions for different scales of farming 

and regional environments that take social/behavioral factors 

into consideration. There should be an emphasis on performancebased 

solutions to assure accountability. This research should be 

regional, national and global in scope, future-oriented and 

anticipatory of emerging challenges, multidisciplinary, 

including agricultural universities and medical schools, 

and involve public and private partnerships. 


Target implementation of best management practices to the highest 

priority water quality concerns: Past technical, cost-sharing and 

educational work on nutrient management planning had 

significant shortcomings in implementation and accountability. 

Existing programs may not be focused on the most important 

environmental problems. In addition, small and mid-size farms 

appear to be important contributors to water quality problems, 

at least in the United States. Existing programs may not reach 

these producers because their size exempts them from current 

regulatory programs. 

Central elements of this approach are to target efforts to areas 

and farms with the greatest problems to achieve the most 

environmental bang-for-the-buck. This would possibly include 

a multi-faceted approach to integrate ecological goods and 

services into agri-environmental policy to reach broader 

environmental outcomes. Because the focus is on implementation, 

it would use existing social and economic research knowledge 

on implementation and adoption, including incentive-based 

tools. It would require improved coordination among agencies 

and possibly other water or air quality monitoring groups, and 

development of information systems to assure cross-compliance 

with existing farm programs and resulting benefits. Work would 

be needed to improve understanding and build trust within and 

among suppliers of information and services, and with stakeholders. 

Use market-like mechanisms to “get the prices right”: This option 

involves public and private cooperation to explore and foster 

promising innovative arrangements that internalize external 

costs of the firm, i.e., off-farm impacts on neighbors, communities 

and the environment. Such arrangements could more accurately 

reflect the societal costs of animal production in prices, 

providing incentives to firms to better manage manure and 

animal byproducts. Reflecting the true cost and value of 

manure and byproducts in prices of products or services might 

provide an incentive for producers and processors to adopt 

systems that maximize profits while being environmentally 

friendly. This option recognizes that environmental stewardship 

does not depend on technology alone; incentives must exist for 

producers to adopt practices that protect the environment. The 

type of incentive program will depend on implicit or explicit 

property rights in current government approaches. 

Legal reform: In the United States, environmental litigation 

continues to create uncertainty for animal agriculture. This risk 

is difficult to manage with traditional risk management tools. 

Many legal reform proposals have been put forward designed to 

provide the industry with some certainty or a “safe harbor.” 

But, generally, these reform efforts fail because they are perceived 

as taking rights from one group and giving them to another 

without compensation or required action by the industry.


The crux of this policy approach is the need for multiple 

parties—industry, scientists and the public (through 

government)—to act together. In exchange for the industry’s 

obtaining some protection against complex and costly litigation, 

the industry supply chain would take specific responsibility for 

the handling of animal manure and other environmental 

impacts using recognized science-based methods. The agricultural 

scientific and research community must be a part of this effort 

by continuing to advance our knowledge of the human and 

environmental effects of animal agriculture, and exploring new 

and innovative ways in which to manage the handling of animal 

manure and other environmental impacts of animal agriculture. 

The mutual goal would be to balance society’s goals for 

environmental quality with economic goals, such as jobs 

and income growth and industry health, in North America. 

Community and Labor Issues 

One significant outcome of the changes in animal agriculture is 

a change in the relationship between farms and rural communities. 

Production units have become larger and more technologically 

advanced, using supply chains and marketing channels to link 

to the economy at large. Much production has shifted from 

independent operators to vertically coordinated operations that 

largely bypass community linkages. New operations may bring 

new resources, opportunities and economic growth to local 

economies. Large production or processing operations require a 

concentration of workers, who may not be highly paid and may 

have to be recruited from other locales. All this challenges the 

socioeconomic milieu of communities where these enterprises 

are located. New economic opportunities may impact the 

community’s autonomy, norms, traditions, pace, culture 

and control. 

The community and labor impacts associated with livestock 

and poultry production and processing are significant, but very 

diverse. Labor is more mobile than is industry infrastructure 

and inputs that give a particular region a comparative advantage 

in animal agriculture. Livestock and poultry production is a 

value-added enterprise that creates jobs directly and indirectly 

as producers and workers purchase goods and services. The 

local economic impact of this industry will depend in part on 

the community’s ability to meet the needs of producers or 

processors. In some rural communities where animal production 

and processing have expanded, there are more jobs than available 

local workers; immigrants increasingly fill these generally 

unskilled jobs. Regions of the United States and Canada are 

sometimes challenged to integrate new people and new cultures 

into existing communities. Mexico, whose rural communities 

often supply the immigrant workers to U.S. and Canadian 

companies, benefit from the remittances sent to families. 

However, the out migration to urban cities in Mexico and 

north of the border is creating challenges in rural Mexico. 

Meat packing and processing are more dangerous and lower 

paying than other manufacturing jobs. In the United States, 

many of the workers are undocumented immigrant workers and 

may not have health insurance. A large number of immigrant 

workers in a community often stretch thin such local resources 

as health care and public schools’ English as a Second Language 

programs. Mexican workers send a significant amount of 

money back to their families in Mexico. The average income for 

rural Mexican households receiving remittances in 2000 was 

3,250 pesos per month, compared with 1,662 pesos/month for 

those not receiving money from the United States. Some 

estimate that remittances reduce the number of people in 

poverty in Mexico by 1 percent to 2 percent annually. This cash 

flow from North to South provides income in rural areas of 

Mexico, where some small communities average 83 dependents 

per 100 working-aged individuals. 


Economic development: Rural communities in North America 

compete in a global environment. Provinces, states, regions 

and communities seeking investment need to assess how their 

location will potentially make animal agriculture operations 

globally competitive. This is challenging in a world of varied 

wage and regulatory conditions. 

Industry has a responsibility to the community in which it does 

business. Industry needs to be proactive and act as a responsible 

citizen, providing leadership in creating positive experiences 

for communities. If they are unable to create these positive 

community experiences, there will be an increasing inability 

to site or expand. Some communities will always oppose the 

industry, but many would welcome a partner to help them 

develop socially and economically. 

Potential strategies include: 1) Government bodies should 

consider comprehensive industrial policies, so animal agriculture 

is not singled out. Effective development and community 

impact policies are needed. 2) Streamline regulatory processes. 

3) Develop industry strategies to create positive community 

impacts. 4) Focus on rural economic development, not just 

animal agriculture development. 5) Make use of provincial, 

state or regional economic development resources. 

Labor: Reducing labor turnover has benefits for employers, 

as well as the communities in which they operate. Options for 

strengthening human capital include using the workplace as a 

location for classes to strengthen English language, finance and 

banking skills, or to provide health services. Partnerships with 

local high schools or community colleges are one alternative 

for implementation. 

Governments might consider maintaining immigrant worker 

programs that ensure adequate labor supply to the animal 

agriculture industry. Helping immigrant workers adjust to a 

new location and culture and helping communities adjust to

8 

new immigrant populations can be advantageous to employers. 

Fostering integration may help immigrants be more productive 

workers, help immigrants advance in their workplace, help 

workers’ families and reduce opposition to newcomers. These 

actions can provide a more stable work force and community. 

There are increasing needs for the animal agriculture industry 

to engage in private and public-private partnership programs to 

enhance labor and community relationships. Potential benefits 

include enhancing human capital, improving the well-being of 

employees, reducing turnover and fostering good relations with 

the community at large, which has become a strategic 

stakeholder. As the firm grows, it places demands on the 

community. Proactive labor policies can be an important signal 

of a firm’s commitment to its community. 

Agriculture can pose threats to worker health and safety. 

Government agencies are challenged by the dimensions of 

regulation enforcement regarding worker safety and immigration. 

Areas for potential improvement include engineering, 

training and education, health service, surveillance, safety, and 

understanding culture differences. Particularly in animal 

production facilities, improvements can be made in surveillance 

of non-fatal injuries and illnesses, controls to decrease organic 

dusts and manure-generated gases, improvements in the 

functionality and comfort of personal respiratory protective 

devices, and strategies to provide affordable workers’ compensation 

programs for agricultural employers. 

Food Safety and Animal Health 

Protecting the safety of the food supply is essential to all 

countries, and Canada, Mexico and the United States spend 

significant resources to assure that food is safe to eat and 

wholesome. While consumers do not always understand the 

science behind industry practices and government policies, 

North American consumers have a high degree of confidence in 

the safety of their food. Technological developments to enhance 

production efficiency and/or protect animal health often raise 

concerns among consumers despite the rigorous product 

approval process and ongoing testing and surveillance programs. 

Globalization of food trade provides greater food choices, and 

potentially confusion, if there are not consistent standards for 

safety and labeling. Increased consumer sophistication and 

advanced information technology pose both a challenge and an 

opportunity for firms and the government to inform consumers 

and address their concerns. Advanced supply-chain management 

systems allow for tracing food products that result in faster, 

more targeted recalls when needed. Private-sector efforts to 

minimize risks of recalls and protect brand equity are part of an 

effective food safety strategy. 

Animal health is closely linked to food safety and consumer 

confidence and is also central to the profitability of the livestock 

and poultry production sectors. Increased production costs, 


lower revenues for farms with disease and trade restrictions due 

to the presence of particular diseases have economic impacts on 

all producers in the industry. To protect animal industries and 

consumers from imported diseases or food safety problems, SPS 

regulations have become part of most trade agreements. 

However, these standards can also be trade distorting and 

protectionist, and accentuate the need for harmonization of 

standards and enforcement within NAFTA. 

The North American live animal market is increasingly linked, 

and companies within countries are ever more interdependent. 

Once implemented across North America, animal identification 

and tracking systems could allow restricted animal movement 

within or across countries while still controlling disease. Farmlevel 

biosecurity measures to reduce disease risk and developments 

in vaccine research are providing new tools to lessen the threat 

and impact of animal diseases to farmers. 


Animal health and food safety are for the public good and 

important elements of national security in all North American 

countries. The challenge is to develop and implement policies 

that most effectively achieve a safe and secure food supply and 

competitive livestock and poultry sectors in North America. 

The options discussed below offer a range of public-sector 

involvement and discretion on how to utilize scarce 

government resources. 

Public programs and policies: Recent BSE cases in the United 

States and Canada have crystallized concerns that consumers, 

livestock producers and allied industries share about the 

economic impacts of animal disease and the complexity of 

estimating the size of such impacts. Public agencies have 

responded with resources and more visible programs to guard 

against potential outbreaks and maintain consumer confidence. 

Policy instruments to share losses, policy costs and program 

benefits might be used to guard against losses at each level of 

the animal industry. Government intervention may prove 

necessary because market failures and public goods (such as 

public health) may not provide adequate private incentives to 

achieve efficient protection against animal health threats. 

Accelerated response times to adverse food safety and animal 

health incidents are needed. This is especially crucial when 

timely responses can limit the spread of disease, or when there 

may be distribution or sale of infected or contaminated 

livestock products. 

Public and private partnerships: Adding credible certification 

and labeling processes proposed by industry and improving 

coordination of animal health and food safety responses are 

ways governments might proactively partner with private 

industry. Funding research and developing programs to build 

scientific, educational and managerial capacity to respond to or


prevent animal health and food safety incidents are other 

possible government actions. Consumers may perceive that the 

government is addressing their needs by providing third-party 

verification of credence attributes promoted by private brands 

and firms. 

In Canada, Mexico and the United States, government investments 

are made in research addressing veterinary science, food science, 

epidemiology and economics of animal health, and food safety 

issues. Under this option, government would support more 

research on technology and science to maintain a safe food 

supply, leaving the private sector to concentrate on investments 

in quality assurance. The public sector might increase consumer 

outreach, possibly in cooperation with nutrition education 

programs already provided by public institutions. 

Because of its reputation for being impartial and science-based, 

the U.S. Land Grant university system could in its cooperative 

relationship with USDA play an expanded role in providing 

educational programs on the food system, animal health and 

food safety, and in providing research to undergird food safety 

programs at the regional, state and local levels. Additional 

research funding may be needed. Different relationships exist 

in Canada and Mexico. 

Coordination of public efforts: In the United States, the national 

structure of the food safety system is expected to continue 

moving toward a single food safety system functionally, even if 

not through legislative changes to create a single food agency. 

Coordination of food safety efforts by government agencies will 

likely expand to identify the cause of food-related illnesses 

through source tracking and attribution to known and 

unknown pathogens. 

Consideration should be given to developing a risk-based 

pathogen analysis system that would identify existing epizootic 

links from animals to humans, particularly in the face of 

potential outbreaks, such as the current situation involving 

avian influenza. For known pathogens, the ability to identify 

the common source of food-borne illnesses, even for geographically 

dispersed human cases, is expanding because of advances in 

genetic technologies. During the next five to 10 years, the 

increasing ability to identify risky products and remove them 

from market channels could even further reduce food-borne 

illnesses from known pathogens. 

A comprehensive NAFTA-wide diagnostic, monitoring and 

surveillance network: Food safety and animal health threats go 

beyond the capability of a single entity to affect the entire 

animal production value chain and even the economy as a 

whole under the right circumstances. A cooperative and 

functional NAFTA-wide network would multiply the efficacy 

of networks in the United States and Canada and establish a 

comparable functioning network in Mexico. The network could 

include stockpiles of vaccines and treatment agents for many 

diseases; serve as a clearinghouse for effective quarantine and 

animal disposal protocols to limit disease spread; and NAFTAwide 

planning for dealing with outbreaks, which may allow 

options to address only affected sections of a country or region. 

Enhance capabilities for rapid and widespread information 

dissemination: Both government and the industry would 

benefit from fast and widespread access and dissemination of 

information when dealing with food safety and animal health 

hazards. This information is essential to retain consumer 

confidence in the food systems at home and abroad. The 

establishment of national tracing systems would be important. 

Increased public and private investment could help reduce 

disease transmission and enhance public and animal health. 

Support new scientific tools and technologies: New scientific 

tools and technologies are being developed that have the 

potential to enhance animal disease prevention, detection and 

diagnosis in North America. Work is needed in current animal 

health frameworks to evaluate, validate and implement rapid 

prevention strategies to protect the health of each nation’s 

animal populations. One area of concern is strengthening 

border protection systems regarding the importation or 

unnoticed transfer of animals raised out of the mainstream 

food security network. Exotic animals, backyard poultry and 

backyard livestock have the potential to place national herds 

and flocks at risk. 

Establish indemnity insurance for animal agriculture: In the 

United States, there are currently no uniform governmentbacked 

insurance programs for animal agriculture that parallel 

those for crop agriculture. Consequently, livestock producers 

may absorb catastrophic losses (destroyed animals, market loss, 

business interruptions) that may be associated with animal 

health events unless the disease is determined to constitute a 

national emergency, in which case producers would be 

indemnified 100 percent. Financial risk management of animal 

diseases is a question that government and industry must 

address in partnership to ensure that effective and efficient 

financial risk management tools are in place to deal with future 

animal disease outbreaks. An indemnity program could reduce 

private-sector uncertainty and thus increase reporting 

compliances. Participation in such a program would be 

predicated on following strict biosecurity protocols related to 

level of risk. A broader production certification program 

addressing food safety, animal health and emergency 

management could also be developed. 

International food safety and animal health standards for trade: 

The lack of consistency in international standards and their 

enforcement creates inequities in trade among potential partners 

and may well limit trading arrangements. Eliminating this 

artificial trade barrier would allow competitiveness to be more 

accurately evaluated; gains from trade may be more fully realized. 

There are currently prescribed events and standards that signal

10 

conditions for which trade interruptions commence, but such 

signals to recommence trade are not readily apparent. Establishing 

“triggers” that allow trade to resume once food safety and 

animal health concerns were alleviated could contribute to freer 

trade within NAFTA, as could true harmonization of standards 

and enforcement among NAFTA partners. 

Animal Welfare 

The majority of the general public in North America has little 

direct contact with agriculture. In Canada and the United 

States, less than 3 percent of the working population is 

employed on farms. Even in Mexico, where roughly 17 percent 

of the labor force is employed in agriculture, the share of the 

population on farms is declining steadily. As a result, most 

consumers of meat and animal products are increasingly 

removed from how animals are raised. Nevertheless, the 

well-being of farm animals is becoming an important issue for 

the animal industries in North America. 

A range of concerns are expressed about how animals are raised, 

transported, handled and slaughtered. Many of these concerns 

are associated with methods that have increased productivity in 

the animal production industries and reduced costs to consumers. 

Innovations, such as the use of confinement, have a mixed 

effect on animal well-being. Potential positive effects, such as 

reduced mortality from disease, predators and the effects of 

weather, must be balanced against potential negative effects. 

While animal welfare issues may create the potential for some 

producers to adopt less-intensive systems, such as that reflected 

by free-range eggs, and to sell at a price premium in niche markets 

that covers the additional costs, this is unlikely to be an option 

for most North American producers. Good animal husbandry 

practices are not inconsistent with profitability, but the imposition 

of higher standards, for example, through legislation, could lead 

to increases in costs, affect the global competitive position of 

the animal products industry and raise food prices. The central 

issue that faces the industry is how to modify existing production 

and handling systems so they respond to consumer concerns 

about animal welfare in a cost-effective way. 

The livestock industry is taking steps to address some of the 

concerns expressed about current practices. Much of the effort 

centers on the voluntary development of standards and the 

application of codes of practice. This is in contrast to the 

situation in Europe, where legislation is playing a major role. 

Pressures for additional legislation are likely to intensify in 

North America if the general public perceives that selfregulation 

is not addressing public concerns effectively. 


Improve the flow of information to the general public: Many, but 

not all, stakeholders in the animal products industry have 


developed clear public positions on improving animal wellbeing. 

Policy statements and positions are not always visible to 

the general public. One option would be for all stakeholders to 

develop a statement of principles for the treatment of farm 

animals, and to make this statement prominent in publicity 

material and on Web sites. Industry groups could also support 

the development of educational materials for the general public 

and for use in schools and colleges. This includes discussion of 

current practices and the reasons behind them. A potential 

consequence of this option would be to increase consumer 

choice and facilitate niche marketing. 

Develop and apply standards and codes of practice: The industry 

has made substantial progress in applying a science-based 

approach to the development of standards and codes of practice 

for improving the well-being of farm animals. A multidisciplinary 

approach is needed to develop standards. Increasing 

integration in the North American livestock industry requires 

that standards need to be developed and applied for 

transportation and slaughter, in addition to production 

methods. One option would be for the industry to ensure that 

standards and codes are developed for all types of livestock. 

Industry groups could make the dissemination of information, 

and support for training in the application of appropriate 

standards, a high priority activity. They could also lend support 

to the development and application of appropriate sciencebased 

standards within North America, and assist government 

representatives in efforts to develop appropriate international 

standards through the World Organization for Animal Health 

(OIE). Industry groups across North America could work 

together to provide a more coordinated and harmonized 

approach for the development of standards, certification 

programs and labeling, including helping the general public 

understand what various types of certification mean. This is 

necessary to avoid confusion over labeling, which appears to be 

a problem in Europe. Governments could also play a role in the 

harmonization of standards. However, standardization could 

decrease consumer choice and reduce opportunities for niche 

marketing outside of agreed-on certification options. 

Research and education: Research can play an important role in 

helping the industry improve the well-being of animals. One 

option would be to assign a higher priority to this issue in 

publicly funded research, for example, by increasing the 

proportion of total funding currently available for research in 

animal breeding and husbandry, farm facilities and processing 

methods. Particular emphasis could be placed on encouraging 

research into developments that are both practical and 

economically viable. A further step would be to ensure that 

all associate, baccalaureate, graduate and continuing education 

programs in animal science, veterinary medicine and related 

fields incorporate course material relating to the various aspects 

of animal welfare—not only biological, but also ethical and 

socioeconomic perspectives.


Finally, the dissemination of information and training activities 

on animal welfare could be made a priority in public extension 

programs, particularly for the training of farmers and ranchers, 

and employees in the animal products industry. A potential 

consequence of this option would be better understanding of 

the tradeoffs between increasing the welfare of animals and 

associated costs. 

Summary 

Markets, Structure and Competition 

Traditional open commodity markets for animals are fading, 

but there will always be competition among different value 

chains offering a variety of products to consumers. The sale 

barn with multiple buyers is less a standard method of marketing, 

and most animals are marketed through contracts, cooperatives 

and a variety of arrangements that link production with 

processing and retailing of final products. Cooperatives play a 

key role in dairy. 

Current production technologies and marketing arrangements 

have significant economies of scale that encourage large units 

for production and processing of beef, pork, poultry and milk. 

Production units are getting larger across the board. Fewer large 

firms dominate the animal-processing industry in North 

America. While small, traditional production units are still a 

major factor in Mexico, large-scale production units similar to 

those in Canada and the United States are growing rapidly in 

dairy, swine and poultry. 

This economic environment challenges small and mid-size 

producers. Opportunities exist, and others are evolving. Because 

different consumers place different values on various product 

attributes, there will be markets for animal products with 

specific characteristics. For example, demand for organic 

products is growing rapidly. Many small and mid-size producers 

can flourish if they position themselves to provide products that 

command premium prices in the marketplace. 

The North American animal agriculture industry also faces 

competitive challenges from other world producers and 

processors, in part due to the transferability of technologies 

and increasing worldwide demand for animal products. This 

has implications for trade, labor and the environment. 

What We Need to Know 

• Who receives the value from technological and business 

management innovations such as supply chains and 

traceability systems? How is this value distributed among 

producers, processors, retailers and consumers? Are there 

better ways to identify relationships among parties in 

these systems? 

• What are the long-term impacts of increased energy 

production from corn, other animal feeds and animal waste 

on animal agriculture? 

• To better understand the competitiveness of the North 

American livestock industry, a critical research need is a 

comparative analysis of the cost of producing and 

processing various animal products in different geographic 

locales in the world. Critical dimensions of this analysis 

would be to use a standardized methodology to measure 

costs and to analyze both commodity products, as well as 

higher-valued differentiated products. 

Value in Integrated Markets 

There is economic value in an integrated North American 

market for animal products. The dairy industry remains 

protected to different degrees in all three countries, and the 

Canadian poultry industry remains protected. But there is 

significant evidence that NAFTA benefited the beef and swine 

industries in all three countries. Open borders allowed the 

industries to specialize with live animals, carcasses and 

processed products moving back and forth across all borders. 

The disruptions caused by the closing of the U.S.-Canadian 

border because of BSE demonstrated the degree of market 

integration that had developed in recent years. While some 

parts of the industry benefited from the border closing, the 

North American industry as a whole lost. There is value in 

an integrated North American market, and institutional 

mechanisms are needed to reopen borders quickly to prevent 

long-term economic disruptions. 


• What are the true costs of border disruptions? Who 

benefits and who loses because of these disruptions? 

• Have the “temporary” BSE-related border closings 

permanently altered animal trade flows in North America? 

Demand Is Increasing 

Demand for animal protein depends primarily on income and 

population growth. Predicted increases in income in developing 

countries, particularly in Asia and Latin America, will increase 

global demand for animal products during the next generation. 

In high-income regions like North America and Europe, 

consumers are demanding animal products with specific 

characteristics related to nutrition and health concerns and 

specific production practices. As noted previously, demand 

for organic products is growing rapidly.

12 



• What really influences consumer purchases of meat and 

animal products? How do consumers react to health and 

food safety concerns and to concerns about animal welfare? 

• What is the economic impact of consolidation in the food 

processing and food retailing sectors? What are the impacts 

on farmers and on consumer choice? 

Environmental Regulation and Litigation 

Environmental regulations can be a significant cost factor for 

the industry and will likely be a major factor in future investment 

decisions by the industry. While predictions of a “race to the 

bottom” are made, the expanding variability of regulation from 

location to location will impact decisions concerning the 

location of future animal production and processing units. 

Differences in environmental regulation across countries, states 

and provinces are problematic for animal agriculture. Broader 

multi-jurisdictional regulatory approaches may represent an 

opportunity for more efficient environmental management and 

lower industry costs. 

Litigation related to environmental issues is a growing problem 

in the United States. While litigation is a symptom, not a cause, 

of conflict continued litigation can be expected unless there is 

meaningful legal reform that provides the industry with some 

“safe harbor” legal parameters in exchange for assuming greater 

responsibility for environmental concerns. Litigation or legislative 

outcomes must provide legal rights and responsibilities that 

balance business practices with environmental concerns to 

resolve the issues. In the environmental arena, uncertainty is a 

greater problem than the level or type of environmental regulation. 


• What are the costs and benefits of various regulatory systems? 

General trends are known, but more detailed information 

is needed, such as the impacts of regulation on different 

sized operations. 

• What are the public health impacts of possible pathogens 

in air emissions from animal production facilities? How do 

we best measure the level of pathogens and their impacts? 

Immigration and Labor 

Many segments of animal agriculture in the United States and 

Canada depend on a foreign-born labor force. In the United 

States, many of these workers are from rural Mexico and are 

undocumented. The legal uncertainty associated with this 

undocumented work force has consequences for the workers 

and the companies for which they work. Workers may not 

receive full legal protections and may be reluctant to complain 

about working conditions. Employers are vulnerable to a variety 

of legal sanctions and risk the loss of a significant portion of 

their work force if immigration laws are strictly enforced. This 

legal uncertainty creates a “cost” that can be mitigated with 

revised government policies. 


• What are the labor market needs for animal agriculture, 

and how will specific immigration reform legislation 

impact the industry? 

Animal Identification and Traceability Systems 

Animal identification and traceability systems have a key role to 

play in the future of the North American animal agriculture 

industry. Whether the underlying issue is animal health, food 

safety, animal welfare, process assurance or quality attributes, 

animal identification and traceability are the keys. Canada is 

well ahead of the United States and Mexico on this issue. 

Identification and traceability systems will emerge rapidly during 

the next few years to enhance the industry’s ability to respond 

to natural and intentional disease outbreaks, improve food safety, 

and provide assurances of food quality and wholesomeness. 

Some elements of these systems will be developed and managed 

by government, other parts may be purely private, and some 

elements may require public/private partnerships. 


• How could information generated by traceability systems 

be utilized to develop risk-management strategies to 

minimize the impacts of animal disease outbreaks? 

Communities and Communication 

There are no simple answers to the complex issues facing 

rural communities affected by animal agriculture. The issues 

are multi-faceted and link producers, processors, retailers, 

consumers, and the people living and working near farms 

and processing facilities. Reaching workable solutions requires 

patience, partnerships, information and clear communication. 

Solutions may require the cooperation of industry and multiple 

levels of government. 


• What are the economic and social consequences of 

alternative regulatory systems for making siting/zoning 

decisions about animal production and processing 

facilities? What tools can be brought to bear to encourage 

cooperation among industry, government, the public and 

the various elements of the food supply chain?


• What are the actual economic multiplier effects of animal 

agriculture production and processing facilities on 

rural communities? 

Concluding Remarks 

North America enjoys highly efficient livestock production 

systems that have adapted and evolved to meet changing 

conditions. New products are developed to meet changing 


Contracts replace open markets and redefine the relationships 

among the stakeholders in the system. Technological developments 

increase farm-level productivity, processing efficiency, distribution 

systems and marketing. Every facet of the animal food chain— 

from genetics to retail and food service outlets—is adjusting to 

the rapid pace of change. 

The North American animal agriculture industry remains 

competitive in the world market. However, it faces significant 

challenges and opportunities, both in North America and 

abroad. Farm Foundation initiated this project to compile a 

comprehensive look at the opportunities and challenges facing 

animal agriculture in North America today. How industry, 

government and academia use the information compiled here 

will help shape the future of this industry in North America.

Chapter 1 

Introduction 






among the stakeholders in the system. Technological 

developments increase farm-level productivity, processing 

efficiency, distribution systems and marketing. Every facet of 

the animal food chain—from genetics to retail and food service 

outlets—is adjusting to the rapid pace of change. 

To take advantage of emerging opportunities for further 

growth, the industry must address certain challenges. With 

help from technology, production economies are moving the 

industry to fewer and larger production units. This has led to 

concerns about impacts on environmental quality, control of 

animal disease, food safety, worker availability and safety, and 

animal welfare. 

Consumers not only want high-quality products, but they also 

often demand more specific information about animal 

production and processing practices. The industry is developing 

systems to trace animal products from farm to plate. Small, 

independent producers face fewer traditional market outlets and 

may need to affiliate with large integrators, market directly to 

consumers or join with other producers in various alliances to 

participate in emerging value chains. Consolidation has left a 

number of rural communities without a viable animal 

agriculture industry, while, in a few communities, rapid 

expansion of the industry has strained public services. 

Globalization and trade provide new customers and new 

competition from low-cost, high-quality operations, challenging 

the North American industry to continue to adapt and 

innovate. There is concern that some segments of the industry 

may move offshore to reduce costs and avoid various regulatory 

constraints. However, other countries are increasing 

environmental constraints to deal with expanding, 

concentrated production of livestock. The North American 

livestock industry must adapt to these competitive challenges 

if it is to serve the burgeoning markets for meat products in 

developing economies. 

The remainder of this chapter provides a broad overview of the 

factors influencing animal agriculture in North America and the 

opportunities and challenges it faces in today’s world. It 

provides background and a platform for the seven Working 

Group reports that follow: 

• Economics of animal production, processing and marketing 

• Consumer demand 

• Global competitiveness and trade 

• Food safety, biosecurity and animal health 

• Environmental challenges and opportunities 

• Community and labor issues 

• Animal welfare 

The report concludes by outlining possible future actions for 

government, industry, academics and consumers. 

The Industry Today 

Beef—The North American beef cow herd was estimated at 

49.2 million head in 2004. North American beef cows account 

for 21 percent of the world total. U.S. beef cattle are two-thirds 

of the North American herd, while Mexico accounts for 23 

percent and Canada 10 percent. The most significant trend 

during the past 25 years is the growth in both the Canadian 

and Mexican beef cow herd and calf crop relative to those of 

the United States. In 2004, North American beef production of 

14.9 million metric tons (mmt) on a carcass weight equivalent 

(cwe) basis accounted for a quarter of world beef production. 

The United States produces about 80 percent of North 

American beef, while Mexico averages about 12 percent of 

production and Canada about 8 percent. 

Swine—The number of North American breeding sows has 

declined during the last two decades, but due to improvements 

in reproductive efficiency, pig numbers have not. Sow numbers 

were estimated at 8.5 million head in 2004, compared with 

11.7 million head in 1980. The North American pig crop has 

been greater than 10 percent of the world total since the early 

1990s. The United States accounts for approximately 70 

percent of the North American pig crop, with Canada 

producing 20 percent and Mexico producing about 10 percent. 

The most significant trend during the past 25 years is the 

15

16 

growth in the number of Canadian sows and pigs relative to 

that of the United States. North American pork production was 

12.4 mmt in 2004, accounting for 10 percent of world pork 

production. While world pork production increased to 100.9 

mmt in 2004 from 69.9 mmt in 1990, North America has 

averaged 12 mmt production during the last five years, behind 

only China at 47 mmt and the European Union (EU) at 21 

mmt. Pork production in North America and the EU has 

remained relatively stable since 1999, while China’s production 

has more than doubled. 

Poultry—U.S. poultry production has increased threefold 

during the past two decades. The majority of this expansion 

was in fresh/frozen broilers and turkeys. Production growth was 

spurred by the availability of low-cost feed grains, capital and 

technology for expansion, and a well-integrated, efficient 

production and marketing system. Poultry meat production in 

North America was 21.2 mmt in 2004, about 88 percent of 

which was broiler meat. The United States has seen a steady 

increase in poultry meat production to 17.8 mmt in 2004 from 

6.3 mmt in 1980. The United States accounts for 84 percent of 

North American poultry production while Mexico accounts for 

11 percent and Canada 5 percent. 

The three North American countries accounted for 35 percent 

of world poultry meat production in 2004, down from a high 

of 39 percent in 1993. The main reason for the decline in 

North American world share was due to a 300 percent increase 

in Chinese production and a 257 percent increase in 

Brazilian production. 

Dairy—Cow’s milk production in North America was estimated 

to total 95.4 mmt in 2004, or 15.6 percent of the world’s milk 

output. U.S. production represented 81 percent of North 

American milk output, while Mexico made up approximately 

10 percent and Canada about 8 percent. The North American 

dairy herd consisted of 16.9 million head in 2004, with the 

U.S. herd totaling 9.01 million head, 6.80 million head in 

Mexico and 1.08 million head in Canada. India is the world’s 

largest producer of milk (87.2 mmt), but almost 60 percent of 

this total is buffalo milk. North America trails the 25 EU 

countries that combine to produce 131.1 mmt of cow’s milk. 

During the past two decades, Mexican milk production 

increased by one-third, while the United States and Canada saw 

output grow by 19 percent and 6 percent, respectively. In the 

United States and Canada, the increases in output have come 

from fewer cows and sharp improvements in milk productivity 

per cow, primarily from enhanced genetics. Mexico’s dairy herd 

has increased in number. 

Evolution of the Industry 

The latter half of the 20th century was an era of increasing 

consolidation and specialization in agriculture. Animal 

Introduction 

production on farms moved from providing food for farm 

families and the local community to specialized economic 

enterprises. As indicated in Table 1, the percent of U.S. farms 

with livestock decreased dramatically during the last century, 

particularly in the past 30 years. This trend is most acute in 

dairy, swine and poultry. This trend is also evident in Canada, 

but comparable statistics are not available for Mexico. 

Table 1. Animal Production on Farms, 

Canada and the United States 

Percent of Farms Producing 

Year Number Beef Dairy Swine Chicken 

of Farms 

United States 

2002 2,128,982 37.4% 4.3% 3.7% 1.5% 

1974 2,314,013 44.3% 17.4% 20.3% 1.5% 

1920 6,118,956 29.7% 74.6% 79.3% 

Canada 

2001 230,540 52.9% 9.5% 6.7% 11.5% 

1971 258,716 96.1% 56.2% 47.3% 46.2% 

1921 711,090 84.2% 63.4% 82.4% 

Source: U.S. Census of Agriculture; Census of Agriculture, Statistics 

Canada, Recensement de l’agriculutre, Statistique Canada. 

With specialization came significant increases in productivity. 

In the United States, the number of pigs per litter has risen 

about 50 percent during the past 60 years. Milk production 

per cow has risen more than threefold. Broiler production 

has increased more than tenfold. This time of increasing 

specialization and productivity growth was also a time of 

significant public investment in agricultural research and 

outreach to farmers. 

Geography: The geography of animal processing facilities 

changed during the 20th century. Until mid-century, red meat 

processing facilities were located in or near large urban areas. 

Poultry processing was generally small in scale. In the mid-20th 

century, red meat processing starting moving out of the cities 

to small towns in the Midwest and Great Plains. Poultry 

processing began to concentrate in the Southeast, the Delmarva 

Peninsula on the East Coast and the West Coast as the industry 

integrated and consolidated. 

The location of animal production also changed during the 

20th century. U.S. beef feedlots moved from the Midwest to 

the Great Plains. In Canada, the cattle feeding industry

concentrated in Alberta, although it has a significant presence 

in all provinces. The Mexican beef industry is mainly pasturebased. 

In northern states, the industry exports feeder cattle 

to the United States, while other regions serve the Mexico 

City market. 

The U.S. dairy industry has expanded in central California, the 

Mountain West and the Great Plains, and has a reduced 

presence in the Southeast and the Northeast. There is still a 

large dairy industry in the upper Midwest, but this region no 

longer dominates the industry as it did 50 years ago. The 

Canadian dairy industry is centered in Ontario and Quebec. 

Average herd size remains small at about 60 cows because of the 

government’s supply management system. The bulk of the 

Mexican dairy industry is small and traditional, but 

development of ultra-high temperature (UHT) fluid milk 

products has spurred recent growth in large-scale, modern 

dairies to serve Mexico City and other urban markets. 

There has been a dramatic increase in U.S. swine production in 

North Carolina and in the Plains of Oklahoma, Texas and 

Kansas. However, Iowa remains the leading swine production 

state. Canada has experienced large increases in swine 

production in the Prairie Provinces, particularly Manitoba. 

Large-scale production facilities have become the norm in the 

United States and Canada. The Mexican swine industry is 

still dominated by small traditional herds, but large-scale 

production units similar to those in the United States 

and Canada are increasing in the states of Chihuahua 

and Vera Cruz. 

Markets and Contracting: The markets for animals and animal 

products continue to evolve. Direct consumer sales, robust cash 

and futures markets, farmer-owned cooperatives, and 

production contracts are among the marketing institutions that 

have changed to meet the needs of the industry. These 

institutions have generated a number of public policy issues and 

business conflicts through the years. Contract law and the 

Uniform Commercial Code evolved to address business 

transactions between farmers and processors. In the United 

States, the Packers and Stockyards Act of 1921 was passed to 

address farmer concerns about the market power of meat 

packers. Cooperatives emerged in the dairy industry to give 

farmers a way to market a perishable product at a “fair” price. 

In recent years, production contracts between growers and 

integrated processors have become the norm in the poultry and 

swine industries. While these contracts offer benefits and 

certainty to producers and to processors, questions continue to 

be raised concerning business conflicts and public policy issues. 

Concentration: While thousands of farms are still involved in 

animal production, animal ownership has become more 

concentrated in some segments of animal agriculture. Meat and 

milk processing have also become more concentrated. 

Slaughter facilities have grown in size and specialization. 

Introduction 17 

Between 1980 and 2000, the number of medium- to large-scale 

cattle slaughtering plants in the United States fell to 170 from 

600, and the number of hog slaughtering plants fell to 180 

from 500. The top four firms account for 84 percent of steer 

and heifer processing, 64 percent of pork processing, and 49 

percent of broiler processing. By 1997, 80 percent of all steers 

and heifers slaughtered in the United States were processed in 

plants with annual capacity of more than 500,000 head, and 88 

percent of the hogs were slaughtered in plants with annual 

capacity of more than 1 million head. 

Although meat and poultry processing continue to concentrate, 

much economic power has shifted to the retail grocery chains, 

which have experienced major consolidation, domestically, in 

North America and worldwide. Wal-Mart is now the leading 

grocer in the United States, and the top four firms account for 

46 percent of all grocery sales in the United States. 

(Hendrickson et al., 2001). 

The Challenges 


The drive to reduce the cost of production and improve the 

quality and consistency of livestock products has consolidated 

the production and processing sectors into fewer and larger 

firms. There is increased use of formal contractual agreements 

and a greater interdependence between producers and 

processors. The next generation of efficiencies will be gained 

from supply chain management that provides more quality and 

cost control, reduced food safety risk, more efficient scheduling 

of facilities and labor, and quicker response to changing 

consumer demands. Small to mid-size operations are looking to 

increase revenue by marketing differentiated products in niche 

markets, or cooperate with peers to capture cost advantages 

enjoyed by larger producers. 

The chapter discusses in greater detail issues of scale economies, 

production systems, market contracts and policy options 

regarding: 

• The forces driving integrated livestock production, 

processing and distribution systems; 

• The competitiveness of North American animal 

agriculture to attract the capital, management and skilled 

labor needed for the future; 

• Government policy or industry initiatives needed to 

promote economic viability of small to mid-size livestock 

farms; and 

• Implications of environmental regulations and changing 

energy policy on production and processing in 

North America.

18 


The demand for meat and other animal based foods is largely 

related to income and consumer tastes and preferences. Two 

fundamental trends affect demand for animal-based products: 

income growth and demographic changes. In developed 

countries, consumer tastes and preferences change, but total 

demand grows relatively slowly (Figure 1). While the demand 

has shifted for specific products, total demand has grown at 

about the rate of population growth. The changing demand for 

specific meat products results from concerns about diet and 

health, functional characteristics of products such as 

convenience, food safety, and perceived values associated with 

the place or techniques of production. More dynamic growth in 

demand for animal-based protein results from the fact that 

incomes are rising in many developing economies with large 

populations. The rapid increase in per-capita income, 

particularly in China, has generated a significant increase in 

per-capita meat consumption. Similar income and consumption 

trends are occurring in India, Indonesia, Chile and other 

developing countries of Asia and Latin America. 

Figure 1. 

Animal Protein as a Share of Total Protein 

Introduction 

Source: Based on data through 2002 from FAO and World Bank. 

The Consumer Demand Chapter addresses a series of policy 

questions, including: 

• How do government policies related to diet and health 

impact food demand? 

• What is the appropriate division of responsibility between 

the public and private sectors on the issues of traceability 

and certification? 


Until recently, international trade in animals and animal 

products has been limited in volume. Most countries restrict 

trade in animal products to protect their domestic markets and 

industries from disease and to protect food safety and human 

health. Almost all countries except Australia and New Zealand 

protect their dairy industries with domestic support programs, 

export subsidies or import tariffs. In North America, Canada 

and the United States restrict most dairy imports. Canada 

restricts most poultry imports. NAFTA reduced many of the 

barriers to livestock trade in North America, particularly for 

beef and swine. The World Trade Organization (WTO) and 

other recent trade agreements have started reducing market 

barriers to trade in animal products.

Worldwide meat demand is increasing rapidly, particularly in 

developing countries. In some countries, growing demand has 

outstripped the production capacity of domestic industries, 

forcing many developing countries to rely on international 

trade. Modern technologies utilized for mass production of 

livestock and poultry are readily transferable to developing 

economies. While in the short run countries may choose to 

satisfy animal production shortfalls from imports, the long-run 

goal may be to produce domestically by importing feed grains 

and soybeans or producing their own feed. 

Animal agriculture production is becoming more highly 

integrated and concentrated, with leading integrators often 

having operations in more than a single country. These firms 

have the flexibility to shift sources of supply and markets. 

Capital and technology is mobile, and production and processing 

can be located nearly anywhere. However, importing grain for 

livestock into a region that cannot produce enough feed also 

imports nutrients that may not be able to recycle through local 

crop production, creating an environmental challenge. 

Global trade-oriented animal agriculture systems are vulnerable 

to disruptive shocks and political pressures. For example, during 

the decade since NAFTA, the North American cattle and swine 

industries became more integrated, with animals and products 

moving quite freely across the borders. However, recent diseaserelated 

or market-driven border closings have disrupted this 

integration, produced price/market aberrations and reduced 

industry support for open trade policies. 

This chapter addresses a number of issues that affect the future 

competitiveness of the North American livestock industry, such as: 

• Will the animal food chain continue to integrate across 

borders, or will trade frictions reverse recent trends? 

• Will NAFTA countries be able to harmonize agricultural 

programs and sanitary standards that reduce the risks that 

producers and processors face from border closings, if they 

invest based on an integrated livestock market? 

• Can the animal agriculture industry in North America 

remain competitive in a global economy? 


Ensuring a safe food supply is important to all nations. In the 

United States, the Pure Food and Drugs Act of 1906 was the 

first federal legislation focused on the safety of the food system. 

Adoption of the Uniform Pasteurized Milk Ordinance by most 

states and municipalities in the early 20th century assured a 

supply of safe, wholesome milk. In recent years, the 

development of Hazard Analysis and Critical Control Point 

(HACCP) systems has increased the ability to control foodborne 

diseases. 


Incidences of bovine spongiform encephalopathy (BSE) and E. coli 

0157:H7 contamination have brought demands for adoption 

of traceability and quality assurance systems to manage the 

animal products supply chain. The increasing dominance of 

international food retailers has been a key factor in the wide use 

of such systems, even when not demanded by regulations. The 

rapid growth of supermarkets in developing countries and trade 

agreements are also driving food safety concerns. 

Animal disease is a major challenge to livestock production and 

impacts food biosecurity, national economies and public health. 

Joint efforts between research universities and public agencies 

have eradicated or controlled many animal diseases. Advances 

in veterinary medicine, basic research, educational programs 

and animal housing have contributed to this accomplishment. 

However, without vigilance and effective surveillance systems, 

even eradicated diseases can return. Potential terrorist attacks 

to the food system cannot be excluded. Driving forces in food 

safety and animal health across North America include 

questions about feed additives, biotechnology, food-borne diseases, 

links between animal and human diseases, and traceability. 

This chapter explores a number of questions relative to the safety 

of animal-based food products and animal health, including: 

• What is the future for antibiotic feeding in livestock 

production? Who will decide? 

• What are the long-term public health impacts of foodborne 

pathogens in the North American and foreign markets? 

• Can mandatory animal identification and traceability 

allow for faster resolution to animal disease-related 

border closings? 


Environmental concerns and opportunities in animal 

agriculture encompass a wide range of issues important to 

various stakeholders. While water quality has long had much 

attention, air quality concerns involving odor and dust are 

becoming increasingly important with the proliferation of 

nuisance lawsuits and siting barriers. In the United States, 

recently revised Concentrated Animal Feeding Operation 

(CAFO) regulations require larger operations to meet nutrient 

application standards when applying animal manure to the 

land. Due to the consolidation of the production sector, the 

majority of livestock production is coming under regulatory 

oversight. Many states have, or are in the process of reexamining, 

current air and water quality regulations. In 

Canada, the federal and provincial environmental regulations 

for agriculture are coordinated through the Agricultural Policy 

Framework. Environmental regulation of agriculture in Mexico 

is centralized at the federal level, with state and local 

jurisdictions having minimal responsibilities.

20 

Nutrient loading on farmland from manure application is a 

major concern. Nutrient application rates already exceed 

amounts that can be recycled effectively without impacting 

water supplies in some major producing areas. A key 

determinant of the industry’s future geographic location will be 

environmental absorptive capacity. This suggests that the 

industry may move to those geographic parts of North America 

or elsewhere with lower population density and the driest 

climates. But access to water may limit this strategy. Conflicts 

over siting livestock facilities and land use will determine where 

the industry will prosper or decline. Establishing processes or 

strategies to resolve potential conflicts can benefit everyone. 

There are scientific challenges for establishing measurable 

standards for offensive odors and then economically feasible 

methods to mitigate those odors. Separation from neighbors, 

bio-covers on waste handling and storage facilities, and the use 

of best management practices in manure disposal are odorcontrol 

mechanisms that will increasingly be required. 

Strategies to solve byproduct disposal and environmental 

problems include the recycling of animal manure as a crop 

nutrient or conversion into productive resources to be used in 

agricultural and industrial processes or energy production. 

Adopting technologies to mitigate odors or minimize excess 

nutrients through changes in the feeding regime are other 

possiblities. An important question is whether technological 

solutions to manure disposal will be economically feasible. 

This chapter examines environmental challenges and 

opportunities, including: 

• How do environmental considerations affect production 

and processing location decisions, and what policy changes 

are needed to address nuisance lawsuits? 

• Do larger farms or smaller farms have an advantage in 

meeting future environmental regulations or other 

concerns related to social responsibility? 

• What technological advances might reduce the impacts of 

animal agriculture on air and water quality, or turn waste 

into marketable products? 

• Will industry-driven changes push technological advances 

even faster than government regulation? 

• What is the impact on food prices and global 

competitiveness of alternative regulations? 

Community and Labor Issues 

Livestock production is a fundamental, value-added activity in 

the agricultural sector. The profitability and viability of the 

livestock industry are important to many rural communities in 

Introduction 

North America. Basic commodities are converted into higher 

value products, creating additional revenue for growers and 

additional jobs in those industries that provide inputs, slaughter 

and process animals or their products, or buy livestock 

products. The economic health of the industry impacts 

employment, incomes in primary and related industries, and tax 

revenues. Increasingly, some states or local communities are 

looking at how to attract new livestock investment. 

The contribution of viable and profitable livestock industries to 

the economic performance of many rural communities cannot 

be overstated. Not only do livestock production, processing and 

distribution create jobs directly in their respective sectors, but 

firms in these industries support their business activities with 

the purchase of products and services, thus creating additional 

jobs and economic activity. The employment and income 

multipliers for livestock production generate state and local tax 

revenues that support public services, particularly schools. 

Large-scale production and processing facilities may also bring 

new populations into communities and increased demands for 

services. If employees from outside the community or with 

different ethnic backgrounds are attracted to the generally lower 

skilled jobs in the livestock industries, conflicts may develop in 

the local schools and other community organizations. Conflicts 

over facility location or siting decisions may occur, and 

concerns about surface or groundwater contamination may 

impact a larger group of community residents than just those 

located near the production or processing site. 

The cost and availability of labor can have a significant impact 

on the structure and location of livestock production and 

processing, as well as on the efficiency of individual farms. Over 

time, labor is relatively mobile and moves among firms and 

regions if the financial rewards provide incentives to do so. 

Availability of labor may be a problem due to difficult working 

conditions and generally modest wage rates in the livestock 

production and processing industries. But the skills required in 

both production and processing are increasing. The industry 

may face higher wage and benefit costs and recurring training 

costs. In contrast to the past, the livestock industries may be 

sourcing from the mainstream of the labor market. 

Issues addressed in this chapter include: 

• Can modern animal agriculture be a positive economic 

and social force in rural communities? 

• How has the immigration of workers from Mexico 

impacted the rural communities they left in Mexico and 

the rural communities in the United States and Canada 

where they now work and live? 

• Will labor availability and costs impact animal 

agriculture location?


Animal welfare is a significant public policy issue. During the 

last six or seven years, 50 to 60 bills relating to animal welfare 

have been introduced in Congress annually, with even greater 

proliferation at the state level. The recent ban of gestation crates 

for sow housing in Florida, and standards specific to livestock 

and poultry production practices in New Jersey, were 

promulgated under anti-cruelty statutes. 

Confinement facilities protect animals from the elements and 

predators and provide greater control of manure for 

environmental protection. However, large-scale farming systems 

are seen by some as exploitation of animals and not conducive 

to ensuring animal welfare. Some consumers want more 

information on how and where their food is raised. While 

farmers and ranchers generally still enjoy positive public 

opinion, confined feeding operations and other large-scale 

agriculture operations are not so fortunate. 

This chapter examines a range of animal welfare issues, including: 

• Will the market or the government set animal 

welfare standards? 

• How will animal welfare issues impact future industry 

location and structure? 

• What market opportunities arise from animal 

welfare issues? 

References 


Challenges and Opportunities 

Animal agriculture in North America is at a crossroad, facing 

conflicting signals and forces. Demand for meat protein is on 

the rise in much of the world. It is clear that the North 

American animal industry can continue to be a major supplier 

to this increased demand. Technologies have reduced 

production, processing and marketing costs, yet many segments 

of the animal food chain operate on smaller and smaller 

margins. Industrialization and consolidation of the industry 

may facilitate traceability and product quality control. At the 

same time, emerging consumer demand in and supermarket 

entry into developing countries may provide more incentives 

for domestic production within those countries, as well as 

increasing import. This will also provide great opportunity for 

the North American livestock industry. 

The seven chapters of this report provide its organizational 

framework, even though some issues must be addressed in 

several contexts. The opportunities and challenges are 

interrelated. Animal health and food safety are related to 

consumer demand and animal welfare. Global competitiveness 

is a function of production economics, environmental 

regulation, labor costs and productivity. Communities are 

impacted by air and water quality, the size and scope of 

production and processing operations, and labor force issues. 

Farm Foundation’s intent in launching this project was to 

integrate the knowledge of all stakeholders, examine the critical 

questions and help prepare the industry for the future. 

Hendrickson, M., W.D. Heffernan, P.H. Howard, and J.B. Heffernan. (2001, January). “Consolidation in Food Retailing 

and Dairy: Implications for Farmers and Consumers in a Global Food System.” Report to the National Farmers Union. 

Available at http://www.foodcircles.missouri.edu/whstudy2.pdf.

Chapter 2 

Economics of Production, Processing 

and Marketing 

The North American livestock industry is undergoing major 

structural change due to rapid change in product characteristics, 

worldwide production and consumption patterns, technology, 

size of operation, and geographic location. Production once 

dominated by independent, family-based, small-scale firms is 

now led by large firms that are tightly aligned across the 

production and distribution chain. Contracts and other types of 

marketing arrangements are increasingly important across 

nearly every market level—from input supply and seed stock 

to finished food product markets. The traditional production 

and marketing firms and linkages still exist, but are gravitating 

to niches for differentiated products that may command a 

premium from some consumers. As the industry has become 

more industrialized, specialized and managerially intense, 

location options have expanded beyond traditional 

production regions. 

There is great diversity in how livestock is produced in North 

America and the world, but common themes are emerging. As 

in North America, many countries worldwide are experiencing 

major structural changes in their production sectors, and 

environmental concerns in production are nearly universal. 

Technology adoption is rapid, and a “world standard” is 

evolving to greater commonality of technology, size of 

production units, processing and quality—particularly in the 

pork and poultry industries. Differences exist across species and 

parts of the world that differentiate competing suppliers of 

animal proteins. 

This analysis assesses the global competitiveness of the North 

American livestock industry by focusing on: 

• Industry cost and coordination structures; 

• Market demand for source verification, traceability and 

emerging markets; 

• Government regulations, policy and standards; and 

• Cost drivers, including feed costs; nutrition and production 

technology innovations; crop-livestock synergies; financing, 

risk and capital access/cost; energy costs and ethanol 

production; and access to and the price of land, water 

and labor. 

The chapter begins with an assessment of the current situation 

and then moves to the drivers of change impacting livestock 

production, processing and marketing in North America. It 

discusses policy options and implications, ending with topics 

for additional research. 

Current Situation 

Industry 

Cost, Size and Competitiveness: Consolidation has occurred and 

continues throughout the livestock industry; however, the rate 

and form of consolidation vary by species. The strength of the 

North American livestock industry depends on the degree to 

which increased concentration in production and processing 

reduce production costs and address market segmentation. 

International market power will be gained from increased firm 

size, especially in processing, in sectors that exhibit economies 

of size. 

Economies of size exist in animal production. Most animal 

production displays an L-shaped average cost curve. Costs 

decrease rapidly as size of operation initially increases, then 

much more slowly beyond a certain size, which is typically 

larger than what is generally defined as family-size. 

Cost-of-production advantages associated with large operations 

vary across species. Recent research indicates that dairy and 

poultry have considerable economies of size; in pork, costs of 

production are management related after a certain size 

operation is reached. Scale economies for beef cow operations 

are more difficult to distinguish because many production units 

are part time and subsidized with off-farm income. A recent 

Iowa study of feedlot environmental regulations indicates that 

operations just large enough to fall under the environmental 

regulation requirements had higher per-head costs of 

production than did large feedlots with environmental 

regulation requirements and small feedlots exempt from feedlot 

environmental regulations. Other beef feedlot technologies, 

such as steam-flaked corn to improve feed conversion, have 

economies captured at much larger sizes. 

Cost comparisons among countries are difficult to find and 

generally use different assumptions and measurements. A recent 

analysis of U.S. and Mexican costs of producing pigs to 

23

24 


weaning weight (11 lbs. to 13 lbs.) indicates that feed costs 

are 68 percent higher in Mexico than in the United States. 

However, lower labor and management costs in Mexico more 

than offset higher feed costs. From a total cost perspective, costs 

are approximately 10 percent higher in Mexico than in the 

United States. This study supports the common perspective 

that, in general, while labor costs for the livestock industry are 

lower in Mexico than elsewhere in North America, other costs 

of production, including feed, are high—resulting in a cost 

disadvantage relative to the United States and Canada. Cost 

comparisons show that Canada has a competitive advantage 

over the United States in the production of weaner/feeder pigs. 

However, the U.S. Corn Belt has a competitive advantage in 

finishing hogs. Taking all costs into account, it is estimated 

that the United States has a $4 per-head advantage over 

Canada in producing a 250-pound pig from farrow to finish. 

The United States also has lower pork-processing costs. 

A growing number of Canadian pigs are exported to the U.S. 

Corn Belt for finishing and slaughter to capture the advantages 

in both countries. 

Because of the size of the market or the nature of production, 

some types of specialty production—such as specialty pork, 

grass-fed beef and free-range chickens—favor small operations. 

These production systems are generally more labor and 

management intensive and less conducive to automated 

production techniques. While growing, specialized niche 

production does not appear likely to become the dominant 

segment of the market (see Consumer Demand Chapter). Any 

significant market expansion of these specialty products would 

likely attract large production firms. 

Significant consolidation in the U.S. processing industry has 

generated larger harvest or slaughter capacity, resulting in more 

efficient plant operation and lower procurement costs. There is 

a limit to the amount of concentration that can occur in 

production or processing without encountering market or 

regulatory barriers. Consolidation appears to be accelerating for 

dairy, slowing for swine, and stable for beef and poultry. The 

number of processing plants and access to those plants have 

already reached a critical point in many areas of the country 

with limited producers. 

In Canada, consolidation continues in both production and 

processing. About 20 percent of the livestock farms in Canada 

produce 80 percent of the product. There has been expansion 

of both hog production and cattle feedlots in Western Canada 

during the last decade. Reduced freight supports for grain 

shipments encouraged more feeding of livestock, and there has 

been new investment in pork and beef processing in the region. 

The two largest beef packers are owned by U.S. companies. 

Livestock production in Mexico is influenced by diverse landecological 

conditions. Climatic variability influences the choice 

of animal breeds, so production systems are very heterogeneous. 

Operations range from subsistence farming to high-technology 

systems. Significant opportunities exist to expand livestock 

production in Mexico. 

There is wide variance in the types of beef produced in Mexico, 

the result of variability of animal age at slaughter, differences in 

breed characteristics and climatic variability. In general, 

productivity indicators from the U.S. and Canadian industries 

are higher than those of Mexico. For example, in the United 

States, the calving rate (calves born per cow inventory per year) 

is more than 80 percent, while in Mexico it is about 50 percent. 

In Mexico, hogs are produced through different systems, each 

with different levels of technology and productivity. Backyard 

production, with one to 25 breeding animals, has low 

productivity and is primarily for self-consumption. Small and 

mid-size farms with up to 300 breeding animals have higher 

productivity. Some produce under contract. Just as is the case 

with mid-size operations in the United States and Canada, these 

units are under severe economic pressure and declining in 

number. Expanding modestly in number are large-scale family 

and industrialized operations using modern technology, 

achieving high productivity, and producing under contract 

arrangements with processors. The dairy and poultry industries 

are characterized by similar, but diverse, structures. Larger 

scale/industrialized systems in this sector are more predominant 

and growing more rapidly than in pork or beef. 

Coordination and Value Chain Structures: Contracts and other 

types of marketing arrangements are increasingly important 

across every market level of the livestock industry—from input 

supply and seed stock to finished food product markets. They 

provide greater coordination and more detail specification than 

do arm’s-length open market transactions. These marketing 

tools enable firms to reduce costs of buying and/or selling meat 

and livestock; reduce risk exposure; enhance access to credit; 

increase supply chain information flow; ensure closer quality 

specifications and product traceability; ensure market access; 

increase flexibility in responding to customer needs; enhance 

opportunities for product differentiation and branding; 

increase food safety and biosecurity assurances; and enhance 

operating efficiency. 

Many firms participate in contracts to assure market access. 

With the dramatic decline in spot market transactions in hogs 

and cattle during recent years, market access has been a 

concern, especially for producers located in fringe production 

areas. Likewise, packers outside major production regions can 

use contracts to secure necessary supplies. Producers in key 

production regions use contracts to ensure access to buyers 

without incurring substantial search costs when animals are 

ready for harvest. Packers also contend that marketing contracts 

allow them to source better quality and more consistent quality 

of animals.

Economics of Production, Processing and Marketing 25 

The substantial horizontal contracting growth among hog 

producers suggests that contracts enable large production 

operations to get larger. However, numerous other factors 

contribute to the large horizontal expansion and consolidation 

in hog production. These include profits that attract external 

capital and advances in genetics, health, nutrition and 

production management that increase economies of scale. Many 

smaller operations have been able to remain in hog production 

by contracting with horizontal and vertical integrators. 

Integrators provide production services, capital and risk 

management options that encourage smaller operations to 

continue to participate in livestock production. 

Packing companies have increased their involvement in 

production agriculture. Ownership of U.S. fed cattle by the 

four largest beef packers is approximately 10 percent of 

harvest/slaughter, though this number varies depending on how 

ownership is defined. Hog ownership by pork packers 

represents about 24 percent of total harvest (Hayenga, et al, 

2000). Vertical integration by packers or others in livestock 

markets are a substitute for contracts, partnerships and alliance 

types of arrangements. 

Some people perceive large operators as beneficiaries of 

marketing agreements and contracts. Others contend that 

marketing agreements reduce spot market liquidity, lessen the 

availability of market information for efficient price discovery, 

and adversely affect smaller operations. It is unclear whether 

contracts and marketing agreements are a result of, or a factor 

in, increased concentration of firms involved in meat and 

livestock markets. It is also unclear if the benefits from 

improved supply coordination offset any potential costs that 

the decreased use of open markets may cause. 

Asymmetries in market information and captive supply are 

continuing sources of controversy in the livestock industry. But 

empirical evidence on market power and pricing suggests that 

processor advantages are inconsistent and not widespread. 

In general, Mexican livestock supply chains are less integrated 

from production through retailing. This has created a large 

number of intermediaries and a preference for imported animal 

products. Challenges facing the Mexican animal industry 

include: 

• Lack of modern storage and transportation infrastructure, 

resulting in high mortality/losses in the distribution channel. 

• Higher quality imported products, which leave Mexican 

products at a disadvantage in the marketplace. 

• Producers sell animals to intermediaries, rather than direct, 

resulting in lower prices. 

• Buyers purchase animals with 90 days’ credit, which is not 

viable for small producers who need the money immediately. 

• Limited financing. 

• Lack of support from the government to improve 

production conditions. 

In Mexico’s dairy and poultry industries, more tightly aligned 

value chains are growing in importance, with a focus on 

marketing to higher income domestic consumers. 

In summary, new forms of value chain coordination enable 

large firms to shift risk, leverage capital, increase profitability, 

improve product uniformity and traceability, exploit 

comparative advantages, reduce costs, and provide more direct 

price signals to value chain participants. Industry advocates 

maintain that increased information flow enhances overall 

market efficiency and better enables the industry to compete 

globally and domestically. Critics object to the lower prices 

allegedly paid to family farms and the loss of access in the 

marketplace. More intensive value chain coordination 

mechanisms provide a direct method to verify and ensure 

particular production, processing and marketing practices, and 

procedures to enhance product quality, safety and credence for 

consumers. Some traditional producers that have lost share to 

large-scale, tightly aligned supply chains are targeting valueadded 

niche markets that differentiate the product by how or 

by whom the animal was raised. These markets are either direct 

farmer to consumer or are more coordinated than traditional 

open markets. The ultimate beneficiaries of new value chain 

coordination mechanisms are consumers who pay less for 

products of standardized quality or who pay more for 

differentiated products. 

Market Demand 

Source Verification, Identity Preservation and Food Traceability 

Systems: Consumer concerns about access to and the availability 

of reliably safe food sources have prompted changes in the 

global meat and livestock industries. Issues include use of 

hormones, animal health, bio-terrorism threats, food safety, 

international trade, credence attributes (which consumers 

cannot determine from viewing or consuming the product), 

and improving supply chain management. Economic incentives 

pushing these new systems, in large part, originate from the 

international meat marketplace. Increasingly, consumers 

worldwide are demanding assurance of safe meat products, 

and assurance that production systems are capable of tracking 

sources of potential food safety concerns in a timely and precise 

manner. Countries and producers able to provide such 

assurances will have a considerable competitive advantage in 

world meat markets. 

Food products that can be traced through production, 

processing and marketing have strong appeal to consumers. 

Such products are seen as having greater food safety standards 

and assurances. For the livestock industry, animal identification

26 

and traceability are critical for effective management and rapid 

arrest of animal health and disease concerns. National animal 

and meat traceability programs are being implemented. The 

discovery of bovine spongiform encephalopathy (BSE) in Canada 

and the United States has increased the urgency of having such 

systems in place to achieve timely and accurate trace-back 

of animals. 

The U.S. and Mexican livestock sectors are well behind major 

global competitors in meat and livestock trace-back systems. 

Canada, Australia, Brazil and Europe all have more advanced 

and comprehensive animal identification systems than do the 

United States and Mexico. Primary world competitors are 

quickly adopting wide-scale traceability systems. 


New Markets, Niche Markets: Consumers have diverse 

preferences. Many consumers, particularly those who are more 

affluent, are demanding extrinsic food attributes not related to 

food safety or federal grading standards. Some consumers are 

interested in issues related to animal production, such as animal 

welfare, antibiotic free, growth hormones, use of genetically 

modified organisms and free-range production. Developed 

economies, such as the United States, Canada, Japan and the 

European Union (EU), have some consumers that fit this 

profile (see Consumer Demand Chapter). 

Many of these characteristics cannot be verified through 

physical testing of the product; consumers must rely on supplier 

reputation, or process verification and certification programs. 

This requires animal segregation throughout production, 

processing and marketing. These practices may increase the cost 

of production, relative to traditional commercial production 

methods, i.e., reduced growth efficiency due to not using 

growth hormones in beef production. Differentiated markets 

and different pricing/product valuation structures are necessary 

to support such production practices. 

Meeting consumer demands for specific product and process 

attributes can only be assured through verification and audit 

programs. Such programs often require alliances, partnerships, 

contracts and/or vertical control or ownership of production, 

processing and marketing functions to assure complete 

compliance. National animal traceability systems will provide 

the infrastructure to trace these animals, but there will still be 

costs associated with certification and verification. 

Challenges Facing Small Farms in Serving Niche Markets: Some 

highly differentiated products are more expensive to produce 

and market and may not be able to capture economies of size 

because of the limited size of local niche markets. It is generally 

difficult to establish national market presence with highly 

differentiated products. Such product demands enhance 

opportunities for smaller-scale operations in localized, 

niche markets. 

But successful small to mid-size producers will have to find 

opportunities to either increase revenue or reduce costs. Higher 

revenue may be possible in value-added niche markets where 

consumers pay high enough premiums for differentiated 

products to offset the increased cost of producing, processing 

and distributing small quantities. Small to mid-size producers 

may be able to capture the access and cost advantages of larger 

producers by joining a network or alliance that acts like a large 

producer. Certification programs might be utilized to facilitate 

the development of these niche markets. 

These strategies, like the supply chain model for mainstream 

animal agriculture, require a higher level of interdependence 

than that to which North American producers are traditionally 

accustomed. Even if this strategy is pursued, the challenge to 

smaller farms/firms is that once the niche market becomes large 

enough or sufficiently well-established, large operations can take 

advantage of the economies of size of specialized production or 

implementing certification programs. 

Government 

Impacts of Regulations: A sound regulatory framework 

protects the health and environment of citizens, contributes 

to economic growth, and promotes investments that, in turn, 

improve a nation’s productivity and its people’s standard of 

living. A dysfunctional regulatory system hinders productivity 

and innovation and reduces competitiveness and job 

opportunities. Protecting health and environment is not 

necessarily a tradeoff for competitiveness and innovation. A 

slow, burdensome regulatory system can actually harm human 

health and the environment by stifling the very innovations that 

could yield improvements. 

Increasingly, every aspect of animal production is regulated 

at some level of government—municipal, state, provincial or 

federal. Farm-level regulations include disposal of dead stock, 

environmental (including site selection, waste management and 

protection of water resources), medicated feeds, sale and use of 

livestock medicines, transportation of compromised animals, 

animal identification, animal cruelty, and nutrient 

management. At the processing level, regulations include 

livestock and poultry carcass grading, food safety, dairy 

products regulations, and egg and processed egg regulations, all 

of which fall under various national regulatory authorities. 

The intent of any regulatory framework is to protect the 

country’s citizens while keeping its industries competitive by 

promoting investments and increasing productivity. The 

challenge for the future is to seek a balance of regulations that 

do not compromise competitiveness by imposing too many 

costs on various segments of the value chain.


State and Federal Policy: Paralleling most other sectors of the 

economy, the animal and animal products sector is 

characterized by increasing firm size and consolidation at all 

levels of the supply chain. This concentration of processors and 

retailers has prompted concern about the competitive position 

of producers in the supply chain. Increasingly, economic 

policies are being considered to shape alternative outcomes in 

terms of industry structure and conduct. Economic efficiency is 

only one concern. Equity and fairness issues also are important 

in debates about economic policies for the animal and animal 

products sector. 

Traditionally, U.S. public policies in the livestock industries 

have been directed at improving economic efficiency and 

“leveling the playing field,” especially in protecting the interests 

of producers relative to those of packers and processors. The 

Packers and Stockyards Act of 1921 has financial, trade practice 

and competition provisions. The Agricultural Marketing Act of 

1946 and related statutes provide the authority for federal 

grading and standards activities, provision of market news 

information, and other market-facilitating functions. 

The Livestock Mandatory Reporting Act of 1999 was 

introduced to correct perceived market failures, which were seen 

as particularly detrimental to smaller livestock operations. 

Voluntary reporting of spot market prices facilitated price 

discovery for many years in the United States. The adequacy of 

the system was called into question as more trade took place 

through marketing or formula pricing arrangements that were 

not reported under the voluntary system. Under mandatory 

reporting, large meat packers are required to report information 

on all cattle, hog and sheep purchases and beef and lamb sales 

transactions. A recent Government Accountability Office 

(GAO) study indicates mandatory reporting has given the 

market additional information about prices for different kinds 

of sales transactions. The study also identified reporting errors 

to be addressed. The trend toward formula purchases of cattle 

has slowed since mandatory price reporting was implemented, 

and the volume of cattle moving under negotiated purchases 

has increased. It is not clear if mandatory price reporting caused 

the movement away from formula purchases, or if it coincided 

with the move that occurred for other reasons. Debate to 

continue the law centers on its effectiveness and the reporting 

burden imposed on large meat packers. 

In recent years, various state and federal policies have been 

proposed in the United States to restrict certain types of 

organization and market conduct in the livestock and meat 

industries. For example, there have been proposals to prohibit 

packer ownership of livestock and to restrict certain marketing 

practices, such as privately negotiated marketing agreements 

that allow packers to know the supply of animals coming to 

their plant for more than 14 days in advance. At the federal 

level, such market conduct regulations are under the purview of 

USDA’s Grain Inspection, Packers and Stockyards 

Administration (GIPSA). Small-farm advocates have long 

contended that USDA was not enforcing the laws as intended 

in the original 1921 act, and had pressured states to enact 

legislation. A 2006 GAO study found that GIPSA had not 

established an adequate control structure and environment to 

allow the agency to oversee and manage its investigative activities. 

Several states have anti-corporate farming laws to correct 

market imbalances, particularly between large meat packers and 

smaller livestock producers. Some laws seek to preserve the 

ability of livestock producers to operate independently without 

having to become aligned with a particular buyer through 

ownership, contract or other vertical alliance. Debate over these 

policies will continue—one side arguing that such policies do 

little more than impede economic efficiency and freedom to 

contract, and the other arguing the policies are needed to 

prevent abuse of market power and preserve family farms. 

In the United States, mandatory country of origin labeling 

(COOL) has been introduced at both the state and federal 

levels, with considerable support from smaller producers. 

Proponents argue that consumers would choose domestic 

product and pay higher prices for it if country of origin 

information were provided. Opponents argue that COOL 

imposes high costs of implementation and impedes the benefits 

of free trade. A 2002 Farm Bill provision on mandatory COOL 

for meats and other commodities was to become effective in 

2004. Canada and Mexico submitted comments opposing 

USDA’s proposed rule for mandatory COOL. Subsequent 

legislation postponed the implementation date to 2008 for all 

commodities except fish. 

Animal identification is another potential area of regulatory 

policy. The Canadian Cattle Identification Program is 

administered by the Canadian Food Inspection Agency under 

the Health of Animals Act. As of January 1, 2001, cattle leaving 

the herds in which they were born—their “herd of origin”— 

were required to have an ear tag approved for use in the 

Canadian Cattle Identification Program. On July 1, 2001, the 

program was extended to include cattle leaving all premises, 

whether born there or not. Effective July 2005, tag distributors 

are required to report all tag sales to the national database 

within 24 hours of sale to the producer. Producers are required 

to report all tags from dead stock disposed of on the farm and 

dead stock leaving the farm to the national database to ensure 

that the tag number is retired. Similar animal identification 

regulations are now being debated in the United States. 

In Mexico, government support for the livestock industries has 

the primary objective of promoting productivity in production 

systems. Programs are operated by the federal and local 

governments, as well as through farmer organizations. Resources 

are limited and do not meet demand. Promotion programs for 

beef production operated through Alianza para el Campo focus

28 

on support for genetic improvement, integral project 

development and shepherding land recovery. Government 

assistance to hog production is implemented by two programs. 

The Genetic Improvement Program promotes acquisition of 

reproductive animals and breeding stock of better genetic 

quality. The Hog and Poultry Program promotes development 

of projects for the acquisition of infrastructure and equipment. 


Incentive payments are also paid to producers to encourage 

higher quality production that can meet the standards of 

federally certified harvest plants. In 2003, Mexico implemented 

a program to support grain consumption on hog farms, using 

contracts between hog and grain producers. 

Cross Border Animal/Product Movements 

Movements of animals and products across Canadian, Mexican 

and U.S. borders vary depending on such factors as exchange 

rate, regulatory programs, economies of scale, differences in 

grading systems, existence of home biases, threats of antidumping 

and countervail actions, and temporary production 

shortfalls due to disease or growing conditions. Two examples 

illustrate the impacts of border disruptions on location of 

investment, industry growth and productivity. 

In 1985, the United States imposed a countervailing duty on 

exports of both hogs and pork from Canada. The International 

Trade Commission (ITC) determined that exports of hogs from 

Canada threatened to injure the U.S. hog industry, and the 

duty on hogs was upheld. No other markets to which Canada 

was exporting were directly affected. In 1989, another 

countervailing duty allegation contended that exports of pork 

were being subsidized, causing injury to the U.S. pork industry. 

A duty was imposed in May 1989. Canada successfully 

challenged the decisions on subsidy and injury under both the 

General Agreement on Tariffs and Trade (GATT) and the 

Canada-U.S. Free Trade Agreement, and the duty was 

eliminated in 1991. 

The overall impacts of the countervailing duty were twofold. 

First, harvest/slaughter facilities expanded in Canada at a more 

rapid rate than had the markets remained fully integrated. 

Because of the countervailing duty, investment and related jobs 

in hog processing shifted to Canada from the United States. 

Second, the Canadian hog/pork industry strengthened efforts to 

expand market share for Canadian pork products in the Asian 

markets, in competition with products from other countries, 

including the United States. 

In a second example, the discovery of BSE in Canada in May 

2003 resulted in prohibition of Canadian exports of live cattle 

and beef products to the United States and other countries. 

This had a number of consequences in Canada: 

• The price of cattle over 30 months (OTM) in age fell 

dramatically, lowering the equity value in the herd held by 

Canadian farmers. While the usual expectation in markets 

with low prices is that the herd would diminish in Canada, 

the opposite has happened. OTM cattle are being held 

back and re-bred, in part because of the exceedingly low 

prices in Canada, and in part from the lack of adequate 

harvest/slaughter facilities in Canada. At the same time, 

heifers are entering the Canadian herd. Consequently, herd 

expansion and subsequent annual calf crops are increasing 

more rapidly than in previous periods, and more rapidly than 

would have been the case had the border remained open. 

• The fed cattle price difference between Canada and the 

United States has grown substantially—from about US$5-$6 

per hundredweight (cwt) to about U.S. $20-$30/cwt for 

the period after trade in boneless product from cattle under 

30 months of age (UTM) was re-established. For the packing 

industry in Canada, the result has been considerably larger 

margins than before May 2003, stemming from both the 

domestic market sales (because of the limited change in retail 

prices) and higher U.S. prices for exported boneless beef. 

• Faced with limited harvest/slaughter capacity and the 

growing realization of long-term insecurity of U.S. trade, 

major efforts are under way to expand harvest/slaughter and 

processing capacity in Canada. At the same time, packing 

plants in the border states of the United States are closing 

because of the loss of access to Canadian live cattle. 

In summary, trade restrictions and the atmosphere regarding 

trade in animals and animal products between Canada and the 

United States are prompting greater investment in 

harvest/slaughter capacity in Canada and a loss of similar 

investments and jobs in the United States. The Canadian cattle 

herd is expanding more rapidly than would have been the case 

without restrictions, and more rapidly than the U.S. cattle herd. 

Periodic or extended periods of trade disruption in one or more 

components of fully integrated markets can cause significant 

long-term effects in the size and competitiveness of an industry 

at farm and processing levels. Even though consumer-level 

prices may remain fully integrated, distribution of the margins 

within the value chain can change sharply for extended periods. 

As a result, location of investments, particularly for processing 

and distribution, can be expected to change over time in 

response to these unforeseen disruptions. 

Cost Drivers 

Access to Inputs 

Feed Costs and Future Nutritional Technology: Feed is the highest 

operating cost—50 percent to 60 percent—of most animal 

production operations. Any change in feed costs dramatically 

impacts profitability. Use of antibiotics, feed additives, dietary 

modifiers and specialized feed ingredients has focused on 

increasing animal productivity. Research works to determine


specific nutrient requirements for specific genetics. Recent 

biotechnology techniques have provided insight to the 

mechanisms controlling metabolism at the cellular level, 

allowing for development of diet modifiers or feed formulations 

to affect nutrient retention. These tools appear to be cost 

effective, contributing to increased production and/or an 

increased price for an improved quality of product. 

Reducing the crude protein level in monogastric diets and 

supplementing with essential synthetic amino acids have been 

important dietary changes for hogs. These shifts have reduced 

nitrogen excretion levels 25 percent to 50 percent, and reduced 

emissions of specific gases and odors from animal housing 

units. Reducing protein from plant sources and balancing the 

amino acid profile with synthetic amino acid reduce nitrogen 

excretion of excess amino acids. Use of the synthetically derived 

enzyme, phytase, which is also present in wheat and barley, can 

reduce phosphorus excretion up to 20 percent to 25 percent 

with no significant cost increases. 

Many animal producers use specific feed ingredients or enzymes 

to reduce phosphorus levels in manure because of regulations 

on phosphorus applications to agricultural land. Animal 

production in areas with these regulations is at a cost 

disadvantage, compared to areas in the world without such 

regulations. Some nutrition technologies influence the quality 

of the final animal product, which can potentially fit niche 

markets and result in value-added returns. 

While there will be considerable debate as to how much, as a 

general rule, U.S. farm support programs have reduced the cost 

of feed grains and oilseeds. For countries that support feed 

prices and restrict imports, such as the EU, feed prices are 

higher but more stable. These differences lay at the root of 

many trade restrictions in livestock products. 

Production Technology Innovations and Crop-Livestock Synergies: 

The primary method of manure management in North America 

is recycling the nutrients back into crop production (see 

Environmental Chapter). If grains and forages can be produced 

with the correct amounts of nutrients, and rations can be 

formulated to meet a specific animal’s requirements, the need 

to supplement diets will be reduced, reducing excess excretion 

of nutrients that need to be stored, treated and used on 

cropland. Costs would also be reduced, as would the pressure 

on the environment. 

The potential exists for relationships between animal and crop 

producers—the animal producer purchases grain from the crop 

operation, which then receives manure nutrients. This trade 

may result in economic advantages for each operation. In a 

long-term scenario of fertilizer costs increasing and fertilizer 

resources diminishing, the use of organic fertilizers may be 

much more valuable. In farms, regions or countries that import 

grain to feed animals because not enough is produced locally, 

manure nutrient management is more challenging. Operations 

are looking to treat, compost or generate energy by burning or 

biogas production from the manure to reduce the volume of 

nutrient-containing material that has to be hauled to fields (see 

Environmental Chapter). 

Feed costs are very competitive in North America compared to 

the global market. This is due to the relatively close proximity 

of feedstuffs and animal production, and the potential for 

developing market linkages for specialized feed crops and 

feed ingredients. 

Technologies are available to enhance the efficiency of animal 

production, and control the impact of animal production on 

the environment. Large operations can better afford and 

manage manure treatment technologies, particularly those with 

high fixed costs. They can spread the costs over a larger volume 

of product and have sufficient volume to potentially sell valueadded 

products. Environmental regulations requiring significant 

restrictions on producers will force the structure of the animal 

industry to much larger operations. Some technologies in 

nutrition or housing designs are size neutral and will not affect 

the structure of the industry, as long as the technologies are 

cost effective. 

Financing, Risk and Capital Access/Cost: Capital markets are 

relatively efficient in allocating funds to those who successfully 

manage risk and generate the highest returns. This 

generalization is more accurate in its application to the 

processing, wholesaling and retailing segments of the value 

chain than to smaller firms in the production sector. Firms that 

do not use modern technology, that are smaller scale, have 

relatively high costs, and/or have not used accepted tools and 

techniques to manage operating risks may encounter difficulty 

accessing financing at reasonable costs. 

The dramatic globalization of the capital/financial markets has 

dissipated the relative advantage the North American livestock 

market had over global competitors in accessing the capital 

markets at a competitive cost. The significant barriers and 

resulting higher costs that once restricted the flow of funds 

across country borders have declined. Firms that can show 

competitive returns are less constrained in access to financing in 

the form of debt or equity funds, regardless of their location in 

the world. 

One critical spatial or geographic/country difference that still 

impacts capital markets is country risk—the financial risk 

resulting from such fundamental economic forces as political 

stability, inflation, currency values and economic growth. 

Different countries have different business and political 

climates that result in different country risk premiums in 

capital/financial markets. In general, North America, and

30 


particularly Canada and the United States, have a less 

volatile economic and political climate and, thus, less risk. 

Consequently, financial markets generally reflect a lower-risk 

premium and cost of capital for investments in North America, 

when compared to other countries/locales. But that risk 

premium has declined and is less of a comparative advantage 

than in the past. 

The North American livestock industries, particularly in 

Canada and the United States, are well positioned in terms of 

global competitiveness and cost structure for access to financing 

and the capital markets. The capital market institutional 

structure, combined with efficient and effective risk 

management and mitigation procedures for borrowers and 

lenders, aids credit access and the flow of equity capital to the 

sector. Economies of size, combined with the multi-plant 

replicate expansion strategy and the broader adoption of 

strategies to manage operating risk, enable larger-scale firms 

to exhibit lower cost and expand more rapidly than smallerscale 

firms. The efficiency and product flow scheduling, 

quality management, traceability and risk mitigation advantages 

of more tightly aligned value chains have and will continue to 

transform the industries from open-access market coordination 

to vertical linkages through ownership, contracts or 

strategic alliances. 

Energy Costs and Ethanol Production: High energy prices 

increase costs of production. The United States has an animal 

production system that requires more fossil fuels than grazing 

or less confined systems. Some regions or countries will see 

higher energy prices in the form of higher cost transportation 

costs to import grain or higher irrigation costs to pump water 

to grow grain. The impact of increased energy prices will fall 

more heavily on the United States and Canada, relative to 

countries using less energy in production, processing and 

retailing. In 2002, approximately 8 percent of U.S. consumer 

expenditures for all food were energy related after the farmgate; 

this is even higher for animal products. 

Nitrogen fertilizer is a major component of the energy 

consumed in producing feed. From 1982 to 1997, the number 

of livestock farms decreased 50 percent and the number of 

confined animal units (1,000-pound liveweight per unit) 

increased 10 percent. This has led to situations where there is 

excess application of farm manure nutrients and an increasing 

number of crop farms depending totally on external sources for 

nutrient needs. The increasing value of animal manure could 

result in a slowing, if not reversal, of the trend toward more 

separated grain and livestock production farms. 

Corn-based ethanol has become a popular fuel additive in the 

United States. In September 2005, 77 new ethanol plants were 

planned or under construction in the United States. Ethanol 

production is a nonfeed demand for corn. Distillers grain, a 

coproduct of ethanol production, is used as an animal feed and 

will replace some corn and soybean meal as a source of calories 

and protein in rations. This is particularly true for ruminants— 

beef and dairy cattle—that can utilize the high-fiber distillers 

grain, and to a lesser extent for monogastrics, hogs and poultry. 

A negative impact of distillers grain and other coproducts is a 

concentration of and therefore higher excretion of nutrients, 

especially phosphorus. This will require more land for manure 

application to meet environmental regulations, or a costly 

treatment of manure to recover phosphorus for distribution 

off-farm. The increased costs of production due to higher feed 

costs from increased demand for corn for ethanol will be felt 

mostly in North America, decreasing the region’s world 

competitive position. 

Larger farms may have more options to save energy. To the 

extent that this is true, increasing costs should have little or no 

effect. It is currently unclear what impact increased ethanol use 

will have on the size and size distribution of animal producers. 

Higher energy prices coupled with ethanol production may 

move some livestock production closer to ethanol plants to 

lower transportation and distillers grain drying costs. Those 

savings may be partially or totally offset, however, by the 

increase in grain cost the closer to the ethanol plant. 

Access to and Price of Land and Water: North American 

producers have seen higher land values increase production 

costs and affect the geographic location of animal agriculture. 

In areas where land values have increased substantially because 

of urbanization pressures, it is not feasible to have landintensive 

animal agriculture. Currently, prices are increasing 

faster in urban areas and areas with recreation or aesthetic 

amenities. Intensive animal agriculture has developed in some 

less-densely populated areas. These types of production 

systems keep the land cost per unit of output lower by 

intensifying production levels or moving production to lower 

land prices elsewhere. 

Conflicts among humans, nature and all industrial sectors over 

access to fresh water will be one of the main challenges of the 

21st century. Agriculture is the biggest user of water in the 

economy. Livestock production’s use of water is minor 

compared to plant irrigation. About 60 percent of livestock 

water is for drinking. Other livestock water uses include 

evaporation from stock ponds; dairy sanitation; cleaning and 

waste-disposal systems; cooling of an animal or a product; and 

processing animal products. Sufficient access to and availability 

of fresh water resources will continue to impact the ability of 

North American livestock producers and processors to produce 

and compete in the world marketplace. The extent and severity 

of regulatory policies on water use will affect the costcompetitive 

advantage or disadvantage.

The Future 


Given the current situation detailed above and underlying 

economic trends, what is implied for the future of the North 

American livestock industry? 

Size, Scale and Supply Chains 

The North American livestock industry is expected to see 

continued consolidation to fewer and larger firms. For 

producers and processors with old technology, market prices are 

expected to cover variable costs, but will likely be inadequate to 

cover depreciation and other fixed costs. They will continue 

operating until buildings and equipment need replacement, at 

which time they may consider other alternatives. For small and 

modest-size operations, niche markets may provide 

opportunities. Alternatively, networking with others in a 

cooperative or other form of alliance may have high payoffs. 

For small-scale operations, the operating principle is not 

necessarily to be big, but to look and act big through networks 

or alliances, obtaining the efficiency and market access benefits 

of size. 

There will be increasing emphasis on managing and optimizing 

livestock supply chains, from genetics to end-users. This 

approach will improve efficiency through better coordination 

and quality control throughout the chain, reduce food safety 

risk, and increase the ability to quickly respond to changes in 

consumer demands. Retailers will impose consumer preferences 

on the production process through production specifications, 

including differentiated or specialized products, such as 

hormone free, organic or animal friendly. 

Food safety is a key risk for all segments of the livestock 

industry. Food products that make people ill, or in a worst-case 

scenario cause death, can quickly destroy brand value, the most 

valuable asset of a branded-food product company. Supply 

chain management using a traceback system, combined with 

quality-assurance procedures such as Hazard Analysis and 

Critical Control Point (HACCP), facilitates control of the 

system to minimize the chances of a food contaminant, or to 

quickly and easily identify the sources of contamination. 

Traceability is increasingly a key motivation for controlled 

origination of raw materials from certified suppliers to 

implement a supply chain philosophy. 

The management of livestock production is expected to trend 

toward more micro-management of specific production sites, 

specific pens and possibly even specific animals. The motivation 

will be to minimize costs and enhance product quality, and it 

will increase the amount of information available regarding 

what affects animal growth and well-being and product 

attributes that in turn will be used to refine the system. 

The supply chain approach will increase interdependence 

between the various stages in the production/processing/distribution 

chain. It will encourage producers and other members of the 

chain to form or join strategic alliances, networks and other 

linkages to improve logistics, product flow and information 

flow. Competition will occur in supply chains competing for a 

share of consumers’ animal protein expenditures, rather than 

individual firms competing for market share. 

Supply chain optimization concepts have a significant 

implication for growth of the livestock industries. In the past, 

decisions concerning location of production, processing and 

distribution centers were made in a relatively independent 

fashion. In the future, this will not be the case. It is unlikely 

that new processing plants of optimal size to capture economies 

of scale will be constructed without specific plans for building 

production systems to supply those plants. Producers are not 

expected to invest in production capacity without assurance of 

access to processing plants that can pay competitive prices for 

their products. The benefits of a coordinated system will result 

in the development of production-processing centers and the 

supporting infrastructure as the optimal strategy for growth and 

expansion of the industry. This strategy will not only influence 

the geographic location of the industry, but also further increase 

the interdependence among the segments of the industry. 

Industry Mobility and Location Decisions 

One of the most critical issues to shape the structure and 

location of the livestock industries in the future is storage and 

utilization of manure and other byproducts from production 

and processing, and mitigation of air and water pollution from 

the industry. The Environmental Chapter of this report 

provides a more detailed discussion of environmental issues, but 

key factors include: 

• recycling of animal manure, 

• processing manure into energy of other productive resources, 

• technological mitigation of nutrients and odors, and 

• relocation of the industry to geographic regions where there 

is more environmental absorptive capacity (lower population 

density, drier climates, fewer surface waterways, less 

permeable soils or sufficient crop production), or where there 

is more willingness to exploit the environment. 

Until and unless technological fixes to environmental and odor 

problems occur, this challenge will continue to dramatically 

affect the size, location and structure of the livestock industry. 

Investment capital is highly mobile, and capital markets are 

increasingly efficient at allocating funds to industries and 

geographic areas exhibiting comparative advantage. There is 

little reason to believe capital markets will not continue to 

provide adequate financing for future domestic and 

international expansion of the livestock and poultry industries.

32 


However, lenders are particularly conscious of risk and 

increasingly impose discipline on their customers to be efficient 

and utilize the best risk management strategies. This suggests 

that an increasing proportion of production will occur in 

integrated production/distribution systems—not only to 

capture the efficiencies of such a system, but also to reduce risk 

exposure in market prices, quantity and quality. Consequently, 

it will be increasingly difficult for traditional independent 

producers to access adequate funds unless they adopt current 

technology and use management strategies to reduce their and 

their lenders’ risk exposure. 

Technology is also mobile, and technological advances could 

dramatically alter labor requirements in production and 

processing. While labor and community issues are discussed in 

another chapter, the constraint of labor availability in some 

regions or sectors could be reduced by greater substitution of 

capital for labor. Production is increasingly automated and 

sophisticated, including use of electronic monitoring and 

measuring devices to determine real-time animal product 

quality characteristics. This information will be useful in 

rewarding producers for those attributes and in segmenting 

products into proper categories for efficient distribution to 

different end-users. 

The livestock industries will likely face new instabilities and 

financial risks from factors not previously considered. The 

increased interdependence that comes with supply chain 

alliances trades price and quality risk for relationship risk, such 

as a plant shutdown, contract termination or disease outbreak. 

There will also be increased variability in feed ingredient prices 

because of growing competition with the energy and industrialuse 

markets for corn and soybean products. 

Globalization brings greater dependency on export markets, 

which increases instability from exchange rate fluctuations, 

changing political policies in foreign countries, and weather 

conditions worldwide. Trade disputes and disease outbreaks will 

have greater impacts on the North American industry, as 

demonstrated by the outbreak of foot-and-mouth disease 

(FMD) in the United Kingdom and the cases of BSE in 

Canada and the United States. In addition, countries such as 

Brazil and Argentina are expanding production and exporting 

animal proteins into the global markets. 

A major change in North American and world livestock 

production and distribution is the globalization of ownership 

and operations of production/distribution firms. Japanese 

companies have already invested in pork production and 

processing systems in the United States (Oklahoma, Texas, 

Wyoming and Indiana). The EU is now encouraging European 

companies to locate operations in Asia, South America and 

Eastern Europe. U.S.-based companies have already invested in 

processing capacity in Canada, Mexico, Brazil, Eastern Europe 

and Asia. The livestock production/distribution industries are 

clearly becoming global in scope, not only with product exports 

and imports, but also with internationalization of production 

and processing. Today’s technological systems can easily be 

transferred to other areas of the world, providing an 

environment where internationally focused livestock firms will 

likely build capacity offshore. In the future, only a very few 

livestock firms are likely to dominate world production and 

processing and will source and sell products globally. 

In general, relatively low input costs, including feed, combined 

with modern technology and well-developed input and product 

markets, institutions and distribution systems, enable North 

America to be a competitive producer and supplier of quality 

livestock products. However, North America will be 

increasingly challenged in commodity production and lower 

value and quality animal products by Brazil in beef, pork and 

poultry, and by Australia and Argentina in beef. It will be 

important for the North American livestock industry to 

maintain and increase its emphasis on quality attributes and 

differentiated products to expand its position in the global 

animal product markets and industries. 

Environmental and odor problems may be significant deterrents 

to locating livestock production and distribution systems in 

various areas of North America. But it is highly likely that 

much of the expansion in production to meet increasing 

worldwide demand for animal proteins will be by North 

American or European integrated production/distribution firms 

or alliances, regardless of where the production and plants are 

located. North America cannot rest its competitive case on low 

cost alone—it must adapt products to specific markets and 

provide enhanced quality control and health and safety assurances. 

In summary, the consolidation trend to fewer and larger 

livestock and poultry operations is expected to continue. The 

economies of scale in production and processing are significant 

and will drive the optimal size of the facility, as well as the firm. 

Firm-level economies will be captured through effective supply 

chain management that improves cost efficiency and control, 

food safety and quality, and the ability to respond to consumer 

demands. Quality concerns will also drive more systemized, 

micro-managed production and distribution processes to reduce 

product variability and improve conformance with quality 

standards and consumer expectations of uniform product 

attributes. Technology will provide new efficiencies and 

information to better manage the system. Concerns about food 

safety and a drive to qualified suppliers and traceback will 

increase pressures and payoffs of tighter coordination along the 

production and distribution chain. 

Successful small to mid-size producers face serious survival 

challenges in determining how they fit into integrated supply 

chain structures. Higher revenue may be possible in valueadded 

niche markets where consumers pay high enough 

premiums for differentiated products to offset the increased cost


of producing, processing and distributing in small quantities. 

Small and mid-size producers may be able to capture the access 

and cost advantages of larger producers by joining a network or 

alliance that acts like a large producer. Both these options 

require a high level of interdependence among producers. 

Optimal processing plant capacity can be very large, requiring 

significant capital outlays and adequate supplies of live animals 

for efficient operations. Producers are not expected to invest in 

production capacity if access is not assured to processing plants 

that can pay competitively for products. This interdependence 

and supply chain advantages will result in development of 

production-processing centers and supporting infrastructure as 

the optimal strategy for growth and expansion in the industry. 

A critical issue that will influence the structure and location of 

the livestock industries is storage and utilization of the manure 

and other byproducts from production and processing. 

Mitigation of air and water pollution is a related issue. Current 

strategies are based on recycling manure nutrients to cropland 

at agronomic rates, or on producing energy from manure. Until 

technological fixes are developed, this challenge will 

dramatically limit the size, location and structure of the 

livestock industry. 

Livestock and poultry production and processing are 

increasingly mobile. Capital and technology can move 

anywhere in the world. North American firms can and have 

invested in production-processing centers in regions with 

comparative advantages. Likewise, such production-processing 

centers in North America may have foreign ownership. The 

livestock production/distribution industries are clearly 

becoming global in scope and in product exports and imports. 

In the future, few global livestock firms are likely to dominate 

world production and processing, and will source and sell 

products globally. 

Policy Options and Implications 

The business climate and fundamental drivers of change 

discussed above are likely to result in a North American 

livestock industry that is: 

• more concentrated and consolidated at all levels of the 

value chain; 

• more vertically aligned across the value chain with fewer 

open access market transactions between buyers and sellers; 

• more specialized, particularly at the production level; 

• dominated by commodity animal product production and 

distribution with modest expansion of differentiated 

products; and 

• cost competitive on a global basis, but with increasing 

concerns about the direct and indirect cost of regulation. 

These structural changes would appear to be a result of 

fundamental market forces combined with public or 

government policies that, in general, do not mitigate and may 

augment these forces. 

Possible alternative futures for the North American livestock 

industry include: 

• changed global cost competitiveness resulting from 

regulatory reform; 

• greater emphasis on differentiated animal protein products, 

rather than commodity production and distribution; and 

• less concentrated, smaller firms, independent, open market 

coordination, and more diversified production/distribution 

systems. 

What types of policies or business strategies could cause the 

industry to change direction, based on existing trends, to one of 

the alternative outcomes? 

Regulatory Reform 

Regulatory reforms that change the cost competitiveness of the 

North American livestock industries might be in the form of 

changes in environmental regulations, labor rules, immigration 

regulations or tax laws. Regulatory reform might include added 

restrictions on business models, such as contract production or 

vertical integration, more restrictive immigration policies or 

worker safety rules, increased environmental regulation, or 

restrictions on the use of feed ingredients/additives—all of 

which would generally increase costs for the North American 

livestock industries. 

Regulations can create benefits, as well as costs. For example, 

increased inspection, individual animal identification and other 

measures to monitor animal health and food safety will likely 

increase costs, but are increasingly critical to maintain and 

expand foreign market access. It is also the type of infrastructure 

necessary for a customer-driven, micro-managed supply chain. 

In general, the cost-competitiveness impact of various 

regulatory reforms is clear—more regulation increases privatesector 

costs, less regulation reduces costs. But in most cases, the 

specific magnitude is not known. Furthermore, regulations are 

frequently implemented, in part, to encourage the private sector 

to internalize costs that, prior to the regulation, they have been 

able to pass on to others. What is known in principle—if not in 

specifics or details—is that regulatory reform that limits 

economic activity and/or increases private-sector costs is 

disadvantageous to small-scale firms; decreases the innovation 

and adaptability of an industry to a changing business climate; 

discourages the private sector from investing and expanding; 

and undermines an industry’s global competitiveness unless 

other countries or locales adopt similar regulations.

34 

Differentiated Product Focus 


Consumers have diverse preferences among socioeconomic 

classes and across countries. Many consumers, particularly the 

more affluent, are demanding extrinsic food attributes above 

and beyond food safety or federal grading standards. These 

attributes include animal welfare, organic, social responsibility, 

environmental responsibility, free-range production, locally 

grown, and no use of antibiotics, synthetic growth hormones, 

or genetically modified organisms. Some European countries 

and/or companies are utilizing these attribute-based brands. 

Most of these attributes cannot be verified or discerned by the 

consumer through physical examination or consumption. 

Consumers must rely on supplier reputation or process 

verification and certification programs for production assurances. 

Assuring these types of attributes requires animal segregation 

throughout production, processing and marketing. Many of 

these differentiated production practices increase production 

costs relative to traditional commercial production methods. 

Reduced growth efficiency associated with not using growth 

hormones is one example. In addition to reduced production 

efficiency and product yield (e.g., less gain, parasite damage, 

etc.), there are higher infrastructure costs to verify that product 

standards are met. Differentiated markets and different 

pricing/product valuation structures are necessary to encourage 

such production practices. 

In general, differentiated products or process markets originate 

as niche markets. Niche markets often result in higher costs 

across production, processing and marketing. These are 

generally small markets meeting particular consumer demands. 

As such, consumers may be willing to pay the extra costs. 

There are essentially two ways to ensure strict production 

practices that cannot be verified post-harvest: vertical 

production and marketing arrangements audited to ensure that 

practices are being met, or vertical ownership of production, 

processing and marketing. This is one reason why farmers’ 

markets selling directly to consumers have been one of the 

prominent sources of these types of products. However, farmers’ 

markets or direct-farm marketing are generally only local in 

scope. Such farms rarely have the scale, logistics, capital, 

expertise or market access necessary to expand beyond highly 

localized niche markets. Organic certification, USDA Process 

Verified Program (PVP) or other third-party verification 

programs may provide the product integrity and consumer 

protection needed to sustain a differentiated market beyond the 

local scope. Larger firms often do not see sufficient market 

opportunities in specialized small niche markets, whether local 

or international. Research suggests that customer demands in 

some Japanese markets, such as pork produced from Berkshire 

hogs, are likely to be served by smaller packing firms. 

Success in developing niche markets generates market-based 

opportunities to maintain a small-scale independent diversified 

market segment. While unlikely to accommodate a large 

number of growers in the short term, it offers a strategy that 

does not rely on significant public intervention. However, 

public support for the development and implementation of 

certification and verification programs may provide the 

necessary infrastructure. It may offer growth opportunities for 

independent, small producers and processors. At some volume 

or margin, however, these markets may eventually attract 

investment from large-scale operators. 

Not all production process control is small, niche-type markets. 

For example, if a large multinational food service company 

demands beef produced without the use of antibiotics, this 

quickly increases the scope of the production, processing and 

marketing channel needed to meet this demand. Small, local 

firms generally would not be able to meet this scale of product 

demand. Where demand for such product differentiation 

originates will largely determine whether it is scale neutral 

or favors large or small production, processing and/or 

marketing firms. 

Maintaining Open Markets and Industry Diversity 

A North American livestock industry characterized by smallerscale 

firms, diversified production systems and traditional open 

access market coordination would likely result only with 

significant public-sector intervention to alter the fundamental 

forces discussed earlier. Particularly in the United States, such 

intervention has focused on the relationship of livestock 

producers with buyers and suppliers. Federal regulations in the 

United States include the proposed Producer Protection Act; 

banning or limiting packer ownership of livestock; anti-trust 

laws; the Packers and Stockyards Act; and court decisions 

concerning concentration and vertical business arrangements in 

the livestock industry. Some states also have restrictions on 

corporate farming. 

As noted earlier, there are concerns that marketing agreements, 

contracts and similar business arrangements are more conducive 

to larger operations; reduce spot market liquidity; reduce the 

availability of market information needed for efficient price 

discovery; and adversely affect smaller operations. Whether such 

arrangements are a result of, or a casual factor in, increased 

concentration in meat and livestock markets is unclear. The 

substantial horizontal contracting growth in hog production, 

for example, would suggest contracts enabled large production 

operations to get larger. However, numerous other factors 

contributed to the large horizontal integration in livestock 

production, including profits that attracted external capital, and 

advances in genetics, health, nutrition, and production 

management that increased economies of scale.


Contracting has enabled many smaller operations to remain in 

livestock production by contracting with horizontal and vertical 

integrators. Integrators provide a number of production 

services, capital and risk management that encourage smaller 

operations to continue in livestock production. For small and 

modest-sized operations, networking with other producers in a 

cooperative or other form of alliance is one way to increase 

competitiveness, increase access to markets and market 

premiums, and access high-quality genetics and other inputs, 

including better information and management skills. Publicsector 

interventions that limit business arrangements or size 

would make it difficult to capture the efficiency and other 

benefits of these business strategies. 

A key argument for public-sector interventions is concern about 

monopoly or monopsony power in the livestock industry value 

chains. Assessments of market power in the U.S. livestock 

industries have generally been inconclusive, or indicate limited 

impacts. Further analysis is warranted. If the structural changes 

are the documented result of market power or similar behavior, 

aggressive pursuit of remedies under anti-trust or other 

regulations is appropriate. However, assessing the competitive 

conduct or behavior of firms in value chain relationships— 

where risks as well as rewards are shared—requires more 

complex measures and metrics than the traditional focus on 

prices and margins currently used in anti-trust and market 

power assessments. 

An alternative to more restrictive interventions is to impose 

“rules of the game” that level the playing field or give some 

participants an advantage. For example, a more complete 

definition of the relative rights of various parties in contracting, 

ownership and other negotiated linkages might be possible. 

Prompt payment and custodial account provisions under 

current legislation for livestock buyers and grain merchandisers 

are examples. Other rules might relate to contract length, 

compensation if a contract is terminated early or without cause, 

and escape clauses for both contractor and contractee. A public 

policy response of providing educational programs, legal advice 

and dispute mediation or negotiation services might also 

be appropriate. 

Two additional issues must be assessed. First, how restrictive, 

comprehensive and limiting must such interventions be to have 

the desired results? In general, if the fundamental forces 

resulting in the structural and location changes are market 

driven, it will be costly to intervene. Such interventions would 

most likely have to be North American in scope to be effective; 

if only state or national, the livestock industry will relocate to 

areas or regions with less restrictive regulations. 

The second issue is potential unintended consequences of such 

interventions, particularly with respect to restricting packer 

ownership of livestock, various forms of contracting or other 

vertical business arrangements. For example, it appears that the 

intended impact of the proposed Producer Protection Act is to 

reduce potential exploitation of producers by processors and 

packers in contractual arrangements, and to foster continuation 

of a relatively independent agricultural sector. A key concern is 

whether the rules imposed would maintain a relatively 

independent agricultural structure, or instead encourage vertical 

integration through ownership of production facilities by 

processors and packers. 

Restricting packer ownership of livestock would eliminate 

vertical integration in its purest form—ownership of livestock 

raw materials—but is unlikely to reverse the trend toward 

tighter alignment in the livestock supply chain, or re-establish 

the dominance of independent livestock producers and open 

access market coordination between producers and packers. 

Because this restriction would eliminate the possibility of 

vertical integration, the other choice of governance structure to 

obtain some of the benefits of vertical alignment is through 

marketing contracts. The economic pressure may be to create 

very tightly controlled marketing contracts with a limited set of 

preferred suppliers—producers with the ability to deliver the 

quality and quantity of livestock needed by the packer to take 

advantage of market demand. Preferred suppliers would have an 

extremely close relationship with the packer and would, in 

effect, act as an agent or franchisee, imitating the vertical 

integration structure. This leaves most other producers in an 

unchanged situation—limited market access and the need to 

sign contracts (albeit with production companies rather than 

packers) that specify production practices and livestock ownership. 

There is a compelling argument that consolidation and vertical 

coordination in the livestock industries are driven by 

fundamental economic forces. Market opportunities for niche 

products will, in some cases, provide opportunities for smallscale 

production/processing systems, but government 

regulations or interventions to recreate a smaller scale, 

independent firm, diversified livestock industry are likely to be 

ineffective unless carefully crafted and quite restrictive. If 

effective, the objectives or anticipated benefits of consolidation 

and coordination will not be achieved, undermining the global 

competitiveness of the North American livestock industry. 

Knowledge Gaps and Research Needs 

Coordination and Value Chain Structures 

Development of value chain coordination strategies and systems 

are costly, time-consuming endeavors, requiring considerable 

cooperation among vertical partners and customers. More 

information is needed regarding attributes of effective 

coordination strategies, understanding of anticipated customer 

demands, implications of various forms of vertical coordination 

strategies on economic efficiency, competitiveness, market 

access, and implication of risk shifting. Having reliable market 

information from which to negotiate long-term contracts and 

alliances is a critical need. Livestock harvesting/slaughter is

36 

highly concentrated and information asymmetry is present, 

especially in contracts and marketing agreements. Additional 

efforts to determine the type of information needed by 

market participants is important to ensure a competitive 

market environment. 


Source Verification, Identity Preservation and Food Traceability Systems 

There is a critical need for better understanding of the benefits, 

costs and functionality of food product traceability and identity 

preservation systems. In the absence of government edicts, 

economics will dictate the type of traceability system used in 

each segment of each industry. Developing technology 

continues to reduce costs and increase technical feasibility of 

enhancing information collection and product and animal 

tracking. Coordination among technology developers and 

economic researchers is essential to assess market needs and 

economic viability of new systems. Economics has considerable 

information to bring to the debate about mandated versus 

market-driven animal and/or meat product traceability systems. 

Increased assessment of market implications of alternative 

governance and regulation of traceability systems is needed. 

New Markets, Niche Markets 

Better information is needed on the scope of niche and highly 

differentiated markets for meat products. Several critical issues 

must be addressed to further understand the impact and 

implications of differentiated products and their respective 

influence on North American producers, processors and 

markets. Vertical production and marketing systems must be 

considered to determine what is required to efficiently verify 

and supply differentiated markets. The industry will need to 

carefully assess risks to producers. 

Regulatory Costs 

The significant impact that regulatory costs have on cost 

competitiveness relative to size of firm and location is critical to 

understand the global competitiveness of the North American 

livestock industry. Uniform regulations are not size neutral 

because it is generally less costly per unit of output for large 

firms to comply than it is for small firms. Different regulations 

in different communities or locales will differentially impact 

costs. Solid empirical estimates of regulatory costs by size and 

geographic location are generally unavailable, but are essential to 

understand regional and global competitiveness. 

Cross Border Animal/Product Movement 

To understand and plan for border disruptions in the North 

American animal and animal products markets, further analysis 

of three issues is needed: 1) the impacts of changing margins on 

investment location, production levels and changing trade 

patterns; 2) differences in animal disease regulations and their 

enforcement; and 3) how to design and implement rules on 

reopening borders closed by disease outbreaks. Today, reopening 

borders is a lengthy and complicated process, even though the 

foundation by international agreement is science-based. New 

rules and planning for such disease-related events would 

contribute to more rapid restoration of trade, more efficient 

investment decisions and greater certainty in returns. 

Production Technology Innovations 

Research is needed on chemical, biological and enzyme 

technologies to enhance the efficiencies of altering and retaining 

nutrients in manure to give a return for processing manure and 

reduce environmental issues. One example is technology to 

stabilize nutrients in the soil, particularly nitrogen, until used by 

plants. Work is needed on technologies to extract energy from 

manure and institutions to encourage it. Biogas systems are 

feasible for large operations, but require significant 

management. The added costs and lack of incentives from 

utility companies make this technology impractical for most of 

the animal industry. The residue or sludge from this process 

contains considerable nutrients that need to be land applied to 

cropland similar to unprocessed manure. 

Research to manipulate or control the genome of enteric 

bacteria and control the incidence of pathogens in the animal’s 

gastrointestinal tract could minimize the threat of pathogens 

contaminating processed food products. The role of 

microorganisms, feed ingredients and feed additives on the 

immune function and disease control of production animals is 

another area of research interest. Advances in determining the 

action and control mechanisms of disease could result in the 

development of control agents through diet modifications, 

genetic modifications or feed additives. 

Energy Costs and Ethanol Production 

More analysis is needed of the impact of rising energy costs on 

the North American livestock industry. Higher and more 

volatility prices will change existing cost relationships. Higher 

energy costs increase costs of production, but also increase the 

value of manure as a fertilizer source, and energy from manure 

may be feasible. Another unknown is what will happen to corn 

prices and net feed costs as ethanol production increases. 

Transportation costs for grain, distillers grain and ethanol will 

be important factors on the location of both energy plants and 

the animal agriculture industry. 

Costs of producing and processing 

A critical research need to better understand the competitiveness 

of the North American livestock industry is a comparative 

analysis of the cost of producing and processing various animal 

products in different geographic locales in the world. Critical 

dimensions of this analysis would be to use a standardized 

methodology to measure these costs and to complete the 

analysis for both commodity products, as well as higher-valued 

differentiated products.

References 


Bradford, E., R.L. Baldwin, H. Blackburn, K.G. Cassman, and P.R. Crosson. (1999). “Animal Agriculture and Global Food 

Supply.” Task Force Rep. 135 Ames, IA: Council for Agricultural Science and Technology. 

Coffey, B., J. Mintert, S. Fox, T. Schroeder, and L. Valentin. (2005, April). “The Economic Impact of BSE on the U.S. Beef 

Industry: Product Value Losses, Regulatory Costs, and Consumer Reactions.” Kansas State University Agricultural Experiment 

Station and Cooperative Extension Service, MF-2678. 

Dickinson, D.L. and D. Bailey. (2002). “Meat Traceability: Are U.S. Consumers Willing to Pay for it?” Journal of Agricultural and 

Resource Economics, 27, 348-364. 

Drabenstott, M., M. Henry, and K. Mitchell. Where have all the Packing Plants Gone? The New Meat Geography in Rural America. 

Federal Reserve Bank of Kansas City. 

Feenstra, G.W. (2005). “What Is Sustainable Agriculture?” University of California–Davis. Available at: 

http://www.pbs.org/ktca/ farmhouses/sustainable_agriculture.html. 

Golan, E., B. Krissoff, F. Kuchler, L. Calvin, K. Nelson, and G. Price. (2004). “Traceability in the U.S. Food Supply: Economic 

Theory and Industry Studies.” U.S. Department of Agriculture, Economic Research Service. Agricultural Economic Report 

Number 830. 

Goldsmith, P. and H. Idris. (2001, November). The Economic Impact of Illinois’s Livestock Industry. University of Illinois at 

Urbana-Champaign. 

Goldsmith, P. and J. Kim. (2002, August). The Economic Impact of Illinois’s Livestock Industry: Supply-Chain Linkages. University of 

Illinois at Urbana-Champaign. 

Grier, K. (2003, November). Commentary on Exchange Rate Impacts on Hog/Pork Competitiveness. Available at 

http://www.georgemorris.org/GMC/Publications/Competitiveness.aspx. 

Grimes, G. and R. Plain. (2005, January). “U.S. Hog Marketing Contract Study.” Department of Agricultural Economics Working 

Paper No. AEWP 2005-01, University of Missouri. Available at: http://agebb.missouri.edu/mkt/vertstud05.htm. 

Groen, AB F., and K. Greef. (2003). “Societal Concerns About Pork and Pork Production and Their Relationship to the Production 

System.” Journal of Agricultural and Environmental Ethics, 16, 137-162. 

Hayenga, M., T. Schroeder, J. Lawrence, D. Hayes, T. Vukina, C. Ward, and W. Purcell. (2000, May). Meat Packer Vertical 

Integration and Contract Linkages in the Beef and Pork Industries: An Economic Perspective. Report for the American Meat Institute. 

Available at http://www.agmanager.info/livestock/marketing/bulletins_2/industry/packer/AMIReport.pdf. 

Herath, D.P., A.J. Weersink, and C.L. Carpentier. “Spatial and Temporal Changes in the U.S. Hog, Dairy, and Fed- 

Cattle Sectors, 1975-2000.” Review of Agricultural Economics, 27(1), 49-69. 

Johnson, A.S. (2003, February). “Export Opportunities.” Agricultural Marketing Resource Center, Iowa State University. Available 

at http://www.agmrc.org/agmrc/commodity/livestock/beef/beef+natural.htm. 

Liddell, S. and D. Bailey. (2001). “Market Opportunities and Threats to the U.S. Pork Industry Posed by Traceability Systems.” 

International Food and Agribusiness Management Review 4, 287-302. 

Market Integration of the North American Animal Products Complex: (2005, May). LDP-M-131-01. 

Molnar, J., T. Hoban, and G. Brant. (2002). “Passing the Cluck, Dodging Pullets: Corporate Power, Environmental Responsibility, 

and the Contract Poultry Grower.” Southern Rural Sociology, 18(2), 23-32. 

Muth, M.K., G. Brester, J. Del Roccili, S. Koontz, B. Martin, N. Piggott, J. Taylor, T. Vukina, and M. Wohlgenant. (2005, July). 

“Spot and Alternative Marketing Arrangements in the Livestock and Meat Industries.” Interim Report Prepared for The Grain 

Inspection, Packers, and Stockyards Administration, U.S. Department of Agriculture. RTI International, Research Triangle Park, 

NC. Available at http://151.121.3.117/psp/issues/livemarketstudy/LMMS_Interim_Report.pdf. 

National Agricultural Statistics Service (NASS). (2005). “2002 Census of Agriculture Summary.” Washington, DC: U.S. 

Department of Agriculture, NASS. Available at http://www.nass.usda.gov/wv/.

38 


Ochoa, V. and S. Zahniser. (2003). “The Mexican Hog Industry: Moving Beyond 2003.” Paper prepared for the Policy Disputes 

Information Consortium’s Ninth Agricultural and Food Policy Workshop Farm Policy Developments and Tensions with NAFTA, 

Montreal, Quebec. 

Oenema, O. (2004). “Governmental Policies and Measures Regulating Nitrogen and Phosphorus from Animal Manure in 

European Agriculture.” Journal of Animal Science, 182, E196-E206. 

Purdue University Cooperative Extension. (1997). “FoodSystem 21.” Purdue University Cooperative Extension. Available at 

http://www.agecon.purdue.edu/cab/research/articles/FS%2021%20 Hog_Pork%20Sector.pdf. 

Ribaudo, M., N. Gollehon, M. Aillery, J. Kaplan, R. Johansson, H. Agapoff, L. Christensen, V. Breneman, and M. Peters. 

“Manure Management for Water Quality: Costs to Animal Feeding Operations of Applying Manure Nutrients to Land.” 

Economic Research Service, U.S. Department of Agriculture, Washington, DC. Agriculture Economic Report 824. 

Schroeder, T.C., C.E. Ward, J. Lawrence, and D.M. Feuz. (2002, June). “Fed Cattle Marketing Trends and Concerns: Cattle Feeder 

Survey Results.” Kansas State University Agricultural Experiment Station and Cooperative Extension Service, MF-2561. 

Schroeder, T.C. and J. Kovanda. (2003). “Beef Alliances: Motivations, Extent, and Future Prospects.” The Veterinary Clinics of 

North America Food Animal Practice, 19, 397-417. 

Shapouri, H. and A. McAloon. (2005, July). “The 2001 Net Energy Balance of Corn-Ethanol.” USDA, U.S. Department of 

Energy, Energy Information Administration, Monthly Energy Review. 

Souza-Monteiro, D.M. and J.A. Caswell. (2004, June). “The Economics of Implementing Traceability in Beef Supply Chains: 

Trends in Major Producing and Trading Countries.” University of Massachusetts Amherst Working Paper No. 2004-6. 

Sutton, A.L., J.F. Power, D.L. Day, J.P. Fontenot, D.L. Forster, D.M. Huber, K.A. Kelling, T.A. McCaskey, J.A. Moore, and L.M. 

Safley, Jr. (1996). “Integrated Animal Waste Management.” CAST Rpt. 128. 

Sutton, A.L., K.B. Kephart, M.W.A. Verstegen, T.T. Canh, and P.J. Hobbs. (1999). “Potential for reduction of odorous 

compounds in swine manure through diet modification.” Journal of Animal Science, 77, 430-439. 

Tegtmeir, E. and P. Duffy. (2004). “External costs of animal production in the U.S.” International Journal of Agricultural 

Sustainability, 2(1), 1-20. 

Thaler, R. (2002, August). “Use of Distillers Dried Grains with Solubles (DDGS) in Swine Diets.” South Dakota Extension, ExEx 

2035. Available at http://www.distillersgrains.org. 

Tonsor, G.T. and T.C. Schroeder. (2005). “Livestock Identification: Lessons for the U.S. Beef Industry from the Australian 

System.” Working Paper, Department of Agricultural Economics, Kansas State University, Manhattan, KS. 

U.S. Department of Agriculture - Economic Research Service. (2005, September). Mandatory Price Reporting Report. Available at 

http://www.ers.usda.gov/Publications/LDP/Sep05/ldpm13501/. 

U.S. Department of Agriculture - Foreign Agricultural Service. (2005, March). “Livestock and Poultry: World Markets and Trade.” 

Available at http://www.fas.usda.gov/dlp/circular/2005/05-04LP/toc.htm. 

U.S. Department of Agriculture - Foreign Agricultural Service. (2005, September). “GAIN Report; 9/1/2005.” GAIN Report 

Number MX5077. 

Weida, W.J. (2001). A Review of the Proposal and Draft DEQ Permit for a Farrow-to-Finish Hog Operation by Big Sky Farms, 

LLC in Cassia County, ID. 

Weida. W.J. (2004). “Industrial Animal Production in the United States.” Department of Economics. Colorado Springs: Colorado 

College, and the Global Resource Action Center for the Environment. Available at 

http://www.factoryfarm.org/docs/Economic_Implications_of_CAFOs_1500.doc. 

Williamson, O.E. (1979). “Transaction-Cost Economics: The Governance of Contractual Relations.” Journal of Law and Economics, 

22 (1979), 233-261.

Chapter 3 

Consumer Demand Issues 

Consumers worldwide are driving changes in animal 

agriculture. Rising consumer income, changing demographics 

and lifestyles, and shifting preferences due to new information 

about the links between diet and health all contribute to new 

demands for foods. At the same time, technological changes in 

production, processing and distribution, structural change and 

growth in large-scale retailing, and expansion of trade 

worldwide have contributed to a rapidly changing market for 

food products. Changes in demand for meat and other animal 

products reflect these developments. 

Population growth in North America and the rest of the world 

is a major factor that drives demand for livestock and meat 

products. During the next 15 years, North America’s 

population is expected to grow slowly, while Europe expects a 

population decline (Table 1). As the rate of natural population 

growth slows, populations age. The shift in demographic profile 

with the aging population leads to changes in diet preferences. 

Across all regions, Asia has by far the largest population, and 

China and India account for the largest share. Both Asia and 

South America will have population growth during the next few 

decades, and that population growth represents opportunity for 

expanded markets for livestock and meat products. Although 

Africa is expected to have the fastest population growth of all 

regions, countries in Africa may lack the income to be a 

significant market for North American meat products. Asia is 

the fastest growing market in absolute terms. To put things in 

perspective, a 1 percent increase in the population in Asia is 10 

times more people than a 1 percent increase in North America. 

Household income is also an important determinant of the 

amount and types of foods purchased. As income rises, people 

purchase more food, though the percentage of income spent on 

food declines. This relationship is true in cross-country 

comparisons, as well as for households. As income rises, there is 

also a shift from grains to animal protein sources and, as 

income continues to rise, to lean animal protein sources. 

Thus, developing economies are important potential markets 

for North American meat production. Consumers in developed 

economies with higher income may shift their purchasing 

decisions on the basis of quality, convenience, or specific 

characteristics of the product or how the food was produced 

and processed. 

This chapter examines the impact of these major trends 

on consumer demand for meat and other animal products in 

North America. The chapter begins with an overview of current 

North American and global markets for animal products. Next 

is a discussion of key trends and drivers of change in demand, 

including retailing, product innovation, and diet and health. 

The chapter ends with a discussion of future directions, policy 

options and areas needing more research. 


Basic demographics of the number, age and income of a 

country’s people are major determinants of food demand. These 

slowly changing statistics can be anticipated with some degree 

of accuracy based on current trends. Population growth on all 

continents is expected to slow during the next 15 years (Table 1). 

In North America, population growth rates are projected to 

decline in Mexico, Canada and the United States. Following 

rapid growth from 1950 through 1990, Mexico’s population 

growth rate is 2 percent today, and it is expected to be nearly 

1 percent in the period 2000 to 2010. In-migration and 

increased ethnic diversity affect the general slowdown of 

population growth in Canada and the United States, although 

the magnitudes differ. A large proportion of Hispanic 

immigrants to the United States are young in age. Their faster 

rate of population growth has kept U.S. population growth 

rates from declining relative to the population growth rate in 

other industrialized countries, such as Canada, Japan and 

Australia. Recently, the United Nations projected that the 

population growth rate of the United States, though less than 

1 percent annually, would surpass that of Mexico and China by 

2025. In Mexico, the overriding shift has been internal, with 

people moving from rural to urban areas. Today, 75 percent of 

Mexico’s population lives in urban areas, and that percentage is 

expected to increase. With a slowdown in population growth, 

North America’s populations are getting older, with fewer 

children, more adults and more elderly (Figure 1). These 

changes contribute to slower growth in aggregate food demand. 

Income provides consumers with the ability to purchase food 

and other goods, and it is an important determinant of the level 

and types of goods and services purchased. During the last 25 

years, there has been a significant increase in income 

39

40 

worldwide. The World Bank predicts that during the period 

2000 to 2015, per-capita income growth in most areas of the 

world will continue to grow, with the exception of East Asia 

(Bruinsma, 2003). Higher income allows consumers to spend 

more on food and have greater discretion in spending, 

especially on such preferred foods as animal protein sources 

and specialized food products. 

One measure of income is Gross Domestic Product (GDP) per 

capita. The United States has the highest GDP per capita 

among developed nations, and Canada is comparable to 

other developed countries (Figure 2). However, Mexico has 

approximately one-sixth that of the United States. Differences 

in income, prices and underlying preferences contribute in large 

part to differences in diets across North America and to changes 

in diet over time. Despite rising prices for food, income has 

risen faster, and the percent of income spent on food has fallen. 

On average, U.S. consumers spend only about 10 percent of 

disposable personal income on food (USDA-ERS, 2003). In 

Canada, the food share of personal disposable income is 

approximately 14 percent (Statistics Canada, 2003). The share 

of income spent on food in Canada is larger than in the United 

States, as per-capita income in Canada is lower. For both 

countries, the share of income spent on food has fallen over 

time as per-capita income has increased. 

For Mexico, lower per-capita income on average means 

that a higher share of the average consumer’s budget goes to 

necessities, including food. Today, Mexican consumers spend an 

average 26.6 percent of total expenditures on food (USDA- 

ERS, 2005b). This compares with 38.8 percent in 1968, and 

41.3 percent in 1984. With income growth, the additional 

income spent on food went first to more diversified products in 

the diet. Then the percentage of income spent on food declined. 

The low share of income spent on food in Canada and the 

United States means that most consumers have some discretion 

in how they spend money, and, in aggregate, choose to spend 

a lower share of income on food or choose higher quality 

products and meat cuts. For example, in Canada, per-capita 

beef consumption has not gone up significantly, but there is a 

change in demand for quality beef and value-added products. 

Consumers are buying more quality beef (steaks) and more 

ready-to-eat, prepackaged meats, such as shish kebabs or filet 

mignon. In the United States, consumers rank quality as the 

most important attribute in purchasing meat products (Food 

Marketing Institute, 2005). 

While there are similarities in the consumption demand for 

protein related to income, demand for specific meat products 

varies in each country. Total consumption of meat in the 

United States and Canada has remained relatively stable during 

the last several decades at nearly 200 pounds per capita, with 

the largest share of meat coming from red meat sources (Figures 

3 and 4). In both countries, poultry consumption has increased 


in share. In Mexico, average consumption of meat in 2004 was 

about 146 pounds per capita, nearly double the level of meat 

consumption in 1990 (Figure 5). Of the total, about half was 

from beef or pork—nearly 40 pounds of beef and 35 pounds of 

pork—and more than one-third was from poultry, 53 pounds 

per capita. Mexican consumption of variety meats is much 

higher than in the other North American countries. 

Within certain animal species, the preferences for the 

appearance, marbling and size of meat cuts may vary 

significantly. Fat color is an important determinant of 

purchasing preferences for Mexican consumers, as both 

grass- and grain-finishing techniques are available and may 

result in different fat and marbling characteristics. A much 

higher percentage of the beef in United States and Canada is 

grain fed. Another difference of consumers across North 

America is the demand for small-serving muscle cuts—a 

common preference in industrialized, urban regions. In 

contrast, demand for roasts, legs and quarters, especially of 

sheep and lamb, is strong by consumers with more time and 

less income available to purchase more processed muscle cuts. 

Immigrants from Asia, Africa and parts of Latin America have 

strong preferences for goat meat and milk. In the United States, 

goat meat and animal sales have risen sharply during the last 

several decades. The number of goats slaughtered at U.S. 

federally inspected plants has tripled since 1990, and many 

more goats are sold live or freshly processed through facilities 

that are not federally inspected. 

In high-income countries, consumers do not change their shopping 

habits when income and prices are relatively stable. Studies 

indicate that a large change in income would be required for 

U.S. consumers to change how much meat they buy. Changes 

in income bring somewhat greater response in Canada and in 

Mexico. Of course, in any of the three countries, significant 

price or income changes may change meat-shopping behavior. 

Increases in income are also associated with changes in the 

composition of foods consumed. In general, higher income 

consumers have diets that are more varied. With increases in 

income, the primary source of calories changes from root crops, 

cereals and other staples to animal products. Protein sources 

shift from cereals and pulses to animal products. Data across a 

wide range of countries show that the share of protein from 

animal sources increases as incomes (GDP) rise, but the rate 

of increase then slows. Increasing demand for protein sources 

implies that there will be an increase in the total demand for 

protein, as well as a redistribution of demand across the various 

meats and fish, which act as substitutes for each other. While 

demand for fish is not specifically investigated here, as income 

increases, consumers may prefer fish as part of the overall 

increase in protein consumption. Higher income consumers 

also demand other food attributes, such as variety, added food 

preparation and convenience.

The consumer food demand pyramid, illustrated in the 

figure below, presents a simple model of the consumer choice 

process (Kinsey, 2000). The idea of a food demand pyramid 

suggests that low-income consumers focus first on meeting 

survival needs (the base of the pyramid). Obtaining sufficient 

calories, lower priced foods and safe foods are basic concerns. 

At lower income levels, food safety may imply foods that are 

not spoiled. More information about food quality and safety, as 

well as higher income, lead consumers to expect foods to be safe 

from microbial contamination and other health hazards. 

Consumer Food Demand Pyramid 

Source: Kinsey, 2000 

At higher income levels, consumers begin to use their 

dollars to purchase products that satisfy preferences above and 

beyond basic nutritional needs, such as better taste, variety and 

convenience. For example, developing countries increase meat 

demand as the economy improves. Once needs lower on the 

food pyramid have been met, consumers at higher income levels 

want expanded information about their food, and how food 

products affect health and lifestyle. High-income consumers 

also begin to be concerned about the impact that individual 

food consumption decisions and choices have on other people, 

the environment and animals. Thus, as incomes increase, the 

demand for food products with different characteristics evolves, 

presenting both opportunities and threats to existing and 

potential food producers. Higher income consumers provide 

opportunities for niche producers that are willing and able to 

produce to this diverse set of standards (see Economics of 

Production, Processing and Marketing Chapter). However, lowto 

moderate-income families in developed countries and people 

in developing economies still demand an increasing amount of 

affordable animal proteins. 

Retailing 

The retailing landscape has changed significantly during the last 

two decades. Twenty years ago, traditional groceries in the 

United States represented 90 percent of at-home food purchases; 

Consumer Demand Issues 41 

today, they represent less than 70 percent. At-home food sales 

in nontraditional stores, including large retail giants like Wal- 

Mart, Costco and Target in the United States, and other types 

of nontraditional stores, such as buying clubs or convenience 

stores, have dramatically increased in market share (Leibtag, 

2005). Wal-Mart represented 11 percent of all food-at-home 

sales in 2003, up from 3 percent in 1998. Today, Wal-Mart is 

the largest food retailer in both the United States and Mexico. 

In Canada, increased consolidation and concentration in retail 

food markets has meant that the large retailers control a larger 

share of retail sales than in the United States or in Mexico. 

The increased power of nontraditional grocery retailers, 

combined with consumer preference for convenience, 

easy-to-handle, prepackaged meat and other food products, 

have resulted in low-cost, nearly-identical-quality products 

available to all customers. 

An important customer for meat processors is the food 

service industry. It has increasingly demanded prepackaged 

products and cuts to substitute for costly labor input at the 

service end. At the same time, new technologies in processing 

and distribution have led to changes in the marketing of meats, 

with increases in the sale of cut-up, or boxed, meat and poultry, 

or sale in prepackaged units. 

While there is growth in large, retail giants in the food 

retailing industry, small retail units have become an increasingly 

vigorous segment of the food retail market. This trend is reflected 

in Wal-Mart’s development of small-scale “neighborhood” 

stores, and growth in direct sale and distribution of meat 

products. Specialty stores, Internet-based markets, smaller sized 

retail markets, and direct marketing methods for meats have 

strengthened the presence of this niche market segment of food 

retailing. The changes are driven by: 

• higher income consumers choosing to avoid large 

grocery chains; 

• some revitalization of downtown areas; 

• growth of select, high-quality brands; and 

• growth of formal and informal markets to meet 

demand from ethnic consumers for different meats 

and meat products. 

Food retailing also includes the rapidly growing food-awayfrom-home 

category. Total away-from-home expenditures, 

defined to include all food dispensed for immediate consumption 

outside of the consumer’s home, amounted to $415 billion in 

2002. That is about 58 percent greater than annual away-fromhome 

expenditures in 1992 (Stewart et al., 2004). Food-awayfrom-home 

expenditures as a share of total U.S. food 

expenditures reached 50 percent in 2004 (Figure 6). Higher 

income and time-starved consumers in North America are 

buying more convenience with their meals. These expenditures 

include meals at fast-food as well as sit-down restaurants.

42 

Trade and Global Market for Food 

Income growth worldwide, urbanization, improved distribution 

and transportation, and changes in the scale and concentration 

of production have contributed to expanded trade and a global 

market for animal products. The Organization for Economic 

Cooperation and Development (OECD) projects world trade in 

meat to rise, with relatively large growth in meat consumption 

in some developing countries, especially China (Figure 7). 

The global nature of the food market today expands 

market opportunities, generating new customers for exporting 

countries and expanded supplies for importing countries. 

Increasing integration of the North American market for pork 

and beef has generated trade in live animals and processed 

products (Hahn et al., 2005). Trading opportunities allow 

markets to take advantage of consumers’ varied preferences 

for meat cuts. An example is the sharp increase in imports of 

processed pork products and variety meats from the United 

States to Mexico, versus whole pork carcasses. Canada exports 

more than 50 percent of its pork, with the main import market 

being the United States, both for live hogs for finishing or 

processing, and final consumer goods (Hahn et al., 2005). 

Some Canadian pork processed in the United States is then 

exported back to Canada. 

Consumers in both the United States and Canada are 

confident in the safety of their own country’s food supply. U.S. 

consumers are concerned about the safety of food products and, 

more recently, about antibiotics and use of hormones in 

livestock (Figure 8). U.S. consumers perceive meat produced in 

the United States to be safer than meat imported from any of 

six other nations (Figure 9). This strong consumer confidence 

in domestic meat is the result of both the U.S. government and 

industry efforts. Canadians, too, are confident in their own 

food supply. Recent consumer surveys show that more than 90 

percent of Canadian consumers thought the overall quality of 

food produced in Canada was better than in other countries, 

and 34 percent thought Canada has better production 

standards and practices. Although 90 percent of consumers 

were confident in the food supply, of those with concerns, 

the majority were concerned about animal diseases 

(Ipsos-Reid, 2004). 

Consumer Perception About Safety and New Technologies 

New developments in food production and processing 

are creating opportunities for food attributes not previously 

possible. The public is aware that some new products touting 

benefits to nutrition or weight loss have little real effect or even 

cause harm. Also, they often perceive that new products, even 

those with overall positive benefits, may have limitations and 

can bring about negative consequences for some segments of 

the population. Emerging agricultural technologies focus on: 1) 

designing foods to improve nutrient levels, deliver pharmaceuticals 


and support weight-loss diets; 2) obtaining greater efficiencies 

in production and enhancing the nutrient content of the diet 

through genetic modification; and 3) improving food safety, 

especially for a population expected to be older and more 

susceptible to food-borne illness. 

All emerging agricultural technologies, even those with overall 

favorable qualities, can create public concerns about safety, 

social equality, environmental quality and ethical treatment 

of living organisms. As the public becomes more removed 

geographically from food production and conceptually from 

foods produced and processed with advanced scientific techniques, 

public responses have become more skeptical. Gaining consumer 

acceptance of complex and sometimes controversial new 

agricultural technologies and understanding commercial 

agricultural practices require good information about 

consumer perceptions and effective communication programs. 

Improved risk communication techniques are part of more 

effective discussion with the public. To some extent, effective 

risk communication depends on recognizing the psychological 

aspects of public perceptions. Public perceptions of control, 

willingness to provide assistance to others, and the competence 

and trustworthiness of scientists, for example, play important 

roles in consumer decision making (Sapp and Korsching, 

2004). In addition to these psychometric factors, perceived 

sensitivity to commonly held values regarding protection of 

local food systems and the environment also affect public 

opinions. Endorsements from respected agencies that are 

perceived as trustworthy and without vested interests in a 

particular technology become especially important as food 

technologies become increasingly difficult for the average person 

to fully understand. For issues related to animal agriculture, 

U.S. consumers place relatively high trust in government 

sources and policies to assure food safety, and relatively less 

trust in industry or producer systems (Christensen et al., 2003). 

Forces and Drivers of Change 

Several major trends affect consumption of animal products, 

including rising income; population growth and changing 

demographics; changing markets and technologies for food; 

new scientific knowledge about diet and health; and consumer 

preferences for and information about the foods they eat. 

Increasing globalization through trade liberalization, as well as 

new information and transportation technologies, has changed 

the perspective of who is the consumer of products. 

Understanding the consumer’s role in affecting the future of 

animal agriculture and implications for change can be addressed 

in the context of these trends. 

Income 

As income levels increase, consumers buy more food and 

change the form and quality of food they purchase. They

devote less time and effort to food preparation and reallocate 

spending away from raw food products to foods with various 

amounts of preparation or processing. Consumers also eat a 

larger share of their food away from home. The entry of more 

women into the labor force also contributes to demand for 

more services in the food products purchased. Recent consumer 

surveys indicate consumers continue to look for ways to cut 

time in food and meat preparation. These changes will create 

opportunities for more value-added animal products. Value is 

added through innovative processing and preparation and in 

new and improved product and production characteristics. 

Consumers are also placing greater trust in others for the safety 

and quality of the product. 

In the United States today, nearly 50 percent of food 

expenditures today are for food eaten away from home, 

compared with 33 percent in 1970 (USDA-ERS, 2005). The 

share of food expenditures spent on meals away from home has 

risen in Canada, as well, to 34 percent in 2004 from 25 percent 

in 1961 (Zafiriou, 2005). In Mexico, fast-food chain sales have 

increased. Consumption of traditional foods, such as tacos and 

tortas, has declined about 50 percent during the last 10 years; 

consumption of tortillas dropped about 25 percent between 

1998 and 2004, according to the National Council for Corn 

Processors in Mexico. 

Another measure of this shift is the share of food expenditures 

that goes to marketing costs and services. In 2003, U.S. 

consumers spent $796.7 billion on food. In 2000, 81 percent of 

consumers’ spending went to marketing costs and services, and 

only 19 percent was paid to farmers for domestically produced 

food (USDA-ERS, 2005). The relatively large share of 

expenditures on food away from home and the large share 

of expenditures spent on marketing services illustrate the 

significant shift of consumers’ food purchases now going to 

food processing, preparation and distribution services outside 

the home. 

Population Growth and Changing Demographics 

Growth of population in North America and the rest of the 

world will lead to increased demand for food. There is, however, 

considerable difference in the population changes within each 

country. Canada’s recent population growth rate has been 

relatively slow, gaining 4 percent between 1996 and 2001 

(Industry Canada, 2004). Canada also has relatively low 

population density, although more than 64 percent of its 

population lives in metropolitan areas. In the United States, 

about 80 percent of the population lives in metropolitan areas. 

In Mexico, nearly 75 percent of the population lives in urban 

areas, with that number forecast to be 82 percent by 2030. 

Population growth and other demographic factors affect food 

consumption—location and population density generate 

different employment and market opportunities; dietary needs 


change throughout the life cycle; and ethnic and cultural 

differences affect preferences for foods. Three major demographic 

trends shaping North American food markets are more women 

in the labor force, an aging population and greater ethnic diversity. 

Women have entered the formal labor markets in larger numbers. 

This has brought significant social and economic change, and 

reduced the amount of time women have available in 

households for meal preparation. In the United States, 43 

percent of women over the age of 16 years were working in 

1970; by 2000, 61 percent of women worked in the labor force, 

compared with 74 percent of men (U.S. Census Bureau, 2000). 

In Canada, 62 percent of women participated in the labor force 

in 2004, up from 46 percent in 1976 (Zafiriou, 2005). In 

addition to significant migration from rural to urban areas, 

Mexico has seen a decline in the fertility rate, to an average 

2.4 children, compared with 3.2 in 1990 and 6.4 in 1970. 

In Canada, 74 percent of the population reported they 

prepared food during the week. According to a 1998 time-use 

survey, Canadians over 15 years of age who were engaged in 

preparing food spent 7.7 hours per week preparing food for 

their families (Zafiriou, 2005; Statistics Canada, 1999). In the 

United States, 54 percent of the population participated in 

preparing food, and time spent by the average adult age 15 and 

over helping with food preparation and cleanup was 7 hours 

(U.S. Department of Labor-Bureau of Labor Statistics, 2005). 

The percentage of women working outside the home has 

stabilized in the United States and Canada, after rising rapidly 

during the 1970s and 1980s. The employment of more women 

in the paid labor force has increased pressure on time available 

in the household, and increased demand for convenience in the 

purchase, preparation and eating of food. Food is purchased at 

convenient locations and times, prepared with little time input 

and often eaten outside the home. For example, in Canada, 

frozen food sales increased an average of 8 percent annually 

between 2000 and 2003 (Zafiriou, 2005). In Mexico, 

household time allocation has changed with the rising levels of 

education and migration to the urban areas. This has led to a 

shift from home-grown, locally obtained foods and traditional 

homemade products to convenience and prepared foods. 

Traditional homemade corn tortillas have given way to 

commercially processed corn tortillas. In 1984, the use of 

industrialized foods, including processed meats, canned tuna, 

powdered milk, yogurt, instant coffee, powdered chocolate and 

mayonnaise, was notably absent from the diets of the population 

in rural Mexican communities; in 1996, processed foods 

contributed 6 percent to 13 percent of total energy intake. 

The higher value of household time and increased demand for 

convenience has led to changes in products available in the 

meat case. Roasts and broiler chickens have been replaced by 

steaks, ground beef and chicken breasts. Deli counters and the 

meat selections offered have also increased.

44 

Increased urbanization of the North American population leads 

to more available food establishments and more meals and 

snacks eaten away from home. The related trend toward more 

dual-career families, where both partners live in an urban area 

or where one rural partner commutes to work in an urban area, 

is likely to continue to boost away-from-home and prepared 

food expenditures. Urban households consume more prepared 

foods and, due to geographic proximity, are more likely to have 

prepared foods delivered to the home. Urban dwellers consume 

more processed than fresh foods and less pork and beef (USDA- 

ERS, 2005) compared to rural residents. 

The second major demographic trend affecting food markets is 

that the population of North America and most developed 

countries is becoming older—people are living longer, and birth 

rates are relatively low. Older consumers eat less total food and 

are likely to have different food preferences. As people age, they 

lose taste buds and seek foods that have enhanced flavor but 

without large amounts of sodium or fat. Obesity affects all ages. 

However, changes in metabolism lessen the ability of older 

people to engage in strenuous exercise and increase susceptibility 

to weight gain. Demand by the older generation for the health 

attributes of meat are expected to influence demand for meat 

(Lin et al., 2003). With increased attention to choosing a diet 

that may reduce heart and stroke disease risks, older consumers 

can also be expected to consume more fruits, vegetables and fish 

(Blisard et al., 2002). 

In the United States, the baby-boomer generation (born 

between 1946 and 1964) is the wealthiest in history. As these 

consumers age and demand lean protein, they are able to afford 

to purchase smaller, but more expensive processed meat cuts 

that meet their preferences or desired attributes. These 

consumers will be less sensitive to relative price. When eating 

out, older adults can also be expected to eat smaller portion 

sizes. Older consumers tend to eat away from home less often; 

however, an increasing number live and eat in an institutional 

setting, and food service in this area is growing. 

In the United States and Canada, average household size is 

smaller, with fewer traditional families with two parents and 

children. There are more young adults living on their own or 

with unrelated adults, more single parents with children, and 

more older, single-person households. In the United States 

today, just over half of households are married-couple 

households; one-fourth are single-person households, similar to 

Canada. People in smaller households eat more food away from 

home, spend more per capita on food and, when eating at 

home, prefer more processed and ready-to-eat foods. 

The third demographic trend is increasing ethnic diversity. 

During the next two decades, population growth in the United 

States will be strongly influenced by Hispanics and Asian 

immigration. About 10 percent of the U.S. population is 

foreign born, nearly double that of 1970. In contrast to the 


early part of the 20th century, today more than half of those 

foreign born come from Latin America. The U.S. population 

growth rate is projected by the United Nations to be higher 

than that of Mexico by 2025 due to immigration and higher 

birth rates among the younger, immigrant populations. In 

Canada, immigration has been increasing during the past 

several decades. Net immigration is the main contributor to 

population growth (Industry Canada, 2004). Most immigrants 

to Canada during the last decade have ethic origin from Asia or 

the Middle East (Zafiriou et al., 2002, citing Statistics Canada). 

The growth of more ethnically diverse populations in the 

United States and Canada is expected to lead to changes in 

food consumption: increases in fruits, rice, poultry and fish, 

and decreases in dairy (Blisard et al., 2002). Ethnic preferences 

can also be expected to result in demand for different types 

of meat, including lamb and goats. Demand for meat or 

animal carcasses may also be related to religious holidays and 

celebrations resulting in identifiable demand spikes. Increased 

ethnic diversity has already introduced changes in the types of 

foods and food preparations consumed throughout the 

population at home and away from home. For example, Davis 

and Lin (2005a and 2005b) found that U.S. Hispanics ate 

more beef and less pork than the national average. These 

changes reflect increased consumption levels by new ethnic 

groups, as well as increased globalization of food choices by 

traditional consumers. 

Changing Food Markets 

Major changes have occurred in the retail market for food. 

There has been increased consolidation and concentration in 

retail food markets. Expansion of private brands and changes in 

food distribution channels mean retail food stores are larger, 

offer more variety and services, and are open more hours. These 

stores exert increasing control in the retail market. North 

America has seen a dramatic increase in the consolidation and 

concentration of food retailing during the last 10 years. In 

Canada, the five largest supermarket chains have 90 percent 

of supermarket sales (Conference Board of Canada, 2005). 

Although the market share of the top five food retailers in 

Canada was lower than for many European countries, relative 

to the United States, Canada has a more concentrated food 

retailing industry (Zafiriou, 2005). Expansion of the Mexican 

market has allowed an increase in new stores that provide a 

variety of products to consumers. The retail food industry has 

been characterized by very low profit margins; however, margins 

vary by store department and by combining food sales with 

general merchandise—which often has higher profit margins— 

to attract the time-scarce consumer. 

Wal-Mart is the No. 1 retailer and the No. 1 food retailer in the 

United States today. At the same time, other food stores in 

North America are increasing sales of general merchandise in an 

attempt to capture a greater share of the household shopping

dollar. Many of the retail environments of department stores 

or convenience stores are unsuitable for fresh meat products; 

however, these stores can offer prepared and convenience frozen 

entries. In addition, standardization of fresh meat products 

available in Super Wal-Mart stores has met the needs of 

consumers with little time to search for appropriate cuts, 

experiment with new products or prepare food. As a buyer of 

product, Wal-Mart has significant impact on processing and 

distribution. Despite more uniform product, nontraditional 

stores tend to have lower prices. A recent study by USDA’s 

Economic Research Service indicates nontraditional retailers’ 

dairy product prices are 5 percent to 25 percent lower than 

traditional retailers, though regional differences are also a factor 

(Leibtag, 2005). 

Recent surveys show U.S. consumers choose food stores 

on the basis of cleanliness, quality of fruits and vegetables, 

and quality of meats (FMI, 2004). Canadian and Mexican 

consumers have similar preferences to U.S. consumers. While 

the retail shopping experience seems to be losing its diversity, 

there is evidence of an increase in market segmentation across a 

variety of products. In many market areas, though primarily 

in metropolitan areas, there is growth in specialty stores for 

breads, coffees and deli items. Farmers’ markets offering fruits, 

vegetables and some animal-sourced products have developed 

to meet the preferences of consumers who prefer local suppliers, 

organic foods or other fresh products. In Mexico, the growth of 

larger department stores meets other demands by consumers for 

convenience and having a variety of products in one place. 

New Food Technologies 

Consumers now demand greater food variety and the 

availability of these foods year round. Technological innovations, 

as well as improved information and transportation technologies, 

have significantly changed the way food is produced, processed, 

transported and delivered to consumers. The “new food 

economy” incorporates information, production and distribution 

technologies that have reorganized distribution channels 

(Kinsey, 2000). New technologies allow increased integration of 

various market activities and increased use of private contracting 

in global supply networks. Buyers are now associated with large 

retail food networks, where reputation, quality and delivery are 

important attributes of the transactions. A leading force in 

Canada is the strong control of retail chains in the market. 

These retailers traditionally used importers, brokers, distributors 

and wholesalers as suppliers, but, increasingly, they are contracting 

directly with farmers and processors, or integrating vertically. 

For example, most major retail food store chains in Canada 

have acquired their own dairies to supply fluid milk and dairy 

products to their stores (Zafiriou, 2005). Many of the large 

retailers make direct food procurement of perishable products, 

such as dairy, produce, meat, poultry and value-added items 

(Zafiriou, 2005; Dimitri, Tegene and Kaufman, 2003). 


Increasing competition in food retailing in Latin America has 

retailers focused on improving procurement networks to reduce 

transaction costs (Zafiriou, 2005). Use of distribution centers, 

contracts with wholesalers and producers, and private standards 

specifying quality, safety, volume and packaging have developed 

as larger food retail stores work to capture efficiencies in 

distribution. Today, there are 9,400 self-serving grocery stores 

in Mexico, with Wal-Mart accounting for 710 of these stores. 

In the period January through May 2005, Wal-Mart reported a 

13 percent growth in sales, while other similar chains had an 

increase of almost 10 percent. 

While they benefit from the convenience, variety and low prices 

achieved through large-scale production and distribution 

channels, consumers also demand assurance of quality. Larger, 

more coordinated networks enable food retailers to track food 

inputs through supply networks and demand products with 

more specific attributes. In such systems, retailer and brand 

name offer assurance to consumers of attributes that are 

difficult to observe or measure. Even consumer preferences for 

foods viewed to promote health or environmental benefits, 

including organic, non-genetically modified and “natural” 

products, benefit from food systems with tighter control and 

traceability. At the same time, many small producers and 

retailers have not been able to survive the intense competition 

of the new food economy. An increasing share of world food 

retail sales is controlled by large global food retailers. 

New Science on Diet and Health 

The dietary guidelines released by the U.S. Department of 

Agriculture influence nutrition education, public policy and 

food programs. The latest guidelines, released in 2005, provide 

guidance on food choices with recommendations for weight 

management and physical activity. The guidelines encourage 

consumption of fruits and vegetables, including increased 

variety; whole grain consumption; and use of low-fat milk and 

equivalents. Recommendations are made to limit fats, especially 

saturated fats and transfats; choose carbohydrates from fiberrich 

fruits, vegetables; and limit intake of added sugars. In 

Mexico, the government is preparing its first set of dietary 

guidelines that will include recommendations on the “plate 

of good eating.” The government’s public health guidance is 

expected to advise consumers to balance their diet by eating 

a mix of three food groups: fruits and vegetables; cereals; 

and beans and all animal products. Canada’s Food Guide to 

Healthy Eating (Health Canada, 2005) and current dietary 

recommendations emphasize the importance of whole grains 

and vegetables and fruit. Dietary guidance stresses the 

importance of eating a variety of foods, eating more fruits and 

vegetables, and eating a balanced meal. Increased interest in 

reducing fat intake and type of fat consumed points to limited 

intake of saturated fat.

46 

In both the United States and Canada, the percent of the 

population that falls short of adequate intake of calcium is 

relatively high. Iron deficiency, especially for women of 

child-bearing age, remains an important concern. Calorie 

and fat intakes remain above recommended ranges. Despite 

recommendations to limit intake of transfatty acids, consumers 

in the United States and Canada have little awareness or 

understanding of this food component. It is likely that producers 

and processors will lead in changing the composition of foods 

with this ingredient, spurred in the United States by new 

legislation for labeling transfat content. 

Obesity is a major health problem. Nearly 30 percent of 

people in the United States, 23 percent in Canada and 

52 percent in Mexico are obese. In Mexico, the most recent 

government national survey, in 2000, found that about 

60 percent of men and 64 percent of women were either 

overweight or obese. In the United States, the figure is about 

50 percent for women and 63 percent for men. Most alarming 

is that the rate of childhood obesity is rising. Mexican health 

authorities have identified an increase in diseases linked to 

obesity, including heart disease. This is due to diet and lack of 

physical activity. Mexican researchers are investigating whether 

consumption of such meats as ostrich, sheep, goat and deer 

may reduce consumers’ risk of disease risk and improve 

health. Public campaigns stress changing nutritional habits, 

consumption of a balanced diet of foods from all nutritional 

groups, more variety in foods low in sodium and fat, and 

increased consumption of foods rich in vitamins and minerals. 

To date, the campaigns promoting health have had little effect, 

and obesity in Mexico, as in Canada and the United States, 

remains a major health concern. 

Despite public health problems such as obesity, U.S. consumers 

show a decreased concern for the nutritional content of their 

food, although fat is at the top of the problems they identify 

(FMI, 2004). Low fat is the top health claim on food products. 

Foods associated with a healthy diet are fish, high-fiber foods 

and dairy foods. Tracking trends in Canada show quality and 

nutrition to be top concerns of consumers when buying food. 

Verifying/Certifying Product Attributes 

Food safety continues to be a major concern of consumers, 

although consumers today are more confident in food product 

safety today than they were in the late 1990s. U.S. consumers 

rank bacteria contamination as the top food-related hazard in 

2004 (Figure 8); however, concerns about antibiotics and 

hormone use in livestock are increasing. 

A 2003 U.S. survey asked respondents to indicate the agency 

they believed would be most suitable to certify the origin of 

meat (Figure 10). Approximately 60 percent preferred the 

government to certify the origin of meat products, reflecting 

strong confidence in the government. Third-party independent 


certifiers were preferred by 22 percent of respondents, and local 

producers 13 percent (Loureiro and Umberger, 2005). 

Organics are one of the fastest growing segments of the food 

market, in part because organic foods present an alternative 

for consumers concerned about specific production practices, 

seeking specific product attributes or products that are locally 

produced. Organic food is produced without use of synthetic 

fertilizers, pesticides, growth regulators or livestock feed 

additives and on farms certified to meet organic standards. A 

significant share of Canadian, U.S. and international consumers 

purchase organic products. With growing market demand, 

mainstream food companies are adding organics to their 

portfolio of products. Organic products are now available 

in nearly 20,000 natural food stores and 73 percent of 

conventional grocery stores, and account for approximately 

1 percent to 2 percent of total food sales in the United States. 

In 2000, for the first time, more organic food was purchased 

in conventional supermarkets than in any other venue 

(USDA-ERS, 2003). 

Summary 

Rising levels of income, changing lifestyles, urbanization 

and other demographic changes have contributed to increased 

consumption of animal products, prepared foods and food away 

from home. Increased attention is being given to the problem 

of obesity, and how to integrate dietary guidance and science 

into recommendations and policies that work to improve 

the quality of diets consistent with the changes in income, 

demographics and market for foods. 

Globalization of the food supply, rising incomes and increased 

urbanization provide consumers access to an increasingly wide 

range of products. Income is projected to continue to rise in all 

three North American countries. The faster growth of income 

in developing countries worldwide will lead to continued 

growth in demand for animal source foods. OECD projects 

increasing trade in agricultural products and that the 

competitiveness of North America will largely determine its 

potential to share in this growing market. However, slowing 

population growth means demand for total calories will also 

slow. There will be a continued role for food away from home, 

but increasingly the source and types of food will change (more 

fruits and vegetables in fast food, more delis in grocery stores, 

convenience built into products for home use). The aging 

population (and smaller households) will support this trend. 

Fundamental attributes that drive consumer demand 

for animal products are that the foods are safe and provide 

nutrition; taste good; provide variety in the diet; are 

convenient; and contribute to good health. Changes in retail 

food marketing are likely to lead to a more diverse market for 

animal products. Growing populations and incomes in developing

economies will increase demand for safe, wholesome and 

affordable animal protein products. Developed economies with 

higher, but still rising incomes are expected to fuel demand for 

niche market products that are produced and marketed to 

deliver specific attributes for the consumer. 

Implications 

Where will these forces take North American animal agriculture? 

1. Food safety will continue to be a paramount consumer expectation. 

While being relatively uninformed about how safe food is 

produced, consumers will become increasingly intolerant of 

food safety failures. Regulation and product processing and 

packaging will continue to evolve to provide more guarantees 

of food safety. For many consumers, information on and the 

ability to trace product attributes (product and process) will 

substitute for food safety in product selection, leading to a 

wider variety of food safety/quality indicators—from home 

grown, local farm or animal welfare friendly to contracted 

international suppliers. In both the United States and Canada, 

consumers have relatively high expectations for the safety of 

products, generally consider domestic production to be safe, 

and have confidence in government sources of information. 

Mexican consumers, especially those with less income, are less 

sensitized to issues of food product safety and choose animal 

products primarily on the basis of price (see Food Safety and 

Animal Health Chapter for discussion on changing standards in 

Mexico to address consumer expectations). This may change 

with continued growth of supermarkets and greater control on 

marketing channels, and standardized inspection services (TIF), 

especially if the pricing differences in markets begin to narrow. 

Demand for safe, wholesome and affordable meat in Mexico is 

expected to increase as the Mexican economy continues to 

grow. Per-capita meat consumption in the United States and 

Canada is near 200 pounds per year, while Mexico is 165 

pounds per year. 

2. As North American incomes continue to increase, consumers 

will choose products on the basis of varied attributes, 

including taste, variety and convenience. 

Animal-sourced food product and process attributes have 

become very important for North American consumers. 

Increased variety in diets often comes about with other changes 

in the food supply, including increased food away from home. 

Consumers have shown increasing interest in variety offered 

through ethnic foods, and these choices provide ways to 

increase food variety. Though consumers may not be familiar 

with production methods, higher income consumers may 

choose products on the basis of attributes related to production 

process, such as natural, organic or “family-farm,” associating 

that process with product quality. Production methods, 


especially at the producer level, have become a shortcut for 

consumers to high-quality attributes and safe food products. 

Labeling is an important tool to communicate product 

attributes, including food safety. To some extent, increased use 

of labels reflects the public’s interest in informed choice 

regarding complex and sometimes controversial new agricultural 

technologies, and the growing market for imported foods. 

Country-of-origin labels might require onerous recordkeeping 

and operating procedures, and imply agreement with food 

safety concerns. For prepared foods, food processors may need 

to determine how much of a food is traditional or genetically 

engineered, domestic or foreign. Informing consumers may 

be a complicated and costly task. 

Labels may provide large amounts of product information, but 

when the information is complex or requires understanding of 

nutritional relationships, consumers may not be fully informed. 

For example, the United States will soon require labeling of the 

composition of fats in products, including 

transfatty acids. This information, which now appears on 

labels, will require consumers to become more sophisticated in 

understanding product comparisons. Despite changes in foods 

consumed and relatively high incomes and education levels, 

U.S. and Canadian consumers still demand low-priced food. 

3. Continued concentration of large-scale processing, 

food distribution and retailing may reduce consumer 

choice in markets. 

Today’s producers and processors are well equipped to meet 

consumers’ demands for quality, low-price food. Transnational 

firms have been growing and have advantages for providing 

lower costs and standard food quality sourced from around the 

globe. Large retailers will offer a variety of foods, though their 

market power presents the potential to restrict consumer choices 

and increase prices. Some newer retailers, such as Whole 

Foods and Wild Oats, have increased market share by offering 

alternative products to some—often high-end—consumer 

segments. It is important to recognize that not all stores will be 

larger stores; small producers and retailers may serve specific 

markets, especially in urban areas. In some markets, large firms 

will dominate food retailing and food distribution. Internet 

shopping may allow consumers access to specialty markets and 

products, but, to date, many consumers prefer to shop in-store 

locations. Where smaller stores and smaller store format exist, 

the stores may be owned by large retailers, raising the potential 

for lack of competition in food markets. 

Policy Options 

Here are four options for addressing the challenges facing 

the North American animal agriculture industry relative to 

consumer issues and demand.

48 

1. Make product standards, certification programs and 

standards more uniform across North America. 

Food safety is a public good across national borders. As 

production, processing and distribution systems for animalsourced 

foods become more integrated, food safety problems 

in one country can quickly pose problems in another country. 

One approach is to strengthen governmental regulation and 

public involvement in setting product standards, mandating 

testing, certification and process control. Harmonization of 

standards across North America would enable firms within the 

three nations to operate on a level playing field with greater 

market transparency, and maintain credibility within the 

integrated food systems. At the same time, increased 

governmental regulation is costly and does not allow firms 

the flexibility to develop their own food safety systems. 

Alternatively, the growth of strong retailing chains can 

support private systems for food safety and quality control 

through internal mechanisms, e.g., vertically integrated food 

supply chains or private mechanisms. Brand name and sales 

under contract are strong incentives for maintaining food 

quality control in food chains. Animal identification systems, 

whether publicly mandated or required by private contracts, are 

one method by which food retailers and food service can 

maintain control of product quality. This may be either source 

verification (in terms of animal identification) or process 

verification (such as organic production). Large food service 

operators have looked to requiring animal identification and 

traceback systems to maintain input quality control. 

It is important to recognize consumer preferences for 

food products are different in the three countries. Mexican 

consumers prefer animal cuts and products that differ from 

those preferred in Canada and the United States. Trade that 

takes advantage of differences in consumer preferences is likely 

to benefit consumers in all three countries. 

2. Enhance the ability of consumers to obtain information 

on products and make use of labeling information. 

There is increased competition in providing various product 

and process food attributes, but consumers may not understand 

the attributes. Lack of or imperfect information leads to 

markets that do not work well and consumers who may lose 

confidence and trust in the quality of the food system. A 

challenge is to present a large amount of information, both 

in quantity and variety, to consumers in forms they can 

understand. This includes information on health and nutrition 

attributes, food handling and warnings. Although much of the 

information is regulated through federal agencies, private 

companies and brands also have incentives to promote desired 

food attributes through labels and advertisement. New methods 

and technologies may provide alternatives to traditional 


media for educating consumers. The Internet and electronic 

information have been used in the retail store environment to 

provide more detailed information to motivated consumers. 

The role of public agencies may be to decide what type of 

information to provide to the general consumer. 

3. Educate consumers about production agriculture. 

Consumers have become distant from production agriculture. 

Lack of information can lead to consumer misconceptions 

about production methods and techniques. At the same time, 

production agriculture is under increasing scrutiny from 

consumer groups. Both sources may threaten continued 

growth in animal product consumption and perpetuate lack of 

understanding about issues surrounding production agriculture. 

Educating consumers about commercial agriculture and 

enhancing the public’s knowledge and awareness of food 

production methods may have long-term benefits in maintaining 

consumer confidence and growth in demand for animal 

food products. 

The increasing scientific complexity of food production 

and processing has placed greater burdens on consumers. 

Most consumers are not highly educated about food science 

or scientific principles. Yet increasingly they will be asked to 

accept more technologically advanced foods and make choices 

concerning more complex issues regarding nutritional content 

and health. Food companies, public officials and educators will 

be challenged to effectively communicate to consumers about 

food and production issues. The communication will address 

scientific uncertainty and choices, as well as problems inherent 

in production agriculture and food processing and new 

technologies to address those problems. 

4. Promote a competitive retail and distribution environment. 

Different food retailing environments exist within the North 

American market. The dominance of four or five large firms 

characterizes both the Canadian and U.S. markets. Wal-Mart 

and other very large, nontraditional retailers 

are having a significant effect on retailing. This type of 

environment provides increased consumer product choice at 

low prices; however, it may reduce consumer choice over other 

products that may serve smaller consumer segments. In some 

markets, the presence of large merchandisers coexists with 

smaller, niche segments. In other cases, the presence of large 

firms may limit the ability of smaller market segments to 

survive. Some suggest that the governments be more aggressive 

in preventing concentration in food retailing to preserve 

consumer choice. However, given rapid change in the industry, 

it is not clear that government action would actually result in 

more choice than is produced by an industry in rapid transition.

Information Needs 

Long term, how will consumers respond to major health 

problems such as obesity? Many consumers have indicated a 

willingness to change eating habits to reduce weight, but the 

efforts have been relatively short-lived. What are the most 

effective approaches to reining in weight gain? How can longterm 

gains be made that meet consumers’ preferences for 

variety, as well as food that is safe, tastes good, is convenient 

and meets more limited calorie requirements? 

What are consumers’ sources of information? How will they 

balance new information and conflicting messages from many 

References 


different sources about complex scientific information? Is there 

a mechanism to enhance the methods and provision of 

unbiased information to help the public weigh choices in 

the market? 

In an increasingly competitive and global environment, 

do consumers benefit or lose with consolidation of retailing? 

Consolidation among food retailers is relatively high in Canada 

and the United States, and increasing in Mexico. Yet, compared 

to other non-food industries, concentration is not very high. 

Can smaller niche markets coexist in the current retail 

environment and under what conditions? 

Agriculture and Agri-Food Canada. (2005, September). An Overview of the Canadian Agriculture and Agri-Food Sector. 

Available at http://www.agr.gc.ca/cb/apf/pdf/bg_con_overvu_e.pdf. 

Ballenger, N. and J. Blaylock. (2003). “Consumer Driven Agriculture.” USDA-ERS. 

Blisard, N., B.-H. Lin, J. Cromartie, and N. Ballenger. (2002). “America’s Changing Appetite: Food Consumption and Spending to 

2020.” Food Review, 25(1): 2-9. 

Bruinsma, J. (ed.) (2003). World agriculture: Towards 2015/2030. An FAO Perspective. London: Earthscan Publications, Ltd. 

Canadian Restaurant and Food Service Association. Online. Available at http://www.crfa.ca/research/#industry. 

Christensen, B.J., D. Bailey, L. Hunnicutt, and R. Ward. (2003). “Consumer Preferences for Public and Private Sector 

Certifications for Beef Products in the United States and the United Kingdom.” International Food and Agribusiness 

Management Review, 6 (3): 19-39. 

Conference Board of Canada. (2005, Spring). Canada’s Retail Trade Industry: Industrial Outlook. Canada: The Conference Board of 

Canada. ISSN 1713-7594. 

Coordinación General de Ganadería SAGARPA (2005). http://www.sagarpa.gob.mx/DesktopServlet. 

Davis, C.G. and B.-H. Lin. (2005a, May). “Factors Affecting U.S. Pork Consumption.” Outlook Report No. LDPM13001, 

USDA-ERS. Available at http://www.ers.usda.gov/Publications/LDP/may05/ldpm13001/. 

Davis, C.G. and B.-H. Lin. (2005b, October). “Factors Affecting U.S. Beef Consumption.” Outlook Report No. LDPM13502, 

USDA-ERS. Available at http://www.ers.usda.gov/Publications/LDP/OCT05/ldpm13502/. 

Davis, D.E. and H. Stewart. (2002). Changing Consumer Demands Create Opportunities for U.S. Food System. USDA-ERS. 

Dimitri, C., A. Tegene, and P.R. Kaufman. (2003, September). U.S. Fresh Produce Markets: Marketing Channels, Trade Practices, 

and Retail Pricing Behavior. Agricultural Economic Report No. AER825, Economic Research Service, U.S. Department 

of Agriculture. 

Food and Agriculture Organization (FAO). (2004). FAOSTAT Food Supply data. Available at http://faostat.fao.org. 

Food Marketing Institute. (2004). Trends in the United States: Consumer Attitudes and the Supermarket 2004. Washington, D.C.: 

Food Marketing Institute. 

Food Marketing Institute. (2005). U.S. Grocery Shopper Trends 2005. Washington, D.C.: Food Marketing Institute.

50 


Hahn, W.F., M. Haley, D. Leuck, J.J. Miller, J. Perry, F. Taha, and S. Zahniser. (2005, May). “Market Integration of the North 

American Animal Products Complex.” Outlook Report No. LDPM13101, USDA-ERS. Available at 

http://www.ers.usda.gov/Publications/ldp/may05/ldpm13101/. 

Health Canada. (2005). Canada’s Food Guide to Healthy Eating. http://www.hc-sc.gc.ca/fn-an/food-guide-aliment/index_e.html. 

Industry Canada, Office of Consumer Affairs. (2004). The Consumer Trends Report. Industry Canada Research Paper. Accessed at: 

http://www.consumer.ic.gc.ca/trends on 2/20/06. 

Ipsos-Reid. (2004, February). “Consumer Perceptions of Canadian Food Safety and Quality.” Presentation by Ipsos-Reid to 

Agriculture and Agri-Food Canada. 

Kaufman, P.R. (2000, August). “Consolidation in Food Retailing: Prospects for Consumers and Grocery Suppliers.” Agricultural 

Outlook, USDA-ERS. Available at www.ers.usda.gov/publications/agoutlook/aug2000/ao273g.pdf. 

Kinsey, J. (2000). “The Changing Global Consumer.” Presented at the 2000 IAMA World Food and Agribusiness Congress. 

Chicago, IL. 

Krissoff, B., F. Kuchler, K. Nelson, J. Perry, and A. Somwaru. (2004). Country-of-Origin Labeling: Theory and Observation. 

USDA-ERS. 

Leibtag, E. (2005). “Where You Shop Matters: Store Formats Drive Variation in Retail Food Prices.” Amber Waves, November 2005. 

Available at http://www.ers.usda.gov/AmberWaves/November05/Features/. 

Lin, B.-H., J.N. Variyam, J. Allshouse, and J.N. Cromartie. (2003, February). “Food and Agricultural Commodity Consumption 

in the United States: Looking Ahead to 2020.” Agricultural Economic Report No. 820, USDA-ERS. 

Available at http://www.ers. usda.gov/Publications/aer820/. 

Loureiro, M.L. and W.J. Umberger. (2005, April). “Assessing Preferences for Country-of-Origin Labeled Products.” Journal of 

Agricultural and Applied Economics, 37(1), 49-63. 

Mermelstein, N.H. (2002). “Food Research Trends: 2003 and Beyond.” Food Technology, 56, 30-49. 

OECD-Food and Agriculture Organization (FAO). (2005). OECD – FAO AGRICULTURAL OUTLOOK: 2005 – 2014. 

www.oecd.org/document/5/0,2340,en_2649_37401_35015941_1_1_1_37401,00.html. 

Reardon, T. and J.A. Berdegue. (2002). “The Rapid Rise of Supermarkets in Latin America: Challenges and Opportunities 

for Development.” Development Policy Review, 20(4), 371-388. 

Regmi, A. (Ed.). (2001). Changing Structure of Global Food Consumption and Trade. Agriculture and Trade Report No. WRS-01-01, 

Market and Trade Economics Division, USDA-ERS. 

Sapp, S.G. and P. F. Korsching. (2004). “The social fabric and innovation diffusion: Symbolic adoption of food irradiation.” 

Rural Sociology, 69, 347-369. 

Starkey, S. (2005, July). “The Obesity Epidemic In Canada.” Economics Division, Parliamentary 

Information and Research Division. 

Statistics Canada. (2003). Family Food Expenditure Survey in Canada, 2001, Catalog No. CS62-554/201E-IN. 

Statistics Canada. (1999). Overview of the Time Use of Canadians in 1998, Catalog No. 12F0080XIE. 

Stewart, H., N. Blisard, S. Bhuyan, and R. M. Nayga, Jr. (2004, January). “The Demand for Food Away From Home Full-Service 

or Fast Food?” USDA-ERS, Agricultural Economic Report No. 829. 

U.S. Census Bureau. (2000). The Population Profile of the United States. 

Available at www.census.gov/population/www/pop-profile/profile2000.html.

Table 1. 2005 Population and Recent and Projected Growth 

2005 

Population Millions 


U.S. Central Intelligence Agency (CIA). (2005). The World Factbook. http://www.cia.gov/cia/publications/factbook/. Accessed 

December 2005. 

U.S. Department of Agriculture - Animal Plant Health Inspection Service (APHIS). (2005). The Goat Industry: Structure, 

Concentration, Demand and Growth. Washington, D.C.: U.S. Department of Agriculture, APHIS. 

U.S. Department of Agriculture - Economic Research Service (USDA-ERS). (2003, February). “Organic Agriculture Gaining 

Ground.” Online. Available at http://www.ers.usda.gov/AmberWaves/Feb03/Findings/OrganicAgriculture.htm. 

U.S. Department of Agriculture - Economic Research Service (USDA-ERS). (2005a). ERS Briefing Room on “food cpi, prices and 

expenditures.” Available at http://ers.usda.gov/Briefing/CPIFoodAndExpenditures/. 

U.S. Department of Agriculture - Economic Research Service (USDA-ERS). (2005b). Data: International Food 

Consumption Patterns. http://www.ers.usda.gov/data/InternationalFoodDemand/. 

U.S. Department of Labor - Bureau of Labor Statistics. (2005). “American Time Use Survey – 2004 Results Announced by BLS.” 

Available at http://www.bls.gov/ tus/home.htm#news. 

Vaillancourt, G. (2005). The Aging Consumer Population. Alberta Agriculture, Food, and Rural Development, Government of Alberta. 

Zafiriou, M. (2005, May). Food Retailing in Canada: Trends, Dynamics and Consequences. Agriculture and Agri-Food Canada. 

Paper presented at the Pacific Economic Cooperation Meetings, Pacific Food Systems Outlook. Kunming, China. 

Zafiriou, M., L. Robbins, D. Karamchandani, and P. Ominsiki. (2002, December). “Changing Consumer Demand and Its Impact 

on Canadian Agricultural Policy and Trade.” Paper presented at the IATRC Meetings in Monterey, CA, December 15, 2002. 

1990-2005 2005-2020 

NA 438 19% 14% 

Europe 728 1% -2% 

Africa 906 43% 36% 

Asia 3905 23% 17% 

SA 561 27% 19% 

Oceania 33 24% 18% 

Source: Population Division of the Department of Economic and Social Affairs of the United Nations

52 

Figure 1. Average Age by Region 

Average Age 

Source: U.S.-CIA World Fact Book 

Figure 2. GDP per capita (2004 est.) 

US$ 


Source: U.S.-CIA World Factbook 

Data on GDP per capita is in: http://www.cia.gov/cia/publications/factbook/fields/2004.html 

Data defined in: http://www.cia.gov/cia/publications/factbook/docs/notesanddefs.html#2004

Figure 3. U.S. Meat Consumption 

Pounds per capita per year 

Source: USDA Economic Research Service 

Figure 4. Canadian Meat Consumption 


Source: RAD Farm Model 

Consumer Demand Issues 53

54 

Figure 5. Mexican Meat Consumption 


Source: Coordinación General de Ganadería SAGARPA 


Figure 6. U.S. Expenditures on Food Away From Home 

Source: USDA ERS 

Million Dollars %


Figure 7. Projected Growth in Meat Consumption (mt) 2004-2014 

Source: OECD-FAO 

Figure 8. Consumers’ View on Food-Related Health Risks, 2002-2004 

Source: Food Marketing Institute

56 


Figure 9. U.S. Consumers’ Perceptions of Safety of Meat from Selected Countries 

Average Ranking (1-5) 

Source: Loureiro and Umberger (2005) 

Figure 10. Who Do U.S. Consumers Trust to Certify Meat? 

Source: Loureiro and Umberger (2005)

Chapter 4 


International trade in animal and particularly animal products 

has increased dramatically in recent years. North America’s 

natural resources, combined with technologically advanced 

production systems, ongoing research and development, and 

extensive transportation and utilities infrastructure, position it 

as a significant competitor in the global livestock and poultry 

industries. An importer of meat and dairy products, North 

America is a leading exporter, as well. Projected population and 

income growth patterns indicate exports will continue to be 

important to the sector’s success. 

This chapter focuses on the importance of trade and the issues 

affecting trade. The chapter discusses the current situation for 

major animal industries, market institutions that impact trade 

and private-sector innovation to benefit from emerging trade 

opportunities. It addresses drivers of change, barriers to trade 

and trade agreements. It concludes by identifying policy options 

and areas needing additional research. 


North American animal agriculture has undergone dramatic 

change during the past two decades. Increased trade and 

investment in animals and animal products resulted in more 

market integration than at any previous time. Animal producers 

especially were impacted by these changes as prices were 

increasingly determined by events, policies and forces beyond 

national boundaries. 

Beef and Beef Cattle 

The most significant North American trend during the past 25 

years is the growth of the Canadian and Mexican beef cow 

herds and calf crops relative to the United States. The period 

1980 to 1985 marked the high point for the U.S. beef cattle 

inventory, relative to Canada and Mexico, and has been 

trending downward ever since. During that same period, 

Mexican and Canadian beef cattle numbers have been trending 

upward. 

North America accounted for 14 percent of world exports of 

beef cattle in 2004, and most of that was within North 

America—Canada and the United States exporting to each 

other and both exporting to Mexico. Previously, North America 

accounted for nearly a quarter of world beef exports. This 

decrease is the result of many other national markets remaining 

closed to Canadian and U.S. beef as a result of bovine 

spongiform encephalopathy (BSE) being identified in 2003. Prior 

to BSE being identified in Canada in May 2003, 85 percent to 

90 percent of Canadian beef exports were to the United States 

and Mexico. Primary markets for U.S. beef exports were Japan, 

Korea and Mexico, with a smaller amount going to Canada. 

North America accounted for 43 percent of world beef imports 

in 2004, a level similar to that of the past five years and above 

that of much of the 1990s, when it was 25 percent to 35 

percent of world beef imports. The United States accounted for 

about 81 percent of North American beef imports in 2004, 

followed by Mexico (14 percent) and Canada (5 percent). The 

U.S. 2004 value compares to 65 percent to 70 percent in the 

previous seven years. This increase is in large part due to a slight 

rise in U.S. beef demand, lower beef supplies due to the U.S. 

cattle cycle being at a low point, and higher imports of lean 

beef to service the ground meat and fast-food markets. Mexican 

and Canadian imports were lower in 2004 compared to those 

in previous years. 

Brazil has emerged as a major trader of beef, with exports at 1.1 

million metric tons (mmt) in 2004, compared with 178 

thousand metric tons (tmt) in 1996 (Figure 1). Brazil’s major 

export markets are the Middle East, the European Union (EU) 

and Chile. Other major beef exporters include Australia and 

New Zealand, which on average have exported a combined 1.3 

mmt during the past five years, mainly to the United States, 

Japan, Korea, Taiwan and Canada. 

Canada is also a major beef exporter, though more than 90 

percent of shipments go to the United States and Mexico 

(Figure 2). The EU, the second largest beef producer in 2004, 

exported only 225 tmt outside the EU, primarily to Russia. The 

Ukraine exported a 10-year low of 77.6 tmt in 2004, with more 

than 99 percent of that shipped to Russia. 

While the U.S. beef trade surplus recovered in 2003, BSE put 

an end to the surplus and helped to cause a $2.8 billion beef 

trade deficit in 2004. Whether this continues long term 

57

58 

depends in large part on the reopening of Japan, Korea and 

other markets to U.S. beef. Prior to BSE, Japan, Korea and 

Mexico accounted for 77 percent to 84 percent of U.S. beef 

exports, with Korea and Mexico growing significantly during 

the past 10 years. Canada’s beef trade surplus was reduced in 

2003 as a result of a case of BSE. However, in 2004, the beef 

trade balance grew substantially as exports of boned beef resumed. 

Before 2004, the main competition for U.S. beef in the 

Japanese market was Australia, usually exporting slightly less 

beef to Japan than the United States. U.S. exports capture 

about 47 percent of the volume of the Japanese beef import 

market and Australia 45 percent (Figure 3). Because U.S. grainfed 

beef is generally considered to be of higher quality than the 

predominantly leaner, grass-fed Australian beef, it sold at much 

higher prices. In 2004, Australia was able to increase beef 

exports to Japan to nearly 90 percent of total market volume in 

the absence of U.S. beef. Another Japanese beef import market 

competitor is New Zealand, which has also increased exports in 

the absence of the United States’ and Canada. Australia and 

New Zealand were able to capture 47 percent of the lost 

volume from the United States previously exported to Japan 

due to limitations in the size of their beef industries. 

The United States dominated the Korean market prior to BSE, 

typically capturing more than 65 percent in recent years. Australia 

and New Zealand have both been able to increase beef exports 

to Korea following the ban on U.S. beef. Once these trade bans 

are lifted, prospects for the United States regaining market share 

will depend largely on rebuilding consumer acceptance. 

Mexico typically buys more than 90 percent of its beef imports 

from the United States and Canada, with U.S. beef dominating. 

Mexico mainly imports U.S. boneless beef, as well as about 

one-third of all U.S. beef offal exports. The Mexican market for 

offal is important to the U.S. industry, as domestic demand for 

that product is relatively low. 

The United States continues to import significant levels of beef; 

Australia and Canada each typically account for 30 percent to 

40 percent, with New Zealand in the 20 percent to 30 percent 

range. The average for the last 10 years has been 864 tmt, with 

an all-time high of 1.1 mmt in 2004. U.S. beef imports have 

increased recently due to the increase in beef demand spurred 

by the low-carbohydrate diets, the popularity of fast food 

(creating the need for lean Australian and New Zealand beef 

trimmings), and the low point in the cattle cycle in the United 

States. If interest continues to decline in low-carbohydrate diets, 

and if the U.S. beef cow herd rebuilds, U.S. beef imports may 

fall during the next several years. 

During the last 10 years, the three nations of NAFTA have 

accounted for 32 percent of world beef consumption, 50 mmt 

in 2004 (Figure 4). This is up slightly from the early 1990s. 

Other major beef consumers during the past 15 years were the 


EU (17 percent), Brazil (12 percent), China (8 percent), Russia 

(7 percent) and Argentina (5 percent). 

When considering market potential for North American beef, 

there are several country issues to consider: 

• The EU is a large beef producer and exporter, but more 

than 85 percent of its beef trade occurs among EU 

countries. Beef imports from outside EU nations are 

primarily from Brazil and Argentina. The EU will not 

import most U.S. and Canadian beef due to concerns 

about the use of beef growth hormones. The United States 

and Canada are allowed to export a small quantity of nonhormone-treated 

beef to the EU, sharing an 11.5 tmt quota. 

• As a result of the Free Trade Agreement negotiated between 

Mexico and the EU, no preferential market access was 

provided by Mexico to the EU due to trade concerns 

related to export subsidies. Therefore, the EU will not 

become a player in the Mexican market in the short run as 

long as “export restitutions” are still granted to EU exports. 

• With a growing middle class and relatively low 

consumption of red meats, China has as yet unrealized 

market potential. Prior to BSE, the United States, 

Australia, New Zealand and Canada supplied 99 percent 

of the Chinese beef and beef offal market. Market growth 

will have to be developed. China imported 3.5 tmt of beef 

in 2004, down from 11.4 tmt in 2002. China also 

imported 39 tmt of beef offal in 2002. 

• Despite political and economic uncertainties, Russia is a 

potential growth market. Russia averaged about 450 tmt of 

beef imports from 1995 to 2003. Most beef imports come 

from Ukraine, the EU and Brazil. For 2005, Russia has an 

announced quota of 457.5 tmt for fresh and frozen beef, 

with the EU allocated 366.7 tmt and the United States 

17.7 tmt, pending post-BSE approval. 

Beef and Cattle Policy and Trade Issues 

Policy plays an important role in shaping beef trade. Policy 

considerations for potential markets and competitors that may 

impact North American beef exports include: 

• Brazil claimed to have made significant progress in 

eradication of foot-and-mouth disease (FMD). However, 

an October 2005 outbreak will likely force Brazil to 

reconsider its expectation of being FMD-free by 2006. 

Brazil has an array of support mechanisms available for 

beef producers, processors and exporters, including 

subsidized loans and programs to modernize 

agricultural machinery. 

• Australia and New Zealand export to North America and 

to major U.S. beef markets. The United States has a

tariff-rate quota (TRQ) in place on Australia and New 

Zealand beef. The Australia-U.S. Free Trade Agreement 

grants an additional quota for manufacturing beef to be 

exported to the U.S. market, and the entire over quota 

tariff is to be phased out over 18 years. Both Australia and 

New Zealand emphasize animal health in their domestic 

programs and are implementing animal identification 

systems. This gives a marketing advantage over the 

United States until it implements a national animal 

identification programs. Canada already has such a 

program in place. Mexico is also implementing a national 

identification system. 

• Once post-BSE market access is granted, the United States 

and Canada will still have to deal with quota systems or 

food-safety concerns. The main issues in the Japanese and 

Korean markets are consumer acceptance of the product 

and the ability to displace Australia’s growing market share. 

Hogs and Pork 

The most significant trend during the past 25 years is growth in 

the number of Canadian sows and pigs relative to the United 

States. The period 1990 to 1995 marked the high point for the 

U.S. hog inventory, relative to Canada and Mexico. The North 

American industry has become more efficient in producing pigs 

as the sow inventory has declined, while the pig crop continues 

to increase. 

In 2004, Canada exported 778 tmt of pork, and the United 

States exported 651 tmt (Figures 5 and 6). About 600 tmt of 

the 1.4 mmt in North American pork exports were to NAFTA 

partners. Since 1995, more than half of Mexico’s imports have 

come from the United States and Canada. For the last 15 years, 

Canada’s main export market has been the United States, 

followed by Japan, exporting in 2004 320 tmt and 190 tmt, 

respectively. In 2004, U.S. top export markets were Japan (293 

tmt), Mexico (157 tmt) and Canada (60 tmt). The main 

competition for North American pork in the Japanese market 

is the EU, which exports slightly more than the United States 

or Canada (Figure 7). U.S. exports captured about 30 percent 

of the Japanese market; Canada, 20 percent; and the EU, 

40 percent. 

EU countries export about 4.5 mmt of pork, though 80 percent 

of this is intra-EU trade. Only 1.1 mmt of pork was exported 

to non-EU countries in 2004. The EU’s major external export 

markets are Japan (353 tmt), Russia (138 tmt) and Korea (100 

tmt). Brazil and China have recently emerged as exporters of 

pork. Brazil exported 478 tmt of pork in 2004, up from 64 tmt 

of pork in 1996. The rapid increase in Brazilian pork exports is 

the result of growth in Russian pork imports. China exported 

411 tmt in 2004—up from 53 tmt in 2000—mostly to Hong 

Kong and North Korea. 

Global Competitiveness and Trade 59 

Since the implementation of the Canada-United States Free 

Trade Agreement (CUSTA), Canadian exports of live hogs to 

the United States increased to 8.5 million head in 2004 from 

1.1 million head in 1989. Canada accounts for all but a few 

hundred head of U.S. hog imports. North America swine trade 

is more than 75 percent of world swine trade. Since 1995, 

Canadian exports of fed hogs to the United States have grown to 

2.9 million head from 1.1 million head. Even more dramatic 

growth has occurred in U.S. imports of feeder pigs from 

Canada—to 5.6 million head in 2004 from 700,000 head 

in 1995. 

Canadian finishing capacity is limited when compared to 

advances in the country’s farrowing capacity and efficiency. The 

U.S. pork industry appears to have an advantage in finishing. 

As a result, increased trade in live swine between the United 

States and Canada has spurred the development of a North 

American pork industry. 

Pork and Hog Policies and Trade Issues 

There are several issues influencing market potential for North 

American pork: 

• Nearly all European pork trade occurs among EU 

countries. The swine and pork market has been indirectly 

impacted by the 2003 Common Agricultural Policy (CAP) 

reform, which lowered grain prices and resulted in lower 

feeding costs. Enlargement of the EU increased trade 

between the 15 existing EU members and the 10 new 

member nations. Investment from Germany and the 

United States in the swine sector of new member nations 

is expected to continue to increase. The main forces of 

change are competitive feeding costs, less environmental 

regulations and closer proximity to important export 

markets, such as Russia and Ukraine. 

• China has a growing middle class, but markets have 

unrealized potential due to political and economic 

uncertainty. North American pork exporters will have to 

further develop the Chinese pork import market, which 

currently is relatively small. The United States has the only 

national meat safety system accepted by China, and 

approved U.S. plants are eligible to export to China. New 

regulation for individual plant approval will result in new 

competition for U.S. suppliers in China’s retail market. 

• Canadian pork organizations and the Canadian Pork 

Council are developing an identification and traceability 

system for the Canadian hog industry. The system is 

expected to be fully implemented by 2008. This enhances 

Canadian marketing in pork exports. 

• Mexico’s export potential is limited by the lack of an animal 

health regulatory and enforcement system comparable to

60 

that of the United States and Canada. Mexico provides 

limited subsidies for activities related to genetic and herd 

improvements through the Agriculture Ministry’s “Alliance 

with You” program. To participate, swine producers are 

required to meet specific standards relating to herd health 

and herd composition. At this time, no specific funding or 

support programs are available to aid small hog producers 

in reaching a viable scale of production through contracts 

with large processors and slaughterhouses. 

• Brazil offers a long-term credit program for its pork packers 

through the Ministry of Science and Technology; $10 

million was allocated under the program in 2003 and 

2004. The program finances projects geared toward genetic 

development and improvements in pork quality and 

carcass yields. 

Poultry Meat 

North American countries accounted for 35 percent of the 60.5 

mmt of world poultry meat production in 2004, down from a 

high of 39 percent in 1993 (Figure 8). The main reason for the 

decline was a 300 percent increase in Chinese production (to 

9.9 mmt in 2004 from 2.4 mmt in 1990), and a 257 percent 

increase in Brazilian production (to 8.6 mmt from 2.4 mmt). 

These increases are much greater than the 76 percent increase 

in poultry meat production that North America experienced 

during the same period. The other leading world producer is 

the EU, producing 9.7 mmt in 2004, up 62 percent or 6.0 

mmt from 1990. Broiler meats account for 92 percent of world 

poultry meat production, up from 89 percent in 1990. 

North American countries accounted for one-third of world 

poultry meat consumption in 2004 (19.4 mmt), followed by 

China (9.8 mmt), EU (9.2 mmt) and Brazil (6.0 mmt). 

Chinese and EU poultry meat consumption is balanced with 

production. North American and Brazilian production exceeds 

consumption by 1.8 mmt and 2.6 mmt, respectively. Brazil is 

cost efficient in poultry production, but has limited 

transportation infrastructure. It has increased poultry meat 

exports by taking advantage of favorable exchange rates, disease 

outbreaks in other exporting countries, sanitary negotiations 

with Asian countries, and aggressive market promotion. In 

2004, Brazil exported 2.6 mmt of poultry meat, while U.S. 

exports were 2.5 mmt (Figures 9 and 10). EU poultry meat 

exports were 2.8 mmt in 2004, however, only 1.0 mmt were to 

non-EU countries. The United States has a 30 percent market 

share of world poultry meat exports, Brazil has 34 percent, and 

the EU, excluding intra-EU trade, has 14 percent. 

North American poultry meat exports reached a peak of 2.9 

mmt in 2001 and have averaged 2.5 mmt since 1996. The 

United States accounted for 90 percent of total exports in 2004. 

Historically, the majority of U.S. poultry exports have been 

shipped to Russia, China/Hong Kong and Mexico. While 


Russia and Mexico have remained consistent markets during 

the past decade, China/Hong Kong began decreasing imports 

of U.S. poultry in 1999, when it was the largest market for 

U.S. exports, at 591 tmt. In 2004, the United States exported 

726 tmt (29 percent of its exports) to Russia; 349 tmt (14 

percent) to Mexico; 129 tmt (5.2 percent) to Canada; and 128 

tmt (5.1 percent) to China. This marked the first time 

China/Hong Kong was not in the top three U.S. poultry export 

markets. Ukraine, Turkey, Cuba, Lithuania and Japan are 

important poultry meat export markets for the United States. 

Poultry meat policies and trade issues include: 

• Canada maintains a supply management system for poultry 

production, attempting to alleviate the need for large 

volumes of imports or the need to export excess supply. 

Canada restricts poultry meat imports with a TRQ on 

chicken meat equal to 7.5 percent of the previous 

year’s production. 

• Mexico also uses a TRQ for imports on chicken leg quarters, 

even though other cuts are now duty-free under NAFTA. 

The leg quarter TRQ is scheduled to be phased out by 

2008. U.S. poultry meat exports to Mexico were also 

impacted by low pathogenic avian influenza in the United 

States. (Low pathogenic avian influenza is not a threat to 

human health as is H5N1 avian influenza. While H5N1 

has been found in Asia, Europe and Africa, no cases have 

been found in North America.) Even though a temporary 

ban is no longer in place, Mexico wants to increase the 

diversification of its poultry meat import suppliers. 

• Brazil is the major global competitor for U.S. poultry 

meat and its exports have grown sixfold in nine years. 

Historically, the No. 1 export market for Brazilian 

poultry has been Saudi Arabia, but it has made significant 

in-roads into China/Hong Kong, Japan and Russia. These 

countries have traditionally relied on the United States for 

the majority of their poultry meat imports. A major reason 

for the increase in Brazilian poultry meat exports, in 

addition to their lower cost of production of finished 

product, is that the Brazilian Poultry Exporters Association 

has worked to guarantee market access and reduction of 

non-tariff barriers around the world, in part by negotiating 

sanitary issues with Asian countries. Periodic disease 

outbreaks in other exporting countries, coupled with the 

cost of production advantages and a favorable exchange 

rate, have provided Brazil a competitive advantage in 

global markets. 

• The EU, with 1.0 mmt of extra-EU exports, is the third 

leading poultry meat exporter to the world market. Russia, 

the Middle East, Ukraine and China/Hong Kong are the 

four largest markets for extra-EU poultry meat exports. The 

United States exports to all of these markets, as well. The

2004 EU enlargement is expected to result in increased EU 

poultry consumption due to an increasing number of 

African and Asian immigrants who traditionally have 

dietary preferences for poultry. As demand within the EU 

increases, EU-produced poultry meat available for export 

may decline. 

• Russia is the largest poultry meat importer in the world, 

importing an annual average of 1.1 mmt to 1.4 mmt from 

2001 to 2004 (Figure 11). While the United States is the 

largest supplier of poultry to Russia, typically supplying 

more than half of Russian imports, Brazil and the EU 

provide significant competition. High domestic meat prices 

have kept poultry meat import demand strong in Russia, 

and demand is expected to increase even more as consumer 

income in Russia increases. Because of a low pathogenic 

avian influenza outbreak in July 2005 and a confirmed case 

of H5N1 avian influenza in Novosibirsk in August 2005, 

Russia may conduct unannounced inspections of its 

domestic poultry processing plants to help ensure 

compliance with sanitary and veterinary requirements. The 

enforced compliance will likely cause an increase in the cost 

of producing poultry meat in Russia, leading to greater 

demand for imported poultry from major exporters. 

• The United States is the only nation that has had its 

entire meat safety system accepted by China. Historically, 

this has provided U.S. poultry exporters a competitive 

advantage over rival exporters. But the Chinese government 

now also allows plants in other countries to be audited and 

registered individually, creating the potential for new 

competition for U.S. exporting companies. The United 

States and other affected poultry exporters are working to 

recover export volume following poultry meat export bans as 

a result of isolated outbreaks of low pathogenic avian 

influenza. Brazil was able to gain greater access to Chinese 

markets during these bans and has maintained its presence by 

competing effectively on price and quality. The U.S. poultry 

industry will likely need to launch an aggressive marketing 

program if U.S. poultry meat is to regain market volume and 

maintain market share in China/Hong Kong and Japan. 

• Ukraine, Turkey and Cuba are growing markets for U.S. 

poultry meat. Ukraine has had a steady increase in poultry 

consumption since the late 1980s, due to declining 

incomes and poultry prices that were low compared to 

red meat. This situation could change in the near future, as 

tariff rates for beef and pork are declining while duties for 

poultry products remain high. Currently, applied import 

duties are prohibitive for the majority of poultry products. 

In Turkey, U.S. poultry meat exports increased to 93 tmt in 

2004 from 1.0 tmt in 1995. Exports of U.S. poultry to 

Cuba began in late 2001 following passage of the U.S. 

Trade Sanctions Reform and Export Enhancement Act of 


2000. Cuba has become a consistent, albeit relatively small, 

market for U.S. poultry meat. 

Milk and Dairy Production 

A brief description of the milk and dairy statistics reported 

in this section is necessary because of the wide variety of 

dairy products and the various amounts of milk required to 

manufacture these products. Therefore, most of the 

quantities listed are in Milk Equivalents (ME), which 

accounts for the pounds of milk used in producing different 

cheeses, butter, milk powders, ice creams, yogurts and many 

other dairy products. 

North American milk production was 95.4 mmt in 2004, 

compared with total world output of 613.4 mmt. The United 

States is the world’s largest single country producer of cow’s 

milk and accounts for 81 percent of North American milk 

output. Mexico produces 10.4 percent and Canada 8.4 percent. 

During the past two decades, Mexican milk production 

increased by one-third, while the output of the United States 

and Canada grew 19.4 percent and 6.7 percent, respectively. 

These increases in output have generally come from fewer cows, 

except in Mexico where extensive dual-purpose production 

systems still predominate. In 2004, the North American dairy 

herd consisted of 16.9 million head—the U.S. herd totaled 

9.01 million; Mexico 6.80 million; and Canada 1.08 million 

head. Continuing improvements in milk productivity per cow 

in the United States and Canada are attributed to enhanced 

dairy cattle genetics. 

Canadian milk production expansion has been limited by a 

national mandatory dairy program that restricts supply to a 

specific quantity of milk or quota. In the absence of such controls, 

U.S. production has increased much more than Canada’s. 

Dairy Trade 

Many nations employed a wide variety of dairy trading 

guidelines that have historically restricted the volumes of milk 

and dairy products. Developed countries, in particular, have 

protected domestic milk farmers and dairy processors through 

complex trading rules and/or rigorous health and food safety 

regulations. The EU, Japan, United States and Canada have 

implemented dairy policies that typically provide domestic 

dairy producers with milk prices that are above world marketclearing 

prices, as domestic dairy markets are protected by trade 

restrictions. The majority of milk and dairy products traded on 

global markets are in the form of cheeses, butter and various 

forms of milk powders (nonfat dry milk or skim milk powder). 

However, trade is shifting from skim milk powder to milk 

protein concentrates, milk protein isolates and casein, and this

62 

shift will likely impact domestic dairy industries. Limited 

volumes of fluid milk products are traded because of the highly 

perishable nature of bottled milk. 

Dairy Product Exports 

According to the Food and Agriculture Organization (FAO) of 

the United Nations, world trade of milk and dairy products is 

limited, with only 12 percent of world production traded 

between countries (Figure 12). The EU makes up 64.4 percent 

of world trade followed by Australia and New Zealand. Most 

EU dairy exports are intra-EU, with only an estimated 25 

percent of exports sold to non-EU countries. 

North America dairy exports totaled only 3.7 mmt in 2003. 

The United States had 75 percent of the area’s shipments (2.8 

mmt); Canada, 0.8 mmt; and Mexico, 0.1 mmt. After 

removing intra-EU dairy exports, New Zealand was the largest 

single exporter, with nearly 15 percent of the world’s total. 

Australia has also become a major dairy exporter, making up 

5.8 percent. Both New Zealand and Australia have increased 

export volumes more than 2.4 times since 1985. Argentina was 

the only other Western Hemisphere nation exporting more than 

1.0 mmt of dairy products in 2003. Brazil increased its milk 

output and exports to 134,000 mt in 2003, from 8,000 mt in 

1995. According to the FAO, the only other non-EU countries 

with at least 0.5 mmt of dairy exports in 2003 were Belarus 

(0.9 mmt); Ukraine (0.9 mmt); Switzerland (0.6 mmt); and 

Uruguay (0.5 mmt). 

U.S. dairy product exports were shipped to a large number of 

countries, including Mexico (25 percent) and Canada (18 

percent) in 2004 (USDA, FATUS Database). Japan, 

Philippines, Central America and the EU accounted for an 

additional 20 percent, with the remainder sold to more than 30 

other nations. By type of dairy products exported by the United 

States, 33 percent were nonfat dry milk powder, 15 percent 

cheeses and about 10 percent whey, evaporated milk and butter 

products, and 40 percent a variety of other dairy products. The 

most important customer of U.S. dairy product exports is 

Mexico, which purchases primarily nonfat dry milk powder. 

Dairy Product Imports 

North America imported only 7.3 percent (5.5 mmt) of the 

world’s total volume of dairy imports in 2003 (Figure 13). Of 

that, Mexico accounted for 48 percent; the United States, 38 

percent; and Canada, 13 percent. World dairy product import 

volumes have increased by more than 50 percent, growing to 

75.6 mmt in 2003 from 50.0 mmt in 1985 (FAOSTAT 

Database). North American imports grew at a faster pace 

during this same period, increasing 63 percent to 5.5 mmt from 

3.4 mmt. The world’s largest dairy product importer is the EU, 

with its 25 member-nations representing more than half of 

world import volumes (38.1 mmt). As with exports, a large 

portion of these imports are intra-EU trade. 


In North America, the United States it the only nation 

currently capable of exporting substantial quantities of dairy 

products. Its export markets are growing as China, Russia, and 

Central American and Caribbean countries realize economic 

expansion. New Zealand has been the newest and most 

interesting export customer for the United States in 2004 and 

2005, purchasing large amounts of nonfat dry milk. As New 

Zealand has continued to increase dairy product exports, it may 

be reaching its capacity to expand its dairy cattle herd. New 

Zealand simply may not have enough land area to increase its 

dairy herd and milk output. 

The key competitors to North American dairy exports are the 

EU, New Zealand and Australia, which dominate world dairy 

trade. Each exports dairy products into North America and 

competes with the United States in selected export markets. 

Other emerging competitors are Argentina and Brazil, which 

have seen tremendous growth in milk productions during the 

past decade. 

Dairy and Trade Agreements 

Further developments in multilateral, regional and bilateral 

trade negotiations could have important influences on dairy 

trade. Milk and dairy products continue to be one of the most 

sensitive agricultural issues in trade negotiations, often forming 

roadblocks for multilateral and regional trade agreements. Many 

countries maintain very restrictive dairy tariffs, well in excess of 

100 percent of the product’s value, and operate extremely 

limited tariff rate quotas. Despite this, world dairy trade sustains 

modest increases in trade flows as more and more barriers are 

reduced or eliminated under a variety of trade accords. 

NAFTA has been instrumental in opening up markets for North 

American dairy products. The Central America-Dominican 

Republic Free Trade Agreement (CAFTA-DR) and the 

Australia-U.S. Free Trade Agreement (AUSTA) will further 

expand trade in dairy products. All three trade accords will gradually 

phase out dairy product tariffs during 15 years to 18 years. 

The sensitivity of dairy policies—especially in the EU, Japan, 

Canada and the United States—has limited milk and dairy 

discussions during World Trade Organization (WTO) 

negotiations. However, WTO is striving to reduce dairy price 

supports and other subsidies in these developed countries, 

which may open markets and expand dairy product trade. 

International Market Institutions and Key Players 

International institutions play a key role in shaping the 

direction and magnitude of trade in animals and meats. Some 

institutions, such as the WTO, set rules. Others, such as the 

NAFTA or CAFTA-DR, provide preferential market access. 

The World Organization for Animal Health (formerly known 

as the Office of International Epizootics and still known by the 

acronym OIE) and the Codex Alimentarius Commission

provide guidelines for animal health and food safety that are 

accepted by most trading countries. Their role as reference bodies 

in international trade is increasing as disease outbreaks arise. 

World Trade Organization 

The 150-member WTO was created in 1995 as a result of the 

Uruguay Round of the General Agreement on Tariffs and Trade 

(UR-GATT). The goal of the WTO is to help producers and 

exporters conduct business. Specific functions are to administer 

WTO trade agreements; serve as a forum for trade negotiations; 

handle trade disputes; monitor national trade policies; and 

provide technical assistance and training for developing countries. 

The dispute resolution process is the WTO’s key mechanism to 

enforce international rules, including market access, the 

Sanitary and Phytosanitary Standards (SPS) agreement, and 

domestic agricultural policy disciplines. This process allows one 

country to submit a petition against the policies or other 

actions of another country alleged to be breaking the rules. 

The most prominent example involving animal products is the 

case that the United States and Canada filed against the EU for 

not allowing imports of beef from animals treated with 

synthetic growth hormones. The United States and Canada 

contend the EU decision to prohibit hormone-treated beef 

imports violated the SPS agreement because scientific evidence 

indicated no measurable risk to consumers. The EU contended 

it was using the precautionary principle, that no science could 

show that risk to consumers was zero. The WTO upheld the 

argument of the United States and Canada. However, instead of 

allowing imports of hormone-treated beef, the EU opted to 

allow the United States and Canada to impose punitive tariffs 

on certain EU imports. While the resolution is allowable under 

the WTO, many U.S. and Canadian beef exporters believe the 

process did not result in a satisfactory outcome. 

Following the discovery of two cases of BSE in the United 

States in 2003 and 2004, U.S. beef was banned in most world 

markets. The United States regained access to some markets 

later that year, including Canada and Mexico, with Mexico now 

becoming the largest export market for U.S. beef. Access to the 

Japanese market was granted in December 2005, but U.S. beef 

was banned again less than a month later due to a violation of 

the terms of the agreement by a U.S. company. Access to the 

Korean beef market is pending. At issue in Japan is the age at 

which cattle might contract BSE. It is generally accepted in the 

scientific community that it is highly unlikely bovine under 30 

months of age could manifest the disease. Japan contends cases 

have occurred in cattle under 30 months of age and imposed a 

20-month age limit on cattle from which beef is exported to 

Japan. The 2005 OIE guidelines state that boneless beef cuts 

from animals under 30 months old have a low risk of BSE. 

While the U.S. government would prefer to resolve this issue 


bilaterally, a petition to the WTO could be a possibility if the 

issue remains unresolved. 

A successful outcome of the current WTO negotiations in 

Doha is important to trade in animals and meats. FAO 

estimates that if trade liberalization were fully implemented 

under the WTO agreement, the EU would shift from being an 

exporter to an importer of beef, increasing imports 165 percent. 

That might not lead to more imports from the United States or 

Canada; however, it would result in more export opportunities 

in other countries as EU exports declined. FAO estimates also 

indicate increases in U.S. prices of 8 percent for beef, 10 

percent for lamb, 3 percent for pork and 6 percent for poultry. 

FAO estimates that with trade liberalization U.S. exports of 

beef may increase 18 percent, sheep meat 27 percent, pork 25 

percent and poultry 20 percent. While these estimates are 

modest when viewed on the basis of annual increases over 10 or 

15 years, they are significant in terms of additional market 

potential over the long term. 

SPS Agreement 

The SPS agreement of the Uruguay Round is designed to 

protect human, animal and plant health and to ensure that SPS 

regulations are not used to unduly restrict trade. SPS 

restrictions must be supported by scientific risk assessment. The 

SPS agreement also allows countries to establish disease- or 

pest-free zones from which to export, should an outbreak occur 

in another part of the country. It is the responsibility of the 

exporting country to establish the zone and to ensure that it is 

free and likely to remain free before regional pest- or diseasefree 

status is granted by an importer. It is on this basis that the 

United States has granted Uruguay access to the U.S. market 

for fresh beef. 

OIE 

Created in 1924, the 167-member OIE—now known as the 

World Organization for Animal Health—promotes international 

cooperation to control the spread of transboundary animal 

diseases (Otte et al., 2004). OIE objectives include: 

• transparency in animal disease and zoonosis; 

• collect, analyze and disseminate scientific 

veterinary information; 

• provide expertise and international solidarity in animal 

disease control; 

• safeguard world trade by publishing animal and animal 

product health standards; 

• improve the legal framework and resources for veterinary 

services; and

64 

• provide better guarantee of safety and animal welfare 

through science. 

OIE sets international standards, but does not have the 

authority to enforce those standards. Compliance with OIE is 

voluntary and often results in sporadic reporting of disease 

incidence. As a result, bilateral agreements and protocols are 

often used to ensure importing countries of the integrity and 

safety of food shipments. 

Codex Alimentarius Commission 

Codex was created by the United Nations in 1963 to develop 

food standards, set guidelines and write codes of practice for the 

joint FAO/WHO Food Standards Program. Codex rules affect 

food products, food labeling, recommendations on pesticide 

residues, food additives and food contaminant levels, and codes 

on hygienic practice (Lupien, 2000). Codex has 171 member 

countries. Private-sector firms and nongovernmental 

organization participate as observers. Objectives of the Codex 

are to protect the health of consumers, ensure fair trade practices 

in food products and promote coordination of food standards. 

Measures consistent with principles established under Codex 

were adopted by the Uruguay Round. Codex standards are 

developed in an eight-stage process that relies on consensus 

among all members. There are no mechanisms for enforcing 

standards within Codex; reliance on voluntary compliance is 

needed to have a system with the integrity to support a sciencebased 

set of rules. Agreed-on standards are not always adopted 

by member countries. WTO relies on Codex as the primary 

institution to provide standards for food safety and quality. 

Codex will likely become more prominent in dispute settlement 

within the WTO. The relationship between Codex and the 

WTO, particularly the SPS agreement, may need to be clarified 

and refined to avoid duplication and ensure that Codex does 

not divert its attention from food safety. 

North American Free Trade Agreement 

NAFTA was implemented January 1, 1994, by the United 

States, Canada and Mexico. Even before NAFTA’s 

implementation, market integration within North American 

animal agriculture was increasing (Rosson and Adcock, 2005). 

NAFTA facilitated further integration across member countries, 

leading to increased trade and investment. SPS provisions of 

NAFTA mirror those of the WTO, relying on science-based 

trade restrictions and the use of regionalization guidelines to 

facilitate trade. 

NAFTA proceeded without major disruption until the 

discovery of BSE in Canada and the United States. The degree 

of market integration has since declined, as witnessed by a 

rather large and rapid expansion of cattle-processing capacity in 

Canada and the reduction of cattle exports to the U.S. market. 


These events call into question whether market integration in 

NAFTA countries has exceeded regulatory integration. The 

primary implication is that when animal disease outbreaks 

occur, governments tend to close international borders, 

regardless of the international standard that may apply. The 

NAFTA countries have agreed on a North American BSE 

Protocol to guide actions should another incidence occur. 

The new harmonized approach to BSE risk mitigation within 

NAFTA relies on a science-based framework. Objectives are 

normalization of trade in ruminants and ruminant products 

throughout North America and promotion of an international 

BSE strategy consistent with OIE guidelines. This integrated 

NAFTA approach has been presented to OIE to promote 

international harmonization of BSE risk mitigation measures. 

While this is an important step toward reliance on science 

rather than protection to facilitate animal trade, it is not clear it 

will set a precedent for other animals or animal product trade. 

As noted in several chapters of this report, there is a need to 

harmonize food safety/animal health regulations within NAFTA. 

Private-Sector Innovation and Implications 

About 75 percent of the growth potential for U.S. food 

industry expansion lies outside the United States. What is 

unclear is the role of private-sector investment and 

technological innovation in shaping consumption and trade 

trends in key markets. During the past 10 years, retail groceries 

in many developing countries in Latin America, the Middle 

East and Asia have adopted scanner and inventory control 

technology that required the previous 50 years to develop and 

implement in the United States, Canada, Europe and Japan. 

Just-in-time delivery is now a reality in parts of the world that 

only 20 years ago lacked in-home refrigeration and microwave 

ovens. As consumer incomes rise in the developing world, there 

is a rapid and significant increase in demand for processed 

foods, requiring less time to prepare and serve. 

Nearly 60 percent of processed food sales occur in retail stores. 

The retail grocery sector is becoming more concentrated in 

many countries, with the four-firm concentration ratios 

approaching 90 percent for ice cream in the Philippines and 30 

percent for all packaged foods. Food companies are also 

expanding their geographic diversity. Kraft, Unilever and 

Nestle, for example, now each operate in more than 120 

countries, offering foods in more than 20 categories (Regmi and 

Gehlhar, 2005). ConAgra, General Mills and Heinz operate in 

20 to 50 countries, each offering 10 to 15 product lines. 

Product suppliers today must compete on the reliability and 

frequency of delivery, along with high standards and quality. 

Global meat markets are increasingly consumer driven, with 

safety, wholesomeness, quality and price among the most 

important attributes. Multinational food retailers have 

expanded in this global market, bringing efficiency and

affordable foods to many developing countries. As the role of 

large firms expands worldwide, North American meat producers 

will likely experience increasing product demand, along with 

greater requirements to assure consumers of product safety 

and quality. 

Critical Issues/Drivers of Change 


The Consumer Demand Chapter of this report examines 

consumer demand issues impacting the North American animal 

product industries. In Canada, Mexico and the United States, 

population growth is slowing. The population is aging, and 

there are now more adults and fewer children. Incomes are 

expected to rise, but with current high levels of per-capita 

animal product consumption in the United States and Canada, 

further increases in income are unlikely to trigger major 

consumption increases except in Mexico. Concerns about obesity, 

healthy diets and reduction of fat intake may further impact 

per-capita consumption of animal products in a negative manner. 

Based on these observations, it is reasonable to expect that 

growth in animal product consumption will largely be limited 

to developing countries with more robust population and 

income growth during the next decade. Income and demand 

elasticities approaching unity for animal products have been 

observed in low-income countries—that is, a 1 percent increase 

in per-capita gross domestic product results in a near 1 percent 

increase in animal product consumption. This is in contrast to 

income elasticities for meat and dairy products of 0.1, 0.3 and 

0.6 for the United States, Canada and Mexico, respectively 

(USDA-ERS, 2003). The distribution of incomes among 

consumers in developing nations will be critical, as well. 

Growth in incomes in the developing world will be a necessary, 

but not a sufficient condition to assure growth of the animal 

product complex in North America. 

Trade Agreements 

A number of trade agreements have or will affect the livestock 

industry. NAFTA and CUSTA have had great influence on the 

integration of the North American livestock complex through 

reduced tariffs and some degree of regulatory harmonization. 

Mexico has a free trade agreement with Japan, and Canada has 

free trade agreements with Chile, Costa Rica and Israel. 

However, NAFTA is by far the most important free trade 

agreement for all three countries. Each NAFTA country has or 

is negotiating a number of bilateral and regional trade 

agreements. Of the most significant for livestock are CAFTA 

and the Free Trade Area of the Americas (FTAA). FTAA is 

important because it offers the opportunity to integrate the 

growing power of the MERCOSUR trading bloc in South 

America, which has established itself as a major agricultural 

competitor for North America. 


The current U.S. proposal in the Doha Round calls for 

worldwide tariff reductions by as much as 90 percent over five 

years, with a second stage to eliminate all agricultural tariffs. 

The proposal would reduce the most trade-distorting U.S. 

subsidies by 60 percent, while calling for EU and Japanese 

initial cuts of 80 percent. 

There are concerns that anything close to the U.S. proposal 

would probably negatively impact the U.S. and Canadian dairy 

sectors. However, some studies have predicted that an increase 

in world prices would offset the loss of domestic support. For 

other animal product sectors, the impact would be felt through 

the feed sector. There is disagreement on the magnitude of 

possible feed price hikes, but with current direct payments 

approaching $20 billion, many feel the impact would be 

significant. Much depends on how potential cuts are filtered 

through WTO rules, resulting in possibly much lower real 

reductions and little impact on feed prices. 

Perhaps the single most contentious, but important, issue for 

livestock in these and future trade agreements—other than 

tariff reductions—is use of non-tariff trade barriers and SPS 

restrictions to trade. Recent examples are the Russian ban on 

imports of U.S. poultry, the EU ban on hormone-treated 

cattle from the United States and Canada, and the U.S. ban on 

imports of Canadian cattle. According to WTO rules, as well as 

most regional agreements that contain SPS regulations, trade 

restrictions for SPS reasons must be science-based. This rule is 

open to interpretation, and many countries have adopted a 

safety-first principle, leading to the closing of borders at the 

first sign of a disease rather than waiting for scientific 

verification of its existence or magnitude. 

Certainly, SPS mechanisms are desirable, especially for livestock 

if the threat of disease spread has substantial economic 

consequences and/or the immediate potential impact on human 

health. The widespread use of SPS restrictions and the 

subsequent litigation in the WTO and other venues suggests 

that the SPS mechanism is being overused, or used to manage 

trade flows where no real threat of contamination exists. The 

frequency and magnitude of SPS restriction usage, and the 

substantial impact on livestock production flows, suggests that 

careful consideration be given to the requirements for 

implementation of SPS restrictions in future trade. 

Government Programs and Regulations 

Government programs have both direct and indirect effects on 

the competitive position of the animal agriculture sector. 

Obviously, farm programs that support the production of corn 

and soybeans, thereby lowering price, benefit livestock 

production. Despite this widely perceived effect of government 

programs, a recent report finds evidence that government 

programs have little overall effect on food and feed prices when 

accounting for technological development (Miller and Coble,

66 

2005). Thus, care must be taken not to overestimate the impact 

of government programs on feed prices. It should also be noted 

that integration of international grain prices means that any 

lowering of corn/soybean prices in the United States would also 

lower world market prices to the benefit of feed users in the rest 

of the world. 

However, differential rates of subsidization across national 

boundaries may ultimately have an impact on the location of 

animal-feeding operations and product flows within North 

America. Future changes to levels and types of subsidization 

will likely impact the structure of the North American animal 

complex. As a historic example, the Canadian rail subsidy 

channeled grain flows out of the Prairie Provinces to export 

destinations at Vancouver and Thunder Bay. Elimination of the 

subsidy helped fuel the growth of livestock-feeding operations 

in Western Canada as increased transport costs (no subsidies) 

lowered the price of grain in local markets. 

Today, the North American countries each support agriculture 

at approximately the same level—about 20 percent as measured 

in producer support estimates (PSEs). But subsidization varies 

widely by type and across commodities (Figure 14). In relative 

terms, the United States relies more on direct payments, and 

Canada and Mexico on market price support. 

The next U.S. farm bill may provide a test as to whether 

NAFTA farm policies move toward greater harmonization. An 

interesting feature is if direct payments, which most believe 

have shifted the supply curve outward, will be reduced by a 

U.S. Congress motivated by budget deficits and/or new WTO 

rules. Limited direct assistance for animal producers through 

government programs has been provided by all three NAFTA 

countries. The United States has long offered a support price 

program for the dairy industry, augmented in recent years by a 

direct payment program, the Milk Income Loss Contract 

(MILC) program. MILC expired in September 2005, but bills 

have been introduced extending it at lower payment levels 

through 2007. Canada operates a quota program that assures 

even greater support to its milk producers through market 

prices. As a consequence of these programs, neither the United 

States nor Canada are major players in world dairy markets, 

and trade with one another is limited. Mexico offers cattle 

producers a program of direct payments and technical support 

(PROG AN). The program was budgeted at about US$126 

million in 2004 and probably has a minimal impact on trade. 

Equally important to trade are evolving health and safety 

regulations. Animal health issues may have direct impact on 

immediate market prices and supply chain operation, and could 

have long-term impacts on consumer confidence in food safety. 

Also of concern are differential policies across national 

boundaries—such as administration of antibiotics and growth 

hormones, or animal welfare. These can lead to governmentinduced 

differences in cost of production and competitiveness, 


and subsequent alternations in location of production and 

product flows. As suggested in the Economics Chapter, there is 

some evidence of a trend toward a world standard. Accelerating 

this trend within NAFTA would be beneficial to the North 

American livestock industry by reducing transactions cost for 

trade within NAFTA and enhancement of consumer confidence. 

While many of these regulations have a direct impact on the 

cost of production, they also offer marketing opportunities for 

the livestock industry. For example, growing consumer concerns 

about antibiotic use or genetically modified feeds have given 

rise to many niche production processes to supply consumers 

with “hormone free” or “GMO free” products (Lusk, Roosen 

and Fox, 2003). Consumer demand has led to an evolution of 

animal supply chains that are outside traditional commodity 

market channels. The pace of this evolution, however, has 

sometimes outstripped regulatory ability to standardize product 

labeling regulations, one example being the recent debate about 

the meaning of “organic.” More regulatory attention is needed 

to protect producers and consumers of niche goods and 

establish the integrity of these emerging supply chains. 

Environmental regulations—air quality and water quality 

standards—are substantially comparable between the United 

States and Canada, but are substantially less developed in 

Mexico. All animal agriculture sectors face environmental 

challenges, but concentrated animal production units receive 

the most attention (see Environmental Issues Chapter). 

Environmental regulations add to the cost of production 

through compliance and, in the United States, litigation costs. 

Recent trends suggest that animal agriculture will face 

increasing pressure from environmental groups and regulatory 

bodies. Differences in environmental regulations across 

countries have direct impacts on industry competitiveness by 

altering the relative costs of production, thereby influencing the 

location of production or stages of production. 

Price Integration 

Market price integration is the degree to which two markets are 

linked through price. Prices between markets should be linked 

(move together). What’s more, the difference in the level of the 

price should reflect only transportation costs, and exchange rate 

differences in the case of international movements (Hudson, 

n.d.). High transport costs may effectively separate markets— 

especially for fresh meat products—so that there is little 

relationship between market prices, as may be the case between 

the United States and Australia (Diakosavvas, 1995). At the 

same time, trade barriers, such as tariffs, quotas or non-tariff 

barriers, may also insulate domestic prices from international 

markets, as has been the case in Europe (Dries and Unnevehr, 

1990). Issues such as differences in quality may decrease market 

price integration. For example, one would expect less 

correspondence between grass-fed beef in Argentina and grainfed 

beef in North America.

With NAFTA, and indeed before, several of the impediments 

to market integration were removed. Most livestock and meat 

products move across borders duty-free or near duty-free, 

suggesting that there should be no monetary reason for lack of 

integration (ignore for the moment the current BSE trade 

restrictions). The issue of sanitary impacts is discussed in more 

detail below. Feeding technologies, breeding stock (with some 

minor exceptions) and feed components are similar or move 

relatively freely across borders, as well, so quality of end product 

is similar. Transport costs are not trivial, and increasing energy 

costs may have a greater impact in years to come, yet these costs 

appear to be well accommodated by the current marketing 

channel system and do not serve as an impediment to the 

movement of products within North America. 

This information suggests that North American meat market 

prices are integrated. Work by the USDA’s Economic Research 

Service (ERS) suggests the U.S. and Canadian meat markets 

show a high degree of price integration, but the United States 

tends to be the price leader in the causal relationship. This 

relationship is visualized in Figure 15, which shows the U.S. 

price for live fed steers (Nebraska basis) and the U.S. dollar 

price (adjusted by the US$/CN$ exchange rate) for live fed 

Alberta steers, and imports of live cattle from Canada between 

1993 and 2003. Figure 16 shows a similar relationship for U.S. 

and Canadian farm-level pork prices. 

Two important conclusions can be drawn from Figures 15 and 

16. U.S. and Canadian prices appear to move together quite 

well, and the Canadian case of BSE and subsequent border 

closing between the United States and Canada drove a wedge 

between U.S. and Canadian prices for beef (Figure 15), 

destroying the price integration that had prevailed until that 

point (Rosson, 2005). Figure 15 highlights the impact changes 

in trade rules can have on market price integration. 

Poultry price relationships are not as strongly integrated due to 

Canadian supply management programs and import quotas. 

The relative lack of price integration in North American 

poultry markets is illustrative of the impacts of government 

policy on market integration. 

Although not discussed in great detail here, the issue of 

exchange rates is important. The relatively strong U.S. dollar 

during the past decade has put significant downward pressure 

on U.S. exports. Exchange rates have a significant impact on 

exports. However, vertically integrated supply chains across 

North America may mitigate the impact of exchange rates, 

particularly rapid and large changes, within NAFTA operations. 

A lack of market integration, per se, is neither a good or bad 

phenomenon. There are many logical reasons why markets 

would not be integrated. A high degree of market price 

integration in the North American meat complex, however, 

suggests that price signals are being efficiently transferred across 


national boundaries, leading to the most rational allocation of 

resources (e.g., location of production and processing and 

consumption), and to the most efficient operation of the 

industry as a whole. This efficiency results in lower overall meat 

prices to consumers in Canada, Mexico and the United States. 

A troubling issue from an economic perspective is that trade 

disruptions impede market integration to the detriment of 

producers and consumers in all three countries. The BSE case 

serves as an example. The impact to date has been an increase 

in the Canadian cattle herd, a decrease in Canadian prices and 

an increase in Canadian slaughter capacity. In 2003, the United 

States halted imports of Canadian live cattle due to the 

identification of a BSE case in Canada, leading to the price 

wedge observed in Figure 15. The U.S. border reopened to 

Canadian boneless beef from cattle under 30 months (UTM) in 

August 2003, and to live cattle UTM (except breeding stock) in 

July 2005. While the U.S. border was closed to imports of 

Canadian cattle (from May 2003 to July 2005), the value of 

processed beef exports increased substantially, as shown in 

Figure 17. Avian influenza could create similar disruptions. 

A simple logical analysis suggests that if Canada had a 

comparative advantage in slaughtering and processing, it would 

have enjoyed it under NAFTA when trade restrictions were 

essentially non-existent. So, it can be surmised that the rapid 

increases in beef slaughtering capacity now occurring in Canada 

are a direct result of the differential treatment of live cattle and 

processed beef products resulting from the BSE case. Some have 

argued that the magnitude of this impact may be small; 

however, one should not discount potential longer-term 

impacts on trade disruptions in terms of lost reputation and the 

costs of disrupted supply chains. The crux of the issue is that 

the live cattle restrictions may have permanently altered the 

level of integration between these markets, and these alterations 

are likely to be detrimental to the overall efficiency of the 

North American beef complex. Similar examples exist in other 

sectors. Russian bans on dark meat poultry imports from the 

United States had significant impacts on the efficient operation 

of the U.S. poultry industry. 

The North American meat complex appears to exhibit a high 

degree of price integration, which suggests that price signals are 

being efficiently transferred across national boundaries. 

However, differential government policies and trade disruptions 

have direct and consequential impacts on price integration, 

which may permanently and irreparably alter the ability of the 

market channels to efficiently allocate resources and provide the 

lowest cost products to consumers. 

Financing and Capital Acquisition 

The North American livestock industry has benefited from 

access to efficient, low-cost debt and capital financing. This 

advantage probably was enhanced by integration of the value

68 

chain in recent years. However, this advantage is deteriorating 

with the advent of multinational lending institutions, and the 

development of production/marketing systems that are similar 

in most countries among efficient producers. There remains 

country risk—associated with political instability, high 

inflation, rapidly depreciating currency values, adverse public 

policies that do not support the development of efficient 

infrastructure, or corruption—that still affords a risk-related 

cost advantage for the U.S. and Canadian livestock industries. 

For example, Rabobank found that capital costs per kilo of hog 

slaughter were twice as high (20 Euro cents/kilo) in Brazil as in 

the United States and Canada. Reduction in country risk 

around the world would eliminate or drastically reduce this 

advantage. Paradoxically, reduction in the dangers of the 

factors associated with country risk are exactly the conditions 

associated with rising incomes and economic growth needed to 

increase livestock and poultry demand on a worldwide basis. 

Summary 

Animal agriculture in North America has undergone dramatic 

changes during the past two decades. Economic forces driving 

increased market integration and trade are complex and 

interrelated. Prices and trade flows are increasingly impacted by 

events, policies and forces outside of North America. Global 

animal product markets are consumer driven, with product 

safety, wholesomeness, quality and price key determinants of 

international competitiveness. Processors, retailers and food 

service corporations are expanding and integrating this global 

market, bringing efficiency and affordable food to both 

developed and developing countries around the world. 

North America is both a leading exporter and importer of 

animal products. The European Union is often a larger 

exporter, but the bulk of the trade is within the EU. While 

Canada and the United States are essential markets for each 

other, they also compete for export customers. Brazil is a 

rapidly growing competitor, particularly in poultry exports, but 

continues to be limited in pork and beef exports by FMD. 

China and Russia have significant potential as export 

customers, but have challenges that may slow the development 

of these markets. 

Two primary factors will shape the future of North American 

exports of animal products: income of developing economies 

and trade agreements. The growth of consumer income in the 

United States and Canada has slowed, as has the growth rate for 

animal product consumption. However, there is a successful 

track record of increased demand for animal proteins as 

economies grow and consumer spending increases. The rate of 

technical transfer and potential economic development is 

accelerating. During the past 10 years, retail groceries in many 

developing countries have adopted scanner and inventory 


control technology that required the previous 50 years to 

implement in developed economies. Trade agreements that 

lower protection on domestic agriculture in developed countries 

and reduce sanitary and phytosanitary trade barriers will also 

facilitate trade. FAO estimates suggest North American 

countries will benefit from fully implemented trade 

liberalization measures at the expense of the EU. However, the 

benefits from trade agreements can be derailed by animal 

disease issues. 

The livestock, meat and poultry markets in North America are 

increasingly integrated. Live hog trade between Canada and the 

United States is a good example. Canadian producers have 

increased farrowing and pig exports to the Midwest region of 

the United States. U.S. producers have invested in finishing 

facilities, have lower feed costs and are in close proximity to 

several large, efficient pork packers. The recent closure of the 

U.S.-Canadian border to live cattle due to BSE encouraged 

Canada to invest more heavily in slaughter facilities; coupled 

with cyclically low U.S. cow slaughter, this has caused some 

U.S. slaughter plants to close. Animal health and food safety 

considerations will continue to impact border decisions, even 

within the NAFTA trade agreement. 

Worldwide, demand for North American-produced animal 

products is likely to continue to grow. Meanwhile, both 

governments and the private sector are facing greater 

requirements and responsibilities for assuring consumers of 

product safety and quality. In the future, private-sector 

decisions will play an increasing role if other countries follow 

China’s role and approve individual plants for import rather 

than entire countries. Market institutions that help to 

harmonize agricultural programs and SPS regulations may 

lessen the confusion about trading rules and facilitate more 

trade opportunities. 


• Consumer income growth in developing countries may be 

the single most important factor in increasing North 

American meat exports during the next decade. The longterm 

payoff to policies aimed at growing the economies of 

developing countries is likely to be quite high. Such policies 

will be highly controversial. They go beyond potential 

concessions in the WTO, FTAA and/or CAFTA-DR to 

renew food aid, and to economic and technical 

development through organizations like the United Nations 

and World Bank. Most controversial, some of these 

programs may be aimed at improving agriculture in the 

developing world as a first step in raising income levels. 

This strategy worked with three large customers for North 

American animal products—Japan, Korea and Taiwan. 

However, improving agriculture in developing countries 

will be viewed by some industry participants as creating

competitors. Economic logic, however, suggests that the 

long-term impact is to create better customers and more 

stable markets. 

• Brazil, and to a lesser extent its neighbors, is a major force 

in world animal product markets. Brazil is likely to increase 

market share during the next decade. This has several 

implications. First, if Brazil’s per-capita income grows fast 

enough, a large proportion of its increasing production will 

be absorbed internally rather than abroad. Second, pursuit 

of FTAA will give the NAFTA countries opportunity to 

integrate markets with Brazil and the MERCOSUR trading 

bloc. As has been learned from NAFTA, it is easier to deal 

with issues of competition within an established 

framework. Hemispheric market integration also may 

be achieved. 

• If improving the efficiency of the North American animal 

industry is a goal, greater harmonization of policies, 

programs and regulations is required. This may include, but 

is not limited to farm programs, environmental regulations, 

product safety and animal identification rules. Regular 

meetings of NAFTA and legislative policymakers to discuss 

regulations and rule making might help improve 

transnational harmonization, but the outcome is uncertain. 

• One of the greatest potential barriers to international trade 

in animal products may be the need to mitigate perceived 

or real risks of animal disease outbreaks. The temporary 

repercussions of short-term actions against another country’s 

products may become permanent obstacles. Implications 

include adherence to science-based principles, improved 

traceability from farm or feedlot to the consumer and 

enhanced regulatory coordination among all three countries. 

• Large supplies of inexpensive feeds creating production 

efficiencies have been a major factor in the growth of 

animal product exports from the United States and Canada. 

Potential increases in feed costs due to changes in farm 

policy may reduce that advantage. Increased ethanol and 

bio-diesel production may further increase feed costs. To 

offset this, the development of new technologies and 

increased efficiency are important to maintain the 

competitiveness of the North American animal 

agriculture industry. 

• Future growth potential for North American animal 

product exports in value-added, branded, packaged 

products is important. To enhance the competitiveness of 

the products, government regulators and trade negotiators 

need to work closely with the food manufacturing and food 

service industries to assure a sound policy and regulatory 

framework to support future trade growth. 


Information and Research Needs 

This analysis raises a number of unanswered questions. 

Industry participants and policymakers face tough decisions in 

the years ahead. Potential areas needing further research and/or 

debate include: 

• Who are the beneficiaries of North American market 

integration: producers, consumers, other market 

participants such as multinational corporations, or all of 

the above? How do market participants benefit, e.g., lower 

price, higher standardized quality or greater variety of 

fresh products? 

• Have temporary BSE trade bans permanently altered trade 

flows and market integration of the North American beef 

market? Or, will there be a gradual return to pre-existing 

trade flows? 

• Are bilateral and regional trade agreements, such as 

NAFTA, a more effective and efficient way than WTO to 

gain access to new markets or reopen disrupted export 

markets for animal products? 

• Should a science-based principle apply to an entire supply 

chain? Why and under what conditions? 

• What is the rank ordering of major factors affecting animal 

product trade flows in the coming decade—worldwide 

economic growth, trade agreements, domestic policies and 

regulations, and market integration? Does the likelihood of 

animal disease outbreaks in various parts of the world 

trump all of these? 

• How will the North American animal industry handle the 

possibility of bioterrorism? Is such risk mitigation even 

economically feasible under current conditions? 

• What are the implications for the Canadian, Mexican and 

U.S. dairy industries of the growing trade in milk 

components, e.g., casein, milk protein isolates and milk 

protein concentrates?

70 

References 


Agriculture and Agrifood Canada. (n.d.). Red Meat Market Information. Available at 

http://www.agr.gc.ca/redmeat/main.htm. 

Codex Alimentarius. (n.d.). Available at http://www.codexalimentarius.net/web/index_en.jsp. 

Diakosavvas, D. (1995). “How Integrated are World Beef Markets? The Case of Australian and U.S. Beef Markets.” Agricultural 

Economics, 12, 37-53. 

Dries, M. and L. Unnevehr. (1990). “Influence of Trade Policies on Price Integration in the World Beef Market.” Agricultural 

Economics, 4, 73-89. 

Eurostat. (n.d.). Available at http://epp.eurostat.cec.eu.int/. 

Foreign Agricultural Service, USDA. (1995-2005). FAS Agricultural Attaché Reports Section. Reports for Livestock Poultry, and 

Products, selected issues, 1995 to 2005. Available at http://www.fas.usda.gov/scriptsw/attacherep/default.asp. 

Foreign Agricultural Service, USDA. (n.d.). Production, Supply, and Distribution: PSD Online. Available at 

http://www.fas.usda.gov/psd/. 

Foreign Agricultural Service, USDA. (n.d.). U.S. Trade Internet System. Available at http://www.fas.usda.gov/ustrade/. 

Hahn, W.F., M. Haley, D. Leuck, J.J. Miller, J. Perry, F. Taha, and S. Zahniser. (2005, May). Market Integration of the North 

American Animal Products Complex. Electronic Outlook Report from the Economic Research Service, USDA. Report No. 

LDP-M-131-01. Available at http://www.ers.usda.gov/Publications/ldp/may05/ldpm13101/. 

Hudson, D. (forthcoming). Agricultural Markets and Prices. New York: Blackwell Publishers. 

Lupien, J. (2000). “The Codex Alimentarius Commission: International Science-Based Standards, Guidelines, and 

Recommendations.” AgBioForum, 3(4). Available at http://www.agbioforum.org. 

Lusk, J., J. Roosen, and J. Fox. (2003). “Demand for Beef From Cattle Administered Growth Hormones and Fed Genetically 

Modified Corn: A Comparison of Consumers in France, Germany, the United Kingdom, and the United States.” American 

Journal of Agricultural Economics, 85, 16-29. 

Market Integration of the North American Animal Products Complex. (2005). Available at 

http://www.ers.usda.gov/publications/ldp/may05/1dpm/13101/ldpm13101.pdf. 

Market Integration of the North American Animal Products Complex. (2004). Available at 

http://www.ers.usda.gov/publications/ldp/nov04/1dpm/12501/ldpm12501.pdf. 

Miller, C. and K. Coble. (2005). “Cheap Food Policy: Fact or Rhetoric?” presented at the 2005 American Agricultural Economics 

Association Annual Meeting in Providence, RI. 

North American Agricultural Market Integration and Its Impacts on the Food and Fiber System. (n.d.). Available at 

http://www.ers.usda.gov/publications/aib784/aib784.pdf. 

Otte, M.J., R. Nugent, and A. McLeod. (2004, February). Transboundary Animal Diseases: Assessment of Socio-Economic Impacts 

and Institutional Reform. Food and Agriculture Organization-Livestock Information and Policy Branch. 

Regmi, A. and M. Gehlhar. (2005, February). “New Directions in Global Food Markets.” Agriculture Information Bulletin No. 

AIB794. Available at http://www.ers.usda.gov/publications/aib794/. 

Rosson, C. Parr. (2005). “Food Chain Disruptions and Trade: The Case of North American Animal and Meat Trade.” Center for 

North American Studies Paper No. 2005-1.


Rosson, C. Parr and F.J. Adcock. (2005, July). “Food Chain Disruptions and Trade: The Importance of North American Market 

Integration.” Choices. 2nd Quarter, 20(2). On-line journal of the American Agricultural Economics Association. Available at 

http://www.choicesmagazine.org. 

Structure of the Global Markets for Meat. (n.d.). Available at http://ers.usda.gov/publications/aib785/aib785-1.pdf. 

U.S. Department of Agriculture – Economic Research Service (USDA-ERS). (2003, October 23). International Food 

Consumption Patterns, Data Set. 

World Organization for Animal Health. (n.d.). Available at http://www.oie.int/eng/en_index.htm. 

World Trade Organization. (n.d.). Available at http://www.wto.org/. 

Zahniser, S. (Ed.). (2005, February). NAFTA at 11: The Growing Integration of North American Agriculture. Electronic Outlook 

Report from the Economic Research Service, USDA. Report No. WRS-05-02. Available at 

http://www.ers.usda.gov/briefing/nafta/mandated.htm/. 

Figure 1. Brazilian Beef Exports 

Source: USDA Foreign Agricultural Service attaché reports

72 

Figure 2. Canadian Beef Exports 

Source: Agriculture and Agri-Food Canada, USDA Foreign Agricultural Service 

Figure 3. Japanese Beef Imports 

Source: USDA Foreign Agricultural Service, Others estimated post-2000 

Global Competitiveness and Trade

Figure 4. World Beef Consumption 

Source: Production, Supply and Distribution Database, http://www.fas.usda.gov/psd 

Figure 5. Canadian Pork Exports 

Source: Agriculture and Agri-Food Canada, USDA Foreign Agricultural Service 

Global Competitiveness and Trade 73

74 

Figure 6. U.S. Pork Exports 

Source: U.S. Trade Internet System, Foreign Agricultural Service, USDA 

Figure 7. Japanese Pork Imports 

Source: USDA Foreign Agricultural Service and Eurostat 

Global Competitiveness and Trade

Figure 8. World Poultry Meat Production 

Source: Production, Supply and Distribution Database, http://www.fas.usda.gov/psd 

Figure 9. Brazilian Poultry Meat Exports 

Source: USDA Foreign Agricultural Service attaché reports 

Global Competitiveness and Trade 75

76 


Figure 10. U.S. Poultry Meat Exports 

Source: U.S. Trade Internet System, Foreign Agricultural Service, USDA 

Figure 11. Russian Poultry Meat Imports 

Source: USDA Foreign Agricultural Service attaché reports, U.S. Trade Internet System and Eurostat

Figure 12. Major Dairy Exporters 

Source: Food and Agriculture Organization 

Figure 13. Major Dairy Importers 

EU-25 

US 

Source: Food and Agriculture Organization 


EU-25 NZ Australia US Canada Argentina 

Algeria 

Brazil 

China 

Indonesia 

Japan 

Malaysia 

Mexico 

Philippines 

Russia 

Saudi Arabia 

Thailand

78 


Figure 14. Selected Producer Support Estimates (PSEs) for the United States, Canada and Mexico 

Commodity U.S. Canada Mexico 

Wheat 25 21 30 

Source: OECD 

Maize 15 15 36 

Oilseed 19 09 65 

Pork 04 08 07 

Beef/Veal 03 18 09 

Broilers 04 07 19 

Milk 45 59 33 

Sugar (refined) 61 _ 49 

Overall 18 21 19 

Figure 15. U.S. and Canadian (adjusted to US$) Live (Fed) Cattle Prices and U.S. Imports of Canadian Live Cattle, 1993-2003 

$/cwt 

1993 

1994 

1995 

1996 

1997 

1998 

1999 

Source: USDA Economic Research Service and Foreign Agricultural Service, and Agriculture and Agri-Food Canada 

2000 

2001 

2002 

2003 

1,000 Head


Figure 16. U.S. and Canada Slaughter Pig Prices, 1993-2003 

Source: Data compiled from USDA Economic Research Service and Agriculture and Agri-Food Canada. 

Figure 17. Value of U.S. Imports of Processed Beef Products and Cattle from Canada, 2000-2004. 

Value of U.S. Imports ($1,000) 

Slaughter Pig Price ($/cwt) 

1993 

1994 

1995 

1996 

Source: Data compiled from the Foreign Agricultural Trade of the United States (FATUS) Database, Foreign Agricultural Service, USDA. 

1997 

1998 

1999 

2000 

2001 

2002 

2003

Chapter 5 


Demand for animal food production is increasing as world 

population increases and developing countries have more 

disposable income. When marginal lands are included, livestock 

production uses more land than any other agricultural 

enterprise. Globally, however, production is shifting to more 

confined, concentrated and intensified systems. In North 

America, this intensification is regional, especially with poultry, 

swine and cattle feedlots. Dairies are becoming fewer and larger 

in size and are concentrating in areas not historically linked to 

dairy production. These changes have an ever increasing impact 

on animal and poultry health and the methods used to prevent 

and/or control diseases and parasites. 

Globalization increases export opportunities for the North 

American livestock and poultry industries, but it also increases 

the risk for introducing a foreign animal disease that can be 

economically devastating. Even if an introduced disease is not 

deadly and is quickly contained, the economic impact could be 

significant if the result is a prolonged disruption of exports and 

trade with North America. 

Maintaining food safety and assuring consumers of the safety of 

their food will continue to be challenges for the industry. The 

processing sectors have adopted process control strategies 

(Hazard Analysis and Critical Control Point, or HACCP) to 

reduce food-related risks. The production sector is adopting 

quality assurance programs and best management practices 

(BMPs) to address specific product quality and food safety 

issues. Advances in information technology and improved 

infrastructure to trace animal disease threats provide vehicles to 

share more product information through the supply chain. 

Individual firms may utilize the information infrastructure as 

part of an enhanced process control system. 

Numerous facets to food safety and animal health issues are 

confronting North American animal agriculture. This chapter 

discusses the current situation and drivers of change, including 

issues that can be considered cross-cutting with respect to 

animal health and food safety concerns, government and 

policy issues, and emerging business strategies. It will then 

lay out options for the future, discuss the implications of each 

and conclude by identifying areas where additional research 

is needed. 


Animal health and food safety issues are closely related. In some 

cases, the priorities of each are different enough to warrant 

separate strategies. Even if there are similarities in the 

approaches that address animal diseases and food safety, it is 

important to recognize that the objectives and desired outcomes 

are often different. 

Cross-Cutting Issues 

Traceability, Bioterrorism and Animal Disease: The ability to 

identify, track and sequester diseased animals and contaminated 

animal products is vital to secure the North American food 

system from accidental or intentional threats. Government and 

industry have common needs and uses for information from 

tracking systems. A partnership of government and private 

industry stakeholders will be needed to develop, implement and 

maintain functional, credible and reliable tracing systems, 

particularly in light of animal agriculture’s dependency on 

export markets as engines for expansion and profitability. 

An effective tracking system will enhance the industry’s ability 

to compete effectively in global markets. Increasingly, global 

trade in animals and animal products accentuates the need for 

reliable disease identification and quarantine systems. This is 

especially true in high-income export markets, such as the 

European Union (EU) and the Pacific Rim, where consumer 

expectations and government regulations are raising the bar for 

traceability and identification of animal products. In addition 

to more favorable market positioning, a rapid animal 

identification tracking system would help mitigate potential 

losses from naturally occurring or terrorist-generated disease 

events. Animal and premise identifications are first steps in 

developing a rapid animal identification system. 

Animal Disease and Public Health Interactions: Recent incidents 

of high pathogenic H5N1 strain of avian influenza in Southeast 

Asia, China and Europe and bovine spongiform encephalopathy 

(BSE) in Canada and North America have heightened fears of 

potential zoonotic diseases, i.e., those diseases that spread from 

animals to humans. These incidents have resulted in greater 

interaction between public health agencies and the veterinary 

81

82 

and medical professions. This increased coordination provides a 

foundation for proactive response to potential animal disease 

threats. The U.S. chicken industry, for example, has a testing 

program to ensure that chicken flocks, and the food products 

made from them, are free of potentially hazardous forms of 

avian influenza. Through comprehensive testing of all flocks, 

chicken companies will add another layer of safety to already 

existing measures to protect consumers and the food supply 

(Pretanik, 2006). 

Organics: Organic agricultural products are a small but the 

fastest growing segment of the North American food products 

market. More farmers and ranchers are using organic 

production methods, and a majority of food retailers sell 

organic products. The U.S. market for organics is projected to 

be $30.1 billion by 2007. Organics represent only about 2 

percent of food sales. Some consumers view organic products as 

being healthier and of better quality and are willing to pay 

higher prices for those perceived attributes (see Consumer 

Demand Chapter). Other consumers may view buying organic 

products as a way to support sustainable agriculture. Current 

demand indicates that there are opportunities for expanding 

organic production. Third-party certification of organic 

production systems, segregation of product from traditionally 

produced goods and traceability are the key elements of organic 

agricultural production. These characteristics may signal safer 

food supplies to some consumers. There is, however, no 

assurance that organic products are any “safer” than non-organics; 

in fact, they may be less safe from a pathogen perspective. 

In Mexico, development of this market is growing, but is less 

developed than in Canada and the United States. A local 

capacity of assessment and verification of processes must be 

developed. This is an area of opportunity for cooperation 

among the NAFTA partners. 

Residues: Consumers continue to express concern about 

antibiotic and chemical reside in foods. More restrictions on the 

use of antibiotics in food-producing animals may reduce 

concern in the general public over residues (USDA-AMS, 

2005). The proliferation of claims about antibiotic use increases 

consumer confusion over undefined terminology such as 

“antibiotic free,” “no antibiotic residues,” “without added 

antibiotics” and “no sub-therapeutic antibiotics.” The degree to 

which residue can be detected, combined with a lack of 

scientific understanding, may complicate the ability of 

consumers to assess risks. Continued improvements in 

detection methods for pathogens will enhance the ability of 

food firms to keep potentially harmful products out of the food 

supply chain. 

Even when regulatory aspects have been developed, 

enforcement in Mexico is minimal and basically restricted in 

the case of meats to the Federal Inspection System plants, 

which represent only a small part of the slaughter. In milk, 


established firms and cooperatives have good control of 

residues. There is not a well-established consumer organization, 

and no such initiatives as advertising based on specific safety 

issues are observed. Therefore, in terms of the NAFTA region 

and its potential and capabilities to gain access to important 

markets outside the region, an effort should be made to 

minimize the differences among countries and identify agreed 

minimum standards. 

Government and Policy Issues 

Food Safety: Global production and marketing of animals and 

animal products have increased the risk of widespread animal 

disease. Canada, Mexico and the United States have systems in 

place to guard against the importation of plant and animal 

diseases, and to control naturally occurring disease outbreaks. 

Concern exists from Mexican officials, however, that “less than 

robust” food import inspection and enforcement capabilities in 

Mexico may result in shipments of “below standard” food 

products from the United States and Canada to Mexico. 

In Mexico, both human health and agricultural authorities 

share food safety responsibilities, and there are many areas of 

intervention where specific coordination must be negotiated. 

The lack of clear-cut assignment of responsibilities favors the 

existence of regulatory loopholes that benefit dishonest 

wholesale traders and retailers. Effective coordination between 

the government agencies is not always negotiated or achieved. 

Clear-cut definitions or the creation of a single agency will be 

an important issue during the political campaigns leading up 

to elections. 

Antibiotic Resistance: Consumers, trading partners and health 

professionals are concerned about the use of antibiotics. This is 

particularly true for those antibiotics used for growth promotion 

because of the potential development of resistance when used in 

low-dose regimens. Conversely, many people also believe that a 

reduction in antibiotic use will lead to more animal disease and 

higher levels of food epizootic pathogens, such as Salmonella, 

Campylobacter and E. coli in animal food products. 

Animal Health Regulation: Science-based regulations are vital to 

a strong animal agriculture industry and will serve as a 

foundation to enhance domestic and international operations. 

A recent report by the National Academy of Sciences National 

Research Council recommends the United States establish a 

high-level mechanism to coordinate the currently fragmented 

regulatory framework for addressing new and emerging animalborne 

diseases, e.g., BSE, avian influenza and West Nile Virus 

(National Research Council, 2005). 

As a NAFTA region, a common robust system for 

epidemiological surveillance should be developed, which may 

include the strengthening of diagnostic capabilities. For Mexico,

it is advisable to reconsider updating the diagnostic laboratories 

network which once existed, and reinforcing capabilities for 

rapid response to animal health emergencies. 

Trade and Market Accessibility: Consumers today desire a wide 

variety of foods throughout the year. To meet this diverse and 

year-round demand, many foods are produced outside of North 

America. This presents challenges for ensuring safe production 

practices, quality and food safety. Sanitary and Phytosanitary 

Standards (SPS) have become part of most trade agreements, 

but disputes over implementation can result in trade restrictions 

or embargoes on food products. The issue becomes more 

complex as trade expands and more regional trade agreements 

are established. Operation of local and regional markets, 

particularly those dealing in live animals, will continue to be a 

source of concern regarding animal health and will complicate 

full market accessibility within the North American Free Trade 

Agreement (NAFTA) (Nolen, 2002). As the North American 

market becomes more integrated and farmers and businesses in 

each NAFTA country become more interdependent, border 

issues become increasingly important. For example, about 

100,000 Canadian pigs are transported to and fed weekly in the 

United States. Canada does not have the facilities to house and 

feed the pigs; if the border between the United States and 

Canada were to close, Canada would have difficulty dealing 

with these pigs. This further accentuates the need for 

harmonization of standards and enforcement within NAFTA. 

Increased trade raises the issue of “pass-through” trade— 

products that originate in non-NAFTA countries and may meet 

SPS requirements in one NAFTA country, but not the country 

of final destination. Options include adoption of internationally 

equivalent animal health and food safety standards; NAFTA 

partners implementing similar levels of inspection; and 

consolidating food safety responsibilities in a single government 

agency. Canada, Mexico and the United States might consider 

establishing common North American disease restrictions for 

imports and exports of all animal species. Similarly, there are 

more well-defined criteria for trade stoppages due to disease and 

food safety concerns than there are for trade resumptions, a 

situation that will no doubt hamper full market integration 

among NAFTA trading partners. There is a need to manage 

trade in ways that cause the least disruption and increase the 

understanding of how NAFTA partners will treat each other in 

the event of a trade disruption. There is a high pay-off to 

market integration and, correspondingly, a high value to 

putting in place effective mechanisms to reopen borders after 

disease outbreaks or food safety incidents occur. 

North American livestock products are considered to be among 

the safest, highest quality and most nutritious in the world. 

Despite this, there are periodic reports of pathogens or 

occasional recalls of contaminated products. Consumer 

perceptions of the existence of a problem, or the extent of its 

Food Safety and Animal Health 83 

impact, may influence domestic or international market 

demand and producer profits. 

Livestock Insurance and Indemnity: Animal disease outbreaks 

have the potential to be extremely damaging to the affected 

country’s economy, through agriculture and agri-food product 

trade interruption, and/or loss of domestic consumer 

confidence. In the event of a crisis, the government would 

likely be under enormous pressure to provide financial 

disaster assistance. 

In general, income support mechanisms in the agriculture 

sector are not specifically designed to address the sustainability 

of an entire industry when faced with closed export markets. 

Animal agriculture is more vulnerable than field crops because, 

except for dairy, it does not have the benefit of safety net farm 

policies. The fact that animal agriculture crises often are 

unforeseen and require quick responses generally results in 

government interventions that are reactive and discretionary. 

Despite all precautions, disease outbreaks will occur. 

Consideration of ways to protect the North American economy 

from the impacts of disease outbreaks may be needed. 

Livestock insurance and indemnification of animals destroyed 

to control disease outbreaks are options to mitigate diseaserelated 

animal losses. Such programs must also consider the 

impact on price to all producers if export markets are lost due 

to an animal disease. Producers with healthy animals will still 

suffer economic losses. Initially, government agencies might 

have to provide subsidies for livestock insurance programs as 

they do for most crops. Such programs would be riskmanagement 

tools for animal producers and integrators. 

Current disease eradication plans have not considered the costs 

of dealing with surplus market animals. 

A common NAFTA fund for livestock insurance and indemnity 

is one option to be considered. 

Business Strategies 

Source Verification: At present, private industry is implementing 

the most effective strategies for source verification. Many of 

these practices involve computerized production, receiving, 

inventory and shipment tracking through Radio Frequency 

Identification (RFID). In August 2005, the U.S. Department 

of Agriculture (USDA) approved the Age and Source 

Verification (ASV) program, enabling beef exports to Japan 

under specified conditions. Trade resumed in December 2005 

only to be halted again in January 2006 due to one veal 

shipment in violation of requirements. Increasingly, suppliers of 

inputs to finished goods are required by their customers to have 

the capability to track the source of these inputs. Wal-Mart and 

other large multinational firms are the primary drivers of source 

verification. This is particularly true for products grown or

84 

produced under specific contract stipulations, organics and 

boutique products, such as “antibiotic free,” “pesticide free” and 

“humane practices” products. 

While involved with many goods, large firms do not handle all 

products. For example, in Mexico, the majority of the domestic 

consumption of animal products is handled by small-scale 

retailers and traditional marketing systems, such as the tianguis. 

Developing a local capability to assess and verify specialized 

processes (e.g., organic products, pesticide-free, residue-free, 

non-GMO) is an area of potential cooperation among privatesector 

firms and NAFTA governments. 

Recall Mitigation: U.S. and Canadian food firms continue to 

enhance their ability to voluntarily recall foods that fail to meet 

their internal quality standards, or fail to meet certain 

government-established standards. Many firms routinely 

implement mock recalls to improve their ability to respond 

quickly and efficiently. This practice increases the efficacy of 

recalls with respect to public health and helps preserve product 

and brand equity. In Mexico, only large firms have the 

capability to implement a food product recall on an emergency 

basis. Developing trademarks for unprocessed meats and animal 

products may enhance the capabilities of firms to conduct 

necessary targeted or widespread recalls. 

Product Claims: In the United States, USDA and the Food and 

Drug Administration (FDA) have established specific criteria 

for product claims and product labeling in response to 

consumer demand for verification of claims. How food firms 

use such terms as natural, residue-free and humane in 

marketing products is the subject of debate. Policing these 

practices is limited. If public health remains unaffected and no 

laws are violated, it appears to be left to the market to 

determine appropriate product descriptions. Care must be 

taken to ensure that sanitary and health-related claims are 

confined to real and verifiable safety risks. 

Homemade products remain outside the purview of most 

agencies, particularly in Mexico, where a large portion of 

agricultural products are sold in regional markets. Due to 

market structure and consumer behavior in Mexico, awareness 

of food product labels and product claims lags behind that of 

Canada and the United States. Product claims made in Mexico 

will advance consumer sophistication if they are verified by 

governmental agencies charged with this responsibility. 

Cost Implications of Animal Health Management: Management 

and maintenance of animal health is a cost of doing business. 

Improvements in disease testing and continued vaccine research 

should eventually result in decreased costs. The initial cost of 

adopting technologies may involve additional fixed assets, but 

average variable and marginal costs should decrease as these 

technologies become fully operational, thereby decreasing the 

breakeven level for producers. Small producers may require 


special attention to improve their technological capabilities. 

Securing animal health for these producers is in the best interest 

of the entire animal agriculture industry and society as a whole. 

Future Planning Strategy: Continued biotechnological advances 

should allow earlier administration of more protective vaccines 

to animals. One example is the in ovo technology currently 

used in the poultry industry that allows vaccination of chicks 

prior to hatching and then again at one day of age. This 

eliminates additional handling and reduces labor costs. 

Analogous to this practice would be in utero vaccination of 

other animal species. The development and adoption of these 

technologies may result in management strategy changes and 

precipitate industrywide operational changes. 

Special effort should be made to provide small producers access 

to and support in the use of new technologies so that risk 

epidemiological niches do not develop. 

Drivers of Change and Industry Responses 

The majority of consumers consider domestically produced 

food to be safe. In a recent Gallup poll, 1,001 U.S. adults 

ranked restaurant, agriculture and grocery industries first, third 

and fourth, respectively, in terms of their trust of industries. 

High consumer confidence in the food system was also 

evidenced by the virtually imperceptible change in beef 

consumption related to the recent BSE incidents in Canada and 

the United States. The National Cattlemen’s Beef Association 

(NCBA) and USDA worked cooperatively to address 

consumers’ concerns regarding BSE by providing science-based 

information to the media and by encouraging clear 

communication between producers and the public. Processed 

foods are considered safe and as posing little threat to 

consumers, if properly handled and stored. Some consumers are 

concerned about chemical residues, the potential for antibiotic 

resistance of human pathogens resulting from prophylactic 

dosages in animals, and issues such as biosecurity and 

zoonotic diseases. 

All these factors represent the rapid and constant changes that 

animal industries are experiencing, driven by numerous forces. 

Those forces, and their possible implications for the future of 

animal agriculture in North America, are discussed here. 

Certain food characteristics, presentations and in-home 

preparations are important parts of the culture of different 

groups in the NAFTA region. Such cultural diversity in food is 

welcome and encouraged within a framework of sound food 

handling and processing practices that assure food safety. 

Consumer Sophistication: Consumers are becoming increasingly 

sophisticated and are contributing to the evolution of markets 

for traditional and niche animal products. Consumers are 

demanding more information and greater access to information

on food safety and animal health issues. These informational 

needs cut across issues of animal health, antibiotic and 

hormone use by the industry, production and slaughter 

practices, and environmental effects of intense and confined 

production units. Advocacy groups press producers and 

processors to adopt practices consistent with their demands; this 

is also reflected in food retailers’ pressuring suppliers to adopt 

practices framed by advocacy groups. 

How consumers react to food safety concerns and animal health 

incidents will shape ongoing industry and government 

responses and help motivate further innovation and partnering. 

Responses may involve: 1) market innovations flowing from the 

private sector; 2) public policies and programs developed to 

support private initiatives, trading partners or the consumer 

population; or 3) partnerships and collaborations between 

public and private interests, primarily in education and 

improved timeliness and accuracy of information. 

The implementation of sound, science-based regulations that 

include animal welfare and the safety of animal products is 

needed to avoid subjectivity and provide a legal framework for 

the different stakeholders in society with interests in the use of 

animals for the benefit of humans. 

Supply Chain Management: Market segmentation, 

consolidation, integration and concentration in animal 

agriculture will continue to be key drivers of change. 

Management of the resulting supply chains enables more rapid 

and effective responses to consumer demands and government 

regulations. It is important to recognize that the industry has 

historically behaved tactically, not strategically and reactively, 

not proactively. Firms that adapt decision processes and 

behavior patterns to the rapidly changing marketplace have the 

potential to reap benefits from increased competitive advantage 

and enhanced profitability. Process and market innovations 

driven by technological adoption will characterize successful 

firms. For example, there is evidence that some of the growth in 

niche livestock markets may be fueled by consumer concerns 

and demand for source assurance (see Consumer Demand 

and Economics Chapters). New models of supply chain 

management may emerge related to specific food safety/quality 

attribute certification, in addition to product differentiation 

and branding. 

Costs of Animal Health and Food Safety: Obtaining a competitive 

advantage is generally cited as a primary determinant of 

industry or individual firm efforts to arrive at innovative 

solutions to complex problems. Animal producers and 

processors are constantly faced with meeting or exceeding 

regulatory guidelines and market acceptability standards for 

their products. At the same time, they are adopting cuttingedge 

technology that is often capital intensive at startup but 

cost efficient long term. This keeps these operations balancing 

on the precipice of profitability as they look for ways to cut costs. 


Doing business in a global marketplace with exposure to new or 

emerging pathogens and zoonotic diseases puts a premium on 

maintaining animal health, preventing disease outbreaks, and 

dealing with the economic consequences of these management 

systems, whether successful or not. The economic consequences 

of widespread and serious animal disease incidents involving 

avian influenza, foot-and-mouth disease (FMD), Exotic 

Newcastle Disease (END) or swine fever (cholera) are 

potentially as devastating as those of BSE. USDA and FDA 

estimate an outbreak of BSE in the United States could result 

in a loss of $15 billion in sales revenue and $12 billion in 

slaughter and disposal (Pritchett et al., 2005). Estimated losses 

to U.S. farm income from an FMD outbreak are $14 billion 

(Paarlberg et al., 2002). Even relatively isolated outbreaks, such 

as the 2002 Virginia END outbreak that affected 197 poultry 

premises and resulted in approximately 4.7 million birds 

being depopulated, had a cost of more than $130 million 

(Bauhan, 2004). 

Technological advances to decrease disease losses and changes in 

management to increase production efficiency will help lower 

costs for producers. Producers can absorb some of the costs, 

but eventually, the market will pass some of those costs on to 

consumers so that producers may remain solvent and competitive. 

Pressures facing retailers and distributors are twofold. Increased 

consumer sophistication results in greater attention to issues 

such as shelf life, temperature control and overall product 

quality assurance. Private technology providers are developing 

tracking capabilities to give retailers and distributors tools to 

respond effectively to consumer demands. There are 

competitive pressures to cut costs through provision of shelfready 

meat and poultry products and specialty dairy products 

priced at the plant production site. Both practices save labor 

and augment check-out accuracy. 

Technological Developments: Impacts of technological 

developments span the spectrum of animal health and food 

safety issues. Biotechnology and technology impacts on 

mitigation of existing food safety incidents and in identification 

of new food safety concerns through known and emerging 

epizootic diseases continues to be of paramount importance. 

Attribution of specific pathogens to foodborne illnesses and 

other human health events is currently at the epicenter of 

zoonotic disease tracking. Rapid disease and pathogen 

identification technology and systems to enable rapid response 

to animal and human health events or food safety incidents will 

likely shape the future of animal agriculture. 

Globalization: Many international issues relate to 

implementation of sanitary and phytosanitary restrictions under 

the World Trade Organization (WTO). Often times these 

restrictions are imposed as thinly veiled tools of protectionism. 

It is imperative that North American animal agriculture 

continues to stay engaged in the difficult business of

86 

establishing food safety system equivalency worldwide despite 

the existence of freer trade worldwide. 

Globalization is not limited to trade and regulatory equivalency. 

Many diseases thought to have been eradicated have reappeared 

in both human and animal populations. Exotic diseases may be 

inadvertently introduced through trading partners. Deterrence 

and prevention are the first lines of defense against introduction 

of pests and pathogens from foreign or domestic sources. 

Strategies involved include global and regional efforts to reduce 

a potential threat before it reaches the borders, and prohibiting 

potential threat agents at ports of entry (National Research 

Council, 2002). Security concerns will continue to drive the 

need for improved animal disease detection. 

Market Innovations: Most innovations originate as private-sector 

initiatives. Obtaining a competitive advantage is generally the 

primary motivation for an industry or individual firm to 

develop innovative solutions to complex problems. Privatesector 

initiatives fall into three broad categories: 1) source 

assurance through more aggressive branding of animal products; 

2) product technology innovation to support consumer 

confidence with measurable, scientific criteria; and 3) emerging 

niche markets that capitalize on uncertainty surrounding safety 

of the traditional animal product supply chain. 

In the commodity food system, consumers have been assured 

by government agencies that the food is safe and wholesome. 

Increasingly, consumers want credible sources of additional 

information on the quality and safety of food and the practices 

employed in its production. Branding combined with source and 

process verification may offer increased assurances to consumers. 

A likely area for innovation in source assurances is information 

technologies that support tracking systems for food and animal 

products. Food manufacturers are providing new types of 

information that are often used to differentiate their brand and 

that may be interpreted as offering assurances to consumers. 

As these systems are introduced at the farm level, some public 

and private support of small farmers may be necessary to make 

sure these small farmers adopt these technologies, and thereby 

avoid risks to the NAFTA food system. 

Firms now seek detailed information from suppliers for 

inbound logistics and procurement for better cost and quality 

control. Some large national and multinational retail food firms 

require suppliers to implement tracking systems at both the raw 

and processed levels. More innovations are occurring that will 

make traceability of product handling more evident to 

consumers and partners farther down the supply chain, such as 

retailers or food services. An example is the negative impact of 

the total time that products are kept above recommended 

temperature limits. A German firm has developed an RFID 

temperature sensor for food products that logs temperature data 

and can be read with a wireless interface (New Low-cost 


Temperature Sensor, 2002). Such information can verify 

handling of a product from processor to purchase. Issues of 

source and process verification are largely irrelevant for local 

or regional markets offering animal products with little or 

no processing. 

These private-sector activities illustrate that companies believe 

their customers (marketing partners) and consumers are seeking 

additional credible information about how product is produced 

and handled. This trend is likely to persist, and high levels of 

private innovation are expected to continue. 

In addition to high-profile animal health events like BSE or E. 

coli O157:H7, there are concerns among some consumers on 

broader public health issues associated with production 

practices, such as antibiotic and hormone use. Private-sector 

responses to address these issues are a signal of the market’s 

perception that production assurances will differentiate 

companies and their brands. A major U.S. pork producer has 

announced it will limit the amount and kind of antibiotics it 

uses in pigs to comply with new guidelines imposed by a major 

customer in the food service industry (McLaughlin, 2005). 

That firm’s decision to buy pork and chicken only from 

suppliers that do not use growth-promoting antibiotics that 

come from classes of drugs also used in human medicine is a 

significant private response to consumer concerns. Most, if not 

all, livestock and poultry producers limit use of subtherapeutic 

antibiotics to those not used in humans. 

Consumer concerns about the safety of using preventative 

antibiotics led to the July 2005 decision by FDA to ban Baytril 

in poultry production. This action comes at a time when an 

increasing number of companies are marketing “antibiotic-free” 

meat. However, no meat sold in the United States is allowed to 

have antibiotic residues that exceed safe levels established by 

FDA when it enters the human food chain. One firm is 

capitalizing on the negative opinion toward antibiotic use by 

releasing a line of broilers that are “antibiotic free” by selective 

breeding of naturally immune individuals (Pyxis, 2005). 

There may be a downside to discontinuing subtherapeutic 

antibiotics. Following such a move in Denmark, the world’s 

largest pork exporter, overall antibiotic use in animals initially 

fell by about half, but therapeutic antibiotic use has increased 

30 percent to 40 percent (Hayes et al, 2003). Taking away 

subtherapeutic antibiotics can lead to more frequent need for 

treatment with therapeutics and the potential for more 

foodborne pathogens in animals that enter the food chain 

(Sundberg, 2005). 

Better education and more transparent information are needed 

regarding antibiotic residue issues. Governments may have a 

role in educating the public on the science behind the debate. 

This might include clarifying the meaning of “without added 

antibiotics” and “no subtherapeutic antibiotics.”

Efforts at the Production Level to Mitigate Animal Disease and 

Food Safety Incidents: The trend toward more intensive confined 

animal agriculture production systems impacts herd and flock 

disease prevention programs, such as vaccination programs and 

BMPs, including vigorous biosecurity programs. Practices 

include vaccinations, sanitation, handling and use of colostrums, 

separating animals by age and production phases, and 

restricting all visitors, suppliers and their vehicles. Producers do 

not want to spend money to change production practices 

without assurances that such practices will meet the working 

standards of regulatory agencies and are economically feasible. 

Until recently, most vaccination technology was similar to that 

used in the past century—animals were given whole, weakened, 

live or killed microorganisms to elicit immune responses. These 

types of vaccine are still used. Biotechnology advancements 

during the last five years have increased understanding of 

disease-causing organisms and pathogenesis of diseases, 

resulting in safer and more efficacious vaccines. 

Advances in biotechnology, gene technology and genomics may 

allow development of vaccines with genetic sequences that 

stimulate immunity and/or protect from a number of specific 

pathogens, parasites and pests. This preventative approach works 

with the animal’s immune system rather than on prophylactic 

antibiotic use or treatment strategies. Advances such as these 

may provide immunity solutions in wider disease and production 

situations, potentially increasing producer profitability. 

Risk Assessment and Management: Food animal veterinarians are 

a vital link in preventing and controlling potential animal 

health and food safety incidents. The number of food animal 

veterinary practitioners has declined in recent years. One 

question is whether there will be adequate numbers of 

professionals in the field to diagnose, prevent and treat animal 

diseases in the future. Increased global movement of animal 

products creates a need for more veterinarians trained in foreign 

animal disease diagnosis and control, and implementation and 

enforcement of sanitary and phytosanitary trade standards. 

Information technology helps to expand training opportunities. 

In the United States, the recently enacted Veterinary Workforce 

Expansion Act establishes competitive grant programs to build 

capacity in veterinary medical education and expand the work 

force of veterinarians engaged in public health practice and 

biomedical research. Public health practice includes 

bioterrorism and emergency preparedness, both of which 

impact agriculture and the food supply. 

The duration, size and extent of quarantines will decrease as 

animal identification systems are more broadly implemented. 

Use of satellite mapping for tracking animal movement and 

more rapid diagnostic techniques, such as DNA probes, to 

identify disease may help decrease the spread of disease. It has 

been shown that regional or more limited quarantines can be 


effective in the control of potential disease outbreaks. More 

rapid diagnostics and traceability could limit future quarantines 

to a few or even a single farm. A recent decision by the U.S. 

commercial chicken industry to voluntarily test for both H5 

and H7 avian influenza includes establishment of a control 

zone two miles around any infected flock. Other flocks within 

the zone would be held and tested, with testing repeated 

weekly. The continued testing would ensure that flocks are clear 

of avian influenza before going to market. Any flock testing 

positive for avian influenza would be destroyed (National 

Chicken Council). 

Canadian cattle and hog producers have moved quickly to 

establish animal identification and tracking systems. The federal 

government has helped industry come together through interspecies 

organizations to develop standards and protocols for 

animal identification that can be adapted to all major species. 

The United States is in the process of developing and 

implementing a mandatory animal identification and tracking 

system for animal health protection purposes. This publicprivate 

partnership is expected to be in place in 2009. 

Emerging and/or re-emerging diseases and pathogens will 

continue to be a problem in developing nations. This could 

result in an increase in disease transferability. With agricultural 

globalization and lessening of trade restrictions, these diseases 

could become a problem in North America. Educational efforts, 

disease recognition, more rapid diagnostic testing and 

prevention programs will be vital to diminish the likelihood of 

disease spread. Increasingly larger animal production numbers 

will necessitate affordable insurance instruments for possible 

problems that could adversely impact the producer. The costs of 

these programs may need to be shared or covered by 

government programs. 

In Mexico there is no funding to support these studies. 

Epidemiological surveillance of diseases transmitted from food 

is still pending. Only large producers commercializing in 

supermarket chains or foreign markets follow these procedures. 

Canada, Mexico and the United States have reached an 

agreement and have an FMD vaccine bank so that an early 

response may be reached in a short time. The three countries 

should build similar capabilities into other animal disease threats. 

Efforts to Mitigate Product Contamination in Marketing 

Channels: There is a need to proactively address preharvest food 

safety issues. Scientists continue to work with animal producers 

to investigate production practices that might reduce potential 

food safety risks. Much is known about the ecology of 

biological, chemical and physical hazards during animal 

production; however, specified production practices have yet to 

be identified to addressing biological hazards that consistently 

and predictably contribute to improved food safety.

88 

In the United States, FDA, under the Public Health Act, has 

limited preharvest authority to follow up on human illnesses 

related to products under its control. USDA’s Animal and Plant 

Health Inspection Service (APHIS) has preharvest authority to 

address animal disease situations; USDA’s Food Safety 

Inspection Service (FSIS) regulates animal food safety from the 

point animals enter meat and poultry slaughter establishments 

through the completion of slaughter and further processing, 

with limited compliance activities in commerce. 

Implementation of producer-level management activities has 

the potential to reduce the presence of Salmonella and other 

pathogens in animal products. Investigation is needed to: 1) 

determine if interventions currently available to producers can 

form the basis for BMPs to reduce Salmonella before slaughter; 

2) identify promising interventions and determine what steps 

need to be taken to make interventions to limit and control 

Salmonella available at the production level; and 3) identify 

research gaps with respect to Salmonella control at the 

production level. 

Protecting and Assuring Food Safety: Consumer marketing 

channels are an information link between producers, retailers 

and consumers. Consumers may neither be aware of the many 

options available to familiarize the public with current food 

safety measures nor have the knowledge of possible outcomes of 

improper food safety procedures. Figure 1 illustrates consumer 

attitudes about the seriousness of risks associated with various 

food safety treatments and contaminants. Figure 2 relates the 

share of consumers completely or mostly confident in the safety 

of their food. 

Hazard Analysis and Critical Control Point (HACCP) 

encompasses a set of government regulations that focus on 

preventative food safety measures. This preventative program 

helps ensure that unhealthy or unsafe animals and birds never 

enter the food supply and that safe and wholesome products are 

sold to consumers. In Canada, the Canadian Food Safety and 

Quality Program helps industry develop and implement 

HACCP-based production systems through the food-value 

chain, as well as train industry in its use. In the United States, 

FSIS provides information for consumers and processors. Food 

processors must follow HACCP guidelines and keep written 

documentation. Food product recalls are monitored and made 

public, but access to the recall information may be limited for 

consumers. 

The HACCP-based Inspection Models Project (HIMP) is a 

U.S. project to determine the accomplishments of the current 

system and develop improvements to the FSIS online slaughter 

inspection process. Under HIMP, FSIS has established 

performance standards for food safety and non-food safety 

defects. Presently, there are 20 young-chicken plants (the 

maximum permitted), four market-hog plants and two youngturkey 

plants participating in the study (USDA-FSIS, 2005). 


National Association of Slaughterhouses Federal Inspection Type 

(ANETIF) is a joint effort of the Mexican government and the 

private sector to implement inspection standards in private 

slaughterhouses to guarantee the food safety and quality of the 

meat processed. These facilities process the 35 percent of meat 

sold to supermarkets or for export. Municipalities have 

responsibility for slaughterhouses that process meat for 

traditional Mexican markets. The government also sets sanitary 

requirements for these operations, but they are not at the level 

of standards required by ANETIF. 

Despite efforts by the Federal Commission for the Protection 

Against Sanitary Risks (COFEPRIS), Mexico does not have a 

reliable sanitary inspection in municipal slaughterhouses. This 

is in sharp contrast with the reliability of sanitary inspections 

that take place in the 279 private slaughterhouses applying 

federal regulated sanitary inspection (TIF). There are two 

sanitary standards—one for exportation and distribution 

through supermarkets for local consumption, and another for 

meat purchased at other outlets, largely consumed by people 

with low economic capacity. 

Recalls: Research results indicate that brands suffer when a recall 

occurs (Thomsen et al., 2006). A sales decline of 22 percent to 

27 percent can be expected after a foodborne pathogen recall, 

with brand recovery taking four to five months. The media play 

a role in reassuring consumers, but the impact of positive 

information is considerably smaller than that of negative 

information (Smith et al., 1988). Current recall procedures 

address product not meeting regulatory standards or product 

that has been implicated in human foodborne illness. The 

current system fails to take a farm-to-table approach to tie all 

foodborne illnesses to their root cause and then address the root 

cause. Food companies that implement recall procedures have 

necessarily determined the root cause for the recall as a food 

safety concern. 

Training and Education: Specific goals should be set to allocate 

resources effectively and efficiently to prevent human foodborne 

illnesses. If targeted effectively, increased funding of consumer 

education may be more effective in preventing foodborne 

illness. Educational efforts to encourage recycling are a possible 

model for food safety. Educational efforts for recycling focused 

on reaching people early in life. Elementary school education 

turned the nation’s children “green,” and they influenced their 

parents to change habits, which led to a measurable increase in 

recycling—not because they have to do it, but because it was 

accepted as the right thing to do for the environment. 

Emphasizing food safety starting at the elementary school level 

could lead to a population that experiences vastly reduced levels 

of foodborne illnesses. 

Driven by incentives, private industry explores ways to 

communicate with the end consumer using labeling and media, 

and to provide the public with products that are largely free

from risk. Food safety experts are continually testing for new 

strains of foodborne pathogens and providing preventative 

control measures. Future genetic technology of growing animals 

with specific disease-resistant traits and non-antibiotic therapies 

are being tested (Pyxis, 2005). Producers routinely run mock 

recalls on a random basis to track product to its place of origin. 

Regional training is being provided by NCBA, where growers 

are prepared for a future of source and age verification 

(Wickens, 2005). The Food Emergency Response Network 

(FERN), which operates 90 U.S. labs, works to prevent and 

respond to possible attacks and emergencies involving food. 

Staff at participating FERN laboratories analyze surveillance 

samples, validate new methods used to detect threat agents in 

food products and meet guidelines to ensure the security and 

safety of facilities and employees (Demert, 2005). 

In Canada, federal animal health and food safety measures, 

under the responsibility of the Canadian Food Inspection 

Agency (CFIA), regulate the health of farm animals and the 

safety of the products derived from them. To further ensure the 

unrestricted trade and safety of animal production, CFIA has 

programs related to animal health and production to guard 

against the entry of foreign animal diseases and to prevent and 

control the spread of certain domestic animal diseases. CFIA 

conducts inspections and has surveillance, monitoring and 

testing programs in place. In collaboration with provincial 

departments of agriculture and other agri-food sector 

stakeholders, Agriculture and Agri-Food Canada (AAFC) and 

CFIA have jointly established the Food and Agriculture 

Emergency Response System (FAERS), an emergency 

management system for natural disasters linking federal, 

provincial and private sectors to better manage and coordinate 

response to emergencies. FAERS mobilizes all agri-food sector 

resources to mitigate the effects of emergencies and to ensure 

continuity, adequacy and safety of the agri-food system. However, 

FAERS does not deal with foreign-animal disease introductions. 

Innovations: Innovations in the food safety and quality 

assurance arenas are aggressively pursued by private industry. 

Funding provided for research and the implementation of new 

technology and safety practices give industry leaders an 

advantage in providing a safe food environment for consumers. 

For example, Pyxis Genomics has proposed implementing the 

first integrated traceability platform for pork (Pyxis, 2005). 

TEMPTIME Corp. manufactures time temperature indicators 

which are self-adhesive labels the retailer can apply to perishable 

food packages (TEMPTIME, 2005). 

Mexico has good infrastructure and human resources, but not 

enough to perform quality research in animal health issues in 

government research institutions and universities, most of 

which are supported by the government. 

With passage of the Sustainable Rural Development Law in 

2001 and the Science and Technology Law in 2002, Mexico has 


legal support to coordinate and encourage research, but there 

are insufficient budgetary resource to fully support these demands. 

An important strategic issue with potential to benefit Canada, 

Mexico and the United States would be to formalize a 

cooperative research and training program on animal health 

issues of common interest. 

Summary 

Protecting the safety of the food supply is essential to all 

countries, and Canada, Mexico and the United States spend 

significant resources to assure that it is safe and wholesome. 

While consumers do not always understand the science behind 

industry practices and government policies, North American 

consumers have a high degree of confidence in the safety of 

their food. Technological developments to enhance production 

efficiency and/or protect animal health often raise concerns 

among consumers in spite of the rigorous product approval 

process and ongoing testing and surveillance programs. 

Globalization of food trade provides greater food choices, and 

potentially confusion, if there are not consistent standards for 

safety and labeling. Increased consumer sophistication and 

advanced information technology pose both a challenge and an 

opportunity for firms and the government to inform consumers 

and address their concerns. Advanced supply chain management 

systems allow for tracing food products that result in faster, 

more targeted recalls when needed. Private-sector efforts to 

minimize risks of recalls and protect brand equity are part of an 

effective food safety strategy. 

Animal health is closely linked to food safety and consumer 

confidence and is also central to the profitability of the livestock 

and poultry production sectors. Increased production costs, 

lower revenues for farms with a disease and trade restrictions 

due to the presence of particular diseases have economic 

impacts on all producers in the industry. For example, one cow 

testing positive for BSE in the United States resulted in the 

immediate loss of $4.8 billion in annual beef exports (Doud, 

2006). To protect animal industries and consumers from 

imported diseases or food safety problems, sanitary and 

phytosanitary standards have become part of most trade 

agreements. However, these standards can also be trade 

distorting and protectionist and accentuate the need for 

harmonization of standards and enforcement within NAFTA. 

The North American live animal market is increasingly linked 

and companies within countries are evermore interdependent. 

Once implemented across North America, animal identification 

and tracking systems could allow restricted animal movement 

within or across countries while still controlling the disease. 

Farm-level biosecurity measures to reduce disease risk and 

developments in vaccine research are providing new tools to 

lessen the threat and impact of animal diseases to farmers.

90 


Animal health and food safety are for the public good and 

important elements of national security in all North American 

countries. The challenge is to develop and implement policies 

that most effectively achieve a safe and secure food supply and a 

competitive livestock and poultry sector in North America. The 

options discussed below offer a range of public-sector involvement 

and discretion on how to utilize scarce government resources. 

Public Programs and Policies 

Recent BSE cases in the United States and Canada have 

crystallized concerns that consumers, livestock producers and 

allied industries share about the economic impacts of animal 

disease and the complexity of estimating the size of such 

impacts. Public agencies have responded with resources and 

more visible programs to guard against potential outbreaks and 

maintaining consumer confidence. 

Policy instruments to share losses, policy costs and program 

benefits might be used to guard against losses at each level of 

the animal industry. To be effective, public policies and 

programs to manage the risk from animal health outbreaks will 

need to be well-designed and consider private incentives as 

different types of livestock producers will respond differently 

(Pritchett et al., 2005). Government intervention may prove 

necessary because market failures and public goods (such as 

public health) may not provide adequate private incentives to 

achieve efficient protection against animal health threats. 

Accelerated response times to adverse food safety and animal 

health incidents are needed. This is especially crucial when 

timely responses can limit the spread of disease, or when there 

may be distribution or sale of infected or contaminated 

livestock products. Consumers and businesses expect 

government to quickly and effectively investigate and 

communicate a potential event. While the United States and 

Canada have reasonably well-functioning systems, 

epidemiological surveillance of diseases transmitted from food is 

still pending in Mexico, primarily due to lack of funding. The 

potential economic impact of an incident is a function of the 

time between the announcement of the potential event and the 

confirmation of its validity. 

Public and Private Partnerships 

Adding credible certification and labeling processes proposed by 

industry and improving coordination of animal health and food 

safety responses are ways governments might proactively partner 

with private industry. Funding research and developing 

programs to build scientific, educational and managerial 

capacity to respond to or prevent animal health and food safety 


incidents are other possible government actions. Consumers 

may perceive that the government is addressing their needs by 

providing third-party verification of credence attributes 

promoted by private brands and firms. For example, the 

Mexican government has cooperated with the private sector to 

implement Mexico Calidad Suprema (Mexico Supreme 

Quality), an officially supported label which is intended to 

assure that Mexican food products are safe and of superior 

quality. This standard has not been fully achieved to date. 

In Canada, Mexico and the United States, government 

investments are made in research addressing veterinary science, 

food science, epidemiology and economics of animal health and 

food safety issues. Some argue that development and 

implementation of research findings has slowed progress in 

addressing issues. Under this option, government would 

support more research on technology and science to maintain a 

safe food supply, leaving the private sector to concentrate on 

investments in quality assurance. 

Up to 90 percent of all foodborne illnesses are attributed to 

handling and preparation, often in the household (Schutze et 

al., 1999). The public sector might increase consumer outreach, 

augmenting private efforts. Programming could be similar to 

and, possibly in cooperation with, nutrition education 

programs already provided by public institutions, such as the 

USDA’s Cooperative State Research, Education and Extension 

Service. Created by the National Restaurant Association 

Education Fund, the ServSafe program certifies food service 

managers in food safety and provides resources to help maintain 

sound food safety practices by workers in the food service 

industry. This program could be strengthened and redirected. 

Because of its reputation for being impartial and science-based, 

the U.S. Land Grant university system could in its cooperative 

relationship with USDA play an expanded role in providing 

educational programs on the food system, animal health and 

food safety and in providing research to undergird food safety 

programs at the regional, state and local levels. Additional 

research funding may be needed. Comparable relationships do 

not exist in Canada and exist to a much lesser degree in Mexico. 

While public-private partnerships have the potential to generate 

many benefits, care is needed. There is an inherent conflict in 

governments’ dual roles as advocate and regulator. To maintain 

public confidence in the food safety system, separation is 

needed between the rule makers, enforcers and educators. 

Universities and government agencies must maintain strict 

independence in funding and conducting research, outreach 

and regulatory functions. This will assure an increasingly wellinformed 

public that these institutions provide credible and 

well-founded information.

Coordination of Public Efforts 

In the United States, the national structure of the food safety 

system is expected to continue moving toward a single food 

safety system functionally, even if not through legislative 

changes to create a single food agency. Coordination of food 

safety efforts by government agencies will likely expand to 

identify the cause of food-related illnesses through source 

tracking and attribution to known and unknown pathogens. 

New methods would allow food safety officials to pinpoint the 

reasons for breakdowns in the food safety continuum and target 

more specific preventive measures. Efforts focused on 

identifying interventions at processing plants could be 

expanded to include other components of the food supply 

chain. Funding national programs to train and educate 

producers on food safety production practices would increase 

the quality of end products and marketability for the producer. 

Due to low educational levels of some traditional Mexican 

farmers, it may be necessary to use a variety of media to reach 

this audience with information on how to use certain animal 

pharmaceutical products to avoid food safety risks. 

Consideration should be given to developing a risk-based 

pathogen analysis system that would identify existing epizootic 

links from animals to humans, particularly in the face of 

looming outbreaks, such as the current situation involving avian 

influenza. Efforts to combat foodborne illness are focused on 

easily identifiable hazards, although the cause of the majority of 

foodborne illness is never determined; estimates of the actual 

causes of foodborne illnesses gathered in the Morbidity and 

Mortality Weekly Report (MMWR) of the U.S. Center for 

Disease Control (CDC) are based on information from eight 

“representative” states (Figure 3). For known pathogens, the 

ability to identify the common source of foodborne illnesses, 

even for geographically dispersed human cases, is expanding 

because of technological advances in genetic. During the next 

five to 10 years, the increasing ability to identify risky products 

and remove them from market channels will help reduce 

foodborne illnesses from known pathogens. 

Despite research indicating the need for more effective 

consumer education, implementation of successful food safety 

education programs is limited. Consumer education needs will 

increase. Identification of the balance between what consumers 

think they want and need with a more scientifically based 

understanding of what the public health community 

recommends would be helpful. 

Researchers are developing and adapting new technologies to 

address food safety issues. One result may be a system to assist 

regulatory and industry personnel in attaining compliance, 

optimizing efficiency and providing a safe product. Future 

research is expected to help automate inspection of poultry 

carcasses and implement these machines at on-line slaughter 


facilities. These on-line machines use a real-time visual 

detection system that can be incorporated into an HACCP 

plan for detection of external/internal damage and fecal 

contamination. Under development are spectral and image 

detection and in-house multispectral and laser-induced 

fluorescence imaging systems for real-time detection of diseases, 

defects and contamination on poultry carcasses. Also being 

developed are optimal spectral preprocessing treatments for 

imaging contaminated meat that identifies the site and type of 

contamination (MMWR, 2005). These technological tools 

would increase the safety of livestock food products. 

The Codex Alimentarius Commission is an international 

organization that promotes fair trade while considering the 

global economic and personal health of the consumer. More 

than 160 member countries have access to its standards, codes 

of practice and guidelines for use in trade. Codex forums will 

continue to set standards to facilitate international trade of food 

products and provide information on innovative food safety 

systems, new technology and trade practices. Sharing this 

information may lead to safer food supplies. 

The World Organization for Animal Health (OIE) has 

international guidelines to regain disease-free status for a 

country affected by animal diseases. Even once disease-free 

status is regained under OIE rules, recovery of each export 

market has to be renegotiated by the exporting country. OIE 

guidelines are voluntary and usually interpreted as minimum 

requirements from importing countries to open borders to 

exports. Importing countries may ask that additional measures 

be taken to prove that exported products are free from any trace 

of the disease. There are, however, current OIE efforts to 

redirect trade rules under an animal disease context toward a 

more risk-oriented approach. This could result in improved 

food safety and more efficient trade. 

A Comprehensive NAFTA-wide Diagnostic, Monitoring and 

Surveillance Network 

Food safety and animal health threats go beyond the ability of a 

single entity to affect the entire animal production value chain 

and even the economy as a whole under the right 

circumstances. A cooperative and functional NAFTA-wide 

network would multiply the efficacy of networks in the United 

States and Canada and establish a comparable functioning 

network in Mexico. The network could include stockpiles of 

vaccines and treatment agents for many diseases and serve as a 

clearinghouse for effective quarantine and animal disposal 

protocols to limit disease spread. Precedence for creating such a 

cooperative effort include the FMD and the screw worm 

eradication programs established jointly between Mexico and 

the United States. Those programs effectively ended the 

extensive and adverse impacts of these two animal health issues 

in North America.

92 

A national structure coordinated by governments within 

NAFTA countries could serve as a focal point for engaging and 

enhancing partnerships among government agencies and the 

private sector (National Research Council, 2005). For example, 

in the United States, several federal and state agencies and 

various animal and human health organization programs are 

responsible for food safety and animal health policy, but there 

are implementation gaps, ineffective communications and lack 

of information sharing. 

Enhance Capabilities for Rapid 

and Widespread Information Dissemination 

Both government and the industry would benefit from fast and 

widespread access and dissemination of information when 

dealing with food safety and animal health hazards. This 

information is essential to retain consumer confidence in the 

food systems at home and abroad. Establishment of national 

tracing systems would be important. Increased public and 

private investment could help reduce disease transmission and 

enhance public and animal health. Increased public awareness 

through education and training programs is critical to food 

safety and animal disease prevention. It may be possible to 

develop tools focused on strategic and tactical cooperation 

between the public and private sectors in the event of food 

safety, animal health or biosecurity emergencies. 

Support New Scientific Tools and Technologies 

New scientific tools and technologies are being developed that 

have the potential to enhance animal disease prevention, 

detection and diagnosis in North America. Work is needed in 

current animal health frameworks to evaluate, validate and 

implement rapid prevention strategies to protect the health of 

each nation’s animal populations. One area of concern is 

strengthening border protection systems regarding the 

importation or unnoticed transfer of animals raised out of the 

mainstream food security network. Exotic animals, backyard 

poultry and backyard livestock have the potential to place 

national herds and flocks at risk. 

Veterinarians play a key role in any animal disease prevention, 

detection and diagnosis in North America. To strengthen longterm 

availability of this human capital, governments could 

develop programs that involve more private-practice foodanimal 

veterinarians and devote more resources to public health 

and research veterinarians. In the United States, there are 

concerns about a potential shortage of research veterinarians. A 

National Academy of Sciences National Research Council report 

states stronger efforts are needed to recruit more veterinarians 

and other scientists into veterinary research, noting that a 

growing shortage of veterinary pathologists, lab animal scientists 

and other veterinary researchers is making it more difficult to 

meet mounting challenges (National Research Council, 2005). 


Establish Indemnity Insurance for Animal Agriculture 

In the United States, there are currently no uniform 

government-backed insurance programs for animal agriculture 

that parallel those for crop agriculture. Consequently, livestock 

producers may absorb catastrophic losses (destroyed animals, 

market loss, business interruptions) that may be associated with 

animal health events unless the disease is determined to 

constitute a national emergency, in which case producers would 

be indemnified 100 percent. Financial risk management of 

animal diseases is a question that government and industry 

must address in partnership to ensure that effective and efficient 

financial risk management tools are in place to deal with future 

animal disease outbreaks. An indemnity program could reduce 

private-sector uncertainty and thus increase reporting 

compliances. Participation in such a program would be 

predicated on following strict biosecurity protocols related to 

level of risk. A broader production certification program 

addressing food safety, animal health and emergency 

management could also be developed. 

International Food Safety and Animal Health Standards for Trade 

The lack of consistency in international standards and their 

enforcement creates inequities in trade among potential 

partners and may well limit trading arrangements. Eliminating 

this artificial trade barrier would allow competitiveness to be 

more accurately evaluated; gains from trade may be more fully 

realized. There are currently prescribed events and standards 

that signal conditions for which trade interruptions commence, 

but such signals to recommence trade are not readily apparent. 

Establishing “triggers” that allow trade to resume once food 

safety and animal health concerns were alleviated could 

contribute to freer trade within NAFTA, as could true 

harmonization of standards and enforcement among 

NAFTA partners. 


As the risks to animal health evolve, so must mechanisms to 

address them. To develop and implement effective and efficient 

tools, work is needed to assess and predict this evolution of 

risks, evaluate the current system’s response capabilities, identify 

areas where improvements may be warranted and communicate 

them effectively. 

• Research is needed on risk-management tools that livestock 

producers could use to mitigate catastrophic financial 

losses from destroyed animals, market losses or business 

interruptions related to animal disease outbreaks. What 

tools might be developed in the public and private sectors? 

Would an indemnity program reduce private-sector 

uncertainty and thus increase reporting compliances?

What would be the most effective way to structure an 

indemnity program? 

• Research is needed on scientific, managerial and 

educational tools and practices to enhance identification of 

and response to an animal disease outbreak. Continuing 

research is needed on technological tools that can identify 

diseases, defects or contamination in animal products. 

How to effectively provide consumers with information on 

issues related to animal disease outbreaks is another area 

where additional research is needed. 

References 


• What mechanisms need to be explored for establishing 

“triggers” that allow cross-border trade to resume once 

food safety and animal health concerns are alleviated? 

What process can be identified to move the NAFTA 

partners toward harmonization of food safety and animal 

health standards and enforcement? 

Bauhan, H. (2004, March). “Federation Report, March 2004.” Virginia Poultry Federation. Available at 

http://www.vapoultry.com/March2004FedReport.html. 

Demert, A. (2005, February 15). “FSIS Establishes Food Emergency Response Network Division.” USDA Food Safety and 

Inspection Service News Release Available at http://www.fsis.usda.gov/News_&_Events/NR_021505_01/index.asp. 

Doud, G. and J. McWright. (Jan-Feb, 2006). “2005 beef exports – is that a light at the end of the tunnel?” Available at 

http://www.beef.org/uDocs/2005beefexports.pdf. 

Hayes, Dermot J. and H.H. Jensen. (2003, 3rd Quarter). “Lessons From the Danish Feed Ban on Feed-Grade Antibiotics.” 

Choices. 18(3), Available at http://www.choicesmagazine.org/scripts/printVersion.php?ID=2003-3-01. 

McLaughlin, K. (2005, August 2). “Concern grows about antibiotic use in food; Limited FDA Ban Comes as Ranch, Retailers Pitch 

Range of Drug-Free Products.” Wall Street Journal, (Eastern edition) New York, NY, p. D.1. 

Morbidity and Mortality Weekly Report. (2005, December 23). “Provisional Cases of Selected Notifiable Diseases, United States, 

weeks ending December 17, 2005 and December 18, 2004.” MMWR weekly report. Available at 

http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5450md.htm. 

National Research Council, Committee on Biological Threats to Agricultural Plants and Animals. (2002). “Countering Agricultural 

Bioterrorism.” National Academies Press. 

National Chicken Council Avian Influenza Monitoring Plan. Available at http://www.avianinfluenzainfo.com. 

National Research Council. (2005, July). “Animal Health at the Crossroads Preventing, Detecting and Diagnosing Animal Diseases.” 

National Research Council, Committee on Assessing the Nation’s Framework for Addressing Animal Diseases Report. 

New Low-cost Temperature Sensor. (2002, July 19). RFID Journal. Available at http://www.rfidjournal.com/article/view/28/1/1/. 

Nolen, R.S. (2002, November). “Exotic Newcastle disease strikes game birds in California.” Journal of the American Veterinary 

Medical Association. Available at http://www.avma.org/onlnews/javma/nov02/021115b.asp. 

Paarlberg, P.L., J.G. Lee, and A.H. Seitzinger. (2002, April). “Potential Revenue Impact of Foot and Mouth Disease in the United 

States.” Journal of the American Veterinary Medical Association 220(7), 988-992. 

Pretanik, S., “Testing Program Launched to Ensure Chicken Products Are Free of Avian Influenza,” National Chicken Council, 

Press Release, January 5, 2006.

94 


Pritchett J., D. Thilmany, and K. Johnson. (2005). “Animal Disease Economic Impacts: A Survey of Literature and Typology of 

Research Approaches.” International Food and Agribusiness management review vol 8, issue 1. Available at 

http://www.ifama.org/members/articles/v8i1/. 

Pyxis Genomics. (accessed 2005, August 11). Available at www.pyxisgenomics.com. 

Schutze, G.E., J.D. Sikes, R. Stefanova, and M.D. Cave. (1999, January). “The Home Environment and Salmonellosis in 

Children.” Pediatrics 103(1). 

Smith, M.E., E.O. van Ravenswaay, and S.R. Thompson. (1988, August). “Sales Loss Determination in Food Contamination 

Incidents: An Application to Milk Bans in Hawaii.” American Journal of Agricultural Economics, 70(3), p.513-520. 

Sundberg P. (2005, April). Vice President, U.S. National Pork Board. Personal communication. 

TEMPTIME. (accessed 2005, August 25). Time-Temperature Indicators. Available at http://www.lifelinestechnology.com/. 

Thomsen, M., R., Shiptsova, and S. Hamm. (2006, Spring). “Sales response to Recalls for Listeria monocytogenes: Evidence from 

Branded Ready-To-Eat Meats.” Forthcoming, Review of Agricultural Economics. 

U.S. Department of Agriculture - Agriculture Marketing Service (USDA-AMS). (accessed 2005, September 15). The National 

Organic Program. Available at http://www.ams.usda.gov/nop/indexNet.htm. 

U.S. Department of Agriculture - Food Safety and Inspection Service (USDA-FSIS). (accessed 2005, August 26, 2005). “An 

Overview of the HACCP-Based Inspection Models Project.” USDA Food Safety and Inspection Service Fact Sheets. Available at 

www.fsis.usda.gov/Fact_Sheets/Overview_of_the_ HACCP_Based_Inspection_Models_Project/index.asp. 

Wickens, T. (2005, August 3). “Seminar Draws Crowd.” The North Platte Telegraph. 

Figure 1. Consumer Attitudes About Risks in Food 

Source: “Trends in the United States: Consumer Attitudes and the Supermarket,” Food Marketing Institute, 1989-97.

Figure 2. Overall Confidence in Food Safety 


Source: Trends in the United States: Consumer Attitudes and the Supermarket, Food Marketing Institute, various issues 

Figure 3. 2004-05 Reported Cases of Notifiable Diseases in the United States 

Source: U.S. Center for Disease Control 

Pathogen 2004 2005 

Campylobacter 12.9 9 

E. coli O157:H7 2,452 2,368 

Listeria 710 769 

Salmonella 40,263 40,327 

Shigella 13,327 13,195 

vCJD 0 0

Chapter 6 


The evolution of animal agriculture in North America is 

focusing increased attention on its impacts on water and air 

quality. The adoption of new technologies and the restructuring 

of the food and agricultural system are generating new 

economic and environmental impacts and influencing public 

perception about animal agriculture. The expansion of livestock 

and poultry production is increasingly leading to private 

disputes and public issues concerning agricultural production 

and the environment. These disputes are leading to new 

patterns of costs and benefits and, in some cases, public policies 

that are affecting competitiveness of this sector. The issues and 

options to resolve them are complex and require increased 

understanding and involvement by all stakeholders. 

North America has significant livestock and poultry sectors, and 

the United States and Canada export a significant amount of 

grain. Manure and other byproducts from animal production 

are an important source of fertilizer nutrients for crop 

production. Manure also has the potential and is increasingly 

being used for energy production. It is an important resource 

with actual value to humans when available in the right form, 

location and time. The challenge for producers is to accurately 

value the byproducts of livestock and poultry production when 

making business decisions in such a way that it does not 

negatively impact water, air and other environmental attributes. 

The economic environment for North American animal 

agriculture has changed dramatically in recent years. Meat 

exports have increased significantly during the last decade (see 

Trade Chapter). Broiler production continues to increase 

steadily. The hog and egg sectors continue to undergo major 

economic reorganization and geographical relocation. There is 

also a growing population of nonfarm rural residents who have 

moved to the countryside and in some communities are 

increasing the number of neighbors to a farm. These new 

neighbors may not be familiar with modern farming practices 

and are often concerned about the environmental aspects of 

livestock farmers. 

There are also emerging issues being raised regarding the 

possible human health aspects of other potential byproducts 

from livestock and poultry production. Air emissions from 

animal agriculture are being studied for potential releases of 

compounds that are harmful to humans. Research also is 

evaluating the possible transmission and impact of U.S. Food 

and Drug Administration-approved pharmaceuticals used in 

animal agriculture. 

This chapter begins with a discussion on the various policy 

instruments used in the three North American countries to 

assist animal agriculture regarding environmental issues. It then 

outlines the current concerns and methods of addressing water 

and air quality and emerging issues, and discusses challenges to 

implementing existing programs and public policy alternatives 

that are being evaluated. It concludes with a discussion of 

options for moving ahead and information needs. 

Current Policy Instruments 

Canada 

In Canada, jurisdiction over the environment and agriculture 

is shared between the federal and provincial governments. 

The federal government is mainly involved in national 

environmental priorities and interjurisdictional issues, such as 

air pollution and toxic chemicals. Provincial governments have 

their own policy and agri-environmental policy instruments to 

deal with their respective situations and issues. 

Historically, the policy environment has been dominated by 

regulatory approaches. At the national level, the Fisheries Act, 

the Canadian Environmental Protection Act (CEPA), the 

Migratory Birds Convention Act and the Species at Risk Act are 

all regulatory instruments that currently mandate Canadians’ 

behavior, including that of farmers. The Fisheries Act prohibits 

the deposit of deleterious substances into waters frequented by 

fish or into storm drains that lead to such waters. CEPA sets 

out a process to assess the risks of toxic substances on the 

environment and human health and to manage these risks. 

Provinces have their own regulations, including those on 

nutrient management developed to reduce environmental 

risks related to the disposal or use of various nutrients, 

including manure. 

During the last two decades, federal and provincial 

governments have also developed programming to provide 

financial incentives for the adoption of environmentally sound 

management practices and to better monitor environmental 

performance. With the Agricultural Policy Framework (APF), 

97

98 

coordination of federal and provincial actions has progressed 

toward a more integrated approach to agri-environmental policy 

and program. The APF is a comprehensive policy framework 

that encompasses five key elements—business risk management, 

environment, food safety and quality, renewal (farm business 

advisory services), and science and innovation. 

The environmental component of the APF is a broad-based 

strategy to improve environmental performance of Canadian 

farms on water, soil, air and biodiversity. The federal 

government has developed a national approach to farm 

stewardship, using environmental farm planning and 

complementary beneficial management practice incentives. 

Other components, such as development of environmental 

performance targets, environmental standards, information 

systems, and evaluation of the potential role of 

environmental certification programs and regulations, 

contribute to a more systematic and proactive approach 

to agri-environmental programming. 

Key national programs include: 

• The Environmental Farm Planning (EFP) program under 

which a voluntary and confidential process is used by 

individual farmers to identify environmental risks and 

benefits from their own farming operations, and to develop 

an action plan to mitigate the risks. The EFP process allows 

farmers to set priorities that address on-farm environmental 

concerns, as well as those which serve the public interest. 

• The National Farm Stewardship Program (NFSP) supports 

implementation of beneficial management practices that 

address on-farm environmental risks by providing cost-share 

assistance to producers with approved farm plans. Examples 

of cost-share assistance for livestock operations are improved 

manure handling and storage, manure treatment and manure 

land application; farmyard runoff control; relocation of 

livestock confinement facilities away from riparian areas; 

riparian area management; nutrient recovery from wastewater 

(e.g., milk houses); and grazing management planning. 

• The Greencover Program is designed to help producers 

improve grassland-management practices, protect water 

quality, reduce greenhouse gas emissions, and enhance 

biodiversity and wildlife habitat. Farmers have access to 

financial incentives and technical assistance for the adoption 

of improved management practices. 

• The National Water Supply Expansion Program (NWSEP) 

provides financial assistance from the federal government to 

address national water-supply issues considered a priority for 

the agriculture industry. Projects funded include water 

infrastructure development, such as surface storage projects, 

pasture pipelines, wells, and multi-user water infrastructure, 

such as regional water pipelines and tank-loading facilities. 


• The Environmental Technology Assessment for Agriculture 

(ETAA) program provides funding to identify and assess 

emerging innovative technologies and systems for 

environmentally responsible agricultural production and to 

provide such information to the various stakeholders in the 

agricultural sector. 

• The Water Quality Surveillance Program provides funding for 

a national risk assessment of microbiological contaminants in 

agricultural runoff. 

Provincial and/or municipal governments may have regulations 

regarding Intensive Livestock Operations (ILO). Building 

permits with environmental considerations may be required for 

ILOs. Provinces also have regulations dealing with nuisances, 

such as odor, noise, dust or smoke, resulting from an 

agricultural operation. 

During the last decade, the federal government has been 

working with various Canadians, including farmers, to reduce 

greenhouse gas (GHG) emissions. In ratifying the Kyoto 

Protocol, Canada committed to reduce during the period 2008 

to 2012 its GHG emissions to 6 percent below 1990 levels. The 

climate change plan, “Moving Forward on Climate Change: 

A Plan for Honoring Our Kyoto Commitments,” was released 

April 13, 2005. In the plan, an important component of 

meeting Canada’s Kyoto target is developing a domestic 

offset system. 

Animal agriculture has the potential to reduce its GHG 

emissions. Potential projects include covered manure lagoons 

with flaring, installing a biodigester, better manure spreading 

practices on agricultural land, improved animal diets and 

grazing land management. (The decision to include grazing 

land management as an eligible activity under the Kyoto 

Protocol for Canada’s reporting is still being scientifically 

evaluated, and a final decision will be made by August 2006.) 

In non-covered sectors, such as agriculture, participation in the 

offset system is voluntary, and no penalties exist for those who 

continue emitting GHGs. It is hoped that the incentive offered 

through the ability to sell offset credits will spur increased 

efforts by farmers to quantify and reduce GHG emissions 

through new technology and management practices. 

There is growing interest in Canada in exploring how the 

concept of ecological goods and services could contribute to 

improving the environmental performance of the agricultural 

sector and the effectiveness of the country’s agri-environmental 

policy. The integration of an ecological goods and services 

approach into agri-environmental policies would represent a 

fundamental shift toward policies that could link on-farm 

stewardship actions to higher scale environmental objectives, 

and would provide a more comprehensive approach to 

addressing environmental sustainability in the agricultural 

sector. The comprehensiveness of this policy should allow both

positive and negative externalities from agricultural production 

to be addressed. Federal and provincial research is currently 

being dedicated to this policy development. 

Mexico 

In Mexico, prevention is considered the most efficient way 

to avoid ecological imbalance. Laws applicable to animal 

agriculture are centralized by the national legislation, but 

recently are being delegated more to state and local 

governments. Most environmental regulation of animal 

agriculture is by national water policies, based on river basin 

boundaries. Management of water resources is done in a 

centralized form, with some participation from the local, state 

and federal districts, as well as the council of river basins and 

other organizations. The use of water in river basins is regulated 

by the states. Users must pay for water, and users who 

contaminate water are responsible for restoring water quality. In 

general, user fees have not been applied to agricultural sources. 

Additional federal funds are needed for research and 

development of technology (Speir et al., 2003). 

The National Water Commission, through the National Water 

Quality Monitoring Network (RNM), has systematically 

measured water quality in the primary bodies of water in the 

country since 1973. The primary objective of the RNM is to 

create criteria and guidelines for planning and operating 

monitoring activities, measurement of variables of water quality, 

and integration of current and reliable statistics that allow the 

analysis and evaluation of water quality, with the end purpose 

to control and preserve water quality. 

Environmental authority and laws vary by state. States and 

municipalities do not have explicit authority over the handling 

of manure and wastewater generated by livestock operations. 

Through coordination agreements, municipalities often have 

the authority or responsibility for environmental impact 

assessments and licensing point sources of pollution. 

Enforcement of ILO impacts from discharges has been a low 

priority. While extensive data is not available on Mexican 

environmental regulations, the effects of animal agriculture on 

local air quality do not appear to be a priority (Speir et al., 2003). 

Mexico joined the Kyoto Protocol on climate change and is 

focusing on a mechanism of clean development. Mexico has 

established the Office of Clean Development, a group formed 

between Semarnat, Mexico’s environmental agency, and the 

Secretariat of Energy. Actions are under way to reduce the 

emission of methane into the atmosphere, including an 

exchange of technology and consulting for the management of 

the primary methane-producing industries in the country. 

Those industries include landfills, mining, primarily carbon 

extraction; petroleum and gas extraction; and farming. An 

international market for carbon bonds exists, of which the 

largest buyers are Canada, Japan and the European Union. 

Interaction with these buyers is vitally important to Mexico in 

Environmental Issues 99 

order to attract investment in climate-changing projects and 

sustainable development. Currently, the Mexican Office of 

Clean Development has created 35 projects in different sectors, 

14 of which have been approved, including management of 

organic waste. 

The use of organic gases produced by farming operations has 

recently caught the attention of the developing market for 

GHG (gases de efecto invernadero or GEI) emission reductions, 

especially now that the Kyoto Protocol has taken effect and the 

mechanism of the Office of Clean Development offers a viable 

opportunity to generate additional income through projects 

that reduce GHG emissions. As long as the present treatment 

systems generate organic gas emissions (in other words, the 

basic atmospheric emissions), and technological solutions are 

able to prevent the emission of these gases into the atmosphere, 

farming operations can claim financing from the carbon market 

in exchange for these non-emitted gases. The opportunity 

becomes even more significant due to the high potential of 

global warming caused by methane, a prominent organic gas. 

United States 

In the United States, regulation of animal agriculture’s 

environmental effects occurs at several levels of government, but 

in principal has strong federal oversight. In the 1970s, the 

Environmental Protection Agency (EPA) created two rules 

under the federal Clean Water Act that affect animal 

agriculture: a National Pollutant Discharge Elimination System 

(NPDES) and Effluent Limitations Guidelines (ELG). Animal 

feeding operations (AFOs) are defined as agricultural operations 

where animals are housed, fed and cared for in barns or other 

confined space. EPA has responsibility for addressing 

concentrated animal feeding operations (CAFOs), which are 

AFOs with animal numbers above a defined threshold–1,000 

head or more of beef cattle, 2,500 swine or 750 dairy cattle. 

CAFOs have the potential of being regulated under the 

NPDES permitting program (U.S. EPA, 2004). The remaining 

AFOs (approximately 220,000 of an estimated 1.3 million total 

livestock operations) are the responsibility of the U.S. 

Department of Agriculture’s (USDA) Natural Resources 

Conservation Service (NRCS), which uses non-regulatory tools 

or incentives to prevent or reduce negative environmental 

effects. The Unified National Strategy for Animal Feeding 

Operations is a joint plan between EPA and USDA that 

establishes that all AFOs should develop and implement 

technically sound, economically feasible and site-specific 

comprehensive nutrient management plans. In addition, recent 

farm bills have provided cost-sharing programs and technical 

assistance, as well as research and education, to help producers 

reduce water quality impacts from animal production. 

The National Clean Air Act amendments of 1990 established 

National Ambient Air Quality Standards for pollutants 

considered harmful to human health. Air emissions are

100 

regulated federally by the Comprehensive Environmental 

Response, Compensation and Liability Act (CERCLA), the 

Emergency Planning and Community Right-to-Know Act 

(EPCRA) and the Occupational Safety and Health 

Administration (OSHA), a federal agency dealing with worker 

safety. While CERCLA and EPCRA have not been applied to 

animal agriculture in the past, current litigation is challenging 

this view of the law (Sierra Club v. Seaboard Farms Inc., State of 

Oklahoma v. Tyson Foods). Air emissions from AFOs have 

traditionally been a local issue, but states and the federal 

government have become more active in this area. EPA has 

initiated research through the Air Quality Compliance 

Agreement of January 21, 2005, which reflects the intent of 

EPA to address air quality concerns with respect to animal 

production, with the goal of developing federal emission 

standards for livestock and poultry. Specifically, the agreement 

focuses on nitrogen oxides (NOx), hydrogen sulfide (H2S), 

volatile organic compounds (VOCs), or particulate matter 

(PM), which are covered under the Clean Air Act, and which 

may or may not be released from CAFOs. 

Responsibility for implementing the federal CAFO program has 

been assumed by all but about five states. From a national 

perspective, the implementation of the CAFO program was 

perceived to be slow and uneven, prompting an environmental 

group to sue EPA to force implementation of the rules and 

improve the program. EPA lost the case and, in response, 

released final revised CAFO regulations in 2003. States were 

given two years to bring CAFO-permitting programs into 

conformity. EPA was then sued again by environmental and 

agricultural interests regarding changes in the revised CAFO 

regulations. This has delayed implementation of the regulatory 

changes as EPA is developing new regulations in response to the 

decision by the Second Circuit Court of Appeals in Waterkeeper 

Alliance et al. v. EPA, (2nd Cir. 2005). A number of states also 

have policies and regulations for water quality. In the 1990s, 

some states’ regulations began surpassing federal regulation in 

stringency. Each state has policies and regulations for water 

quality, and most have CAFO-permitting programs. The 

regulations and policies vary in what they address, including 

nutrient management and application plans, facility designs, 

and, in some cases, protections for producers from nuisance 

suits, exemptions from local authorities, and provision for 

mediation in conflicts (Animal Confinement Policy National 

Task Force, 1998). 

The increasing use of litigation as means of changing 

environmental regulatory frameworks and enforcing 

implementation of existing laws has emerged as a new tool in 

ongoing water quality debates (Cushman, 1998). There are 

substantial concerns related to the use of litigation, including 

the length of time before court decisions are made, cost of 

litigation as a tool and risk that the court process may not 

include stakeholders (Boggess et al., 1997; Batie, 2003). 


Litigation has also created a check on federal progress, as in the 

case against EPA’s final 2003 CAFO regulations. However, 

litigation has also created an uncertain environment in which 

businesses must operate, making investment decisions difficult. 

The U.S. Clean Air Act amendments of 1990 required EPA to 

establish National Ambient Air Quality Standards (NAAQS) 

for pollutants considered harmful to human health. These 

standards are applicable to all industries. Under the federal 

CERCLA and EPCRA, ammonia and particulate matter are 

reportable compounds if emissions exceed 100 lbs. per day. 

OSHA has established Permissible Exposure Limits (PELs) for 

specific compounds inside AFOs. EPA is beginning to examine 

the need to establish federal emission standards for livestock 

and poultry, and the courts are hearing arguments concerning 

the applicability of CERCLA and EPCRA to CAFO 

operations. These issues are not resolved. 

A few states are developing air quality regulations. Odor issues 

have historically been addressed through local zoning and 

setback ordinances directing facility siting decisions. Most state 

regulatory discussions regarding air emissions from animal 

agriculture have focused on odor concerns. Odor is usually 

considered a common law nuisance, but there is ongoing 

research to determine potential human health effects. 

Current Situation— 

Environmental and Related Issues 

Water Quality 

How animal production and manure interact with the 

environment are issues for industry, government, interest groups 

and the public, especially rural residents. Producers and 

agribusinesses have concern for their future in light of changing 

regulatory environments. In the United States, events such as a 

spill in the mid-1990s of the contents of a 25-million-gallon 

lagoon have put animal manure management issues into the 

reform spotlight. 

Livestock and poultry farms generate manure, bedding, milking 

house wash water, spilled feed and dead animals that can 

impact water quality if not properly managed. Manure, bedding 

and other byproducts from livestock can be recycled as an 

energy source (through methane production or burning), 

compost, heat source and most commonly by application to 

land as a nutrient for crops. 

Animal manure and related byproducts contain elements that, 

under certain circumstances, might reach surface or ground 

water and cause pollution. Surface water contamination from 

manure and other animal production byproducts usually is 

due to organic matter, nutrients and fecal bacteria. Sediment 

transferred from outdoor livestock operations can also 

affect surface water. The location of an AFO plays a role 

in how pollutants may reach water and the magnitude of

environmental damage. Climate, soils, geology and existing 

conditions can influence the absorptive capacity of a location 

(Abdalla et al., 1995). 

There has been significant improvement in manure 

management during the last 10 years. Producers have adopted 

technologies that are easier to manage and capture more of the 

manure and byproducts. Many states have implemented 

CAFO-permitting procedures by initiating or expanding 

nutrient management policies and programs. Formed manure 

storage and injected or incorporated manure application are 

two examples of improvements in liquid manure management 

to minimize nutrient loss. However, lagoon spills from animal 

operations sometimes occur, with significant environmental 

impacts, including contamination of streams and fish kills (New 

York Department of Environmental Conservation, 2005). 

Industry Changes and Implications 

In the United States and Canada, both the number of livestock 

operations and operations with confined animals has decreased 

since 1982, partly due to the industry’s structural changes 

toward large, consolidated operations (Kellogg et al., 2000; 

Statistics Canada, n.d.). The consolidation of the livestock and 

poultry sectors into fewer and larger operations has brought 

more animals and farms under regulatory oversight. Some 

sectors, particularly the pork industry, have moved from 

outdoor production units to confinement facilities where there 

is less weather-related environmental risk. The increase in 

confinement operations has raised questions of animal welfare 

(see Animal Welfare Chapter). The structural concentration of 

livestock and poultry production has also been accompanied by 

geographical concentration. Broiler production has grown 

throughout the southeastern United States. Cattle feedlots and 

increasingly hog production are expanding in the Great Plains 

of the United States and Prairie Provinces of Canada. Some 

regions with the highest density of dairy animals per square 

kilometer are near major Canadian and U.S. cities. With 

higher human population density, there are more pressures 

on agriculture regarding water quantity and quality, though 

the urban center may also have a significant impact on 

the environment. 

Concentration of animal production in geographic locations 

requiring the import of feed transports nutrients away from 

crop-producing regions. Animal production in grain-deficient 

regions may generate manure nitrogen or manure phosphorus 

in excess of the assimilative ability of nearby land for manure 

application. EPA’s 2003 CAFO revisions address surplus 

nutrients by requiring manure plans that balance application 

with crop removal and land management as a way to minimize 

risk to water quality. Producers in these regions often face 

higher land application costs and look to innovative 

technologies, such as composting and energy generation, to 

manage nutrients. 


The United States and Canada have regions with surplus 

animal nutrients. In Canada, manure production is currently 

more concentrated in some areas, mainly southwestern areas 

of Quebec and Ontario, southern Manitoba, and central and 

southern Alberta. U.S. counties with estimated excess manure 

nutrients are primarily in North Carolina, Virginia, Maryland, 

Delaware, Mississippi, Georgia, Alabama, Arkansas, 

Washington and California. Figure 1 and Figure 2 show regions 

and counties where excess nitrogen and phosphorus exist in the 

United States. However, the maps are based on 1997 animal 

production and the nutrient production in manure was 

calculated using coefficients that have since been updated to 

reflect changes in the knowledge of manure outputs and feed 

inputs. Nutrient surpluses will need to be re-examined as 

manure values are revised. While the maps are drawn at the 

county level, nutrient management occurs at the farm and 

individual field level. Required plans and regulations are 

evaluated at this micro level. 

Small and mid-size farms are a large segment of the animal 

production industry. In the United States, small and mid-size 

operations account for 99 percent of farms, and 80 percent of 

animals (Gollehon, 2005). A model designed by the U.S. 

Geological Survey showed that unconfined operations 

contribute to more fecal coliform bacteria than do confined 

operations with the same animal units (Alexander and Smith, 

2005). In most states, smaller confined and unconfined 

operations are currently not held to the same water quality 

standards as larger operations. If stricter regulations were 

enacted, many of these operations may not be able to afford the 

costs of compliance and would likely stop livestock production. 

Emerging Issues 

Looking ahead, the scientific community has identified a series 

of issues that may be linked to animal manure and the 

environment. Current knowledge about these potential threats 

is incomplete. However, these are issues that will receive more 

and more attention. 

Pathogens and pharmaceutically active compounds (PACs) in 

manure, bio-solids and other byproducts are emerging 

environmental issues (USDA, Agricultural Research Service, 

2004). They can be transmitted to other animals and humans 

through food supplies, water and possibly air. Animals can also 

be infected from vectors, such as birds, rodents or insects. 

Additional research is needed on the seriousness of health 

effects on and off the farm, and knowledge about pathogen 

survival in manure collection, storage, treatment and 

application systems. 

Certain foodborne and waterborne microorganisms are of 

particular public health concern. Pathogens targeted as highest 

priority are: Salmonella species; Campylobacter jejuni/coli, 

Escherichia coli O157:H7 and other related strains; the parasite 

Cryptosporidium parvum; and enteroviruses. The most

102 

significant manure-borne pathogens are the one-celled parasites 

Cryptosporidium parvum and Giardia duodenalis, and the 

bacteria Salmonella, Campylobacter, Escherichia coli and Listeria 

monocytogenes. 

PACs, such as hormones and antibiotics, may be present in 

manure and can be transferred to the environment. Pathogens 

in livestock and poultry can become resistant to antimicrobial 

agents. Monitoring by the National Antimicrobial Resistance 

Monitoring System (NARMS) has not provided a clear picture 

of the impact of antimicrobial agents on antibiotic resistance in 

U.S. animal agriculture (FDA/USDA/CDC, 1998). Changes in 

microbial resistance patterns vary by animal species and the 

bacterial and antimicrobial agents monitored (USDA-ARS, 

1998). Manure-borne antibiotics and antibiotic-resistant 

bacteria may influence indigenous bacterial populations in soil 

and water. Naturally excreted hormones and some drugs can 

interfere with the endocrine systems of humans and wildlife. 

However, the potential health effects are not clearly understood 

because these chemicals occur in the environment and function 

at very low doses. 

Those pathogenic bacterial populations that have acquired 

antibiotic-resistant genes are a human and animal health 

problem, as conventional antibiotic treatment of some 

infections is no longer effective. Research is needed on PACs 

movement in air and water and fate in environmental 

conditions (e.g., temperature, moisture, etc.). If environmental 

risks are found, research needs to focus on development 

of treatment strategies and on-farm best management 

practices (BMPs). 

Air Quality 

Air quality issues associated with AFOs are nuisance concerns, 

and there is increasing focus on potential health-related 

concerns. Minimal research data exists on these issues, 

particularly measurement of health impacts. Odors are 

generated in livestock housing and cannot be contained within 

the structures. Manure is present, even in systems with external 

manure storage. Odorous compounds tend to be carried on 

dust particles. Odor chemistry is complex and poorly 

understood. The challenge is complicated by the fact that 

individuals perceive odors differently. 

Studies suggest that humans have physiological responses to 

odor exposure (Schiffman et al., 1995; Thu et al., 1997; Wing 

and Wolf, 2000). In none of these studies was odor measured 

and correlated to incidence of adverse health effects. Other 

studies suggest that the impression of an offensive odor can lead 

one to believe there are adverse effects. Frequency, duration or 

intensity of an odor can trigger a nuisance response, making it 

difficult to set a regulatory standard. Recent air quality research 

has focused on measurable characteristics of odor and specific 

gas impacts on human health. As a whole, there are no clear 

health effects of odor or livestock emissions. There is, however, 


data related to human health effects following exposure to 

specific gases based on industrial and worker safety research. 

In addition to direct emissions from cattle, the anaerobic 

decomposition of manure during storage produces methane. 

Ruminant livestock (dairy and beef cattle) is estimated to 

produce 250 liters to 500 liters of methane per day, potentially 

accounting for an estimated 2 percent of the global warming 

worldwide that may occur in the next 50 to 100 years (USDA- 

ERS, 2005). Canadian animal agriculture contributes about 6 

percent of total GHG emissions, excluding fossil fuels. In the 

United States, animal agriculture contributes 17 percent of total 

GHG emissions (Johnson and Johnson, 1995). GHG emissions 

from farm animals have increased during the last decades due to 

the overall increase in the number of livestock and the relatively 

low rate of adoption to technology to reduce emissions. 

There is increasing concern in the scientific community about 

bioaerosols, which are tiny airborne particles that contain 

microorganisms (viruses, bacteria, protozoa and fungi) or their 

byproducts (e.g., microbial toxins). Pathogens capable of 

causing human or animal disease and microbial toxins may 

become aerosolized by such practices as land application of 

animal biosolids, livestock wastewater spray irrigation, livestock 

wastewater injection or animal pen scraping. Other sources of 

bioaerosols include exhausted air from livestock confinement 

buildings, high winds that carry bioaerosols from open livestock 

wastewater systems and dust blown from outdoor livestock 

pens. Little research has been done regarding bioaerosols 

generated by livestock management practices (USDA, 

Agricultural Research Service, 2004). 

Treatment Strategies 

Throughout the history of animal production, various 

technologies have been used to recycle nutrients back to land, 

including aerobic systems, anaerobic systems, composting, 

constructed lagoons and land application. Air emission control 

involves control or mitigation strategies that primarily address 

the manure source, e.g., the animal, through diet or genetic 

improvements. Mitigation strategies change the form of an 

emitted gas, or prevent transport of it using manure covers, 

anaerobic digestion or biofilters. Some treatment technologies 

are specific for air and water, and, in some cases, have more 

than one purpose. For example, anaerobic digestion can reduce 

organic matter content and produce a fuel (biogas), but it can 

also control odors and reduce pathogens in wastewater. 

Technological work is being done to improve manure value or 

reduce emissions, i.e., composting to produce a soil 

amendment, combustion, solid state anaerobic digestion, 

advanced constructed wetlands, gasification to produce energy 

from manure, and recovery of phosphorus and nitrogen in 

concentrated forms. Some large producers are developing 

technologies to produce viable byproducts, such as anaerobic 

digestion, to produce methanol, a liquid fuel.

Managing or changing the components of animal diets is an 

important area of science and a way to influence the amount 

and characteristics of manure and odors. There are several 

strategies for reducing nutrient excretions in animals (Table 1) 

(Sutton et al., 2001). Methods of reducing nutrient losses in 

manure include reducing feed wastage; more accurately 

matching nutrient requirements of the animal; and improving 

the digestibility of the diet. New dietary strategies may become 

available to assist with lowering nitrogen and phosphorus 

excretion in livestock manure. Ultimately, economics will 

always be a driving factor behind producer acceptance of these 

new technologies (Metcalfe, 2000). 

Barriers to Implementation 

In the United States and Canada, manure and nutrient 

management plans have been one cornerstone of federal and 

state/provincial approaches to effective management of manure. 

For example, the Unified Animal Feeding Operations Strategy 

focuses on the development of Comprehensive Nutrient 

Management Plans (CNMP) for certain U.S. operations. 

Achieving environmental benefits from CNMPs depends 

critically on the follow-up and actual implementation of 

nutrient and manure management plans. The existence of a 

plan may, in and of itself, be insignificant. In the United States, 

anecdotal information has suggested that some plans have not 

been used or incompletely implemented; some practices are not 

maintained over time. Information is scarce about nutrient 

management plan implementation and the connection of farm 

practice change to improvement in water quality. 

Important social and behavioral factors may prevent 

implementation of management practices and technologies for 

addressing manure and other byproducts of animal production. 

Constraints to practice adoption are of two types: an inability 

to adopt and an unwillingness to adopt (Soil and Water 

Quality, 1993). The inability to adopt may be related to lack of 

information; technological complexity; increased costs and/or 

profit losses; labor requirements; inadequate management skills; 

and limited control over management decisions. Constraints 

related to an unwillingness to adopt new technologies or 

practices may include conflicting or irrelevant information; 

incompatibility with existing practices; lack of understanding of 

the new technology; short-planning horizon; perceived or real 

increase in risk; and a belief in traditional practices. Social 

science work suggests that a focus on farm-level implementation 

is a “missing link” to the success of government’s attempt to 

encourage better manure management. For example, based on 

survey work in Wisconsin, the promotion and requirement of 

nutrient management plans as part of government conservation 

programs should address how plans are implemented and 

maintained, not merely how they are written (Shepard, 2005). 

Understanding farmers’ decision-making environment is key to 

the design of strategies that increase the potential for adoption 


of technologies. Producers receive information and signals from 

the market, consultants, government at various levels and many 

other sources. In addition, producers can have different goals 

and values concerning their operations, financial or other risks, 

neighbors and communities, and the environment—all of 

which affect their decisions. 

Land-Use Decisions 

As rural communities and agriculture change, the juxtaposition 

of animal production and other land use has caused conflicts 

over water and related impacts of animal production. These 

conflicts can turn neighbor against neighbor, threaten 

livelihoods and traditional ways of living, and have significant 

social and economic costs. Conflicts between just a few 

neighbors all too often escalate into larger community, county 

or statewide debates. Significant economic and emotional costs 

may result for all involved, no matter who “wins” (Abdalla and 

Kelsey, 1996). In addition, decision-making gridlock and 

conflict can occur over who should decide the growth in animal 

agriculture (Abdalla and Shaffer, 1997). 

In many parts of the United States, change at the rural-urban 

interface threatens the viability of animal agriculture. During 

the last 15 years, the population of many rural areas grew, with 

a net in-movement of people from metropolitan areas. These 

demographic shifts, combined with strong public preferences 

for protecting the environment, suggest continuing friction 

between farmers and neighbors—especially those who are nonfarmers—and 

communities (Ervin and Schmitz, 1996). 

Complaints about animal agriculture’s impacts come not just 

from new rural residents. Long-time rural residents may have 

been comfortable with the traditional types and scale of 

agricultural operations in their community, but complain about 

new farm operations or increased odors, noises or flies 

sometimes associated with larger agricultural operations. In 

some communities, the complaints even come from 

neighboring farmers (Abdalla and Kelsey, 1996). Agriculture 

across North America is changing as producers specialize and 

increase the size of their enterprises to remain profitable. This is 

particularly true in sectors and regions where rapid growth and 

geographic shifts in animal production are occurring. 

In the United States, litigation is growing in debates about 

animal operations. If a conflict gets tied up in litigation, 

communities often lose because of costs, and litigation often 

shifts the decision-making responsibility to someone outside the 

community. Protracted legal cases can take months and, in 

some cases, years to be resolved. The potential for litigation 

may act as a barrier to establishment, expansion and survival of 

animal agriculture operations. 

Canada has not experienced extensive use of litigation related to 

animal agriculture. The Canadian legal system does not 

motivate this course of action to solve issues. Canadians still 

have a relatively positive perception of agriculture and farming

104 

activities, as well as a high level of trust in the safety of their 

food supply. There is increasing interest in having reliable 

information on production systems and corresponding potential 

health and environment impacts. 

How a conflict over animal agriculture is handled impacts the 

long-term viability of solutions. In the United States, a 

proliferation of local ordinances is difficult for animal-related 

businesses that operate on a regional, statewide or multi-state 

level. Concerns about how variance in local ordinances may 

create an unlevel playing field within a state have led some U.S. 

states to pre-empt local ordinances relating to zoning, water 

quality, nutrient management and odor (Abdalla and Shaffer, 

1997; Feedstuffs, 2005). For example, Pennsylvania passed 

legislation reducing local government’s authority for nutrient 

management and odor management (Beegle and Lanyon, 1994; 

Becker et al., 2005). Other states where there has been action to 

limit local control and subsequent controversy include Iowa, 

Kansas, North Carolina, South Carolina and Missouri (Abdalla 

and Shaffer, 1997; Feedstuffs, 2005). 

The level of government at which animal agriculture is 

regulated has important implications. Who makes decisions and 

what factors they consider is affected by where the decision is 

located. A mid-1990s review of six states indicates that states 

which favored state control were more likely to be pro-animal 

agriculture development. Where local control dominated, 

attitudes tended to be less friendly to animal agriculture. 

It is also clear that in some cases, multiple levels of government 

are involved in making decisions about approval of an animal 

agriculture facility (Animal Confinement Policy National Task 

Force, 1998). While this may be appropriate in some cases, it 

can be duplicative and add significant costs and time delays. 

At the same time, there may be issues—flies, odors, water 

access, property value reductions—where no government 

agency has responsibility or even objective information on the 

perceived impact. Such “orphaned” issues create the potential 

for neighbors and other stakeholders to become frustrated, 

and resort to the level of government closest to them for 

protection or redress from actual or perceived losses (Abdalla 

and Dodd, 2002). 

Some researchers have suggested that differences in costs to 

producers due to differences in regulatory stringency will lead 

to more geographical movement by the industry. In many cases, 

this movement will result as operations seek lower costs of 

handling manure and odor, such as movement to less populated 

areas with drier climates. These regulatory costs must be 

balanced against other costs of production, such as feed costs 

and transportation costs for livestock, labor and facilities. An 

extreme case of geographical movement depicts a “race to the 

bottom”—a progressive movement of capital and technology 

from areas with relatively high levels of wages, taxation and 

regulation to areas with relatively lower levels (Spar and Yoffie, 


2000). Industry has an incentive to move to where total costs 

are lowest. In the animal agriculture context, different levels of 

environmental regulation could influence industry to move 

across state or provincial borders. Burdensome environmental 

regulations in North America may influence the animal 

agriculture industry to move between countries or overseas to 

areas where regulations are less stringent. 

Research in the U.S. swine industry indicates that geographical 

shifts in certain animal sectors may have been influenced by 

differences in state environmental regulations and the related 

compliance costs. One study found that small hog feeding 

operations’ location decisions were affected by differential 

compliance costs, while large operations’ were not (Metcalfe, 

2000). Another study found change in environmental 

stringency to be a factor in hog inventory growth (Brewin, 

2004). In a study of the dairy industry, results showed more 

stringent environmental regulations have a negative effect on 

dairy cow numbers and shifts in location from California to 

states such as Idaho, New Mexico and Texas (Isik, 2004). The 

challenge with all this research is how accurately do the 

estimated costs of environmental regulation, particularly 

differential costs of new or additional regulation, compare to 

actual costs, and how reasonable is it to attribute changes in 

livestock numbers and relocation to those differential costs. 

These studies also suggest that environmental regulations may 

affect choice of location in other ways. The ability of the 

environment to assimilate nutrients from manure and other 

animal production byproducts into cropping systems or other 

uses is expected to be an increasingly important factor in 

location decisions. Regions with high animal populations and 

low assimilation capacity may use manure for energy 

production to lessen the cost of nutrient management. 

Additional research with more accurate measures of 

environmental regulation compliance costs could help better 

determine the role of these costs in geographical movement by 

the animal agriculture industry in North America. Such 

research can also be used to better design future policy options, 

while keeping in mind the dynamic nature of environmental 

regulation costs. 

Forces of Changes and Their Implications 

Nine major forces of change are affecting environmental issues 

related to animal agriculture in North America. Each will have 

important implications for the industry during the next decade. 

1. Concentration and Specialization 

Economic forces will continue to consolidate animal 

agriculture. The poultry and livestock industry taking advantage 

of the economic comparative advantage of a particular region 

will continue to expand. These regional clusters form around 

economic advantages, such as climate, processors,

transportation access and costs; infrastructure, such as feed 

mills, professionals, and labor; and proximity to inputs. 

Increasingly, a region’s acceptance of animal agriculture is a key 

factor in where to expand. Expansion in areas with existing 

nutrient surpluses may exacerbate water quality and possibly 

other environmental concerns. The requirement of 

phosphorous-based nutrient plans will reduce the risk to surface 

water and will increase the cost of nutrient management in 

some animal-dense regions. 

2. Uncertainty About Human Health Connections 

As in many other environmental and public health issues, 

technology for detecting contaminants in the environment 

outpaces our ability to understand the human health 

implications of these new data. There are traditional concerns, 

such as illnesses from waterborne pathogens or insects resulting 

from improperly managed manure. There are also emerging 

concerns over possible effects of endocrine disruptors, antibiotic 

resistance and air emissions from animal facilities. In the United 

States, EPA is researching emissions from CAFOs, the transport 

and fate of pharmaceuticals, and has called for NPDES permits 

to include BMPs for pathogens. 

3. Advances in Animal Operation Technologies 

New and improved technologies have historically generated 

tools to mitigate environmental problems in the animal 

agriculture industry. New treatments for manure can help to 

reduce the loss of nutrients to the environment. Animal-feeding 

strategies have been developed to reduce nutrient excretions, 

emissions and odor from manure (Table 1). Attention is being 

turned toward economically viable uses for manure that reduce 

the environmental impact. New methods have learning and 

adjustment costs, as well as some risks. Without a focused 

strategy for implementing new technologies, adoption may 

be slow. 

4. Environmental Activism and Information Technologies 

In the United States, advances in information technologies have 

allowed neighbors of proposed CAFOs to communicate 

effectively. Traditional, trusted sources of information, such as 

local or state universities and news media, are challenged as 

access to information increases. The Internet allows local groups 

to communicate, obtain information about issues and legal or 

political strategies, form alliances with groups across longer 

distances, and select their own “facts” to use in discussions and 

debates. This is likely to add to the challenges of public policy 

decision-making and increase the potential for decision-making 

gridlock and delay. 

In Canada, there has been ongoing collaboration among 

governments, environmental nongovernmental organizations 

and industry stakeholders to proactively address environmental 

pressures associated with agricultural production, and to 


develop in a transparent way solutions that address the 

respective needs and expectations of producers, the conservation 

community and consumers. It is not expected that advances in 

information technologies will adversely impact relationships 

among various stakeholders. 

5. Litigation 

Litigation is a common strategy to settle disputes in the United 

States, but much less so in Canada and Mexico. Neighbors or 

environmental groups may continue to use litigation as a 

strategy to force implementation of regulations, or to have rules 

changed to reflect new science or changing public values. As 

described earlier, concerns regarding litigation relate to costs, 

delays, uncertainties, loss of control and loss of representation 

for all stakeholders. These problems may impact the size and 

number of animal operations, as small and mid-size farms may 

not have the resources to challenge a suit. 

If other means of mediating conflicts are not crafted and 

implemented, the costs and uncertainty related to litigation as a 

strategy to affect environmental policy may impact the 

competitiveness of regions within the United States. If other 

countries, including Canada and Mexico, do not have these 

costs and uncertainties due to more stable regulatory regimes, 

an incentive may exist for U.S. animal firms to relocate. As a 

result, production in these countries may increase over time. 

6. Changing Perception of Agriculture 

Farmers are traditionally viewed as good environmental 

stewards of the land and the environment, and enjoy a large 

amount of good will among the public. However, in the case of 

animal agriculture, this support appears to be declining, with 

potential spillover effects to crop farmers. The public may be 

less tolerant of environmental and nuisance impacts of animal 

agriculture. Public support may be directed to specific segments 

of agriculture, depending on what the neighbors and the public 

know about that particular sector. Improved scientific 

understanding of the impacts certain management practices 

have on the environment may have a stronger impact on 

addressing environmental concerns than do changing public 

perceptions. The Canadian government is working to maintain 

the confidence Canadians have in their food production sector. 

An example is building capacity to generate and gather 

information on efforts made by farmers to protect 

the environment. 

7. Changing Measurement Technologies 

It is difficult to attribute specific efforts of farms implementing 

BMPs to environmental outcomes. Measurement challenges 

include time delays, influences of weather, and difficulties 

measuring and monitoring smaller and diffuse sources of 

pollution. Advances in measurement technology have the 

potential to drastically change our understanding of pollution

106 

sources and to create new systems of accountability. Biological 

source tracking has been proposed as a method to determine 

not only the species (e.g., human, bird, cattle, swine), but also 

pinpoint the specific flock, herd or community causing the 

contamination. These developments have the potential for 

informing debate about the relative contributions of farming or 

other land uses (lawn fertilization or septic tanks) to pollution. 

8. Resource Constraints 

Resource constraints have for some time been a limit in 

conservation and environmental programs affecting animal 

agriculture. These resources include personnel and funds for 

cost sharing, research, technology development and technical 

assistance/education. In the United States, significant increases 

in the federal budget deficit mean fewer resources may be 

available in the future to address environmental issues 

associated with animal agriculture. There will be increased need 

for government agencies to set priorities. There may be an 

increasing role of the private sector, private-public partnerships, 

and multi-state and multinational programs. Regardless of the 

origin of the resources, the priority must be on actively seeking 

practical solutions. 

9. Uncertainty About the Evolution of Kyoto Implementation 

It is expected that Canada’s domestic Offset System and 

Mexico’s Office of Clean Development for GHG will continue 

to evolve. While there is no certainty regarding the status of the 

Kyoto agreement after 2012, internationally there is potential 

for continuation, and a commitment domestically to see that 

credits can be supplied by projects during at least the next eight 

years. Through technology development, there is greater 

potential to reduce animal agriculture emissions than to capture 

gains through cropland management and sinks (withdrawing 

and storing atmospheric carbon dioxide in biomass and soils). 

A successful pollution credit trading market has the potential to 

make effective technologies economically viable for producers. 

Summary 

Consolidation of the animal production industry has resulted in 

fewer and larger operations, and, in the United States, more 

animals and operations under regulatory oversight. Despite 

improvements in technologies and manure management and 

new regulations and programs in many states, events still occur 

that release pollutants into the environment. Increasingly, 

questions arise about ongoing air emissions from livestock 

operations. In the United States, evidence indicates that smaller 

operations may be contributors to water quality problems, and 

that financial or other constraints limit these farms’ ability to 

make environmental improvements. Emerging niche markets 

with preferences for small-farm or free-range production may 

pay prices high enough to support environmental improvements 

on these smaller operations (see Economics and Consumer 


Demand Chapters). However, most North American and 

developing economy consumers will continue to be pricesensitive 

shoppers. The development of new technologies to 

improve environmental performance and monitor progress is 

encouraging, however, implementation may be slowed by 

resource constraints. 

Historically, regulations have been the main type of policy 

instruments used to deal with environmental issues related to 

animal agriculture. These regulations may vary across states and 

provinces. Within the United States, states are a key part of the 

implementation process. Regulatory differences across states 

may increase due to delays in federal rule-making and an 

increase in uncertainty about the federal government’s role in 

dealing with concentrated AFOs. A major consequence of these 

issues is increased costs to producers and agribusinesses, as 

private disputes and public policies require environmental and 

related impacts to be considered in their decisions. Such 

changes may, in turn, increase product prices and may adversely 

affect the competitiveness of the animal agricultural sector 

where these disputes occur. These implications appear to be the 

greatest for the U.S. industry due, in particular, to the 

prevalence of litigation. 

Finally, while there is diversity, there are many existing and 

developing similarities in the structure of the livestock and 

poultry production sectors in Mexico, Canada and the United 

States. Across the countries there are different environmental 

and economic priorities, regulatory strategies and resources, and 

legal framework. Public policies and business strategies to 

address environmental issues of animal agriculture must be in 

the context of the country and industry in question, but 

industry diversity should not be an excuse for inaction. 


Here are five potential options for change in the future, and the 

potential implications of those options for the respective 

stakeholders. These are not recommendations, but rather are 

presented as possible alternatives, broadening the scope of 

information for public- and private-sector decision makers to 

consider as they address environmental issues in the future. 

Option 1. Strengthen the Public-Sector Role 

Establish stronger federal, state or provincial policies to 

encourage responsible growth of the animal industry in 

locations with less environmental risk. In the United States, 

these policies could create a more uniform regulatory playing 

field across states, creating a broader approach to regional 

environmental management that could reduce overall 

environmental risk, and preventing competition for industry 

that could indirectly weaken the standards of individual states. 

The policy would allow industry to work more easily nationally 

in the United States and possibly across North America. There

could also be integrated air and water policies for agriculture, 

which are likely to be more cost-effective than separate policies 

for each (USDA-ERS 2005). This option could include 

increasing commitment to implementing regulatory and 

incentive programs, including adequate funding for staff. 

A related option would be for public-sector entities to provide 

guidance for the improvement of private decision making by 

key stakeholders. Under the National Land and Water 

Information System, Canada is building capacity to provide 

strategic information on land, soil, water, air, climatic and 

biodiversity resource information to decision makers. 

One implication of this option is that it would prevent the 

“race-to-the-bottom” scenario that some fear. This option also 

would allow the industry to move more freely across the continent. 

Option 2. Expand systems research 

by the public and private sector 

Increase funding and partnerships for systems-oriented research 

and technology about farm and industry-related aspects of the 

problem, environmental/health aspects of the problem, and 

social, economic and legal/policy, and international aspects of 

the problem. 

This research program must focus on farm and environment 

interface, consider environmental capacity issues, and identify 

solutions for different scales of farming and regional 

environments. The technological solutions must consider 

social/behavioral factors related to adoption, incorporate 

information systems and use a performance-based approach to 

assure accountability. The research should be regional, national 

and global in scope, future-oriented and anticipatory of 

emerging challenges, multidisciplinary including agricultural 

universities and medical schools, and involve public and 

private partnerships. 

One implication of this option is that it would require 

increased funding of research. Multidisciplinary research and 

research partnerships are other potential implications. 

Option 3. Target implementation of best management practices to 

the highest priority water quality concerns 

Past technical, cost sharing and educational work on nutrient 

management plans had significant shortcomings in 

implementation and accountability. Existing programs may not 

be targeted to the producers contributing in a significant way to 

local and regional water quality problems because of lack of 

information on water quality problems or poor coordination 

among agencies. In addition, in the United States, small or 

mid-size farms that appear to be important contributors to 

water quality problems in some states and regions may not be 

reached by existing programs. These farms are not typically 

required to be permitted by federal and state water quality 

regulatory programs. 


Central elements of this approach are to target efforts to areas 

and farms with the greatest problems to achieve the greatest 

environmental bang-for-the-buck. This would possibly include 

a multi-faceted approach to integrate ecological goods and 

services into agri-environmental policy to achieve broader 

environmental outcomes. Because the focus is on 

implementation, it would use existing social and economic 

research knowledge on implementation and adoption, including 

incentive-based tools. It would require improved coordination 

among agencies and possibly other water or air quality 

monitoring groups, and development of information systems to 

assure alignment with existing farm programs and resulting 

benefits. Work would be needed to improve understanding and 

build trust within and among suppliers of information and 

services, and with stakeholders. 

Implications of this option include greater return on investment 

from environmental programs; require greater investment in 

education and efforts to move research findings into the field; 

and focus on incentive-based tools rather than command and 

control regulation. 

Option 4. Use market-oriented mechanisms to “get the prices right” 

This option involves public and private cooperation to explore 

and foster promising innovative arrangements that internalize 

external costs of animal enterprises, e.g., off-farm impacts on 

neighbor, communities and the environment. Such 

arrangements could more accurately reflect the societal costs 

of animal production in prices, providing incentives to firms 

to better manage manure and animal byproducts. Reflecting 

the true cost of manure and byproducts in prices of products 

or services provides incentive for producers and processors 

to adopt systems that maximize profits while being 

environmentally friendly. This option recognizes that 

environmental stewardship does not depend on availability of 

technology alone. Incentives must exist for producers to adopt 

practices that protect the environment. The type of incentive 

program will depend on implicit and explicit property rights in 

current government approaches. 

There are several market-oriented approaches to environmental 

stewardship that attempt to provide the appropriate cost and/or 

price signals to the managers that can influence the 

environmental outcome. Examples include the following: 

• Tighter coordination among participants in the supply chain 

with regard to environmental byproducts of the operations. 

• Green payments that reward stewardship and give farmers 

incentives to provide environmental services. 

• Tradable environmental credits could be used for many 

environmental objectives, such as reduction of GHG 

emissions and/or carbon sequestration, biodiversity credit, 

and air and water quality. Polluters in other industries could

108 

purchase credits from livestock and poultry producers instead 

of paying higher costs of abatement. 

• Eco-labeling to provide consumers information on which 

products are environmentally preferable (see Consumer 

Demand Chapter). 

• Environmental management systems (EMS) have resulted in 

improved environmental stewardship by enhancement of 

management standards in other industries. 

• Host community compensation mechanisms used in 

the municipal waste industry might be adapted for 


Implications of this option include sharing environmental costs 

across the food chain, and substituting incentive-based tools for 

command and control regulation. 

Option 5. Legal Reform 

In the United States, environmental litigation continues to 

create uncertainty for animal agriculture. This risk is difficult to 

manage with traditional risk-management tools. Many legal 

reform proposals have been put forward designed to provide the 

industry with some certainty or a “safe harbor.” But, generally, 

these reform efforts fail because they are perceived as taking 

rights from one group and giving them to another without 

compensation or required action by the industry. 

The crux of this policy approach is the need for multiple 

parties—industry, scientists and the public (through 

government)—to act together. In exchange for the industry’s 

obtaining some level of protection against complex and costly 

litigation, the industry supply chain would take specific 

responsibility for the handling of animal manure and other 

environmental impacts using recognized science-based methods. 

The agricultural scientific and research community must be a 

part of this effort by continuing to advance our knowledge of 

the human and environmental effects of animal agriculture, and 

exploring new and innovative ways in which to manage the 

handling of animal manure and other environmental impacts 

on animal agriculture. The mutual goal would be to balance 

society’s goals for environmental quality with economic goals, 

such as jobs and income growth and industry health, in 

North America. 

This option combines a safe harbor for industry (both producer 

and processor level) with acceptance of greater responsibility by 

the entire industry supply chain at all levels. Implications of this 

option: 1) Ensure a holistic approach to problems associated 

with animal manure; 2) Create bridges among industry, 

producers, environmental community, research and scientific 

community, and the general public; and 3) Give industry some 

measure of assurance that their participation will protect them 

from frivolous lawsuits. 


Implications 

When making choices involving the five options above, it is 

important to recognize that none of the five alone offer a single 

solution to all environmental issues. Each option may offer a 

feature or attribute that may be helpful to the resolution of 

environmental issues associated with animal agriculture. The 

actual choice may not be between different options, but 

deciding on the right mix of policy options. 

Consumers. Any public- or private-sector policy option that 

results in higher farm level cost of production will ultimately 

lead to higher retail prices of animal-based products. As a result, 

the welfare of consumers will likely decrease. New regulations 

requiring increased investment or operating costs, or the 

relocation of an existing industry that would not have occurred 

under competitive market conditions, will increase producer 

costs. Public support for cost-share programs or recognition of 

more flexible market-based incentives may lessen these costs 

and thus food price impacts. Another way to lessen the 

consumer impact is to allow imports of animal products from 

countries that have lower cost of production. Environmental 

conditions may improve in North America, but degrade 

elsewhere in the world if livestock and poultry industries 

expand in regions with lower environmental standards. 

Producers. If regulations increase costs of production, economic 

opportunities in animal agriculture would be reduced for 

producers. This is particularly true in areas of significant 

environmental risks (e.g., highly erodible land and/or near 

water bodies) or where large current nutrient surpluses exist in 

traditional production areas where it is difficult or expensive to 

transport manure to other areas. Producers may stay in more 

highly regulated areas, but adapt their practices or innovate to 

stay in business. Some evidence of this was found in the dairy 

sector in Florida (Boggess et al., 1997). Any substantially higher 

environmental compliance costs would raise questions 

concerning the competitiveness of North American animal 

agriculture compared to other regions. Higher costs also would 

have implications for the structure of North American 

agriculture as it is likely that smaller and mid-size farms may be 

the first to leave. Regardless of the size of the farm, constantly 

evolving regulations and/or litigation creates an uncertain 

environment in which to invest in expansion or environmental 

technologies. Nonetheless, the industry has shown substantial 

ability to adapt and prosper. 

Local Businesses. In general, the fate of local businesses that 

support animal production (veterinary services, feed 

manufacturing, building construction, machinery, etc.) will 

mirror that of the local production sector. Any reduction in 

livestock and poultry production due to higher cost of 

production would reduce the need for some inputs provided by 

these businesses. However, remaining animal operations may 

have increased demand for environmentally related products

and services. The success of the local business depends on its 

ability to change from products no longer needed to new 

technologies demanded by the production sector. Benefiting the 

most will be businesses providing products or services related to 

environmental protection, such as nutrient management 

consultants, engineers, manure haulers and nutrition experts. 

These impacts are likely to vary by animal sector and by the 

region’s economic structure, i.e., the degree to which inputs are 

purchased locally versus regionally. 

Agribusinesses. Agribusinesses that operate across state, 

provincial or national borders may benefit from more uniform 

and predictable regulatory programs. Agribusinesses in better 

financial standing may be better able to adapt or relocate as 

regions, technologies and sectors may be impacted differently. 

Some businesses would benefit as producers purchase new 

technologies to meet water or air quality standards. Similarly to 

what was discussed above for producers, if environmental 

regulation substantially raises costs, competitiveness of 

agribusinesses that support animal agricultural production may 

be challenged. 

Rural Residents. Improvements may result in water and/or air 

quality in areas where animal agriculture reduces density or 

implements more environmental friendly practices. Given the 

slow movement and/or buildup of nutrients in soils, water 

quality benefits in some areas may take months, years and 

possibly decades to be realized. Some surface water concerns, 

such as pathogens, would be reduced more quickly, as would air 

quality concerns. To the extent that environmental and 

nuisance impacts of animal agriculture reduce nearby residents’ 

property values, a reduction in these off-site impacts through 

stricter regulations, technology adoption or closing of animal 

production farms should lead to an increase in property values 

near animal facilities. On the other hand, many types of 

agriculture generate amenities that neighbors and rural residents 

enjoy (Batie, 2003). To the extent that these amenities are lost 

when farms go out of business and/or convert to other uses, 

rural residents may be less well off, and possibly see a decline in 

property values. 

Citizenry/Taxpayers. Animal agriculture is an important 

economic activity in North America, particularly rural areas. 

Increasing regulations, incentives for environmental 

performance, or research on new technologies or innovative 

institutional programs will require an investment from the 

public sector. Taxpayers will carry part of the cost. Some 

benefits would be obtained by reallocation of existing 

government funds to cost sharing, technical assistance and 

education to targeted areas and farms. But more government 

funds would be needed to accomplish other program aspects, 

thereby increasing taxes. The general citizenry’s welfare would 

be reduced as they would have less money to spend on other 

items. The public-sector costs differ with the options selected. 

Increased regulation places a burden on industry, but there is a 


cost of policing the regulated firms. Incentive-based programs 

to encourage implementation of BMPs involve a cost share 

from the government. Industry-led efforts to achieve more 

accurate pricing of products and byproducts and improved 

environmental performance will require public investment in 

research and development of technologies and institutions. 

Knowledge Gaps 

1. Increased scientific understanding of agricultureenvironment 

interactions, and linkages between biophysical 

and economic models, are needed to better measure and 

monitor the environmental performance of agricultural 

practices at appropriate scales at regional, local or watershed 

level, with a focus on adoption by different sizes and types of 

farms. These models could then be used to evaluate policy 

options relative to the environment and economic 

competitiveness at the farm, regional and national levels. 

They would also help raise awareness of the environmental 

benefits provided ecosystems and inform private and public 

decision making about the environmental issues related to 


2. Information is needed on the potential implications to 

human health of pathogen activity and air emissions from 

livestock and poultry production and manure storage, 

handling, treatment, utilization and application. It should 

focus on innovative solutions to address emerging issues. 

This research could lead to on-farm BMPs to reduce 

environmental impact. 

3. Better understanding is needed of North American 

environmental problems, boundary issues, physical 

interconnections (Gulf of Mexico, Great Lakes) and public 

policies related to animal agriculture. This includes issues of 

water quantity, as well as quality and knowledge on the 

effects of farm practices on GHG emissions from animal 

agriculture. What are the implications of environmental 

issues for small, mid-size and large animal operations and 

across Mexico, Canada and the United States? Are proposed 

solutions equitable, or should they be? How should the 

stringency of environmental laws or the effectiveness of 

public policies be measured? Better information is needed on 

implementation of policies and regulations.

110 

References 


Abdalla, C.W., L.E. Lanyon, and M. C. Hallberg. (1995, December). “What We Know about Historical Trends in Firm Location 

Decisions and Regional Shifts: Policy Issues for an Industrializing Animal Agriculture Sector.” American Journal of Agricultural 

Economics, 77, 1229-1236. 

Abdalla, C.W. and T.W. Kelsey. (1996, November/December). “Breaking the Impasse: Helping Communities Cope with Change 

at the Rural-Urban Interface.” Journal of Soil and Water Conservation, 51, 462-466. 

Abdalla, C.W. and J.D. Shaffer. (1997, July). “Politics and Markets in the Articulation of Preferences for Attributes of the Rapidly 

Changing Food and Agricultural Sectors: Framing the Issues.” Journal of Agricultural and Applied Economics, 29(1), 57-71. 

Abdalla, C. and A. Dodd. (2002). “Nutrient Management Policy: Pennsylvania Stakeholder Views of Policy, Progress, and Future 

Directions.” Department of Agricultural Economics and Rural Sociology, Penn State Cooperative Extension, University Park, PA. 

Alexander, R. and R. Smith. (2005). “Moving from Monitoring to Prediction: The Quality of the Nation’s Streams.” USGS. 

Animal Confinement Policy National Task Force. (1998). “1998 National Survey of Animal Confinement Policies.” 

Available at http://cherokee.agecon.clemson.edu/confine.htm. 

Batie, S. (2003). “The Multifunctional Attributes of Northeastern Agriculture: A Research Agenda.” Agricultural and Resource 

Economics Review, 32(1),1-8. 

Becker, J., C. Abdalla, and D. Beegle. (2005). “Questions and Answers about the ACRE Program.” Penn State Cooperative 

Extension circular. Available at Nutrient and Water Policy Update, http://agenvpolicy.aers.psu.edu/ACRErevised%20(2).pdf. 

Beegle, D.B. and L.E. Lanyon. (1994, March/April). “Nutrient Management Legislation in Pennsylvania.” Journal of Soil and Water 

Conservation, 49, 84-86. 

Boggess, W.G., G. Johns, and C. Meline. (1997). “Economic Impacts of Water Quality Programs in the Lake Okeechobee 

Watershed of Florida.” Journal of Dairy Science, 80, 2682-2691. 

Brewin, D. (2004). “Three essays in regional economics that consider the importance of space, agglomeration, and income.” PhD 

Dissertation from the Department of Agricultural Economics and Rural Sociology, Pennsylvania State University. Available at 

http://www.etda.libraries.psu.edu/theses/approved/WorldWideIndex/ETD-628/index.html. 

Cloutier, L., P. Thomassin, F. Dagicour, and J. Rodriguez. (2003). “Local Environmental Protection and Trade: The Cases of Hog 

Production in Canada and Mexico.” Report prepared for The Second North American Symposium on Assessing the 

Environmental Effects of Trade, Commission for Environmental Cooperation, Mexico City, Mexico. 

Cushman, J.H. (1998). “Courts Expanding Effort to Battle Water Pollution: New Enforcement Tactic.” New York Times, 

February 28, pp1, 20. 

Ervin, D. and A. Schmitz. (1996). “A New Era of Environmental Management in Agriculture.” American Journal of Agricultural 

Economics 78 (December), 198-207. 

Feedstuffs. (2005, May). Available at http://www.feedstuffs.com/ME2/Default.asp. 

FDA/USDA/CDC National Antimicrobial Resistance Monitoring System – Enteric Bacteria (NARMS-EB), Veterinary Isolates 

Final Report-1998. http://www.ars.usda.gov/Business/docs.htm?docid=6755. 

Gollehon, N. (2005). “Status and Trends in Small and Mid-sized Animal Operations in the U.S.” USDA, ERS Presentation at the 

Workshop on Small and Mid-Sized Animal Operations and Water Quality, Linthicum Heights, MD. 

Isik, M. (2004). “Environmental Regulation and the Spatial Structure of the U.S. Dairy Sector.” American Journal of Agricultural 

Economics 86(4), 949-962. 

Johnson, K.A. and D.E. Johnson. (1995). “Methane emissions from cattle.” J. Anim. Sci. 73(11), 2483-2492. 

Kellogg, R., C. Lander, D. Moffitt, and N. Gollehon. (2000). “Manure Nutrients Relative to the Capacity of Cropland and 

Pastureland to Assimilate Nutrients: Spatial and Temporal Trends for the United States.” USDA, NRCS, Washington, DC.


Metcalfe, M. (2000). “Environmental Regulations and Implications for the U.S. Hog and Pork Industries, Nature Amenities Drive 

Rural Population Change.” An Unpublished PhD Dissertation from the Department of Agricultural Economics, North Carolina 

State University. 

National Research Council Committee on Drug Use in Food Animals, Panel on Animal Health, Food Safety and Public Health, 

Board on Agriculture, (1999). “The Use of Drugs in Food Animals: Benefits and Risks.” National Academy of Sciences. 

New York Department of Environmental Conservation. (2005, September). “DEC Issue Violations for Manure Spill and Fish Kill.” 

Environment DEC Newsletter. Available at http://www.dec.state.ny.us/website/environmentdec/2005b/spill082305.html. 

Schiffman, S.S., E.A. Sattely-Miller, M.S. Suggs, and B.G. Graham. (1995). “The effect of environmental odors emanating from 

commercial swine operations on the mood of nearby residents.” Brain Res. Bull., 37, 369–375. 

Shepard, R. (2005). “Nutrient management planning: Is it the answer to better management?” Journal of Soil and Water, 60 

(July/Aug), 171-176. 

Sierra Club v. Seaboard Farms Inc. and Tyson Foods Inc., 387 F.3d 1167 (10th Cir. 2004). 

Soil and Water Quality. (1993). “Soil and Water Quality: An Agenda for Agriculture.” Committee on Long-Range Soil and Water 

Conservation Policy, National Research Council. 

Spar, D. and D.B. Yoffie. (2000). “A Race to the Bottom or Governance from the Top?” Coping with Globalization. 

Speir, J., M. Bowden, D. Ervin, J. McElfish, R. Espejo, T. Whitehouse, and C. Carpentier. (2003). “Comparative Standards for 

Intensive Livestock Operations in Canada, Mexico and the United States.” Report prepared for the Commission for 

Environmental Cooperation. Montreal, Canada. Available at http://www.cec.org/files/PDF/LAWPOLICY/Speir-etal_en.pdf. 

State of Oklahoma ex rel W.A. Drew Edmondson v. Tyson Foods Inc., et al., Case No. 05 CV 0329 JOE-SAJ, (N.D. Ok1.filed 

June 13, 2005). 

Sutton, A., T. Applegate, S. Hankins, B. Hill, G. Allee, W. Greene, R. Kohn, D. Meyer, W. Powers, and T. van Kempen. (2001). 

“Manipulation of Animal Diets to Affect Manure Production, Composition and Odors: State of the Science.” White Paper 

available from the National Animal Waste Management Center, North Carolina State University. Available at 

http://www.cals.ncsu.edu/waste_mgt/. 

Thu, K., K. Donham, R. Ziegenhorn, S. Reynolds, P.S. Thorne, P. Subramanian, P. Whiten, and J. Stookesberry. (1997). “A control 

study of the physical and mental health of residents living near a large-scale swine operation.” J. Agric. Safety Health 3, 13–26. 

U.S. Department of Agriculture - Agricultural Research Service (USDA-ARS). (2004, October). “Manure and Byproduct 

Utilization National Program. Part of Goal 5, Protect and Enhance the Nation’s Natural Resource Base and Environment, of the 

ARS Strategic Plan and the USDA - Research, Education and Economics (REE) strategic plan.” Available at 

http://www.ars.usda.gov/aboutus/docs.htm?docid=1766 and http://www.csrees.usda.gov/ree/strategic_plan.htm. 

U.S. Department of Agriculture, Agricultural Research Service, 1998; Salmonella & Campylobacter-1998 Report. 

U.S. Department of Agriculture – Economic Research Service (USDA-ERS). (2005). “Managing Manure to Improve Air and 

Water Quality.” Economic Research Report No. ERR9. 

U.S. Environmental Protection Agency (U.S. EPA). (2004, May). “National Pollutant Discharge Elimination System (NDPES): 

Animal Feeding Operations.” Available at http://cfpub.epa.gov/npdes/home.cfm. 

Wing, S. and S. Wolf. (2000). “Intensive livestock operations, health, and quality of life among eastern North Carolina residents.” 

Environ. Health Perspect. 108(3), 233–238. 

Zilberman, D., A. Ogishi, and M. Metcalfe. (2001). “Innovative Policies for Addressing Livestock Waste Problems.” White Paper. 

National Center for Manure & Animal Waste Management.

112 

Figure 1. 

Environmental Issues

Figure 2. 

Environmental Issues 113

114 


Table 1. Feeding Strategies With Expected Potential to Reduce Nutrient Excretion and Odor Emission 

Strategy Potential Savings* 

Lower amount of crude protein (CP) 

fed to poultry and swine and 

supplement diets with synthetic 

amino acids (AA): 

Dairy cows: use of somatotropin and 

three-time milking per day compared 

to two times per day: 

Removal of fiber and germ 

from corn in swine diets: 

Remove supplemental P 

from the diet of beef cattle: 

Using new plants developed to 

contain lower levels of phytate P, 

providing more available P, 

decreasing the need for 

supplemental P in the diet: 

Adding phytase (poultry and swine): 

Other additives, enzyme cocktails, 

organic acids and 

vitamin D3 metabolites: 

*If economic and other implementation barriers were overcome. 

Swine. Reduced N excretions and 

ammonia emissions from 30% to 55%, 

hydrogen sulfide emissions by 30% 

and olfactometry odor measurements 

by 30%. 

Feedlot Cattle. Lower CP diets and 

phase feeding can reduce N excretion 

from 12% to 21% 

Reduce N by 15%-30% without 

hurting production 

56% reduction in dry matter excreted 

and 39% reduction in N excretion. 

Group-feeding studies: P excretion 

can be reduced by 20% to 30% (40% 

to 50% in nutrient balance studies) 

20%-30% less P is excreted 

Reduce P excretion 25%-35% 

Also using high available P (HAP) corn 

and soybeans in addition can reduce P 

excretion 50%, possibly more. 

Reduce P excretion from 15% to 25%. 

Source: Sutton, A., T. Applegate, S. Hankins, B. Hill, G. Allee, W. Greene, R. Kohn, D. Meyer, W. Powers, T. van Kempen. 

2001. “Manipulation of Animal Diets to Affect Manure Production, Composition and Odors: State of the Science.” White Paper 

available from the National Animal Waste Management Center, North Carolina State University. http://www.cals.ncsu.edu/waste_mgt/

Chapter 7 

Community and Labor 

Animal agriculture is undergoing fundamental change, 

driven by new production technologies, changing consumer 

demand, genetic improvements, new retailing pressures and 

globalization. One significant outcome is a change in the 

relationship between farms and rural communities. 

Production units have become larger and more technologically 

advanced, using supply chains and marketing channels to link 

to the economy at large. Much production has shifted from 

independent operators to vertically coordinated operations that 

largely bypass community linkages. New operations may bring 

new resources, opportunities and economic growth to local 

economies. Large production or processing operations require a 

concentration of workers, who may not be highly paid and may 

have to be recruited from other locales. All this challenges the 

socioeconomic milieu of communities where these enterprises 

are located. New economic opportunities may impact the 

community’s autonomy, norms, traditions, pace, culture 

and control. 

The community and labor impacts associated with livestock 

and poultry production and processing are significant, but very 

diverse. Labor is more mobile than is industry infrastructure 

and inputs that give a particular region a comparative advantage 

in animal agriculture. Livestock and poultry production is a 

value-added enterprise that creates jobs directly and indirectly 

as producers and workers purchase goods and services. The 

local economic impact of this industry will depend in part on 

the community’s ability to meet the needs of producers or 

processors. In some rural communities where animal 

production and processing have expanded, there are more jobs 

than available local workers; immigrants increasingly fill these 

generally unskilled jobs. Regions of the United States and 

Canada are sometimes challenged to integrate new people and 

new cultures into existing communities. Mexico, whose rural 

communities often supply the immigrant workers to U.S. and 

Canadian companies, benefit from the remittances sent to 

families. However, the out-migration to urban cities in Mexico 

and north of the border is creating challenges in rural Mexico. 

This chapter discusses the current situation in North American 

rural communities and labor markets. It then identifies existing 

policies and activities addressing these issues, concluding with 

an outline of future options and implications. 


United States 

During the last 20 years, there have been four significant trends 

in the U.S. livestock sector: growth and concentration, 

increasing scale, shifting location, and, in meat processing, 

movement of employment to rural areas from urban locales. 

Growth: U.S. animal agriculture is a $99 billion sector that has 

grown at a rate of more than $1 billion per year during the last 

35 years. This growth has not only matched increasing demand 

in the United States, but also reflects the country’s increasing 

competitiveness in export markets. 

Scale: This growth has been accompanied by a dramatic 

increase in the size of livestock enterprises, and increasing 

concentration of ownership and processing. Retailers, hotels 

and institutional meat buyers are looking for consistency, high 

volumes, quality and low price. Large livestock enterprises, 

especially in poultry, pork and dairy, are best able to deliver 

those attributes to processors, who are also growing in size and 

concentration (Goldsmith et al., 2002). This is a global 

phenomenon—farms need to get bigger and acquire the latest 

technologies in order to compete globally. In the United States, 

many Western and Plains states have seen operations increase in 

scale by severalfold as new, modern systems have been built in 

low-population regions. Increases in size of operations are also 

occurring in the traditional livestock production areas of the 

Midwest. Processors continue to consolidate into larger units. 

Location: During the last 25 years, meat processing has shifted 

from urban areas near consumers of meat products to rural 

areas near cattle, hog and poultry producers. The share of meatprocessing 

employees in non-metro areas rose to 60 percent in 

2000 from less than half in 1980. Rural plants are larger, and 

estimates are that more than 85 percent of the beef, pork and 

chicken come from large plants with more than 400 employees. 

The shift of meatpacking from urban to rural areas was due to 

lower land and labor costs, less stringent environmental 

restrictions, and declining transportation costs. Lower labor 

costs and improved labor efficiency are also factors contributing 

to the growth of boxed, vacuum-packed, and cut-up and 

115

116 

sometimes cooked meat products prepared in processing plants. 

Meatpacking work is “hard and dangerous and wages are low by 

manufacturing standards, although often high compared with 

alternative employment in the rural communities in which 

plants are concentrated” (Craypo, 1994). 

Employment: The $70 billion U.S. meat slaughtering and 

processing industry employs about 500,000 workers (U.S. 

Statistical Abstract, 2004-05, Table 982). Animal slaughtering 

and processing is the largest manufacturing industry in the rural 

United States, representing one-third of food manufacturing 

employment (Table 1). 

The U.S. 2002 Economic Census reported 520,000 employees 

in almost 4,000 meat-processing establishments (Table 1). The 

773 meat-processing establishments with 100 or more 

employees accounted for more than two-thirds of total 

employment. About 86 percent, or 435,000, of these employees 

were production workers, earning an average $22,400 a year or 

about $10.80 an hour. There were 214,000 red meat and 

216,000 poultry-processing workers. Red-meat-processing 

workers earn higher wages because more of them are in the 

Midwest, where wages are higher. The poultry-processing 

industry comprised 311 firms with 536 establishments, 

according to the 2002 Economic Census. 

Food manufacturing pays less than the average wage in the U.S. 

private sector, and meatpacking pays less than the average wage 

in food manufacturing (Table 2). However, food manufacturing 

workers tend to work more hours per week than other privatesector 

workers. The median hourly earnings of slaughterers and 

meatpackers was $9.80 an hour in 2002, and $8.47 for meat 

and poultry cutters and trimmers. About 18 percent of 

meatpacking workers belonged to unions. 

Meatpacking is one of the more dangerous manufacturing jobs. 

Common injuries are muscular trauma, repetitive motion 

injury, cuts and strains. According to the Bureau of Labor 

Statistics’ 2003 annual survey of workplace injuries, the injury 

incident rate among 106 million private-sector workers was 5 

percent, i.e., five of every 100 full-time workers had a 

reportable injury or illness (Bureau of Labor Statistics, 2005). 

The incidence rate was 6.8 percent in manufacturing, 8.6 

percent in food manufacturing, and 10.3 percent in animal 

slaughtering and processing. 

There were an estimated 10.3 million unauthorized foreigners 

in the United States in March 2004, including 1.7 million 

children under 18 years of age (Passel, 2005). Fifty-seven 

percent are from Mexico, and 24 percent are from other Latin 

American countries. There has been an increase in immigration 

flow since 1980. There has been little upward mobility in the 

first generation of this group, but more mobility in subsequent 

generations. Generally, unskilled, low-paying jobs, such as 

agricultural work, are the primary jobs available for the 


authorized and unauthorized migrant workers. Unauthorized 

immigrants make a disproportionate number of agricultural 

workers. Unauthorized migrants represent an estimated 5 

percent of the general U.S. work force, but account for 29 

percent of farm workers, 17 percent of food preparation and 27 

percent of animal slaughter workers, according to the Current 

Population Survey, which may not fully enumerate such 

workers (Table 3). 

Mexico 

Mexico is undergoing a demographic transition, with 

significant migration from the countryside to the cities and to 

the United States. According to Mexico’s 1995 population 

census, of the 5.3 million households located in communities 

with fewer than 2,500 inhabitants, 73 percent are in the lowest 

4 percent of income distribution. The highest levels of poverty 

are in these communities. In comparison, in communities with 

more than 100,000 inhabitants, only 23 percent are at this level 

of poverty. The 2005 national fertility rate was estimated at 

2.11, about equal to the replacement of the current generation. 

The demographic conditions, combined with a relatively weak 

economy, have created a strong labor export market within the 

North American Free Trade Agreement (NAFTA) community. 

The United States has had a high rate of job growth during the 

last 10 years, and a highly flexible labor market that has been 

able to absorb a lot of immigration. Within the NAFTA 

context, this is what was expected. Trade barriers would fall, 

allowing resources to be efficiently allocated. The labor exodus 

from Mexico, though, was not anticipated. Most of the concern 

early on was for job flows to be the opposite, from the United 

States to Mexico. This raises an important policy question of 

what is preferred—a well-functioning NAFTA where capital 

and labor move freely, or somehow differentiating capital from 

labor in order to address important short-term social issues 

arising from migration. 

Rural migrants represent about 44 percent of the overall annual 

flow of temporary migrants, or about 143,000 individuals 

annually in 2002. Of the 5 million households in small 

Mexican communities, 25 percent are linked to the 

international migration phenomena, and 10 percent receive 

remittances from a family member living in a neighboring 

country. The average income for rural households receiving 

remittances in 2000 was $3,250 pesos per month (US$313). 

The average income for rural households not receiving 

remittances was $1,662 pesos/month (US$160). 

Only about 11 percent of Mexico’s 196.5 million hectares (485 

million acres) are arable. Only about 4 million hectares (10 

million acres) are irrigated. The rural labor force is large in 

relation to the gross domestic product (GDP) of the primary 

sector. Average productivity per worker nationally is about 2.5 

times greater than in this sector.

Slow economic growth in recent years has hampered creation of 

the necessary productive jobs to efficiently absorb the additional 

labor force. The risks of continued high unemployment and 

under-employment include social problems, such as poverty 

and loss of human capital. The economy is not improving 

adequately to generate the necessary productive jobs to reverse 

the trends. The challenge is to find export markets for 

productive work of the under- and unemployed work force. 

Canada 

Canada’s livestock sector is shifting to larger producers and 

processors, particularly in pork and beef. There has also been a 

rapid expansion in livestock slaughter and processing capacity 

in the province of Manitoba because of a 45,000-hogs-per-week 

(on a single-shift basis) processing facility in Brandon, built in 

1999. The integrated nature of the North American market 

provides opportunities for movement of live animals at a variety 

of stages in the supply chain. For example, the pig crop in 

Manitoba has increased to 8.9 million in 2004 from 2.6 million 

head in 1992 (Agriculture and Agri-Food Canada, 2004). A 

large part of Manitoba’s increased production has resulted in 

increased exports of live animals, both as weaners or feeders to 

the United States. 

In 2004, the Canadian hog industry processed 26 million pigs, 

or 1.9 million tons, with about 30 percent raised in Quebec. 

About 950,000 tons of pork was exported in 2004 and 90,000 

tons imported. The degree of industry concentration is growing 

in the pork and beef sectors, with a trend toward fewer and 

larger production operations. 

Meat processing represents 28 percent of all food industry 

employment (Table 4). Meat processors report annual wages 

and salaries of about $2 billion, 28 percent of the payroll of the 

total food industry. Meat processing reported the second 

highest number of establishments, largely because of the many 

small specialty producers of smoked meats and sausages. 

Meat products were Canada’s single largest food industry export 

prior to the May 20, 2003, discovery of bovine spongiform 

encephalopathy (BSE). Canadians exported C$5.2 billion of 

meat in 2002, representing 31 percent of the value of all 

processed food product exports, and an increase of 135 percent, 

or C$3 billion, since 1995. Exports are now rebounding to 

levels near those prior to May 2003 in large part due to 

resumed beef trade with the United States and Mexico. 

Adding value to raw agricultural commodities through food 

processing is often promoted as part of agricultural policy and 

as rural development policy to create jobs in rural areas. 

However, in 1996, fewer people were working in Canada’s 

food-processing sector than in 1981, though more food was 

processed. Importantly for rural development policy, rural 

metro-adjacent regions gained a higher share of food-processing 

Community and Labor 117 

employment. Rural metro-adjacent regions appear to be 

relatively competitive in keeping a food-processing work force. 

In Canada, as in the United States, a significant portion of farm 

families’ income comes from off-farm sources. Even farms with 

sales of $100,000 or more earn about half of their family 

income off the farm. Small and mid-size farms do not have the 

scale of operations necessary for farm income to contribute 

significantly to total family income. For these families, off-farm 

income is even more important in determining standard of 

living, accounting for almost all of family income. 

During the past 30 years, immigrants have accounted for a 

progressively smaller share of a farm population that is itself in 

decline. Today, in Canadian agriculture, an immigrant is likely 

to be a farm operator from the Netherlands, Britain, 

Switzerland or Germany. The number of immigrants moving to 

rural Canadian communities is still small in absolute terms. 

Across Canada, rural regions attracted about 12,000 immigrants 

in each of 2001 and 2002, down from a peak of 23,000 in 

1993. Rural regions that attracted the most immigrants did so 

through cultural connections and employment availability. One 

example is Brooks, a community in Newell County, Alberta. 

Lakeside Packers, which has a plant near Brooks, has about $1 

billion in annual sales and accounts for about 30 percent of 

Canada’s beef processing. The Brooks plant is unionized. 

Because of the demand for labor in the plant, Brooks is now 

home to about 1,200 Sudanese, who comprise 10 percent of 

the community’s population. This case highlights that the labor 

challenges for Canada as its meat industry expands, like the 

United States, will more likely be encountered at the processor 

level, than at the producer level. 

In some meatpacking plants, landed immigrants (e.g., 

permanent residents) and immigrants who are now citizens 

constitute a significant portion of the work force. A small 

number of these immigrants are Mexican. Canada has a 

Seasonal Agricultural Worker Program (SAWP) that allows 

producers to bring in farm workers from foreign countries to 

work temporarily in Canada. These seasonal workers typically 

come from Caribbean countries, although Mexican workers are 

also employed. These workers live in housing supplied by the 

employer, live without their families and are not in the process 

of becoming permanent residents of Canada. However, SAWP 

has limited applicability to the meatpacking industry, which 

employs workers year-round. 

In Western Canada, high wages paid in the oil and gas and 

construction sectors are drawing labor away from agriculture 

and the meatpacking sectors. Canadian meat product 

manufacturing workers earn an average of C$30,000 

(Industry Canada). 

In some cases, employees of large hog operations also own their 

own farms; income generated from this off-farm source helps

118 

keep their small farms operational. Persons employed in large 

hog barns are not necessarily low-skilled and low paid, nor are 

companies necessarily looking for the cheapest workers. In most 

cases, hired workers are local rural residents looking for local 

opportunities. Employees working in large hog barns bear no 

financial risk, are guaranteed three weeks of holidays and earn a 

competitive wage. 

Community Impacts 

Economic Impacts 

In communities across North America, the economic benefits 

generated by the animal agriculture sector go beyond producers. 

There are economic benefits for the communities and regions 

where business is conducted, as well as the earned income 

opportunities created through jobs and entrepreneurial activity. 

Some studies suggest animal agriculture may have positive 

impacts on community well-being, particularly if part of a 

mixed crop-livestock system. By contrast, commodity crop 

agriculture may have negative impacts on community wellbeing 

because of less labor due to mechanization (Flora et al., 

2005; Monchuk et al., 2005). 

Economic multipliers reflect the effect of changes in one sector 

across a whole regional economy. Each dollar generated by 

economic activity in animal agriculture generates additional 

economic activity—directly through job creation, indirectly 

through the procurement of goods and services, and from 

increases in income and spending resulting from more active 

markets. While the magnitude of these effects differs by sector, 

animal agriculture has higher economic multipliers than such 

sectors as mining, textiles, forestry or crop agriculture 

(Goldsmith and Idris, 2001). Estimates of the multipliers for 

agriculture range from 1.5 to 3.0. In the United States, recent 

work shows livestock multipliers in the state of Illinois range 

from 1.59 for sheep farms to 1.90 for hog operations 

(Goldsmith and Idris, 2001). Multiplier effects differ by 

commodity because each commodity generates a different 

amount of input, output and processing activity. Impact 

multipliers can be even larger for meat and dairy processing, 

ranging from 1.44 for poultry processing to 2.13 for butter 

production (Goldsmith and Kim, 2002). 

Jobs, taxes and other economic benefits of animal agriculture 

are realized beyond the local level. Commuting distances for 

employment are typically greater in rural communities, and the 

distance employees of rural enterprises travel to their work is 

often more than 60 miles. Improvements in transportation 

technology increase the distance inputs and outputs of the 

sector travel over their life cycle. With increased transportation 

of agricultural products at all stages of production, 

opportunities exist for specialization, resulting in efficiency 

gains and increased productivity. This may affect economic 


multipliers by reducing historical patterns of sourcing inputs 

locally. However, the value of locally sourced inputs and labor 

would not be expected to increase as local specialization 

increases because local firms cannot specialize in everything—a 

large share of total inputs would need to be sourced from 

outside the community. Current volatility in energy costs may 

make transportation costs more important to sourcing 

decisions. Global trade liberalization—including inputs and 

products of animal agriculture—also opens communities to 

outside competition, new market opportunities and greater 

access to inputs. 

Information and communication technology, including Internet 

access and computerized electronic infrastructure, are required 

to support modern production and marketing of animal 

agriculture products. Specialized support occupations in such 

areas as accounting, law, veterinary medicine, breeding, 

marketing, information technologies and electronics may 

develop clusters of expertise surrounding communities that 

engage in new higher technology meat and livestock businesses. 

These clusters of expertise create benefits for communities, 

including high-income employment and additional demand for 

information and communication technologies. 

Small niche and hobby units are the largest segment of farms 

and are currently the fastest growing segment of farms. 

Operators of these units earn part of their family income from 

agriculture. These farms service an increasing demand for 

locally grown and niche market food products, including locally 

and regionally sourced products, organic products and such 

specialties as kosher/halal, non-hormone treated and natural 

products (Banker and MacDonald, 2005). These value-added 

sub-sectors can build strong local community connections 

through local retailing and shared marketing efforts. Support 

for these local and regional niches can also be found in the 

restaurant sector, where food attributes enhance marketing to 

local food and hospitality establishments. While dependent on 

a large population of higher income shoppers, there are 

opportunities for regions to maximize these advantages through 

tourism marketing. This trend presents economic opportunity 

for many regions that may not be among the leaders in volumebased 

animal agriculture, but have the advantage of ready access 

to discerning consumers. 

Community/Social Impacts 

The siting of large animal production operations has the 

potential to generate considerable local controversy. Issues of 

contention are potential odor problems, water availability and 

use, manure disposal, and the desired future of agriculture. For 

example, in the state of Illinois, the siting and expansion of 

large livestock production units is governed by the Illinois 

Livestock Management Facilities Act (LMFA). LMFA was 

created in 1996 to formalize and make uniform the process of 

livestock siting and expansion. The process includes a formal

informational hearing, at which community stakeholders can 

learn details of a proposed facility, ask questions, and enter into 

the record evidence supporting or opposing the plan. Transcripts 

of the 25 hearings that have taken place since 1996 provide 

information about community concerns, though reflecting only 

the opinions of those who participated. 

A review of the transcripts revealed more than 40 concerns 

about large livestock operations (Pereira and Goldsmith, 2005). 

The most common positive aspects cited were economic 

development and jobs. The most commonly expressed negative 

issues were: 

• the perceived location of recipients of economic benefits, 

• the perceived poor quality of the jobs, 

• the perceived demographic makeup of the work force, 

• the potential impact on property values, 

• the potential deterioration of infrastructure, specifically roads 

and bridges, and 

• the potential for traffic congestion and road 

cleanliness problems. 

An important aspect of community quality of life is social 

capital—the character of a community reflected in mutual 

trust, reciprocity, and shared norms and identity. In general, 

communities with greater social capital provide greater quality 

of life (Flora, 1998; Flora et al., 1997). Citizens of a U.S. 

community where large swine production units are prominent 

expressed negative assessments of trust, neighborliness, 

networks of acquaintanceship, democratic values and 

community involvement (Kleiner et al., 2000). In an area of the 

state of North Carolina that has experienced a tremendous 

growth in the hog industry, many citizens perceive that the 

interests of large pork producers dominate those of local 

residents at all levels of government (McMillan and Schulman, 

2001; Thu and Durrenberger, 1994). 

Labor Impacts 

An active component of the sociology literature is skeptical of 

the benefits of large farm and processing units for rural 

communities. Their work originates in a classic study of 

California farm workers conducted by Walter Goldschmidt. A 

central conclusion of his 1940s study in the Central Valley of 

California was that absentee-owned, large-scale agriculture in 

which much of the work was done by hired workers resulted in 

community inequities and more limited civic life. Studies 

during the last 60 years suggest that agricultural communities 

with primarily small farms tend to generate less economic and 

social inequality than communities where the predominant 

operations are larger farms with a higher ratio of farm workers 

to farm operators (Goldschmidt, 1978; originally published in 

1946; Lobao, 1990; MacCannell, 1998). 


From this literature questions arise as to the quality of civic life 

in 21st century rural communities where dependency and 

hired labor are more prevalent. If the Goldschmidt hypothesis 

predicting a deterioration of civic life as economies become 

more integrated and coordinated is correct, research would 

help reveal what policies would be effective at improving rural 

civic life. 

A March 1998 report by the U.S. Government Accountability 

Office (GAO) examined changes in communities in Nebraska 

and Iowa that had large meatpacking work forces (GAO, 

1998). The report concluded that the hiring of immigrant 

workers by meatpackers had demographic and economic 

impacts. Immigrants stabilized populations in many counties 

that were losing residents. Meatpacking counties typically had 

faster increases in per-capita incomes and retail sales than the 

state as a whole. There were sharp increases in the number of 

poor and limited-English proficient children in schools, and a 

very high turnover among workers—18 percent to 83 percent a 

year. Teachers complained that it was very difficult for children 

to receive the full benefits of education. The housing market for 

inexpensive rental housing tightened with the influx of workers. 

In the United States, meatpacking has long attracted workers 

with relatively little education and sometimes few English 

language skills. Wages in meatpacking facilities located in urban 

areas have to be comparable with those in other manufacturing 

industries. Meat-processing facilities in rural areas generally do 

not have to compete with other manufacturers for workers, and 

instead often recruit workers from out of the area, especially to 

staff second or night shifts. Refugee resettlement in the 1970s 

and 1980s brought Asians to rural areas of the Midwest. The 

1986 Immigration Reform and Control Act facilitated the 

geographic and occupational mobility of Hispanics, some of 

whom saw the movement from seasonal farm to year-round 

meat processing as a step up the U.S. job ladder. The job boom 

of the late 1980s offered local workers other job opportunities 

just as many plants were adding second work shifts. 

Some plants offer cash bonuses of several hundred dollars to 

current workers or others who refer persons who are hired and 

stay on the job at least 60 or 90 days. As a result, networks have 

evolved to bring U.S.-born, as well as Mexican-born, Hispanic 

workers from areas with high unemployment rates to 

meatpacking plants in the Midwest and Southeast, where 

unemployment rates were very low in the late 1990s. 

Once a core group of Asians or Hispanics is employed in a 

plant, network hiring occurs, with current workers bringing 

friends and relatives to fill vacant jobs (Griffith, 1988). 

Network hiring shifts most recruitment costs to currently 

employed workers, who bring only those who can do the work, 

and often act as their mentors. Critics of the meatpacking 

industry allege that network hiring gives managers more control

120 

of workers, by allegedly threatening to fire an entire crew if 

there are problems with one worker. Some plants provide 

company housing, so losing a job also means losing housing. 

Because there are few local workers in rural areas, the arrival of 

immigrant workers does not usually directly displace local 

workers. The availability of immigrant workers sometimes 

increases productivity and helps both local and immigrant 

workers. New plants in rural areas tend to have more laborsaving 

and worker-friendly technologies, such as a cleaner and 

safer work environment. If the availability of immigrant 

workers allows a second work shift, employers may invest in 

air- and electric-powered knives that make work easier for 

all workers, potentially reducing injuries and illnesses 

in meatpacking. 

Hispanics were 15 percent of the U.S. meat industry’s labor 

force in 1990, and 35 percent in 2000; non-Hispanic whites 

were 41 percent of the industry’s labor force in 2000. The 

arrival of Hispanic or Asian workers can quickly change the face 

of rural areas that have not experienced significant immigration 

in recent years. Most areas, especially those losing people and 

jobs, welcome new residents because they buy homes and shop 

at local markets. But there are also tensions that accompany 

demographic change. 

Positive impacts on communities from an influx of immigrant 

workers include: 

• most workers are married, 

• a higher proportion of Hispanic or Asian men work than 

from other population groups, 

• workers do unwanted jobs that are necessary in today’s society, 

• repopulation of rural areas, 

• a younger work force, and 

• a replacement for aging baby boomers. 

Potential negative issues with the changing labor force include: 

• increased demand for social services in the community, 

• more students with limited English proficiency, 

• greater demand for health care at local clinics and 

emergency rooms, 

• increased poverty among unauthorized migrants, 

• lack of health insurance placing a strain on limited health 

resources in rural areas, 

• a higher prevalence of infectious disease, diabetes and 

maternal health issues, and 

• low propensity to continue education. 

Many meatpackers recognize that they are hiring workers with 

few English language skills and little formal schooling. Some 

companies partner with local community colleges and high 

schools to offer workers classes in English, finance and other life 

skills. For example, one packer has an education assistance plan 


that reimburses 75 percent of the cost of tuition, books and fees 

(up to $3,500 a year) for coursework toward a degree that helps 

to meet the company’s business needs (AP Newswire, 2005). In 

Nebraska, a packer built a two-classroom school near its plant 

in 2002 so workers could attend high school classes before and 

after work shifts. The local school district provided a teacher 

and a teacher’s aide. 

Many communities welcome the diversity and economic 

development new immigrant workers can contribute. The 

community of Marshalltown, Iowa, (population 29,000), has 

established a sister-city relationship with Villachuato, Mexico, 

(population 15,000). Half of the 1,900 employees at a meatprocessing 

plant in Marshalltown plant are from Villachuato. 

Proper immigration and worker documentation are challenges 

for all in agriculture who employ immigrant migrant workers. 

Influxes of immigrant or migrant workers can bring negative 

reactions. In January 2000, two organizations advocating less 

immigration, Population-Environment Balance and the 

Federation for American Immigration Reform, ran 

advertisements asserting that “quality of life is but a memory” 

in Storm Lake, Iowa, (population 8,800), where immigrants 

were recruited to work in pork-processing plants. Local 

residents disagreed, saying they preferred diversity to 

depopulation. Storm Lake’s school enrollment rose 17 percent 

in the 1990s, while 70 percent of Iowa’s schools were losing 

students (Rural Migration News, April 2001). Storm Lake’s two 

meat-processing plants employed almost 2,000 workers in the 

mid-1990s, attracting Asian refugees and Mexican migrants. 

Many schoolchildren do not speak English, prompting 

increased spending for English as a Second Language (ESL) 

programs and bilingual teachers. Meatpackers noted that their 

payroll supports the local economy and schools might close if 

the meat-processing plants closed. 

Impacts on Mexico 

Immigration to the United States and Canada also creates 

challenges for Mexico. Salaries of U.S. jobs are and are expected 

to continue to be at a level above those of Mexican jobs. 

Mexico is balancing public policies that provide the type of 

mobility and opportunities that its migrating population desire. 

However, public policies that make the migration process easier 

must also benefit those who decide to stay; such policies should 

also be compatible with the requirements and necessities of the 

country where the migrants chose to reside. 

The remittances sent to Mexico from Mexicans residing in the 

United States represent a large source of income for the families 

that receive them. According to some estimates, these 

remittances reduce the number of people in poverty by 1 

percent to 2 percent annually, approximately 1 million people. 

These remittances have become very critical, averaging as much 

44 percent of regional income in some locales.

An aspect that should not be overlooked is the migration of 

those possessing substantial human capital. The population of 

those with 12 years of school or more and under the age of 30 

years equaled 46 percent of the migratory sector in the period 

2000 to 2004, compared with 26 percent in the period 1990 to 

1994. This trend represents a loss of important Mexican human 

capital. The challenge is to provide the same possibilities of 

social and economic movement in Mexico that can compete 

with those offered elsewhere in North America. 

As a result of the higher levels of mortality, fertility and 

migration, the age structure of small communities consists of 

more individuals in the age groups younger than 15 years old 

and the elderly than in urban areas. This places more stress on 

those of the diminished working-age level. These small 

communities average 83 dependents per 100 working-aged 

individuals, while urban areas of more than 15,000 people 

average 56 dependents per 100 working-aged individuals. 

Unless local opportunities for employment are created, 

workers may continue to migrate to higher paying jobs to 

support families. 

A recent study demonstrated the importance of raising 

agricultural productivity to reduce rural emigration (Goldsmith 

et al., 2004). Like the case of Mexico, relatively low agricultural 

productivity lowers the opportunity costs for young people to 

leave. Urban areas, or in the case of Mexico the United States, 

are easily attractive because rural wages are low. One example of 

a Mexican policy designed to increase agricultural productivity 

is Programa de Certificación de Derechos Ejidales y Titulación de 

Solares (PROCEDE or the Cooperative Rights Certification 

Program and Qualification of Land), which enlarges farmers’ 

legal security and access to finance sources. Land owned by 

agricultural cooperatives can now be used as collateral for 

financial services such as credit, insurance or capital. The 

government has also established the Fondo de Tierras (Fund of 

Lands) and Joven Emprendedor Rural (Rural Enterprising Youth) 

to help support rural land-based businesses. 

Safety Impacts 

A number of health issues are associated with individuals who 

work in animal production and processing in the United States. 

Unfortunately, comprehensive nationally medical surveillance 

for agriculturally related injuries and illnesses does not exist 

(Kirkhorn and Schenker, 2002). But individual studies have 

identified a number of health issues. 

1. Injuries: Injuries from animals, tractors, falls and machinery 

are major causes of non-fatal injuries (McCurdy and Carroll, 

2000). Animals account for 20 percent of hospitalized injuries 

in Iowa (Rautiainen et al., 2002). Stock farm and feed yard 

workers had the highest rate of injuries in California workers’ 


compensation data (Villarejo, 1998, in Rautiainen and 

Reynolds, 2002). Likewise, slaughtering operations have higher 

levels of injury than many manufacturing plants. 

2. Respiratory illnesses: Livestock farmers, particularly swine 

producers, are considered to have high rates of lung disease 

resulting from exposure to organic dusts and manure generated 

gases (Rautiainen and Reynolds, 2002). Organic dust—which 

contains inflammatory endotoxins from bacteria, molds, animal 

dander, antibiotic residue, grain dust and feces—causes lung 

inflammation and is associated with chronic respiratory disease. 

Researchers have called for the establishment of threshold limit 

values (TLV) for dusts and endotoxins, and lowering the TLV 

for ammonia (Donham, 1995; Donham et al., 2000; Kirkhorn 

and Schenker, 2002). 

Mechanisms to decrease dust levels, such as sprinkling canola 

oil in swine rooms, can result in decreased respiratory problems 

(Senthilselvan et al., 1997; Zhang, 1997). Other mechanisms 

include adequate ventilation, using wet methods to clean 

facilities, automated feeding, and wearing adequate personal 

respiratory protection during high dust-producing activities 

(Kirkhorn and Schenker, 2002). 

3. Hearing loss: This is an occupational risk in farming. Noise 

levels above the U.S. Occupational Safety and Health 

Administration (OSHA) permissible exposure level have been 

measured in swine confinement buildings (Humann et al., 

2005). 

4. Ergonomic issues: Concerns include musculoskeletal 

disorders, especially chronic back pain and arthritis (Von Essen 

and McCurdy, 1998). The earliest mandatory ergonomic 

interventions occurred in animal slaughter houses, which have 

long been associated with such musculoskeletal disorders as 

carpal tunnel syndrome and tendonitis. 

Livestock production and meat processing are dangerous 

occupations, yet government regulations, industry standards 

and insurance industry oversight may make these jobs less 

threatening. One factor encouraging people to look for 

employment in the U.S. agricultural sector rather than stay in 

Mexico is the differences in the regulatory guidelines of the two 

countries. For example, in the United States, OSHA establishes 

the requirements and rights of employees and employers, as 

well as health and safety conditions that should exist in the 

workplace. The U.S. Department of Labor establishes rules for 

contracting and firing a person. In the United States, these legal 

guidelines give certain guarantees to the employees, guarantees 

that may make U.S. employment more attractive than Mexican 

employment. However, wage differentials are probably the 

dominant factor influencing migration decisions.

122 

Stakeholder and Policy Responses 

Economic Development Policies and Zoning 

An agricultural production/enterprise area is a zoning tool for 

regulatory/nuisance relief, or economic development. Security 

of investment in intensive animal operations can be enhanced 

by zoning only if those operations are already in regulatory 

compliance, are well-designed and are well-managed. Security 

of investment has not been uniformly realized with voluntary 

self-assessments or right-to-farm statutes, which have been 

voided by some courts. 

Establishing comprehensive zoning—covering economic 

activities in all sectors, not just agriculture—prepares 

communities to address many types of economic development 

issues. When included in comprehensive zoning, animal 

agriculture is not considered a special case, reducing potential 

for court challenges. 

There are a range of approaches to regulating livestock production 

sites. On one extreme, the Iowa legislature does not allow local 

governments to use zoning or public health ordinances to 

prevent the siting of Confined Animal Feeding Operations 

(CAFOs). The state of South Dakota has a statute that allows 

comprehensive county zoning, including agriculture. Brookings 

County, South Dakota, has a comprehensive zoning ordinance 

with five types of zones—agriculture, industrial, lakes/parks, 

natural resources and flood damage protection, plus an aquifer 

protection overlay. This ordinance and its process of public 

hearings are incentives for early discussions among community 

residents when new economic development is proposed. 

Under debate in the United States is whether comprehensive 

zoning should be a state or county function. Critics of county 

authority for comprehensive zoning cite instances where county 

commissioners, under pressure from anti-livestock groups, have 

imposed moratoriums on animal facility construction or 

expansion. These boards are often small (three to seven 

members) and the majority vote on animal agriculture can 

change with each election cycle, increasing the regulatory 

uncertainty in a county. Livestock and poultry interests prefer 

dealing with state legislatures, where the numbers of legislators 

and the statewide strength of livestock and poultry 

organizations may lessen the potential for what they consider to 

be arbitrary action. Producers operating in more than one 

county prefer uniform regulations. One option is for state 

legislatures to grant comprehensive zoning authority to 

counties, but with statewide criteria for the zones. County 

zoning boards could designate geographic areas to zone, but the 

criteria for those zones would be set at the state level. One 

national consideration is that burdensome regulatory processes 

may contribute to agribusiness decisions to locate production 

and processing facilities in other countries (see Environmental 

Chapter for more discussion on siting regulations). 


Communication is a crucial factor. In 1996, the Cass County 

(Iowa) Rural Development Action Committee designed a 

“Quality of Life/Economic Self Assessment” for animal 

production systems. It urged producers seeking to build or 

expand their operations to voluntarily ask, answer and share 

with community neighbors information ranging from 

expected odor emissions to truck traffic, numbers of jobs and 

real estate taxes to be paid. The program has been successful, 

and at least two other Iowa counties now have similar 

good-neighbor policies. 

Communities attract businesses by streamlining the regulatory, 

permitting, building codes and licensing processes. In exchange, 

firms must abide by specified best management practices 

(BMPs). Many times this involves coordinating the work 

of state agencies to improve the regulatory experience and 

designate BMPs or performance requirements for the firms. 

Agricultural streamlining may involve making the process of 

starting or expanding an operation specific, transparent and 

speedy. Illinois LMFA, discussed earlier, is such a program. 

Regional tax authorities might reduce property taxes in specific 

areas to spur economic development, offset changes in land use 

or provide compensation to homeowners for reductions in 

property values that might occur. A variety of tax-relief options 

are also used as incentives for economic development. 

Guest Workers and Immigrants 

Mexico and the United States are examining options to improve 

the legal movement of workers between the two countries. In 

February 2001, U.S. President George W. Bush and Mexican 

President Vicente Fox established a bi-national migration 

working group to create “an orderly framework for migration 

that ensures humane treatment [and] legal security, and 

dignifies labor conditions.” Topics for the working group 

included legalization, a guest-worker program, ending border 

violence and exempting Mexico from visa quotas. 

At the same time, Mexican and U.S. officials have also 

discussed improving conditions for unauthorized Mexicans in 

the United States. Several proposals to legalize these workers 

have been introduced in the U.S. Congress, but debate stopped 

after the September 11, 2001, terrorist attacks. In January 

2004, President Bush proposed Fair and Secure Immigration 

Reform (FSIR), which would permit unauthorized foreigners in 

the United States with jobs—estimated at 8 million of the 11 

million unauthorized foreigners in the United States—to 

become temporary legal residents. They would be free to travel 

in and out of the United States, to get Social Security numbers, 

to obtain a driver’s license, and to apply for immigrant visas. 

FSIR would match willing foreign workers with willing 

employers when U.S. workers could not be found for jobs. For 

unauthorized migrants already employed illegally in the United

States, FSIR would consider the no-available-U.S.-worker 

requirement fulfilled. FSIR offers no clear path from guest 

worker to immigrant. Surveys show that many unauthorized 

Mexican workers would sign up for six-year visas allowing 

them to enter and leave the United States legally, but there is 

considerable doubt about how many would leave at the 

end of six years. 

Proposed by the Democrats, the Safe, Orderly, Legal Visas and 

Enforcement Act (SOLVE) is similar to 1987-88 legalization 

allowing unauthorized foreigners to become legal immigrants if 

they have been in the United States at least five years, worked at 

least two years, and can pass English, security and medical 

checks. Unauthorized foreigners in the United States for less 

than five years could apply for five-year transitional status, 

allowing them to work, eventually apply for regular immigrant 

status or leave. The Secure America and Orderly Immigration 

Act, introduced in May 2005 by Sen. John McCain (R-Ariz.) 

and Sen. Edward Kennedy (D-Mass.), combines elements of 

the FSIR and SOLVE proposals. 

The three proposals would apply to workers in all sectors of the 

economy. By contrast, the Agricultural Job Opportunity, 

Benefits and Security Act (AgJOBS) would apply only to 

agriculture, ensuring that farm workers were legally authorized 

to work in the United States. AgJOBS is supported by worker 

advocates, who hope legal status will encourage farm workers to 

join unions and press for wage increases. Farm employers 

anticipate easier access to legal foreign workers under provisions 

of the act. 

As of January 2005, there is no consistent U.S. workers’ 

compensation program for agricultural workers. This places a 

burden on local communities if animal agricultural workers are 

injured or are ill. Workers’ compensation varies from providing 

the same coverage that applies to other industries (14 

states/jurisdictions), establishing limitations not applicable to 

covered employees (28 states/jurisdictions), and, in 11 other 

states/jurisdictions, permitting agricultural employers to offer 

voluntary coverage (USDA, 2005). Lack of a sufficient workers’ 

compensation program in agriculture makes it difficult to assess 

the impact of injuries on the agricultural work force or develop 

measures to prevent injuries and illnesses. 

Canadian employers hiring temporary seasonal workers under 

SAWP must meet a list of criteria including: demonstrate 

efforts made to hire Canadian agricultural workers and 

unemployed Canadians; offer foreign workers the same wages 

paid to Canadian agricultural workers doing the same work; 

pay airfare to and from Canada and immigration visa cost 

recovery fee (a portion of these costs can be recovered through 

payroll deductions); provide free, seasonal housing to approved 

foreign workers; ensure that the worker is covered by workers’ 

compensation and has private or provincial health insurance 

during his/her stay in Canada; and sign an employer-employee 


contract outlining wages, duties and conditions. The Canadian 

employer may also be required to pay a non-recoverable fee to 

two nonprofit corporations that assist with the processing of 

foreign workers in Ontario, Quebec, Nova Scotia, Prince 

Edward Island and New Brunswick. 

Health Insurance 

Rural health care facilities and organizations are being 

strained by the inability of employers to offer health insurance, 

employees’ lack of access to state programs, or employees’ 

refusal to purchase available insurance. Many migrant and 

immigrant workers send money back to their families rather 

than buying health insurance, even if it is offered by employers. 

According to the human resources director at a meat processor 

in Wisconsin, 80 percent of their employees are Hispanic, and 

only 20 percent purchase the health insurance provided by 

the employer. 

Obtaining health insurance to cover immigrant agricultural 

employees, particularly undocumented workers, is problematic 

even for motivated employers. A large dairy farm in Wisconsin 

with a stable Hispanic work force has been unable to find 

health insurance for these employees. The employer has been 

told the employees do not qualify for the state health insurance 

product or private health insurance, as they cannot provide a 

valid driver’s license or a valid visa. Allowing agricultural 

employees access to valid means of identification would increase 

access to health insurance coverage. 

In the United States, comprehensive enforcement of 

immigration laws and a strict no-guest worker policy would 

likely drive up wages in meat processing, spur automation and 

perhaps encourage the shift of some facilities to Mexico or 

other locales in Latin America. Some rural communities could 

see plants close, contributing to declining asset values, a loss of 

jobs and high costs for farmers to transport livestock to 

processors. The other extreme would be to acknowledge that 

meat processors have become dependent on out-of-area workers 

and institute policies that provide workers in a manner that 

minimizes community integration costs. 

Summary 

Livestock and poultry production and processing industries are 

important employers for many rural areas in North America. 

These industries have undergone an economic restructuring to 

fewer and large firms that are more geographically concentrated 

(see Economics and Environmental Chapters). The 

restructuring has created more jobs and economic activity in 

communities where the firms expand, but less in communities 

with declining animal inventories or that have had plants close. 

At the same time, industry growth has created challenges for 

some communities that are seeing more livestock facilities built,

124 

often with heated debate regarding site selection and neighbor 

issues. In the United States, states differ on how best to regulate 

livestock facilities, including how much authority resides with 

the county. Many processing plant communities have grown 

rapidly as plants expanded or added a second shift. Immigrants 

make up a disproportionately higher share of employees in cattle-, 

hog- and poultry-processing plants. While immigrants come 

from Africa, Asia and Eastern Europe, most in North America 

come from Mexico and other Latin American countries. 

Meatpacking and meat processing are more dangerous and 

lower paying than other manufacturing jobs. In the United 

States, many of the workers are undocumented immigrant 

workers and may not have health insurance. A large number of 

immigrant workers in a community often stretches thin such 

local resources as health care and schools’ English as a Second 

Language programs. Mexican workers send a significant 

amount of money back to their families in Mexico. In 2000, 

the average income for rural Mexican households receiving 

remittances from family members working in the United States 

was $3,250 pesos per month, compared with $1,662 

pesos/month for those not receiving money from the United 

States. Some estimate that remittances reduce the number of 

people in poverty in Mexico by 1 percent to 2 percent annually. 

This cash flow from North to South provides income in rural 

areas. These small rural communities average 83 dependents per 

100 working-aged individuals. 

Future Options and Implications 

Economic Development 

Rural communities in North America compete in a global 

environment. Provinces, states, regions and communities 

seeking investment need to assess how their location will 

potentially make animal agriculture operations globally 

competitive. This is challenging in a world of varied wage and 

regulatory conditions. 

Industry has a responsibility to the community in which it does 

business. Industry needs to be proactive and a responsible 

citizen, providing leadership in creating positive experiences for 

communities. If they are unable to create these positive 

community experiences, there will be an increasing inability to 

site or expand. 

This phenomenon, whereby communities oppose the siting or 

expansion of livestock and meat facilities, is no longer unique 

to the United States. The opposition is structural and can be 

found in many communities around the globe. It reflects larger 

concerns about globalization, new technologies, large farms and 

multinational food companies. At its heart, communities are 

seeing a loss of local control and rapid change. In response, they 

seek a reactionary course of action that preserves traditional 

norms and institutions. 


The implication for the industry is that it needs to enhance the 

numerous economic benefits it brings with a set of positive 

social impacts as well. Some communities will always oppose 

the industry, but many would welcome a partner to help them 

socially and economically develop. 

Potential strategies are: 

• Government bodies should consider comprehensive industrial 

policies, so animal agriculture is not singled out. Effective 

development and community impact policies are needed. 

• Streamline regulatory processes. 

• Develop industry strategies to create positive 

community impacts. 

• Focus on rural economic development, not just animal 

agriculture development. 

• Make use of provincial, state or regional economic 

development resources. 

Zoning ordinances and the processes they prescribe are one tool 

to enhance open communication between stakeholders in the 

animal agriculture industry. City zoning provides legal and 

procedural precedent for well-designed and managed 

comprehensive rural zoning. Statewide uniformity in 

regulations is another consideration. A variation of that is to 

have criteria for zones set at the state level, and the geographic 

designation of the zones set at the county level. A multi-county 

board to establish uniform zone criteria for a region is another 

option. Consistency of zoning rules within a state could increase 

certainty and reduce risk for producers, processors and citizens. 

Another community issue is competing demands on water 

resources. Use of fiduciary bonds is one option when 

uncertainty exists about how high-demand usage will affect 

water availability and quality (Goldsmith et al., 2003). 

Fiduciary bonds are used when there is uncertainty about the 

nature of a public risk posed by a private firm, i.e., the impact 

of a livestock farm on a community’s water supply. An 

independent body sets the bonding level, a sum of money that 

would be needed to rectify any future problems if they should 

arise. The private firm normally sets aside only a small portion 

of the amount, with the rest, if needed, managed through 

insurance markets. The bonding level can change over time as 

the level of uncertainty and risk changes. 

There is potential for animal agriculture to use many of the 

tools used in industrial sector economic development: 

• property tax reductions for neighbors; 

• service and infrastructure improvements for the community; 

• fiduciary bonds to dissipate risk borne by communities, such 

as demand on water resources; 

• appropriately scaled infrastructure; 

• enhance water supply, road and bridge load rates, traffic flow, 

highway access; or

• compensate parties harmed by animal agriculture operations, 

as is done with other industries. 

Small or mid-size operations may use some form of network to 

provide services and enhance profit potential. Focusing on 

specialized or niche markets may enhance profitability for some 

small operators. Off-farm employment—in agriculture or nonagricultural 

enterprises—will continue to be crucial for many 

small and mid-size operations. Business tools that might 

increase economic development include: 

• A community facilitator can help coordinate among 

producers. Example: Initiative for the Development of 

Entrepreneurs in Agriculture, 

http://web.extension.uiuc.edu/iidea. 

• MarketMaker is a Web-based tool for rural suppliers and 

entrepreneurs to interact with firms in other locales, 

http://www.marketmaker.uiuc.edu. 

• Direct state intervention in a niche market ventures could 

combine alternative business strategies with public policies. 

For example, South Dakota and Iowa are developing 

branded beef products that target consumer demand for 

information on how animals are raised, treatment of animals 

and traceability of products. 

Labor 

Reducing labor turnover has benefits for employers, as well as 

the communities in which they operate. Options for 

strengthening human capital include using the workplace as a 

location for classes to strengthen English language, finance and 

banking skills, or to provide health services. Partnerships with 

local high schools or community colleges are one alternative 

for implementation. 

The United States might consider a program similar to Canada’s 

SAWP to address seasonal worker shortages, though seasonality 

of work is not as common in the livestock sector. 

Governments need to consider maintaining immigrant worker 

programs that ensure an adequate labor supply to the animal 

agriculture industry. Helping immigrant workers adjust to a 

new location and culture and helping communities adjust to 

new immigrant populations can be advantageous to employers. 

Fostering integration may help immigrants be more productive 

workers, help immigrants advance in their workplace, help 

workers’ families and reduce opposition to newcomers. These 

actions can provide a more stable work force and community. 

Animal agriculture often is perceived to offer jobs rather than 

careers, prompting suggestions that foreigners should be 

brought to the United States as guest workers rather than legal 

and illegal immigrants. Guest worker programs can admit 

temporary workers for temporary jobs, as do the U.S. H-2A 


and H-2B programs or Canada’s SAWP. U.S. legislative 

proposals have not advanced, and enactment of a guest worker 

program may not occur in 2006. 

There are increasing needs for the animal agriculture industry 

to engage in private and public-private partnership programs to 

enhance labor and community relationships. Potential benefits 

include enhancing human capital, improving the well-being of 

employees, reducing turnover and fostering good relations with 

the community at large, which has become a strategic 

stakeholder. As the firm grows, it places demands on the 

community. Proactive labor policies can be an important signal 

of a firm’s commitment to its community. 

Agriculture can pose threats to worker health and safety. 

Government agencies are challenged by the dimensions of 

regulation enforcement regarding worker safety and 

immigration. Areas for potential improvement include 

engineering, training and education, health service, surveillance, 

and safety, and understanding culture differences. Particularly in 

animal production facilities, improvements can be made in the 

surveillance of non-fatal injuries and illnesses, controls to 

decrease organic dusts and manure-generated gases, 

improvements in the functionality and comfort of personal 

respiratory protective devices, and strategies to provide 

affordable workers’ compensation programs for agricultural 

employers. Further research in these areas is needed (Kirkhorn 

and Schenker, 2002; Rautiainen and Reynolds, 2002). This 

could result in reduced worker injuries and diseases, lowering 

industry and government health care costs. 


Historically, government has been involved in economic 

development and regional planning in urban areas. What do 

these programs and policies look like when applied to rural 

communities and animal agriculture? What are the economic 

development, infrastructure and government service needs of 

today’s less agrarian and more industrial rural economies? 

Animal production and processing create employment 

and economic activity in rural communities. How does the 

structure of the industry impact employment and the 

multiplier effect? More specifically, what are the economic 

activities associated with animal production and processing for 

comparable supply chains, and what are the wealth distribution 

effects? The results of such a study might be development of a 

tactical road map for communities to partner with industry to 

achieve mutually beneficial outcomes. More research is needed 

to document how the quality of rural civic life has changed in 

communities where modern livestock businesses operate. 

What are the experiences with various models for community 

conflict resolution initiatives?

126 

A continuing debate is whether federal, state or local 

governments can best regulate livestock and poultry operations. 

What are the consequences of alternative regulatory structures 

or zoning models for rural communities? What is the cost to 

the industry and county or district that imposes and enforces 

the policy? What policy tools and regulations can be used to 

improve the competitiveness of the business environment for 

animal agriculture? 

Finally, immigration goals and policy are important to all three 

North American countries. Currently, the U.S. and Canadian 

packing industries rely on immigrant labor for a significant 

References 


AAFC. (1988-1996). “Profile of the Canadian Dairy Processing Industry.” SIC, 1041(49). 

share of the work force. Mexican individuals and communities 

benefit from the remittances flowing from the United States to 

Mexico. But there is concern about the continued migration of 

workers, particularly better educated ones, to the United States. 

Is a NAFTA labor-migration summit needed to examine 

potential new policy tools? What is the impact of emigration 

and associated remittances on Mexico? What are the specific 

needs of the migrant work force in terms of better 

understanding their behaviors and investment in the 

community? What are the labor market needs for animal 

agriculture, and how will specific immigration reform 

legislation impact the industry? 

Agriculture and Agri-Food Canada. (2004, May). “Overview of the Canadian Agriculture and Agri-Food System.” Strategic 

Research, Policy and Planning Team. 

AP Newswire. (2005, June 10). “Meatpacking industry providing education to workers.” 

Banker, D.E. and J.M. MacDonald. (2005, March). “Structural and Financial Characteristics of U.S. Farms: 2004 Family Farm 

Report.” Agriculture Information Bulletin No. AIB797. 

Bureau of Labor Statistics – U.S. Department of Labor. (2005, March). Survey of Occupational Injuries and Illnesses, 2003. 

Available at http://www.bls.gov/iif/oshwc/osh/os/ossm0014.pdf. 

Craypo, C. (1994). Meatpacking: Industry Restructuring and Union Decline. In P. Voos (Ed.), Contemporary Collection Bargaining 

in the Private Sector (pp. 63-96). Industrial Relation Research Association. 

DeLind, L. (1995). “The state, hog hotels, and the ‘right to farm’: A curious relationship.” Agriculture and Human Values 12, 34-44. 

DeLind, L. (1998). Parma, a story of hog hotels and local resistance. In K. Thu & E.P. Durrenberger (Eds.), Pigs, profits, and rural 

communities (pp. 23-38). New York: State University of New York Press. 

Donham, K.J. (1995). “Health hazards of pork producers in livestock confinement buildings.” In McDuffie, H.H., J.A. Dosman, 

K.M. Semchuk, S.A. Olenchock, and A. Senthilselvan, eds. Agricultural Health and Safety: Workplace, Environments, 

Sustainability. Boca Raton, FL:CRC Lewis. 

Donham, K.J., D. Cumro, S.J. Reynolds, and J.A. Merchant. (2000). “Dose-response relationships between occupational aerosol 

exposures and cross-shift declines of lung function in poultry workers.” Journal Occupational and Environmental Medicine. 

42(3):260-69. 

Flora, C.B. and J.L. Flora. (1987, Winter/Spring). “Agricultural Technologies, Farm Structure, and Rural Communities: Livestock 

Counties in the Great Plains.” High Plains Anthropologist, 7, 6-11. 

Flora, C.B. and J.L. Flora. (1988). Public Policy, Farm Size, and Community Well-Being in Farming Dependent Counties of the 

Plains. In L.E. Swanson (Ed.), Agricultural and Community Change in the U.S.: The Congressional Research Reports (pp. 76-129). 

Boulder: Westview Press.


Flora, C.B., C. Mayda, J. Hernandez, and M. Lawrence. (1999). Bringing Home the Bacon. A Report to the Kerr Center, North 

Central Regional Center for Rural Development. Available at http://www.kerrcenter.com/publications/hog_report1.pdf. 

Flora, C.B., S. Carpenter, C. Hinrichs, M. Kroma, M. Lawrence, and K. Pigg. (1999, September). “Generic Environmental 

Impact Statement on Animal Agriculture: A Summary of the Literature Related to Social/Community (A).” Prepared for the 

Minnesota Environmental Quality Board. Available at http://www.eqb.state.mn.us/geis/LS_Social_Summary.pdf. 

Flora, J.L., J. Sharp, C. Flora, and B. Newlon. (1997, Fall). “Entrepreneurial Social Infrastructure and Locally-Initiated Economic 

Development.” Sociological Quarterly, 38(4), 623-645. 

Flora, J.L. (1998, December). “Social Capital and Communities of Place.” Rural Sociology, 63(4), 481-506. 

Flora, J.L., C.J. Hodne, W. Goudy, D. Osterberg, J. Kliebenstein, K.M. Thu, and S.P. Márquez. (2002, February). Social and 

Community Impacts. In Iowa State University and the University of Iowa Study Group, Iowa Concentrated Animal Feeding 

Operations Air Quality Study: Final Report (pp. 147-163). Presented to the Iowa Department of Natural Resources. Available at 

http://www.public-health.uiowa.edu/ehsrc/CAFOstudy.htm. 

Flora, J.L., Q. (Lily) Chen, S. Bastian, and R. Hartmann. (2005, October). “CAFOs, Feedlots, and Packing Plants: Measuring 

Their Impact on Four Types of Capital in Iowa’s Counties.” Draft prepared for Iowa Policy Project, Iowa State University 

Sociology Department. 

GAO. 1998. Community Development: Changes in Nebraska’s and Iowa’s Counties With Large Meatpacking Work Forces 

GAO/RCED-98-62, February 27. Available at http://www.gao.gov/new.items/rc98062.pdf. 

Goldschmidt, W. (1978). “Agribusiness and the Rural Community.” In W. Goldschmidt, As you Sow: Three Studies in the Social 

Consequences of Agribusiness (pp. 279-451). Montclair, NJ: Allenheld, Osmun and Co. 

Goldsmith, P.D., and H. Idris. (2001, November). “The Economic Impact of Illinois’ Livestock Industry.” Special Report # 94, 

College of Agricultural, Consumer, and Environmental Sciences, University of Illinois at Urbana-Champaign. 

Goldsmith, P.D., A. Salvador, D. Knipe, and E. Kendall. (2002). “Structural Change or Logical Incrementalism? Turbulence in the 

Global Meat System.” Journal of Chain and Network Science, 2(2), 101-115. 

Goldsmith, P.D. and J. Kim. (2002, July). “The Economic Impact of Illinois’ Livestock Industry: Supply Chain Linkages.” Special 

Report # 95, College of Agricultural, Consumer, and Environmental Sciences, University of Illinois at Urbana-Champaign. 

Goldsmith, P.D., C. Pomar, Z. Tao, and J. Rivest. (2003). “Social Welfare and the Selection of the Optimum Hog Slaughter 

Weight.” The Canadian Journal of Agricultural Economics, 51, 259-279. 

Goldsmith, P. D., K. Gunjal, and B. Ndarishikanye. (2004). “Rural-Urban Migration and Agricultural Productivity: The Case of 

Senegal.” Agricultural Economics, 31, 33-45. 

Griffith, D. (1988). “The Impact of the 1986 IRCA on the U.S. Poultry Industry. A Comparative Analysis.” Mimeo. September. 

Hassan, Z., D. Herath, and M. Trant. (2004). “Statistics Canada, Industry profile (Canada’s food processing industry).” Statistics 

Canada, Catalogue No.: 15-515-XWE. 

Heffernan, W., M. Hendrickson, and R. Gronski. (1999, February). “Consolidation in the Food and Agriculture System.” Report 

to the National Farmers Union. Available at http://www.foodcircles.missouri.edu/whstudy.pdf. 

Hendrickson, M., W.D. Heffernan, P.H. Howard, and J.B. Heffernan. (2001, January). “Consolidation in Food Retailing and 

Dairy: Implications for Farmers and Consumers in a Global Food System.” Report to the National Farmers Union. Available at 

http://www.foodcircles.missouri.edu/whstudy2.pdf. 

Hendrickson, M. and W.D. Heffernan. (2005, January). “Concentration of Agricultural Markets.” Department of Rural Sociology, 

University of Missouri-Columbia. Available at http://www.foodcircles.missouri.edu/CRJanuary05.pdf.

128 


Human Resources and Skills Development Canada Web site. http://www.hrsdc.gc.ca/en/epb/lmd/fw/seasagri.shtml. 

Humann M.J., K.J. Donham, M.L. Jones, C. Achutan, and B.J. Smith. (2005) Occupational noise exposure assessment in intensive 

swine farrowing systems: dosimetry, octave band, and specific task analysis.” J Agromedicinee 10(1):23-37. 

Illinois Livestock Management Facilities Act (LMFA). (n.d.). Retrieved 2005 from www.agr.state.il.us/Environment/LMFA/. 

Industry Canada. Available at http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis3116wage.html. 

Keith, B. (2003). “More than just farming: employment in agriculture and agri-food in rural and urban Canada.” Rural and Small 

Town Canada Analysis Bulletin 4(8). Available at http://www.statcan.ca/english/freepub/21-006-XIE/free.htm. 

Keystone Conference on Agricultural Health and Safety. (2004). Personal communication, Keystone, CO. 

Kirkhorn, S.R., and M.B. Schenker. Current health effects of agricultural work: respiratory disease, cancer, reproductive effects, 

musculoskeletal injuries, and pesticide-related illnesses. 2002. Journal Agricultural Safety and Health. 8(2):199-214. 

Kleiner A.M., J.S. Rikoon, and M. Seipel. (2000). “Pigs, participation, and the democratic process: The impacts of proximity to 

large-scale swine operations on elements of social capital in Northern Missouri communities.” Paper presented at the Annual 

Meeting of the Rural Sociological Society, Washington, DC. 

Lobao, L.M. (1990). Locality and Inequality: Farm and Industry Structure and Socioeconomic Conditions. Albany, NY: State 

University of New York Press. 

Lohr, L. (n.d.). “Perceptions of Rural Air Quality: What Will the Neighbors Think?” Journal of Agribusiness 14(1), 109-128. 

MacCannell, D. (1998). “Industrial Agriculture and Rural Community Degradation.” In Louis E. Swanson (Ed.), Agricultural and 

Community Change in the U.S.: The Congressional Research Reports. Boulder, CO: Westview Press. 

McCurdy, S.A. and D.J. Carroll. (2000). “Agricultural injury.” American Journal of Industrial Medicine. 38(4):463-80. 

McMillan, M. and M.D. Schulman. (2001). Hogs and citizens: A report from the North Carolina front. In W. Falk, M.D. 

Schulman, A. Tickamyer (Eds.), Communities of Work Athens. OH: University Press. 

Monchuk, D. C., J. A. Miranowski, D. J. Hayes, and B. A. Babcock. (2005, April). “An Analysis of Regional Economic Growth in 

the U.S. Midwest,” Working Paper 05-WP 392, Center for Agricultural and Rural Development, Iowa State University, Ames, IA. 

Retrieved October 2, 2005, from http://www.econ.iastate.edu/research/webpapers/paper_12294.pdf. 

Passel, Jeffrey S. (2005). Estimates of the Size and Characteristics of the Undocumented Population. 

http://pewhispanic.org/files/reports/44.pdf. 

Passel, Jeffrey S. 2006. Size and Characteristics of the Unauthorized Migrant Population in the U.S.: p. 12. 

http://pewhispanic.org/reports/report.php?ReportID=61. 

Pereira, F. and P.D. Goldsmith. (2005, May). “From Negative Externalities to Industrial Illegitimacy, an Empirical Analysis of the 

Illinois Livestock Industry.” Presented at the annual meeting of the Eastern Academy of Management Association, Springfield, MA. 

Pew Hispanic Center. “Unauthorized migrants: numbers and characteristics.” Retrieved June 14, 2005 at 

http://pewhispanic.org/files/reports/46.pdf. 

Rautiainen, R.H. and S.J. Reynolds (2002). “Agricultural Safety and Health Conference: Using past and present to map future actions.” 

Reynolds S.J., K.J. Donham, P. Whitten, J.A. Merchant, L.F. Burmeister, and W.J. Popendorf. (1996). “Longitudinal evaluation of 

dose-response relationships for environmental exposures and pulmonary function in swine production workers.” 

Am J Ind Med, 29, 33-40. 

Rural Migration News. April 2001. Vol 7. No 2. Poultry, Meatpacking Labor. 

Available at http://migration.ucdavis.edu/rmn/more.php?id=498_0_2_0.


Senthilselvan A., Y. Zhang, J.A. Dosman, E.M. Barber, L.E. Holfedl, S.P. Kirychuk, Y. Cormier, T.S. Hurst, and C.S. Rhode. 

(1997). “Positive human health effects of dust suppression with canola oil in swine barns.” American Journal of Respiratory 

Critical Care Medicine, 156, 410-417. 

State of South Dakota. (n.d.). Available at http://www.state.sd.us. 

Statistics Canada. (2004, June). “Immigrants in Rural Canada: an update.” The Daily. 

Stull, D.D., M.J. Broadway, and D. Griffith. (1995). Any Way You Cut It: Meat Processing and Small-Town America. Lawrence: 

University Press of Kansas. 

Thu, K.M. and E.P. Durrenberger. (1994). “Industrial agricultural development: an anthropological review of Iowa’s swine 

industry.” Twentieth Annual National Association of Rural Mental Health Conference. 

Tyrchniewicz, E. and H. Gregory. (2003, June). “Manitoba’s Pork Value Chain.” Agriculture and Agri-Food Canada. 

U.S. Department of Agriculture - Economic Research Service (USDA-ERS). (accessed 2005, August).“Coverage of Agricultural 

Workers.” USDA-ERS. Retrieved at http://www.dol.gov/esa/regs/statutes/owcp/stwclaw/tables-pdf/table3.pdf. 

U.S. Statistical Abstract. (2004-05). Table 982. http://www.census.gov/prod/2004pubs/04statab/domtrade.pdf. 

Van Kleek, R.J. and N.R. Bulley. (1985). “An assessment of separation distance as a tool for reducing farmer/neighbor conflict.” 

Proceedings of the Fifth International Symposium on Agricultural Wastes. American Society of Agricultural Engineers, 

St. Joseph, MI. 

Vogelzang, P.F.J., J.W.J. van der Gulden, H. Folgering, J.J. Kolb, D. Heederik, M.J.M. Tielen, and C.P. van Schayck. (1998). 

“Endotoxin exposure as a major determinant of lung function decline in pig farmers.” American Journal of Respiratory Critical 

Care Medicine 157,15-18. 

Von Essen, S.G. and S.A. McCurdy. (1998). “Health and safety risks in production agriculture.” Western Journal Medicine. 

169(4):214-20. 

Wing S. and S. Wolf. (2000). “Intensive livestock operations, health, and quality of life among eastern North Carolina residents.” 

Environmental Health Perspectives, 108, 233-238. 

Zhang, Y. (1997). “Sprinkling oil to reduce dust, gases, and odor in swine barns.” Agricultural Engineering Digest. 42:1-8. 

Zjeda J.E. and T.S. Hurst. (1994). “Respiratory health status in swine producers relates to endotoxin exposure in the presence of 

low dust levels.” Journal Occupational Medicine. 36(91):49-56.

130 


Table 1. U.S. Food Manufacturing Employment (2002-2012) 

U.S. Food Manufacturing Employment, 2002 

Source: U.S. DOL, www.bls.gov/oco/cg/print/cgs011.htm 

Table 2. Average Earnings($), Production Workers, Food Manufacturing (2002) 

Source: U.S. DOL, www.bls.gov/oco/cg/print/cgs011.htm 

Employment Percent Change 

(1000’s) 2002-2012(%) 

Total 1,525 5 

Animal slaughtering and processing 520 15 

Bakeries and tortilla manufacturing 295 3 

Fruit and vegetable preserving and specialty food manufacturing 182 -1 

Other food manufacturing 152 2 

Dairy product manufacturing 137 -9 

Sugar and confectionery product manufacturing 83 -3 

Grain and oilseed milling 62 -1 

Animal food manufacturing 52 1 

Seafood product preparation and packaging 44 -8 

Average Earnings($), Production Workers, Food Manufacturing, 2002 

Weekly Hourly 

U.S. private industry 506 14.95 

Food manufacturing 497 12.54 

Grain and oilseed milling 802 18.14 

Beverages 684 17.38 

Dairy products 639 15.83 

Sugar and confectionery products 597 15.08 

Fruit and vegetable preserving and specialty 514 12.83 

Other food products 503 12.77 

Bakeries and tortilla manufacturing 453 12.30 

Animal slaughtering and processing 442 10.91 

Seafood product preparation and packaging 334 9.70


Table 3. Unauthorized Workers in Agriculture/Animal Production (1,000s) 

Occupation Total Numbers Unauthorized Unauthorized Migrant Workers (%) 

All Workers 148,615 7,255 4.9% 

Ag Workers 839 247 29.4% 

Source: Passel, 2006 

Butchers 322 87 27.0% 

Food Preparation 758 128 16.9% 

Cooks 2,218 436 19.7% 

Table 4. Employment in Canadian Food Processing 

Number of establishments and work force, by food processing industry group, Canada, 2001 

Food processing industries 1 Establishments Production 

workers 

Administration, office and other 

non-manufacturing employees 

Total work 

force 

Animal food manufacturing 562 10,252 2,954 13,206 

Grain and oilseed milling 177 6,525 1,633 8,158 

Sugar and confectionery 

product manufacturing 

Fruit and vegetable preserving 

and specialty food manufacturing 

189 9,872 1,748 11.620 

372 20,849 3,737 24,586 

Dairy product manufacturing 434 15,024 5,190 20,214 

Meat product manufacturing 769 58,680 9,229 67,909 

Seafood product preparation 

and packaging 

700 31,743 3,096 34,839 

Bakeries and tortilla manufacturing 1,779 30,972 5,108 36,080 

Other food manufacturing 563 16,449 4,683 21,132 

All food manufacturing 5,545 200,366 37,378 237,744 

All manufacturing 54,031 1,602,958 373,147 1,976,105 

1. North American Industry Classification System, four-digit groups 3111 to 3119. 

Source: Statistics Canada, Annual Survey of Manufacturers, CANSIM, Table 301-0003. Statistics Canada, Industry profile (Canada’s food processing industry) 

Industry profile (Canada’s food processing industry), Statistics Canada, Catalogue no.: 15-515-XWE Hassan, Zuhair; Herath, Deepananda; Trant, Michael.

132

Chapter 8 


Animal agriculture in industrialized countries has undergone 

a revolution since World War II. Productivity has increased 

enormously due to the use of animal confinement systems, 

especially for poultry and hogs. There has also been intensive 

genetic selection for desired production traits, development of 

scientific feed formulation and use of productivity-enhancing 

pharmaceuticals. These changes have been accompanied by a 

shift to larger production units to capture efficiencies through 

economies of scale. Critics contend that more intensive 

production methods reduce the welfare or well-being of farm 

animals. However, confinement reduces rates of mortality due 

to predators and the weather, and can reduce the risk of disease. 

There are differing opinions on the extent to which 

confinement affects disease risks. Some argue that keeping large 

numbers of animals in close proximity increases the probability 

of infection and the spread of disease. Control of disease risk 

has been a factor underlying the prophylactic use of antibiotics 

in poultry, though most, if not all, major U.S. poultry 

companies have eliminated that practice. On the other hand, 

non-confined production systems may expose animals to higher 

risks of infection from undomesticated animals. The potential 

for infection of unconfined poultry by wild birds has been 

identified as an issue in the recent spread of H5N1 avian 

influenza, which potentially may be transmitted to humans. 

Specialization and economic integration associated with the 

growth of international trade have also produced changes in the 

way animals are handled in North America. Animals may be 

transported long distances to slaughter facilities designed to 

take advantage of economies of scale. 

Consumers differ in values and beliefs, and, consequently, their 

expectations for food products. These expectations change with 

rising incomes (see Consumer Demand Chapter). All 

consumers expect animal products to be safe, but not all expect 

them to be produced in a certain way. Most expect that the 

products they consume do not come from systems that depend 

on cruelty to animals, but the definition of what constitutes 

acceptable treatment varies widely, as witnessed by differences 

in views over such products as foie gras, produced from goose 

or duck liver, and veal. 

In recent years, the issue of farm animal welfare has become 

increasingly prominent in many countries, particularly in 

Northern Europe. Concerns are expressed about the conditions 

in which farm animals are kept and some management 

practices, particularly in systems where animals are kept in 

confinement for most of their lives. Concerns are also expressed 

about the way that animals are transported and slaughtered. 

These concerns have resulted in increased legislative activity, 

legal challenges, and, in some cases, buyer restrictions on 

production and marketing practices. 

The results of surveys of public opinion on animal welfare can 

be influenced by what questions are asked, and to whom the 

questions are posed. However, a review of several surveys 

conducted in the United States concludes that the majority of 

the public believes farm animals are currently raised without 

cruel treatment (Herzog et al., 2001). The overwhelming 

majority of those questioned also support the view that pain 

and suffering should be reduced as much as possible, even 

though animals are eventually going to be slaughtered. The 

public seems to have a higher concern for the welfare of animals 

today than it did 50 or even 25 years ago. 

The use of an ethical basis for animal welfare standards requires 

some generally accepted principles on how animals should be 

treated and used by humans. A major issue is whether animals 

have rights in the same way that humans are thought to have 

certain basic rights. Those who adhere to the concept of animal 

rights believe animals and people are equal and deserve the 

same rights. With that viewpoint, one would necessarily reject 

the use of animals for food. 

The majority of the people in North America do not share that 

belief, but it is clear they believe farm animals have the right to 

be treated humanely; 79 percent of those questioned in a major 

survey on this issue expressed that opinion (Herzog et al., 2001). 

To judge how current production practices affect the well-being 

of farm animals, it is necessary to define what constitutes 

animal welfare. Few would disagree with the view that if an 

animal is visibly sick or injured, its welfare must be poor. Not 

all would agree that just because animals are growing, their 

health is good, they have high productive efficiency, or they 

133

134 

necessarily have a high level of welfare. Some argue that wellbeing 

requires that an animal be free from fear and pain, and 

that it be in good psychological or mental health, i.e., it is 

comfortable and coping well with its environment. In that case, 

the absence of animal welfare problems might be indicated by 

“minimum mortality, low morbidity, little or no risk of injury, 

good body condition (sustaining adequate production and 

reproduction), the ability to perform species-specific activities 

(including social interactions, exploration and play), and the 

absence of abnormal behaviors and physiological signs of stress, 

including suppression of immune responses” (Halverson, 2001). 

This chapter focuses on animal welfare issues for cattle, hogs, 

poultry and sheep. It includes a description of current 

regulations affecting farm animal welfare, drivers and key 

issues of changes in practices and policy, and alternatives for 

protecting animal welfare. The chapter concludes with the 

economic impacts of welfare practices and the conclusions and 

options for the future. 

Current Rules and Regulations 

Affecting Farm Animal Welfare 

Practices that influence the welfare of farm animals are affected 

by legislation governing the treatment of animals in North 

America, by codes of practice implemented by the animal 

products industry and by international standards. 

Legislation 

Much of the legislative emphasis in North America has been on 

the welfare of pets or companion animals, and animals used for 

research. The legislative situation for farm animal welfare is 

summarized in Box 1. Regulations in the three North American 

countries address humane slaughter and transport, but lack a 

comprehensive animal welfare law applicable to farm animals. 

Mexico has several federal regulations dealing with the 

transportation and slaughter of animals. Roughly 40 percent of 

Mexico’s 32 states have laws relating to the treatment of 

animals. Enforcement of existing legislation is rare. At the 

federal level, a comprehensive bill covering maintenance, care 

and housing, use, transportation and slaughter was introduced 

in 2004, but has not yet been passed. The preamble to the bill 

indicates that an important factor underlying the proposed 

legislation is international developments in animal welfare 

standards, particularly in the European Union (EU), that may 

create barriers to Mexico’s exports of livestock products. If 

passed, the legislation could provide the basis for development 

of a certification system for producers meeting identified animal 

welfare standards. 

Canada has a federal law prohibiting cruelty to all animals and 

regulations dealing with the transportation and slaughter of 


animals for food. Each province has its own legislation dealing 

with animal welfare, which typically recognizes accepted 

humane practices. Specific industry guidelines for such practices 

have been developed for each type of animal. 

The United States has federal regulations dealing with the 

slaughter of livestock, but not poultry, and there are regulations 

on the transportation of animals. Every state has an anti-cruelty 

statute, but in most states the legislation is not targeted to farm 

animals or there is an exemption for accepted farming and 

ranching practices. 

There has been a marked increase in the number of bills 

relating to animal welfare introduced in the U.S. Congress, 

with an average of 50 to 60 such bills introduced annually in 

recent years (Rollin, 2004). There is also a lot of activity in this 

area at the state level, although relatively few bills have actually 

been passed. Recent state initiatives have included proposed 

prohibitions on the tail docking of cattle and on the use of 

stalls for sows and veal calves. In 2002, Florida voters approved 

an amendment to that state’s constitution that bans the 

confinement of a pregnant sow in a cage, crate or other 

enclosure, and prohibits tethering a pregnant sow so that she is 

prevented from turning around freely. 

Codes of Practice and Third-Party Auditing 

Recognition of public concerns about the welfare of farm 

animals has led to increased use of codes of practice by the 

animal products industry. In Canada, recommended codes of 

practice for all major species of farm animals have been 

established by industry groups since 1980. These have been 

developed in conjunction with researchers, federal and 

provincial representatives, and nongovernmental organizations 

(NGOs), such as the Canadian Federation of Humane Societies 

and the Canadian Veterinary Medical Association. There are 

currently 15 codes, as well as a series of fact sheets based on 

them. At the national level, the codes represent voluntary 

guidelines and include various minimum standards for 

producers and others. Two provinces reference the codes in 

provincial regulations. In court cases involving enforcement of 

federal or provincial statutes, the codes have on occasion been 

used as a basis for determining acceptable operating practices. 

In 2005, Canada established the National Farm Animal Care 

Council (NFACC), with broad participation by stakeholders 

from the animal products industry. Besides commodity groups 

and others who have participated through the years in the 

development of the codes of practice, NFACC also includes 

representatives of provincial farm animal care councils, 

and the processing, transportation, food/restaurant and 

retail/distribution sectors. NFACC provides a forum for 

coordination and collaboration among stakeholders regarding 

farm animal care issues, and will assume responsibility for 

ensuring the ongoing development of codes of practice.

In 2005, the Canadian Pork Council launched an Animal Care 

Assessment (ACA) program that sets out requirements for 

animal care for participating producers. The program is 

voluntary, but has become a part of the on-farm food safety 

program, Canadian Quality Assurance (CQA), which, while 

also voluntary, is a condition of sale to most Canadian packers. 

ACA is built on the various codes of practice for hogs, but adds 

auditable points that are examined by an external reviewer. 

There has been little activity in Mexico on the development of 

codes of practice for animal welfare. The label México Calidad 

Suprema (Mexico Supreme Quality) has been developed to 

identify food products that are designed to meet stringent 

health, safety and quality standards. There has also been some 

activity, primarily legislative, relating to organic products and 

biosecurity. Mexico faces particular challenges in the 

development and application of standards for animal 

agriculture, due to the continued importance of small-scale, 

often subsistence production in many rural areas, and the 

prevalence of unregulated slaughter, creating difficulties 

enforcing higher standards. Roughly 45 percent of the pork and 

20 percent of the chicken in Mexico is generated by small-scale 

or backyard producers. It is estimated that as much as 90 

percent of the total slaughter of farm animals in Mexico takes 

place in municipal and clandestine abattoirs, rather than 

federally inspected Tipo Inspección Federal (TIF) slaughterhouses. 

Several U.S. producer groups have taken the lead to introduce 

science-based programs to promote higher welfare standards. 

Two examples are the program created for swine by the 

National Pork Board and for laying hens by the United Egg 

Producers (UEP). Both programs are voluntary and rely on 

independent auditing. UEP engaged university, industry and 

government scientists to develop research-based guidelines for 

egg production. The swine program is described as an 

educational program for producers, while the laying hen 

program is promoted as a certification program designed to 

satisfy customers that a given set of welfare standards are being 

met (Bell et al., 2004). The Swine Welfare Assurance Program 

(SWAP TM ) of the National Pork Board has been field-tested to 

be independent of housing type, size and geographical location. 

The poultry program operates within current widely used 

intensive production systems. 

The activities of major food restaurant chains have been 

important in influencing the development of animal welfare 

standards (Box 3). As global enterprises, these firms are attuned 

to forces around the world that influence their business, 

particularly trends in consumer attitudes toward the products 

they sell. They are exposed to many pressures for change, 

including campaigns by animal activists. Companies have 

responded to growing concerns by publicizing their policies on 

animal welfare, setting up expert advisory bodies, and 

promoting adoption of higher standards by their suppliers of 

Animal Welfare 135 

animal products. The response of food companies to perceived 

threats to their brand image is a key driver of change in the 

development of standards used in the handling of farm animals 

in North America. The UEP guidelines were modified and 

embraced by McDonald’s Corporation, working with science 

advisers to create requirements for producers supplying eggs to 

their restaurants. 

These developments led to a major initiative on codes of 

practice in the United States spearheaded by the Food 

Marketing Institute (FMI), in collaboration with the National 

Council of Chain Restaurants (NCCR). The 2,300 members of 

FMI represent roughly three-quarters of all retail food store 

sales in the United States. FMI also has 200 international 

members in 60 countries. NCCR represents 40 of the leading 

chain-restaurant companies in the United States, collectively 

operating about 120,000 restaurants worldwide. Working with 

an expert advisory group and a number of producer/processor 

groups, a series of standards have been developed for best 

practices in production and processing. The focus is on the 

application of objective, measurable characteristics or indices 

that can be audited by a third party. Suppliers to the food 

retailing and restaurant industry can voluntarily request an 

audit of their facilities to assess the extent to which the criteria 

are being met. The audits are organized by an independent 

company. An audited firm can choose to make the resulting 

data available to retailers or restaurant chains. It is left to each 

of these to determine whether a particular supplier meets their 

requirements. It is notable that before developing its program, 

FMI sought input from focus groups of consumers, who gave 

clear indications that they expect animals to be treated 

humanely and believe that the role of supermarkets is to work 

with suppliers to ensure that this is being done (Brown, 2004). 

In addition to the production and marketing industries 

programs, several animal welfare advocacy groups have 

developed standards and certification schemes. The Animal 

Welfare Institute promotes voluntary standards for a range of 

farm animals. Certification programs have been developed by 

the American Humane Association and by a consortium of 

animal welfare organizations through Humane Farm Animal 

Care. Because of the nature of the standards applied, these 

programs are oriented to less intensive production systems. 

International Standards 

For the last five years, the World Organization for Animal 

Health (OIE) has been working to establish international 

standards for animal welfare. OIE has operated for more than 

80 years to minimize the international transmission of animal 

disease. Its mandate was expanded to the setting of 

international standards under the Sanitary and Phytosanitary 

Standards (SPS) agreement, part of the 1994 Uruguay Round 

Agreement that established the World Trade Organization 

(WTO). Even though animal welfare is not covered by the SPS

136 

agreement, OIE has indicated that its member countries 

“wished to have guidelines and recommendations to assist them 

in bilateral negotiations” (OIE, 2003). The United Nations’ 

Food and Agriculture Organization (FAO) has also issued a 

statement of principle on animal welfare in agriculture. 

Drivers of Change 

Two major drivers of change in the area of farm animal welfare 

in North America are consumer and public attitudes and 

developments affecting international trade in livestock products. 

Consumer and Public Attitudes 

The animal products industry operates in a competitive 

marketplace. How consumers view its products is crucial to the 

economic success of the industry. In making purchasing 

decisions, consumers primarily consider prices and product 

attributes (see Consumer Demand Chapter). As a consumer’s 

income increases, the range of attributes demanded expands 

beyond basic requirements of product safety to more 

demanding requirements, such as the use of particular methods 

of production. Animal welfare standards fall under the latter 

category. Wealthy consumers in developed economies are 

beginning to consider animal care expectations. Low-income 

consumers are focused first on safe, wholesome, nutritious and 

affordable foods. 

A number of surveys have been conducted in the United States 

to assess public attitudes toward farm animal welfare. In 

general, these indicate there is substantial public confidence in 

farmers and ranchers in the treatment of animals. However, the 

surveys also seem to indicate there are increasing concerns 

about certain production practices, such as housing systems for 

veal calves, and intensive confinement for pigs and poultry 

(Herzog et al., 2001; Swanson and Mench, n.d.). To some 

extent, public concerns in the three countries may be connected 

to other issues such as food safety, the decline of traditional 

family farms, the growth of large animal production units and 

resulting environmental implications, the impact of new 

technologies, and the effects of globalization. 

Animal welfare issues are championed by a range of interest 

groups with agendas that range from improving the conditions 

under which animals are raised for food to elimination of the 

use of animals for food or clothing. While there are questions 

about the extent to which some of the views of these pressure 

groups would be shared by the majority of the public, it seems 

clear that the groups have been effective in raising the profile of 

animal welfare issues and in some part stimulating a response 

by the food industry. It is difficult to separate the desire of firms 

and producer groups to be more socially responsible from 

simply reacting to activist groups. However, it is clear that 

pressure from such organizations was one component of 


multiple forces that prompted development of the egg and hog 

industry, McDonald’s and other food service companies, and 

FMI/NCCR animal welfare guidelines, certification and 

auditing programs (Brown, 2004). Protection of “brand 

capital,” the reputation and value of branded food products, is a 

key concern of food industry firms, and they respond to public 

pressures that may threaten the value of their brands. 

In Mexico, there is little data to support the view that animal 

welfare is a major public concern. Animal welfare issues are not 

yet a priority and, consequently, there is less pressure for 

change. To the extent that these issues enter public debate, the 

focus is on the welfare of companion animals and on 

bullfighting and cockfighting. Advocacy for higher welfare 

standards for farm animals has largely come from the academic 

and professional (e.g., veterinary) communities. However, there 

is growing awareness of the issues, and changes in public 

opinion may have to be taken into account in the future. As 

noted earlier, subsistence and backyard production methods are 

still important for animal agriculture in Mexico. Because the 

level of per-capita income is lower than in the rest of North 

America, price is a key factor in the purchasing decisions of the 

average consumer. These factors probably contribute to less 

public awareness of farm animal welfare issues and less pressure 

for change. 

Despite these differences among countries, public pressure to 

address animal welfare issues in North America is likely to 

intensify, and it is likely to result in demands for change in 

some existing production systems (Rollin, 2004). 

International Developments 

The EU’s first rules on farm animals, adopted in 1986, 

concerned protection of laying hens. Rules on the protection of 

calves and pigs were introduced in 1991, and for the protection 

of all farm animals in 1998. The latter cover animals of all 

species kept for the production of food, wool, skin or fur, or for 

other farming purposes, including fish, reptiles and amphibians. 

The rules are based on the European Convention for the 

Protection of Animals Kept for Farming Purposes. The new 

rules will eventually result in the elimination of traditional cage 

systems for laying hens, and individual pens or stalls for calves 

and pigs. Currently, consideration is being given to adoption of 

tighter rules for the production of broilers, including a 

significant reduction in maximum stocking density. Other 

European countries, for example, Switzerland, have legislation 

that prohibits or controls a range of production practices for 

farm animals. 

As noted earlier, developments in major importing countries 

can be a factor in the development of animal welfare policies. 

Introduced in 1999, New Zealand’s animal welfare law seems 

designed to protect its position as a major exporter to European 

markets. It is interesting to note that existing industry-derived

voluntary codes of practice are being reviewed and modified for 

incorporation under the legislation. Australia, another major 

exporter of animal products, introduced a national animal 

welfare strategy in 2004 to address a range of concerns. The 

government has allocated A$6 million (roughly US$4.6 

million) for educational and other activities under this program. 

Key Issues for Change 

The animal products industry faces two major issues in the area 

of animal welfare: questions being raised about production and 

handling practices and how to respond to those questions. 

Practices Being Questioned 

Under question are the impacts of a range of practices on the 

well-being of farm animals. Halverson’s definition cited earlier 

provides a framework for considering these issues. These 

practices relate to four areas: production systems; facilities 

design, setup and maintenance; handling and transportation; 

and management. Many of the practices being questioned are 

associated with intensive production and the confinement of 

animals. Confinement can benefit animals. For example, death 

rates were high for poultry in the United States in the 1950s 

when animals were kept in small flocks outdoors; the causes 

were soil-borne diseases, extreme temperatures and predators 

(Fraser et al., 2001). Caged housing systems for layers were 

developed to allow better environmental control, including 

the amount of light necessary to stimulate higher levels of 

egg production. 

However, confinement raises welfare issues, particularly in terms 

of its impact on the ability of animals to express “natural 

behaviors.” The size of cages and whether these allow for nests 

or perches is a key issue in the debate about the welfare of 

laying hens. Much of the debate on the welfare of pigs in 

confined systems centers on the use of stalls that restrict the 

movement of sows during gestation or farrowing, and the lack 

of bedding material, such as straw. The use of stalls that limit 

the movement of dairy cows and calves raised for veal is also 

an issue. 

A second set of questions relates to certain production practices, 

such as the restriction of feed for laying hens to induce molting 

and a second or subsequent egg-laying cycle, and the restriction 

of feed and water for breeding broiler chickens to control 

weight. Using a diet deficient in iron to produce white veal also 

is an issue. Other practices being questioned include beak 

trimming and toe clipping to limit injuries to confined poultry; 

tail docking of cattle, pigs and sheep; dehorning cattle and 

sheep; branding cattle; castration methods for cattle, pigs and 

sheep; and early weaning of beef and dairy calves and pigs. 


A further set of issues relate to transportation, particularly the 

length of time animals are transported, the duration of rest 

periods, loading densities and the handling of non-ambulatory 

animals. Concerns are also expressed about animal slaughter, 

particularly the use of various methods for stunning animals 

and their handling in slaughter plants, and the methods to cull 

animals when controlling disease outbreaks. 

Finally, although disagreement exists on their scope and 

importance, there are a range of issues relating to livestock 

breeding, particularly the impact of genetic selection based on 

productivity on the reproductive efficiency, health and viability 

of farm animals. Issues sometimes cited are declining fertility 

rates for dairy cattle, increased rates of sow mortality and the 

inability of turkeys to breed naturally because of their size. 

Changes in Practices, Development of Standards 

The central question then becomes what exactly constitutes 

humane treatment. If we had a clear answer, we would be able 

to identify which current practices are acceptable and which are 

not. Unfortunately, a clear answer does not exist because it 

depends on specific beliefs and moral values that differ across 

individuals (Fraser and Weary, 2004). Nevertheless, there is 

increasing acceptance of the so-called five freedoms, as 

elaborated by the United Kingdom’s Farm Animal Welfare 

Council, as a statement of principles for the appropriate 

treatment of farm animals. These are: 

• Freedom from Hunger and Thirst—ready access to fresh 

water and a diet to maintain full health and vigor. 

• Freedom from Discomfort—provision of an appropriate 

environment, including shelter and a comfortable 

resting area. 

• Freedom from Pain, Injury or Disease—prevention or 

rapid diagnosis and treatment. 

• Freedom to Express Normal Behavior—provision of 

sufficient space, proper facilities and company of the 

animal’s own kind. 

• Freedom from Fear and Distress—ensuring conditions and 

treatment that avoid mental suffering. 

To determine how production systems and practices affect the 

welfare of farm animals, scientists have attempted to develop 

objective approaches to evaluating animal well-being. One 

study identifies three overlapping aspects of welfare (e.g., Fraser 

and Weary, 2004): 

• Biological functioning—the health and performance of 

animals under different production systems;

138 

• Affective states—pain, fear and distress displayed by 

animals under different systems; and 

• Natural living—the degree to which natural behavior of 

animals can be accommodated by a production system. 

Other scientists argue that the welfare of animals can be 

measured by observing how well an animal is coping with its 

environment (e.g., Broom, 1988) and that an environment is 

appropriate if it allows the animals to satisfy its needs (Broom, 

1997). Both views were represented in this working group. 

The critical issue when developing standards is what indicators 

of animal welfare are to be used and how are these indicators to 

be measured and interpreted. While the scientific community 

has a predisposition to look for “objective” measures that are 

segregated from ethical and moral arguments, analysis of animal 

welfare presents some unique problems because outcomes are 

heavily influenced by one’s starting point. That decision will be 

based, at least in part, on prior beliefs about what is likely to 

be important. The five freedoms articulated above are an 

example of prior beliefs that can serve as a basis for 

measurable standards. 

Using the Fraser and Weary approach (Figure 1), each of the 

overlapping categories requires the identification and use of 

observable or measurable indicators to judge how an animal is 

coping with its environment. Science-based standards that are 

being developed reflect mixtures of the three aspects identified 

in Figure 1. This is illustrated by the various standards 

developed for laying hens (Fraser, 2004). The “basic” standard 

of a cage size of 450 square cm (69.75 square inches) with good 

access to food and water—which applies to that promoted by 

UEP and FMI/NCCR in the United States—is based on 

research on the minimum space allowance necessary to ensure a 

high level of basic biological functioning. The “enhanced” 

standard approved by the EU—requiring 750 square cm 

(116.25 square inches) of space, plus a nestbox, perch and 

litter—is based on research that supports a high level of 

biological functioning, plus the accommodation of certain 

elements of natural behavior that score well on affective state 

criteria. The “alternative” standards that relate to free range or 

organic systems, promoted by some animal welfare groups, 

require the same amenities as the enhanced standard plus access 

to open space and natural daylight, thus emphasizing natural 

living criteria. Each of these standards claims to protect the 

welfare of laying hens, but each implies a different production 

environment. Consequently, the adoption of any particular 

standard will, of necessity, imply a combination of scientific, 

economic and ethical criteria. 

Public opinion will exert a major influence on the future 

development of standards. It has been a major factor in the 

development of animal welfare legislation in Europe, and in 

pushing that legislation toward standards that are not based 


simply on biological functioning. It is likely that similar 

pressures—already apparent in many recently proposed state 

legislative initiatives in the United States—will continue to 

develop in North America. A central issue is whether the 

pressure for higher standards will result in legislation, or if the 

industry itself can respond effectively to public concerns by 

developing and applying higher standards on a voluntary or 

collective basis. 

Legislation versus Collective Action 

Many businesspeople have a natural aversion to legislation 

mandating changes in business practices. The legislative process 

can be cumbersome and inefficient, particularly in complex 

areas where practices are subject to change, and especially if 

laws closely circumscribe what practices can be used. Public 

attitudes and perceptions about animal welfare are changing, 

and the science of animal welfare continues to evolve. 

Consequently, it is difficult to develop and apply detailed legal 

codes for production practices for farm animals. The U.S. 

Animal Welfare Act does not apply to farm animals, and neither 

do the majority of state anti-cruelty statutes. There may be a 

case for addressing these omissions, at least through extending 

basic principles of humane treatment to farm animals. The risk 

of doing this is that it would open a flood of litigation about 

what constitutes humane treatment in animal husbandry. As 

indicated by the experience in Mexico, the mere existence of 

legislation is not sufficient to guarantee that standards of 

treatment will increase. That depends on the adoption of 

appropriate practices at the level of individual farmers and 

ranchers, and the handlers and processors of farm animals. 

An alternative approach is for the industry itself to develop 

voluntary standards. Science-based guidelines can evolve as 

more is learned. For example, the original UEP guidelines 

stated that feed restriction poses welfare problems, but research 

was needed to develop alternatives. The research was done, and 

the UEP certified program now bans feed restriction to induce 

a molt. Alternatively, individual farms or companies may choose 

to target niche market consumers willing to pay for higher 

animal welfare practices and seek to develop a brand around 

these issues (see Economics Chapter). Industries targeting the 

mass market or export to developing countries may still choose 

to adopt industry standards rather than leaving a void to be 

filled by regulations. The model that has been adopted so far— 

the involvement of animal welfare experts in the development 

of standards and the use of independent audits leading to 

certification—has the potential to address public concerns 

if people in the industry fully accept the process. The 

challenge, of course, is to get 100 percent compliance with 

voluntary programs. 

One of the advantages of legislation is that the judiciary as an 

independent arbiter imposes discipline by punishing those who

eak the rules; discipline is far more difficult to impose in a 

collective approach. For a voluntary, collective approach to be 

effective, some elements of the food industry must be willing 

and able to impose sanctions in the event standards are not 

met. There will also be costs for audits and enforcement. The 

potential for enforcement exists in the FMI/NCCR program if 

food retailers and restaurant chains refuse to do business with 

non-conforming suppliers. McDonald’s has been a leader in this 

approach. Food processors and integrators could play a similar 

role in helping to ensure that agreed standards are met at the 

producer level. However, producers are the ones that will 

implement the animal welfare practices, make necessary 

investments and cover, at least initially, any added costs. They 

must also be involved in developing the standards adopted. 

Economic Impacts 

Unless animal production practices actually result in lower 

productivity and efficiency in the animal industry or pose a 

threat to human health, low animal welfare standards do not 

impose an economic cost on society. In fact, society as a whole 

may gain economically if the prices of animal products are 

lower due to current production practices. 

It is sometimes argued that animal welfare is a public good, i.e., 

all members of society benefit from a system that treats animals 

in certain ways, or, alternatively, that certain production systems 

impose external costs on society that are not reflected in the 

price of animal products. In both cases, there will be a market 

failure—the wrong quantity of a desired attribute is supplied, in 

this case welfare. The public as a whole may suffer “psychic 

costs” in the sense that the well-being of members of society is 

reduced by the knowledge that certain practices are used in the 

search for lower cost food, but there is little evidence of true 

market failure (failure to account for economic costs) associated 

with animal welfare (Carlsson et al., 2003). Consequently, if a 

choice is made to impose higher welfare standards in farming, it 

must be based on criteria other than economics. 

Production Costs and Consumer Response 

More research is needed to understand the relationship between 

increasing animal welfare standards and production costs. In 

some cases, higher welfare standards are likely to increase 

production costs for animal products. Changes in confinement 

operations, particularly increased space requirements, may 

create additional capital costs through the modification of 

existing facilities or construction of new or larger facilities. 

Extensive production systems, such as free-range eggs, require 

more land. Operating costs may increase due to greater use of 

labor in caring for animals, higher energy costs involved in 

running larger facilities, and higher feed costs if feeding 

efficiency declines because of greater energy use by unconfined 

animals. If production systems require fewer animals producing 


less meat, milk or eggs in a given period, there will be less 

output per dollar of total costs. In this case, there will be less 

total production unless there are more production units built 

raising concerns about air quality, site selection and neighbor 

conflict, and, particularly for outdoor facilities, water quality 

related to manure runoff issues, as discussed in the 

Environmental Issues Chapter. Higher standards may also 

increase the costs of transporting and processing animals. 

Multidisciplinary approaches are necessary in balancing various 

trade-offs. Focusing only on natural behaviors and ignoring 

mortality (which is two times higher in non-cage systems) and 

disease issues are examples. Recent concerns about the spread of 

H5N1 avian influenza by migratory birds have led to bans on 

outdoor poultry production in some European countries. 

Balanced against this, there may be some cost savings as a result 

of the application of higher welfare standards. Morbidity and 

mortality may decline and expenditures on disease control and 

treatment may decrease if animal health improves, though this 

may not necessarily be the case. Increases in reproductive 

efficiency may lead to cost savings. For example, product 

quality may improve meat quality as a result of less stress in the 

handling and slaughter of animals. 

For example, total house feed efficiency favored housing birds 

at 48 square inches. However, providing space to the new 

standards of 69 square inches increases per-hen productivity 

and lowers mortality (Bell et al., 2004). This is an example 

where economics and welfare are not in opposition. 

The net effect on costs of changes in standards is difficult to 

determine. Some changes that reduce the stress imposed on 

animals in handling can be relatively inexpensive. 

Unfortunately, there have been relatively few studies of changes 

in production costs associated with changes in animal welfare 

standards. One analysis of increases in poultry production costs 

associated with higher welfare standards in the EU estimates 

unit cost increases ranging from 5 percent for modest changes 

in practices for broilers and layers to 50 percent for more 

radical changes, such as free-range egg production (Table 1, 

Moynagh, 2000). Another study indicates there is a major 

increase in labor costs in switching from the use of cages to 

free-range production—roughly five times as much labor is 

required per bird, egg production per bird falls by 15 percent 

and the amount of feed used increases by roughly 7 percent 

(Vocke, 1991). 

A recent study of the switch from traditional cage systems to 

alternative systems in the EU provides data that confirm some 

of these conclusions (Agra CEAS, 2004). The amount of feed 

used per kilogram of eggs is significantly higher in free-range 

and organic systems, compared to traditional cages (Table 2). 

These alternatives also require more labor. Birds kept under

140 

these systems have higher mortality rates. As a result of these 

factors, the total costs of production of eggs raised under 

alternative systems are higher than traditional systems (Figure 

2). Production costs per unit for barn eggs are roughly 12 

percent higher, and those for free-range eggs are roughly 20 

percent higher. This is less than the 50 percent estimate quoted 

earlier, but the increase in cost is still significant. Estimates 

given in the report for the United States suggest that the 

variable costs of producing a dozen free-range eggs are 12 

percent to 30 percent higher than under conventional 

production systems. The total cost difference is likely to be 

greater than this because of increased fixed costs, particularly 

for housing, under the free-range system. 

There is limited evidence on the cost impact of changes in 

standards and production practices in other areas. Recent 

research in Switzerland suggests the labor and building costs for 

loose housing systems for dairy cattle compare favorably with 

tie-stalls, and that group housing of gestating sows can be more 

profitable than individual housing in stalls (Wyss et al., 2004). 

However, it appears that relatively little economic analysis has 

been done of many alternative production systems, so no 

definitive conclusions can be drawn. 

Increases in production costs due to higher animal welfare 

standards will not be borne solely by producers in the form of 

lower profits. At least part of the costs will be passed through to 

consumers in the form of higher prices. It has been argued that 

because most of the historical cost reductions from 

technological progress have been passed through to poultry 

consumers in the United States in the form of lower prices, any 

cost increases resulting from higher welfare standards will have 

the reverse effect (Gardner, 2003). In the long run, this is likely 

to be true. But in the short term, consumers may adapt by 

switching to domestically produced or imported competing 

products, the prices of which are not affected by higher 

standards, thus placing more of the economic burden of 

adjustment on domestic producers. This would suggest that to 

minimize any potential distorting effect on consumption, 

higher welfare standards should be applied broadly across subsectors 

of the animal industry, rather than being limited to one 

or two sectors. The issues raised by non-conforming imports are 

significant and are discussed in more detail below. 

Long term, producers might be able to adapt to any higher 

costs imposed by standards through the adoption of new 

technology and production techniques. Changes in the 

structure of costs facing an industry typically stimulate the 

search for cost-reducing solutions. Farm mechanization, for 

example, was stimulated by the increasing cost of labor. Any 

increase in costs resulting from higher animal welfare standards 

is likely to generate similar responses in research and 

development. However, new technologies are unlikely to negate 

the adverse effects of higher standards on costs in the short run, 


and the potential implications for competitiveness. Increased 

costs due to higher standards will put North America at a 

competitive disadvantage to producers in regions that have 

lower standards. If higher standards are adopted globally, there 

will still be a smaller industry if consumers respond by buying 

less of the higher priced products. 

Producers will be able to absorb the higher costs associated with 

higher welfare standards if consumers actively demand 

conforming product. For this to happen, consumers must not 

only want to purchase the product and be willing and able to 

pay a price premium, but they also must be able to identify it, 

i.e., it must be differentiated from non-conforming products. 

This is the rationale behind the use of labeling to identify 

welfare-friendly products. Often figures are quoted showing 

consumers’ willingness to pay higher prices for products that 

meet certain standards. Willingness-to-pay estimates are 

typically derived by presenting selected groups of consumers 

with hypothetical choices among various products and asking 

them how much they would be willing to pay for products with 

various attributes. European experience shows that willingnessto-pay 

estimates typically overstate substantially the amount 

that consumers are actually prepared to pay for higher animal 

welfare standards when they are presented with real choices in 

the marketplace (Blandford et al., 2002). Recent research 

conducted at Cardiff University in the United Kingdom also 

indicates that European consumers are generally confused by 

wide variations in the labeling of animal-friendly products 

(Cardiff University, 2005). Such results suggest that the identity 

and nomenclature used to describe products need to be 

uniform and clearly understood in order for the market to 

reflect differences in products that are important in consumer 

choice. Consumer welfare may decline if a proliferation of 

information makes informed choice difficult. 

Because consumers may find it difficult and time consuming to 

ensure that each product they buy meets all their requirements, 

they may rely on food retailers or restaurants to do this for 

them. Some suppliers may limit themselves to niche products 

with particular characteristics to satisfy this need. Suppliers may 

indicate that they specialize in animal-friendly or free-range 

products in order to cater to the segment of the market that 

demands these characteristics. 

Individual producers that adopt higher welfare standards can 

determine whether this differentiated market will yield at least 

as much profit as an undifferentiated approach. If the higher 

standards and any resulting higher costs are imposed on all 

farms, there is no product differentiation. Producers seeking a 

premium for doing something different are disappointed 

because they are like all other firms. Consumers more 

concerned about affordable food than higher welfare standards 

are also hurt because prices will eventually rise to reflect the 

higher cost of production.

In the final analysis, economic forces—specifically whether 

consumers will be willing to pay any additional costs and 

domestic producers will still be able to make a profit—are likely 

to be the major determinants of the success of initiatives to raise 

animal welfare standards in North America. 

Welfare Standards and Competition 

If all producers are required to adhere to a particular standard, 

they will all be on an equal basis in terms of competitive 

position. As noted above, this does not mean their competitive 

position will be unaffected. Product prices will tend to rise as 

higher costs associated with the standards are passed through to 

the market. If competing products are less affected, consumers 

may switch their purchases to those products in response to a 

change in relative prices. There is considerable potential for 

substitution among animal products, so this could have an 

impact on the market share of individual products and their 

final prices. If products are exported, an increase in price will 

lead to a deterioration of competitive position with respect to 

suppliers in other countries who are not required to meet the 

standard, i.e., supply non-conforming products. 

Producers who operate under the higher standard and have 

difficulty differentiating their product face particular risks from 

non-conforming products. Domestic or foreign nonconforming 

producers operating at lower costs and able to offer 

lower product prices may increase their market share at the 

expense of conforming producers. Domestically, the problem 

can be solved by requiring that all producers meet the standard. 

As discussed above, it may be possible to achieve this through 

voluntary means, but, if not, a legislative approach will be 

required. Addressing the issue when non-conforming supplies 

originate from other countries is more complicated. 

The body of law that governs international trade is the General 

Agreement on Tariffs and Trade (GATT) and its associated 

agreements. The responsibility for these agreements rests with 

the World Trade Organization (WTO) in Geneva, Switzerland. 

The WTO promotes free and fair trade, in the sense that all its 

member countries are required to obey an agreed set of rules. 

Two key principles that underlie these rules are equality of 

treatment and non-discrimination. Countries should not be 

able to discriminate among trading partners nor among 

products that meet agreed international standards. 

There are no specific provisions in the GATT that deal with 

animal welfare, though two agreements are relevant to the issue. 

The Agreement on Technical Barriers to Trade (TBT) deals 

with the application of product standards in international trade. 

The Sanitary and Phytosanitary Standards (SPS) agreement 

deals with sanitary and phytosanitary measures that may 

directly or indirectly affect international trade. It is limited to 

the protection of animal health resulting from the entry, 


establishment or spread of pests, diseases or disease-causing 

organisms. The agreement recognizes international standards for 

animal health and zoonoses, the standards, guidelines and 

recommendations developed under the auspices of the OIE. 

Technical regulations cannot be applied that create unnecessary 

barriers to international trade. WTO members are required to 

ensure that in using technical regulations, imported products 

are accorded treatment no less favorable than that for “like” 

products of national origin. Legitimate justifications are the 

protection of human health or safety, animal or plant life or 

health, or the environment. Risk assessments must be 

scientifically based. The agreement requires countries to use 

international standards, where these exist, as the basis for 

developing their own standards. As currently drafted, the TBT 

does not cover animal welfare standards. However, in 2005, 

OIE agreed on adoption of four international standards for 

animal welfare. This could go some way to addressing concerns 

over unfair competition from non-conforming products, but it 

is unlikely that international standards will be able to satisfy the 

requirements of all countries. 

It seems likely that animal welfare standards will become an 

increasingly important issue in international trade, not only for 

governments but also for companies operating in global 

markets. A key issue for North American producers is whether 

to take a proactive or reactive approach to the development 

of standards. 

Conclusions and Options for the Future 

The majority of the general public in North America has little 

direct contact with agriculture. In Canada and the United 

States, less than 3 percent of the working population is 

employed on farms. Even in Mexico, where roughly 17 percent 

of the labor force is employed in agriculture, the share of the 

population on farms is declining steadily. As a result, most 

consumers of meat and animal products are increasingly 

removed from how animals are raised. Nevertheless, the wellbeing 

of farm animals is becoming an important issue for the 

animal industries in North America. 

A range of concerns are expressed about how animals are raised, 

transported, handled and slaughtered. Many of these concerns 

are associated with methods that have increased productivity in 

the animal production industries and reduced costs to 

consumers. Innovations, such as the use of confinement, have a 

mixed effect on animal well-being. Potential positive effects, 

such as reduced mortality from disease, predators and the 

effects of weather, must be balanced against potential negative 

effects. While animal welfare issues may create the potential for 

some producers to adopt less intensive systems, such as that 

reflected by free-range eggs, and to sell at a price premium in 

niche markets that covers the additional costs, this is unlikely to

142 

be an option for most North American producers. Good animal 

husbandry practices are not inconsistent with profitability, but 

the imposition of higher standards, for example, through 

legislation, could lead to increases in costs, affect the global 

competitive position of the animal products industry and raise 

food prices. The central issue that faces the industry is how to 

modify existing production and handling systems so they 

respond to consumer concerns about animal welfare in a costeffective 

way. 

The livestock industry is taking steps to address some of the 

concerns expressed about current practices. Much of the effort 

centers on the voluntary development of standards and the 

application of codes of practice. This is in contrast to the 

situation in Europe, where legislation is playing a major role. 

Pressures for additional legislation are likely to intensify in 

North America if the general public perceives that selfregulation 

is not addressing public concerns effectively. 

To strengthen the process of self-regulation, a number of 

options could be considered: 

1. Improve the flow of information to the general public. 

Many, but not all, stakeholders in the animal products industry 

have developed clear public positions on improving animal 

well-being. Policy statements and positions are not always 

visible to the general public. One option would be for all 

stakeholders to develop a statement of principles for the 

treatment of farm animals, and to make this statement 

prominent in publicity material and Web sites. Industry groups 

could also support the development of educational materials for 

the general public and for use in schools and colleges. This 

includes discussion of current practices and the reasons behind 

them. A potential consequence of this option would be to 

increase consumer choice and facilitate niche marketing. 

2. Develop and apply standards and codes of practice. 

The industry has made substantial progress in applying a 

science-based approach to the development of standards and 

codes of practice for improving the well-being of farm animals. 

A multi-disciplinary approach is needed to develop standards. 

Increasing integration in the North American livestock industry 

requires that standards need to be developed and applied for 

transportation and slaughter, in addition to production 

methods. One option would be for the industry to ensure that 

standards and codes are developed for all types of livestock. 

Industry groups could make the dissemination of information 

and support for training in the application of appropriate 

standards a high-priority activity. They could also lend support 

to the development and application of appropriate science- 


based standards within North America, and assist government 

representatives in efforts to develop appropriate international 

standards through OIE. Industry groups across North America 

could work together to provide a more coordinated and 

harmonized approach for the development of standards, 

certification programs and labeling, including helping the 

general public understand what various types of certification 

mean. This is necessary to avoid confusion over labeling, which 

appears to be a problem in Europe. Governments could also 

play a role in the harmonization of standards, as has recently 

been the case in the development of standards for organic 

produce in the United States. However, standardization could 

decrease consumer choice and reduce opportunities for niche 

marketing outside agreed certification options. 

3. Increase research and education. 

Research can play an important role in helping the industry 

improve the well-being of animals. One option would be to 

assign a higher priority to this issue in publicly funded research, 

for example, by increasing the proportion of total funding 

currently available for research in animal breeding and 

husbandry, farm facilities and processing methods. Particular 

emphasis could be placed on encouraging research into 

developments that are both practical and economically viable. A 

further step would be to ensure that all associate, baccalaureate, 

graduate and continuing education programs in animal science, 

veterinary medicine and related fields incorporate course 

material relating to the various aspects of animal welfare—not 

only biological but also ethical and socioeconomic perspectives. 

Finally, the dissemination of information and training activities 

on animal welfare could be made a priority in public extension 

programs, particularly for the training of farmers and ranchers, 

and employees in the animal products industry. A potential 

consequence of this option would be better understanding of 

the tradeoffs between increasing the welfare of animals and 

associated costs.

References 


Agra CEAS Consulting Ltd. (2004, December). Study on the socio-economic implications of the various systems to 

keep laying hens. Report prepared for the European Commission. 

Available at http://www.europa.eu.int/comm/food/animal/welfare/farm/socio_economic_study_en.pdf. 

Bell, D., B. Chase, A. Douglass, P. Hester, J. Mench, R. Newberry, M. Shea-Moore, L. Stanker, J. Swanson, and J. Armstrong. 

(2004). “UEP uses scientific approach in its establishment of welfare guidelines.” Feedstuffs, 76(11). 

Blandford, D., J.C. Bureau, L. Fulponi, and S. Henson (2002). Potential Implications of Animal Welfare Concerns and Public 

Policies in Industrialized Countries for International Trade. In B. Krissoff, M. Bohman, and J. Caswell (Eds.), Global Food Trade 

and Consumer Demand for Quality. New York: Kluwer Academic Press. 

Broom, D.M. (1988). “The scientific assessment of animal welfare.” Applied Animal Behaviour Science, 20, 4-19. 

Broom, D.M. Welfare evaluation. Applied Animal Behaviour Science, 1997; 54: 21-23. 

Brown, K.H. (2004). “A marketplace perspective.” Proceedings of the OIE Global Conference on Animal Welfare, pp. 79-86. Paris. 

Available at http://www.oie.int/eng/Welfare_2004/proceedings.pdf. 

Cardiff University. (2005). “Food labels ‘confuse’ consumers.” Press Release, June 14, 2005. Available at 

http://www.cardiff.ac.uk/newsevents/media/mediarel/mr0605/page46093.html. 

Carlsson, F., P. Frykblom, and C.J. Lagerkvist. (2003). “Farm animal welfare – testing for market failure.” 

Working Papers in Economics No. 119. Department of Economics, Göteborg University. 

Available at http://www.handels.gu.se/epc/archive/00003066/01/gunwpe0119.pdf. 

Fraser, D., D.M. Weary, E.A. Pajor, and B.N. Milligan. (1997). “A scientific conception of animal welfare that reflects ethical 

concerns.” Animal Welfare, 6,187-205. 

Fraser, D., J. Mench, and S. Millman. (2001). “Farm animals and their welfare in 2000.” In D.J. Salem and A.N. Rowan (Eds.), 

The State of Animals: 2001. Washington, DC.: Humane Society Press. 

Available at http://www.hsus.org/press_and_ publications/humane_bookshelf/the_state_of_the_animals_2001.html. 

Fraser, D. (2004). “Applying science to animal welfare standards.” Proceedings of the OIE Global Conference on Animal Welfare, 

pp. 121-127. Paris. Available at http://www.oie.int/eng/Welfare_2004/proceedings.pdf. 

Fraser, D. and D.M. Weary (2004). “Quality of life for farm animals: linking science, ethics, and animal welfare.” In G.J. Benson 

and B.E. Rollin (Eds.), The Well-Being of Farm Animals: Challenges and Solutions. Ames, IA: Blackwell. 

Gardner, B. (2003). “The Economic System of U.S. Animal Agriculture and the Incidence of Cost Increases.” In R. Reynnells 

(Ed.), Sharing Costs of Changes in Food Animal Production: Producers, Consumers, Society and the Environment. 

USDA/CSREES. 

Halverson, M.K. (2001). “Farm Animal Health and Well-Being.” Report Prepared for the Minnesota Planning Agency. Available at 

http://www.mnplan.state.mn.us/ eqb/geis/TWP_AnimalHealth.pdf. 

Herzog, H., A. Rowan, and D. Kossow (2001). “Social attitudes to animals.” In D.J. Salem and A.N. Rowan (Eds.), The State of 

Animals: 2001. Washington, DC.: Humane Society Press. 

Available at http://www.hsus.org/press_and_publications/humane_bookshelf/the_state_of_the_animals_2001.html. 

Moynagh, J. (2000). “EU regulation and consumer demand for animal welfare.” AgBioForum, 3(2/3), 107-114. 

National Council of Chain Restaurants (NCCR). (n.d.). Available at http://www.awaudit.com. 

National Pork Board. (n.d.). Available at http://www.porkboard.org. 

The OIE’s initiatives in animal welfare. (2003). Available at http://www.oie.int/eng/bien_etre/en_introduction.htm.

144 


Rollin, B.E. (2004). “Animal agriculture and emerging social ethics for animals.” J. Anim. Sci., 82, 955-964. 

Stricklin, W.R. (2003). “Ethical considerations of pork production.” In R. Reynnells (Ed.), Proceedings: Symposium on Swine 

Housing and Well-being. USDA/ARS, Animal Welfare Information Center. Beltsville, MD. 

Swanson, J.C. and J.A. Mench. (n.d.). “Animal welfare: consumer viewpoints.” 

Available at http://animalscience.ucdavis.edu/avian/swanson.pdf. 

United Egg Producers. (n.d.). Available at http://www.animalcarecertified.com. 

United Kingdom’s Farm Animal Welfare Council. (n.d.). Available at http://www.fawc.org.uk. 

Vocke, G. (1991). “Animal welfare legislation alters European egg production – current trends.” World Agriculture. 

Available at http://www.findarticles.com/p/articles/mi_m3809/is_n63/ai_11173974. 

Wyss, H., B. Wechsler, J. Merimod, and T. Jemmi. (2004). “Animal welfare: between profit and protection.” 

Proceedings of the OIE Global Conference on Animal Welfare, pp. 207-211. Paris. 

Available at http://www.oie.int/eng/Welfare_2004/proceedings.pdf.

Box 1. Animal Welfare Legislation in North America 

Canada 


The Criminal Code of Canada prohibits anyone from willfully causing animals to suffer from neglect, pain or injury. Each 

province has legislation on animal welfare. In the majority of the provinces (Alberta, British Columbia, Manitoba, Nova 

Scotia, Quebec and Saskatchewan), there is an exemption for generally accepted practices of animal management. 

Under the 1990 Health of Animals Act, regulations have been established for the transportation of animals (Health of 

animal regulations part XII). These include conditions relating to loading and unloading equipment, prevention of 

overcrowding, segregation of species, protection from injury and sickness, and other aspects of handling. Confinement 

without food and water of monogastric animals is limited to 36 hours, ruminants for 48 hours, and chicks from time of 

hatching to 72 hours. The regulations are enforced by the Canadian Food Inspection Agency. 

Federally inspected establishments are subject to operational policies and regulations established under the Meat Inspection 

Act, which prescribes the humane handling and slaughter of food animals. Provisions of the Meat Inspection Regulations 

cover the unloading, holding and movement of animals in slaughter facilities, and the segregation and handling of sick or 

injured animals, in addition to requirements for the humane slaughter of animals. 

Mexico 

There are three regulations dealing with the transportation of animals (NOM-024-ZOO-1995; NOM-045-ZOO-1995; 

NOM-051-ZOO-1995) and two regulations dealing with slaughter (NOM-008-ZOO-1994; NOM-033-ZOO-1995). A 

bill introduced in 2004, General Law on Animal Welfare, is designed to deal with the maintenance, care and housing, use, 

transportation and slaughter of farm animals. This bill has not been passed into law. Roughly 40 percent, or 13, of 

Mexico’s 32 states have laws relating to animal welfare. Enforcement of existing legislation is limited. 

United States 

There is no federal anti-cruelty statute and no statutes that regulate the treatment of farm animals. Every state has an anticruelty 

statute that protects animals from inhumane treatment. The legislation does not apply to farm animals in 37 states; 

35 have specific exemptions for farming or ranching. The principal federal law governing treatment of animals is the Animal 

Welfare Act of 1970 as amended (7 USC, 2131-2156). The definition of “animal” in the act excludes “horses not used for 

research purposes and other farm animals, such as, but not limited to livestock or poultry, used or intended for use as food 

or fiber, or livestock or poultry used or intended for improving animal nutrition, breeding, management or production 

efficiency, or for improving the quality of food or fiber.” 

Chapter 48 of the U.S. Code, Title 7 (Agriculture) deals with humane methods of slaughter for livestock (excludes poultry). 

These are defined as the use of a single blow or gunshot or an electrical, chemical or other means that is rapid and effective; 

or by slaughtering in accordance with the ritual requirements of any religious faith through which an animal suffers loss of 

consciousness by ischemia of the brain caused by simultaneous and instantaneous severance of the carotid arteries with a 

sharp instrument. 

Section 80502 of Title 49 of the U.S. Code (Transportation) contains some standards on the treatment of animals. Animals 

may not be confined in a vehicle or vessel for more than 28 consecutive hours without unloading the animals for feeding, 

water and rest, after which they shall be unloaded in a humane way into pens equipped for feeding, water and rest for at 

least five consecutive hours. The 28-hour maximum can be extended to 36 hours if a request is made in writing.

146 


Box 2. Examples of Codes of Practice and Certification 

Food Marketing Institute/National Council of Chain Restaurants (FMI/NCCR) Animal 

Welfare Program (www.fmi.org; www.nccr.net; www.awaudit.com) 

This program was created in 2001 by FMI, which represents 2,300 food retailers and wholesalers in the United States and 

around the world, and the NCCR, which represents 40 of the largest chain restaurant companies in the United States. 

Developed in collaboration with independent expert advisers and producer/processor groups, the program is designed to 

promote best practices to ensure animal well-being throughout production and processing. Goals are: consistency across the 

U.S. retail sector; implementation of science-based guidelines; and improved communication across the supply chain on 

animal welfare issues. The program is voluntary and involves an auditing process, results of which are confidential. 

National Pork Board (NPB) Swine Welfare Assurance Program (SWAP SM ) (www.porkboard.org) 

Introduced in 2003, this voluntary program covers nine areas relating to care and well-being: 1. herd health and nutrition; 2. 

caretaker training; 3. animal observation; 4. body condition score; 5. euthanasia; 6. handling and movement; 7. facilities; 8. 

emergency support; and 9. continuing assessment and education. Standards are set out in a handbook prepared by the NPB’s 

Animal Welfare Committee. The program is designed as an educational and assessment tool for producers, and for use as the 

basis for a third-party audit. To maintain status under the program, evaluation by a SWAP educator must occur at least every 

three years. 

United Egg Producers (UEP) Animal Care Certified Program (www.animalcarecertified.com) 

UEP established a Scientific Advisory Committee for Animal Welfare in 1999. Based on its recommendations, guidelines 

were adopted in October 2000. Initially the program was voluntary, but it has since evolved into the Animal Care Certified 

Program. Animal Husbandry Guidelines contain recommendations on a range of issues, including cage configuration and 

size for new construction, beak trimming, molting, handling, transportation and slaughter. The space allowance for hens has 

been increased gradually since 2002. By 2008, the minimum will be from 67 square inches to 76 square inches, depending 

on breed. Molting programs that include withdrawal of feed are not permitted by Animal Care Certified companies. 

Operations of participating producers are examined annually by independent auditors, and the information may be supplied 

to customers on request. Failure to meet the minimum space requirement results in automatic failure of the audit. Companies 

that apply the guidelines in all their facilities, pass the annual audit and file monthly compliance reports can be authorized to 

sell Animal Care Certified eggs or egg products. They may not co-mingle eggs with those from a non-certified supplier. 

Animal Welfare Institute’s Humane Husbandry Criteria (www.awionline.org) 

AWI has developed standards for beef cattle and calves, ducks, pigs and sheep to provide a voluntary basis for farmers to 

evaluate the outcomes of their animal husbandry. 

American Humane Association Free Farmed TM Certification (www.americanhumane.org) 

Introduced in 2000, this program provides a voluntary fee-based service designed to provide independent verification that 

animals are being raised for food under humane conditions. Verification is based on standards created by a team of U.S. 

scientists, animal professionals with expertise in animal care, and producers. A producer who satisfies these standards is 

entitled to use the Free Farmed logo to certify that an animal was humanely treated. To maintain eligibility, producers must 

be audited annually. 

Humane Farm Animal Care (HFAC) Certified Humane Raised and Handled (www.certifiedhumane.org) 

Created in 2003, this program is sponsored by a consortium of animal welfare organizations, including the American Society 

for the Prevention of Cruelty to Animals (ASPCA) and the Humane Society of the United States (HSUS). Fees are charged 

for initial inspection and for continued certification. Facilities are inspected annually.


Box 3. Animal Welfare Initiatives of Some Major Food Restaurant Chains 

Burger King (www.bk.com) 

Burger King states that it “is committed to the humane treatment of the food animals used for its products. Implementing 

its new practices and audits is the right thing to do, and the Company is committed to raising animal handling standards 

across the country.” In June 2001, it adopted the FMI/NCCR auditing program for the care, housing, transport and 

slaughter of cattle, swine and poultry by suppliers. The company states that it will take appropriate action with suppliers that 

do not meet its animal handling standards. Currently, the program is implemented for slaughter facilities in Australia, 

Canada, New Zealand and the United States, representing the regions that provide 90 percent of all products used within 

the Burger King system. The company states that it is expanding the auditing process into every region in which it operates. 

It has an Animal Well-being Council to keep it abreast of policies, procedures and best practices. In its most recent animal 

handling policy statement (2004), the company indicates that its efforts are prioritized to: 1. humane farm animal 

production practices; 2. humane animal transport practices; and 3. humane slaughter practices. 

Kentucky Fried Chicken (www.kfc.com) 

The parent company of KFC states it “is committed to the humane treatment of animals (and) as a major purchaser of food 

products, (has) the opportunity, and responsibility, to influence the way animals supplied to (it) are treated.” The company 

has an Animal Welfare Advisory Council to provide information and advice in formulating its animal welfare program, 

which involves audits of processing facilities. KFC is also implementing farm-level auditing based on standards developed by 

FMI/NCCR. In terms of required production methods, birds should be free to roam throughout the shelters, beak trimming 

is not allowed, and suppliers are not permitted to use hormones or steroids. The use of antibiotics to promote the growth of 

healthy chickens is prohibited where such antibiotics are significant to human health. Compliance with this policy is based 

on supplier assurance. 

McDonald’s (www.mcdonalds.com) 

The company states that it “cares about the humane treatment of animals (and) our responsibility as a purchaser of food 

products includes working with our suppliers to ensure good animal handling practices.” It has a set of guiding principles for 

animal welfare that apply to all countries in which the company does business. One of these principles states: “McDonald’s 

believes treating animals with care and respect is an integral part of an overall quality assurance program that makes good 

business sense.” The company has an Animal Welfare Council, composed primarily of academics, to help it determine 

priorities and actions. The core of the company’s program is a global audit system for beef, poultry and pork processing 

plants. The first audits were conducted in 1999. The company reports it conducted nearly 500 audits worldwide, reaching 

the majority of the facilities that provide its meat products. Suppliers that failed audits and did not take necessary corrective 

action were subject to termination as a supplier to McDonald’s. The company supports NCCR/FMI initiatives for 

farm-level auditing. 

Wendy’s (www.wendys.com) 

The company states: “We believe it is our obligation to ensure that each of our suppliers exceeds government regulations by 

meeting Wendy’s more exacting standards pertaining to the humane treatment of animals.” It has used an auditing program 

for its Canadian and U.S. suppliers since 1998. Those that do not meet the standards are terminated as suppliers. The 

requirements for beef, chicken and pork suppliers are published on the company’s Web site. These relate primarily to 

transportation, holding and handling. For chickens, certain production conditions are specified, for example, a prohibition 

on forced molting, freedom of movement for flocks of breeder and broiler chickens in poultry houses, and a minimum cage 

size for laying hens of 72 square inches. The company is also reviewing slaughter methods for chickens, specifically the use 

of controlled atmosphere stunning.


148 


Figure 1. Value Frameworks of Three Views of Animal Welfare 

Source: Based on Fraser et al., 1997. 

Table 1. Estimated Increases in Production Costs of Farm Welfare Measures for EU Poultry 

Farm cost increase resulting from: 

Broilers – reduced stocking density from 38kg/m2 to 30kg/m2 +5% 

Broilers – slower growth (slaughter weight increase from 40 to 50 days) +5% 

Eggs – cage size of 600 cm2 +5% 

Eggs – cage size of 700 cm2 +15% 

Eggs – free range +50% 

Source: USDA ERS

Source: Agra CEAS Consulting Ltd. (2004) 


Selected Characteristics of Traditional and Alternative 

Table 2. Production Systems for Laying Hens in the European Union (2003) 

Source: USDA ERS 

Traditional cage Barn Free range Organic 

Kg feed per kg eggs 2.21 2.49 2.7 2.81 

Mortality (percent) 6.0 9.1 10.4 13.8 

Hens per worker 36,714 17,420 11,031 5,031 

Hens per m2 of housing 79 8 8 7 

Estimated Total Costs Per Kilogram of Eggs of Various 

Figure 2. Egg Production Systems in the European Union (2003)

150

Chapter 9 

A Look to the Future 

There are many ways to analyze animal agriculture in 

North America. This report was organized around seven basic 

opportunities and challenges facing animal agriculture. Each 

chapter outlines forces of change, projects those forces into the 

future, identifies alternative approaches to the future and 

outlines the implications of implementing those alternative 

approaches for various stakeholders. While thorough, this 

approach may not fully highlight the complex and cross-cutting 

nature of many of the challenges and opportunities facing 


This chapter summarizes the project, cross-cutting themes, 

strategies and policy issues central to the future of animal 

agriculture in North America. It also identifies those areas 

where the knowledge base is thin or nonexistent. Some 

regulatory systems and business strategies are built on weak 

factual foundations, which need to be secured by further 

research and analysis. This requires both public and private 

commitment of financial and human resources and a 

cooperative attitude to bring the best knowledge to these issues. 

Markets, Structure and Competition 

Traditional open commodity markets for animals are fading, 

but there will always be competition among different value 

chains offering a variety of products to consumers. The sale 

barn with multiple buyers is less a standard method of 

marketing, and most animals are marketed through contracts, 

cooperatives and a variety of arrangements that link production 

with processing and retailing of final products. Cooperatives 

play a key role in dairy. 

Current production technologies and marketing arrangements 

have significant economies of scale that encourage large units 

for production and processing of beef, pork, poultry and milk. 

Production units are getting larger across the board. Fewer large 

firms dominate the animal-processing industry in North 

America. While small, traditional production units are still a 

major factor in Mexico, large-scale production units similar to 

those in Canada and the United States are growing rapidly in 

dairy, swine and poultry. 

This economic environment challenges small and mid-size 

producers. Opportunities exist, and others are evolving. Because 

different consumers place different values on various product 

attributes, there will be markets for animal products with 

specific characteristics. For example, demand for organic 

products is growing rapidly. Many small and mid-size producers 

can flourish if they position themselves to provide products that 

command premium prices in the marketplace. 

The North American animal agriculture industry also faces 

competitive challenges from other world producers and 

processors, in part due to the transferability of technologies and 

increasing worldwide demand for animal products. This has 

implications for trade, labor and the environment. 


Who receives the value from technological and business 

management innovations such as supply chains and traceability 

systems? How is this value distributed among producers, 

processors, retailers and consumers? Are there better ways to 

identify relationships among parties in these systems? 

What are the long-term impacts on animal agriculture of 

increased energy production from corn, other animal feeds 

and animal waste? 

To better understand the competitiveness of the North 

American livestock industry, a critical research need is a 

comparative analysis of the cost of producing and processing 

various animal products in different geographic locales in the 

world. Critical dimensions of this analysis would be to use a 

standardized methodology to measure costs and to analyze 

both commodity products, as well as higher-valued 

differentiated products. 

Value in Integrated Markets 

There is economic value in an integrated North American 

market for animal products. The dairy industry remains 

protected to different degrees in all three countries, and the 

Canadian poultry industry remains protected. But there is 

151

152 

significant evidence that NAFTA benefited the beef and swine 

industries in all three countries. Open borders allowed the 

industries to specialize with live animals, carcasses and 

processed products moving back and forth across all borders. 

The disruptions caused by the closing of the U.S.-Canadian 

border because of BSE demonstrated the degree of market 

integration that had developed in recent years. While some 

parts of the industry benefited from the border closing, the 

North American industry as a whole lost. There is value in 

an integrated North American market, and institutional 

mechanisms are needed to reopen borders quickly to prevent 

long-term economic disruptions. 


What are the true costs of border disruptions? Who benefits 

and who loses because of these disruptions? 

Have the “temporary” BSE-related border closings 

permanently altered animal trade flows in North America? 

Demand Is Increasing 

Demand for animal protein depends primarily on income and 

population growth. Predicted increases in income in developing 

countries, particularly in Asia and Latin America, will increase 

global demand for animal products during the next generation. 

In high-income regions like North America and Europe, 

consumers are demanding animal products with specific 

characteristics related to nutrition and health concerns and 

specific production practices. As noted previously, demand 

for organic products is growing rapidly. 


What really influences consumer purchases of meat and 

animal products? How do consumers react to health and 

food safety concerns and to concerns about animal welfare? 

What is the economic impact of consolidation in the food 

processing and food retailing sectors? What are the impacts 

on farmers and on consumer choice? 

Environmental Regulation and Litigation 

Environmental regulations can be a significant cost factor 

for the industry and will likely be a major factor in future 

investment decisions by the industry. While predictions of a 

“race to the bottom” are made, the expanding variability of 

regulation from location to location will impact decisions 

concerning the location of future animal production and 

processing units. Differences in environmental regulation 

across countries, states and provinces are problematic for 

A Look to the Future 

animal agriculture. Broader multi-jurisdictional regulatory 

approaches may represent an opportunity for more efficient 

environmental management and lower industry costs. 

Litigation related to environmental issues is a growing problem 

in the United States. While litigation is a symptom, not a cause 

of conflict, continued litigation can be expected unless there is 

meaningful legal reform that provides the industry with some 

“safe harbor” legal parameters in exchange for assuming greater 

responsibility for environmental concerns. Litigation or 

legislative outcomes must provide legal rights and 

responsibilities that balance business practices with 

environmental concerns to resolve the issues. In the 

environmental arena, uncertainty is a greater problem 

than the level or type of environmental regulation. 


What are the costs and benefits of various regulatory 

systems? General trends are known, but more detailed 

information is needed, such as the impacts of regulation 

on different sized operations. 

What are the public health impacts of possible pathogens in 

air emissions from animal production facilities? How do we 

best measure the level of pathogens and their impacts? 

Immigration and Labor 

Many segments of animal agriculture in the United States and 

Canada depend on a foreign-born labor force. In the United 

States, many of these workers are from rural Mexico and are 

undocumented. The legal uncertainty associated with this 

undocumented work force has consequences for the workers 

and the companies for which they work. Workers may not 

receive full legal protections and may be reluctant to complain 

about working conditions. Employers are vulnerable to a variety 

of legal sanctions and risk the loss of a significant portion of 

their work force if immigration laws are strictly enforced. This 

legal uncertainty creates a “cost” that can be mitigated with 

revised government policies. 


What are the labor market needs for animal agriculture, 

and how will specific immigration reform legislation impact 

the industry? 

Animal Identification and Traceability Systems 

Animal identification and traceability systems have a key role 

to play in the future of the North American animal agriculture 

industry. Whether the underlying issue is animal health, food

safety, animal welfare, process assurance or quality attributes, 

animal identification and traceability are the keys. Canada is 

well ahead of the United States and Mexico on this issue. 

Identification and traceability systems will emerge rapidly 

during the next few years to enhance the industry’s ability to 

respond to natural and intentional disease outbreaks, improve 

food safety, and provide assurances of food quality and 

wholesomeness. Some elements of these systems will be 

developed and managed by government; other parts may 

be purely private; and some elements may require 

public/private partnerships. 


How could information generated by traceability systems be 

utilized to develop risk-management strategies to minimize 

impacts of animal disease outbreaks? 

Communities and Communication 

There are no simple answers to the complex issues facing rural 

communities affected by animal agriculture. The issues are 

multi-faceted and link producers, processors, retailers, 

consumers, and the people living and working near farms and 

processing facilities. Reaching workable solutions requires 

patience, partnerships, information and clear communication. 

Solutions may require the cooperation of industry and multiple 

levels of government. 


What are the economic and social consequences of 

alternative regulatory systems for making siting/zoning 

decisions about animal production and processing facilities? 

What tools can be brought to bear to encourage cooperation 

among industry, government, the public and the various 

elements of the food supply chain? 

What are the actual economic multiplier effects of animal 

agriculture production and processing facilities on 

rural communities? 

Concluding Remarks 






among the stakeholders in the system. Technological 

developments increase farm-level productivity, processing 

efficiency, distribution systems and marketing. Every facet of 

the animal food chain—from genetics to retail and food service 

outlets—is adjusting to the rapid pace of change. 

A Look to the Future 153 

The North American animal agriculture industry remains 

competitive in the world market. However, it faces significant 

challenges and opportunities, both in North America and 

abroad. Farm Foundation initiated this project to compile a 

comprehensive look at the opportunities and challenges facing 

animal agriculture in North America today. How industry, 

government and academia use the information compiled here 

will help shape the future of this industry in North America.



(630) 571-9393 

Fax: (630) 571-9580 

www.farmfoundation.org

The Future of Animal Agriculture in North America - Farm Foundation

Create successful ePaper yourself

Delete template?

Save as template?