#04-177

Complete

Category

Date Full Report Received

05/11/2005

Date Abstract Report Received

12/19/2006

Investigation

Institution:
Primary Investigator:

Increasing concerns regarding the health and well-being of meat animals raised in confinement facilities have resulted in consideration of increasing the space allotment for animals. This research had two objectives: the first to evaluate the economic impact from increasing the pig space allotment and secondly to determine pig space allocations currently in use by pig producers. An industry survey showed that pig space allocations currently in use averaged 7.19 square feet for confinement systems and 11.57 square feet for hoop systems. This was used as the base for determination of the economic impact of increasing pig space requirements. Space restrictions result in two key economic impacts: 1) an under utilization of the existing confinement production asset base, and 2) a resulting impact on potential marketing strategies.

Three major results emerged. First, restricting pig space has significant negative financial consequences for existing commercial confinement swine production systems. Secondly, marketing weight and timing mitigation strategies can be a short-term solution when compared to restricting flows into the finishing phase of production, but are clearly inferior to the longer range solution of adding finishing barns to existing production systems to accommodate the pigs. Reducing pig flows into the finishing phase through reduced size of the breeding herd results in underutilizing the most expensive capital assets (farrowing) and therefore, is the least preferred strategy as it had the most negative impact on return on equity. Additionally, reducing pig flow in the finishing facility through selling weaner pigs, while superior to reduced size of breeding herd, is inferior to most scenarios where all pigs remained in the production system. It was also shown that because of changing weight and animal composition in marketing strategy scenarios that the pricing grid of the packer to which producers market has a substantial impact on the consequences of marketing lighter pigs to meet pig space restrictions. Therefore, impacts will not be uniform across the industry.

In a policy context, the simulations show that regardless of mitigation strategies adopted by existing swine producers there will be substantial and negative financial implications ranging from a 10 percent to a 97 percent reduction in return on equity. Therefore, adoption of space restrictions should be carefully considered in concert with any potential economic benefits which might occur, namely consumer willingness to pay for pigs raised in larger spaced facilities. As food chains consider imposing the space requirements on suppliers, they must recognize that the producers affected must be able to pass on some of the cost to downstream processors, retailers and ultimately consumers. Naturally, this will occur through market forces as producers leave the pork industry and market prices of pork increase from lower production levels. However, even this will not occur if the same or stronger restrictions are not placed on international suppliers of pork to the U.S. This case would clearly undermine efforts aimed at animal welfare entirely and must be considered in the broader policy of space requirements for finished animals.