Assessing Animal Welfare and Farm Profitability in Cow-Calf Operations with Stochastic Partial Budgeting

The societal demand for good farm animal welfare (FAW) has increased over time. Yet, very little is known about the economic consequences of improvements in FAW in cow-calf operations. This study investigates on-farm economic consequences of improved FAW measures in cow-calf operations. It uses a stochastic partial budgeting approach to examine the relationship between contribution margins and improvements in FAW in terms of increased space allowance for a typical Swedish cow-calf operation, as compared to current practices. In the current practice, a cow should be given at least 5 m² and the calf 2.2 m². We found that a 0.5 m² increase in space allowance per calf (achieved by a corresponding reduction of herd size) was associated with a 6.9 to 18.7% reduction in contribution margins in the short term. Our analysis does not include possible indirect gains like decrease in disease incidence and enhanced non-use or 'soft' values associated with increased FAW. However, our analysis indicates that high FAW standards can be costly and careful cost-benefit analysis should be a part of decision-making processes regarding FAW standards. Our results also suggest a need for government support payments and/or the development of market mechanisms to stimulate farmers to continue producing livestock-based foods with high FAW.