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

SIMPLE SUMMARY: The increased consumer demand for high levels of farm animal welfare (FAW) have prompted debates about the costs of achieving higher FAW. Yet, little is known about the economic consequences of improvements in FAW, especially in cow-calf operations. This study contributes to the literature by investigating the relationship between farm profitability and improved FAW measure in terms of increased space allowance in Swedish cow-calf operations. We found that a 0.5 m(2) 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 farm-level contribution margins in the short term. Our results suggest that FAW improvements can be costly for farms and these costs should be considered while taking policy decisions regarding improvements in FAW standards. ABSTRACT: 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 m(2) and the calf 2.2 m(2). We found that a 0.5 m(2) 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.