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9.2 Mechanisms Through Which Concentration of Livestock Production and Scaling-up Impact on Social, Health and Environment Outcomes

9.2.1 Impacts Via Displacement

The most radical impact of scaling-up of the livestock sector on small-scale producers is if it drives them out of business altogether. This is a very hard question to address directly, as neither statistics on exit, nor reasons for exit are kept in any of the study countries. Even statistics on changes on the size distribution of livestock farms over time are hard to find. This section reviews what the country teams could come up with.

The significance of smallholders to livestock production in Thailand has significantly decreased over the past 15 years. Backyard livestock farms are only commonly found these days in remote areas. The Thai country study in Annex IV (Poapongsakorn et. al., 2003) argues that the percentage of poor livestock households has declined proportionately more than the percentage of poor agricultural households overall, which may indicate that some of them are getting rich, but also that some have left the sector. Significantly, the Gini coefficient for livestock farmers is also much lower than the Gini for agriculture as a whole. This indicates that income distribution among livestock-keeping households is becoming relatively more equitable, although this could also mean that only large farms are left. The Thai country study in Annex IV (Poapongsakorn et. al., 2003) does show that the average income of livestock households increased between 1993 and 1998. However, for specialized livestock enterprises, the farms with the highest growth of income in this period were the smallest ones in terms of land size; farms on less than one hectare of land saw their real livestock incomes in 1994 domestic prices grow at 6 percent per annum. Among mixed cropping farms, the highest growth of income (5.7 percent per annum) was for farms in the 1.6 to 6.2 hectare range. This suggests a possibility that the greater equality of livestock incomes over time in Thailand is largely due to catching up by small farms, as opposed to exit by small farmers.

In the Philippines, historical time series data are more reliable for hogs than for the other livestock commodities, at least when broken down by size class. As argued in Chapter 3, hog production has grown on both backyard and large-scale commercial farms at a national level. However, large-scale farms have overtaken the backyard farms in proximity to Manila, and are competing with them for market share. Large-scale layer farms have already completely displaced smallholders, and large-scale broiler operations are starting to do the same. Costales (2003) and Chapter 3 argue that there has been significant market entry into smallholder hog raising over the past 15 years, particularly around major urban markets. Access to investment capital has been key. The typical smallholder operation in Southern Luzon is run either by a wife of a wage-earner or a retired person, providing an extra income source for someone who spends most of the day at home.

Milk production in India is a low-input, low-output farm activity within a smallholder (or even small-scale landless) production system, with about three-quarters of rural households owning two to three milk animals. The average milk animal holding size has remained more or less the same in all zones (South, East, and West) during the last two decades except for the North, where the proportion of households having four or more milk animals increased from 24 percent in 1988/89 to about 30 percent in 1995/96. Livestock holdings in general, and milk animal holdings in particular, appear to be far less inequitable than land holdings in rural India. The Gini coefficient representing the index of inequity in ownership of dairy stock had a perceptible decline, from 0.43 in 1961 to 0.37 in 1971 and further to 0.28 in 1991. This suggests that over time in India, the asset distribution of dairy cows has become significantly more equitable, starting from a fairly equitable base to begin with. Furthermore, the dairy production sector in India is gender-friendly. It provides supplementary income to over 70 percent of rural households, and women carry out over 90 percent of the activities related to care and management of dairy animals.

In Brazil, the most noticeable recent instance and impact of the scaling-up of livestock production has also been in the dairy sector. There is a shrinking in the total number of Brazilian producers due to a higher competition with imported milk and new chilling requirements imposed by processors following liberalization of cooperative regulation and pricing in the 1990s. In 2000, there were 123,000 milk producers in Brazil, producing 6 million liters delivered to the 15 largest processors. Two years later, the number of producers had shrunk to 95,000, producing the same total volume of milk (Camargo Barros, 2003). Antidotal evidence suggests that many of the small-scale swine farms exited the livestock sector in the South after they took out loans to increase the size of their operations at the request of integrators, who refused to renew contracts with producers with few animals. This was because of the additional costs associated with providing technical assistance, delivery of inputs and pick up of the final producer. Some of these small-scale producers defaulted on their loans when the "real" depreciated, and they went out of business.

Integrators have also encouraged their successful producers in Santa Catarina and Rio Grande do Sul to re-settle in the Center-west, where more extensive and cheaper land sources are available for large-scale poultry and swine production. They apparently have found this easier to do than getting the people in the South to switch from traditional agriculture production to raising chickens and swine on a commercial basis.

9.2.2 Impacts Via Resource Degradation and Nutrient Loading

A major problem associated with increased livestock production is that it also results in an increased amount of manure and dead animals. There is no doubt that this is an unwanted and undesirable side of the Livestock Revolution that is becoming an increasingly pressing public policy issue. The country studies document the nature and extent of the issue, while the synthesis focuses on the implications for interactions between scaling-up and environmental outcomes.

Environmental problems may result if these by-products of the production process are improperly utilized or disposed of. The main environmental problems of concern are water pollution, air pollution, and land degradation. Water pollution may occur if nutrients from manure enter the water table because they are either improperly used or disposed of, or may be associated with improper disposition of dead animals that consequently release nutrients into the ground water as they decompose. Air pollution may result as the nitrogen in manure is converted to ammonium, and also through incineration of dead animals. Land degradation may occur if the carrying capacity of animals is too high, leading to over-grazing in the case of ruminants, or if the application of nutrients over a number of years causes buildup of nitrogen, phosphorous and salt, resulting in reduced crop yields. Chapter 7 showed in detail that all these factors with regard to manure and dead animal disposal are observed in the study countries, especially for pig farming. Poultry farmers in all four study countries have sought out markets for utilizing the manure their operations produce. The impact of this on scaling-up and what can be done about it is discussed below, as are policy implications.

9.2.3 Impacts Via Animal Health and Food Safety

As noted in Chapter 3, animal disease control issues are growing with increased concentration of animals in restricted spaces around major cities and in other producing areas. Chapter 3 also discusses the rising demand for food safety for animal products consumed in the study countries. Together, these two sets of structural change are bound up with the livestock industrialization process as both drivers of it and results, and offer special challenges to smallholders. The critical issue is the keeping more and more animals in smaller and smaller spaces, and whether smallholder systems can adapt (or be allowed to adapt) to these changes.

It is harder to monitor compliance with disease control measures where the production system is primarily smallholder. It is also difficult to separate small-scale and large farms for the purposes of disease eradication unless they are physically separated by zone. The rise of disease-free export zones, particularly those certified for export without vaccination, increases the incentive of large-scale export producers to either eliminate small-scale producers from the zone or co-opt them into a system of disease control that is similar in terms of overhead costs to those practiced on much larger farms, resulting in relatively high per unit costs of production for smallholders in those zones, and possible competitive disadvantage. Livestock industrialization is in part motivated by the need to control disease risks at all stages of production.

Furthermore, the increased incidence of diseases associated with greater animal concentrations is probably correlated with a rise in zoonotic disease. In addition, increased concentration in both the developed and developing countries have been associated with increased therapeutic use of antibiotics in animal feeds. This has occurred in all the study countries, but is kept under very careful control in the export zones that ship to the OECD countries.

It could also be argued that increased industrialization of production is itself a result, in part, of greater consumer demand for food safety and predictability. Experience differs across the countries, but the demand for food safety is probably linked to urbanization and income levels. Large producers in all the study countries have sought a form of branding through vertical integration with retail outlets for meat and milk. Smallholders need not only to meet food safety standards to stay involved with the fast growing segment of the market, but will need to be able to have their products credibly recognized as safe. This typically will require integration into high value chains that have large-producer like process-based food safety systems in place and that can deliver a form of branding. Food safety will be a powerful motivator of contract farming for both small farmers and their customers.

9.2.4 Other Impacts

Growth and scaling-up of livestock production in the study countries affects people in more ways than displacement or employment of small-scale farmers, adverse or positive impacts on human and animal health, or through the environment. Two big ways are through the improvement of nutrition of the poor and through the empowerment of rural women. It can also be argued that the way sentient beings such as farm animals are treated affects culture and the social welfare of populations.

Growth and scaling-up of the livestock sector has affected prices for meat, milk and eggs, which are undoubtedly lower than they would be in the absence of growth and scaling-up (Chapter 1). There is also little doubt that the lower income classes in Brazil have greatly increased their per capita consumption of poultry. Annual family food consumption in metropolitan areas exhibited an increase in per capita meat and egg consumption between 1987 and 1996 for all income classes (Camargo Barros, 2003). Egg consumption increases have been especially pronounced for the lower income groups in cities. This is probably due to a fall in the price of eggs relative to other sources of animal protein, which in turn is associated with the expansion of large-scale egg production.

In India, the beneficial effects for the poor of the rapid expansion of milk production have, if anything, been as much on the consumption side as on the production side. In a vegetarian country where protein malnutrition is a serious problem, expansion of cheap and clean milk supplies have been critical to welfare (Sharma, 2003). More generally, while the developed countries and some of the richer sections of the developing countries may worry about excess consumption of fats, most people in most developing countries consume too few grams of meat, milk and eggs a day to get needed micronutrients for good health, particularly non-heme iron, zinc and the B vitamins. Evaluating the impact of scaling-up of livestock production on food consumption patterns goes beyond the scope of this study, but it seems clear that the accompanying increase in aggregate supply and the fall in relative prices has led to increased intake by nutrient-deficient poor people.

With regard to the empowerment of women, official statistics rarely record the gender of livestock farmers. The small-sample results in Chapter 6 shed further insights on this area, although sample size suggests caution in over-generalizing. Samples were selected randomly within strata, and gender was not a selection criterion. In the Philippines samples, one-quarter to one-half of all broiler and hog operations studied large and small-but especially small-were managed by women. The smallholder dairy samples in India and Thailand are primarily operated by women, even if they are not always acknowledged as being in charge. In both the Philippines and India contract farming samples, the shares of female-managed operations were greater than for the independent samples. This may be a result of women facing especially high transaction costs in livestock market participation, which makes institutions of collective action especially useful for them. Scaling-up is a threat to improved gender outcomes if it edges smallholders out of livestock production, but there is already some evidence that vertical integration of women within institutions of collective action in the sector can help overcome this problem.

While it is often thought that animal welfare concerns are primarily a luxury for rich countries, in fact family farmers in developing countries often are greatly concerned about the welfare of the animals under their care (as surely is the case on many family farms in the developed countries). Cows on smallholder farms in India are arguably better treated than they are elsewhere in the world. In truth, smallholders in developing country have a very large share of their capital-relatively speaking-invested in their animals, and a relatively small number of animals to look after.

With the combination of livestock industrialization and possibly lower standards of regulation than in developed countries, the question arises as to what is happening to animal welfare. The discussion in Chapter 2 suggests that livestock industrialization is in fact most advanced among the four study countries in Brazil and Thailand, the same countries that are fast-growing livestock exporters, including exports to the developed countries. The discussion in Chapter 3 argues that it is also in Brazil and Thailand where animal welfare is an active concern of industrial producers and their regulators. Exporters of livestock products to the EU, for example, need to be particularly careful to avoid abuses, as these can have nasty repercussions in terms of market access. In a protectionist climate, it could be argued that they are even more subject to being called to account than are domestic producers in many parts of Europe.

Animal welfare issues become more problematic where there is no export industry to enforce compliance with welfare norms, and where industrialization is nonetheless occurring for the domestic market. The surveys did not observe any egregious abuses of welfare, but did note the use of battery cages for poultry in both India and the Philippines, and sow crates on the larger farms in the latter. It is to be anticipated that animal welfare problems will become worse among producers serving the domestic market, as the concentration of animals increases on shrinking land bases, animal disease such as FMD spread, and management decision-making becomes more removed from a family farming context.

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