Corporate livestock farming threatens food security

The article below argues that the penetration of corporate livestock farming into the developing world and its displacement of traditional smallholders is causing irreparable socio-economic, genetic and environmental damage and poses a grave threat to food security.

The article was published in Third World Resurgence No. 223 (Mar 2009).

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Lim Li Ching
Third World Network

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Corporate livestock farming: A threat to global food security
Susanne Gura

'The industrial model of production is not durable. We cannot keep importing genetically modified soy beans from Brazil in order to feed poultry in the EU, which is then dumped on third markets in the South - forcing the Brazilian farmers to overexploit their land, the EU farmers to pollute their land nearby factory farms, and the small farmers in the South to be driven out of production.' - Francois Dufour, of Confederation Paysanne, a French farmer organisation

'We are always being told that our animals are not productive… but we believe that an animal needs above all to be adapted to its environment.' - Bour‚ima Dodo, of the Association for the Re-dynamisation of Livestock in Niger (AREN)

THE above are two aspects of the same approach that smallholder livestock keepers nurture. Six hundred and forty million smallholders and 190 million pastoralists raise livestock, according to the United Nations Food and Agriculture Organisation (FAO). Smallholder livestock keepers make up 70% of the world's poor. Farmer and civil society organisations, scientific as well as development organisations point out that it is not large factory farms and multinational corporations but small-scale family farms which hold the key to more productivity, environmental sustainability, and more employment.

The fact that the livestock industry is growing seven times faster than smallholder livestock systems is very likely a result of heavy financial and regulatory support. In the best case, where there are enough affluent consumers, traditional products can fetch a premium price in a niche market. More generally, however, smallholders tend to become contract farmers or agricultural labourers, or give up livestock raising. With regard to the loss of livelihoods for smallholders, the World Bank's World Development Report recommended relocating smallholders as a labour force in industrial agriculture. The FAO, however, warned that this absorbs only a small number of people.

The International Food Policy Research Institute (IFPRI) has, with its concept of 'Livestock Revolution', helped industrialised livestock production to spread to developing countries. It states that 'the growing power and leverage of international corporations is transforming the opportunities available to small agricultural producers in developing countries' and assumes that most if not all smallholders have a chance in the corporate value chains that could be seized with the help of technology. The reality is, however, very different.

Contracted in corporate value chains: Exploitation of producers instead of 'win-win'

Contract farming is the common approach to livestock industrialisation. Livestock contract farmers receive inputs (e.g. day-old chicks or piglets, feed, veterinary services) from the company that buys the broilers or pigs for slaughter. Various general types of contracts have been described; but their contents and impact, e.g. with regard to sharing of market risk, have rarely been studied. A reason may be that many contract farmers are obliged to keep the contents secret. Transparency of contract models would serve several public interests, as revealed by the case of Thailand.

The case of Thailand

Charoen Pokphand, today the largest Asian food processing company, started contract livestock farming in Thailand in the early 1970s. A study carried out by the NGO Focus on the Global South showed that livestock smallholders were urged to leave behind their traditional methods and engage in industrial farming. The interviewed contract farmers were provided far-too-optimistic projections regarding their income level and income stability. They were not aware of the size of cost and risk involved. None of them received a copy of the contract they had signed. Many ended up in debt. The companies refused to deliver inputs if they did not upgrade technologies, only increasing the farmers' indebtedness.

According to the Thai study, the interviewed broiler farmers were earning less than the minimum wage and the average income in agriculture at the national level, while layer hen and pig farmers were getting higher incomes on average. They expected income stability, but incomes are fluctuating and extremely difficult to anticipate and monitor. In addition, companies are not obliged to deliver chicks and piglets regularly. With the bird flu crisis, some farmers had been unemployed for more than six months without any prior notice or any compensation. The fluctuating gaps between the production cycles give companies a flexible source of supply, transferring the risk of market volatility to the farmers. Moreover, farmers are committed for many years because of their bank loans (five to 10 years), while companies sign only year-to-year contracts.

More burdensome than the low income is the overwhelming debt problem. The average household debt in the Thai case study was US$7,500. It is more than 10 times the national average for farming households already considered as heavily indebted. The debt makes it almost impossible for the farmers to quit the venture and creates a strong dependency on the contracting agribusiness companies.

These findings coincide with those of the Thai government. The Thai Senate Committee on Agriculture and Cooperatives in its 2003 report admitted that 'most of the contracts exploit farmers and producers. Farmers have to follow the conditions set by the processing factory which are not equitable'. Nevertheless, Charoen Pokphand is continuing to benefit from a long list of tax breaks.

Contract farming needs to be monitored. Contract conditions where farmers are not free to choose their veterinarians or providers of inputs such as feed and breeding stock should be ruled out. Strong regulations to govern contracts along food commodity chains may offer a solution to ensure small farmers a fair share in the trading, and require corporations to comply with social and environmental process and production standards.

Export production in Brazil: No coexistence with smallholders

Brazil has become the world's leading exporter of industrial livestock products; one of the reasons is the country's vast resources to produce concentrate feed. There was a fast process of concentration that made smallholders drop out of production. An important instrument was animal health regulations. According to the regulations of the World Organisation for Animal Health (OIE - Office International des Epizooties), exported animals and products must be disease-free without vaccination. This entails preventive culling whenever diseases occur, in order to maintain export status. Smallholders have not benefited but lost out in Brazil, and are unlikely to benefit from export-oriented policies elsewhere.

In the current phase of global trade expansion, several other countries like Vietnam have large programmes aimed at such exports, and many others facilitate the establishment of industrial livestock production, with a view to possible exports. However, large importing countries are fast stepping up their own production, and consumption in the South cannot be expected to reach current Northern levels.

Expectations regarding livestock export opportunities should be toned down, and livestock development policies should not be export-oriented due to the negative impact on local smallholders.

Animal health regulations against local breeds

Since the advent of industrial breeds, traditional breeds have been blamed for spreading diseases. In fact, local breeds have always carried pests and diseases, but have used their immune system and vitality to withstand them. In contrast, industrial livestock breeds have lost much of their resistance, immunity and vitality due to selection for high meat, milk or egg output. Moreover, animal diseases develop in the narrow cages housing the factory farm animals.

Avian influenza was widely used as a pretext to eradicate backyard poultry. In China, pig diseases broke out coincident with the first factory farms, and it is expected that smallholder pig production, in spite of a growing demand for pork, will disappear within less than a decade and be replaced by factory farms. Such culling is devastating, not only with regard to agricultural biological diversity, but also in terms of poverty alleviation and food sovereignty.

Mass culling of local breeds should be banned by rural development and biological-diversity-oriented international organisations and agreements, including the Convention on Biological Diversity.

Integration of Pakistani smallholders in the milk corporate value chain

Next to tax breaks, public subsidies and regulations that favour companies, not farmers or consumers, are instrumental to the livestock revolution. The 'Dairy Pakistan' plan is a government plan built on Nestle's strategy. Thanks to a new regulation stipulating that all milk sold to consumers has to be pasteurised, Pakistan's millions of buffalo milk producers will be forced into Nestle's value chain.

Pakistan is the fourth largest milk producer in the world, with the lowest production cost. Nestle is the most powerful consumer goods company in Pakistan. In order to increase its access to milk, Nestl‚ is also planning to replace the buffalos with industrial dairy cattle breeds, and Dutch as well as Australian public funds are supporting the replacement. Buffalos thrive well on local feed, and their milk is highly valued by smallholders and consumers. But industrial breeds, if fed with concentrate feed, produce a larger and steadier amount. The world's largest milk-processing factory is being set up in Kabirwala, Pakistan, by Nestle.

The local NGO Punjab Lok Sujag has stated that pasteurisation and packaging does not help consumers or farmers, who are both well supplied with healthy milk products, but corporations, which increase the price they charge consumers and decrease the price paid to farmers. Corporations like Nestl‚ have been living on heavily subsidised Western dairy farming systems. They are now substituting it with cheap supplies from small production units run by very poor Pakistani families.

In 2006, the European Union (EU) stopped subsidies on skimmed milk powder, and in 2007 all other dairy products followed. Between _800 million and 1.8 billion per year of export subsidies had put smallholder dairy production in the South under pressure for about four decades. Civil society organisations estimated that milk production in Asia and Africa was reduced by as much as 50%.

Regulations, tax breaks and subsidies favourable to corporations distort the market against smallholders. Taxpayers should advocate against such subsidies.

Myths of low productivity and overgrazing

Livestock development policies very often have distorted market forces in favour of industrial systems to the disadvantage of smallholder systems which were the main providers not only of products like fertiliser, meat, milk, eggs, wool, hides and skins, but also of essential services like transport, credit ('banks on hooves'), landscape conservation and environmental protection. The smallholder systems also formed an important basis of social organisation and cultural identity. The products and services they provide are still essential in many areas, rural and urban alike. Productivity comparisons that focus on just the quantity and quality of milk, meat or eggs and exclude products and services relevant to smallholders have resulted in biased evaluations.

Herders and pastoralists who migrate seasonally to find grazing for their livestock, have been blamed for overgrazing damages. However, the underlying causes of overgrazing have become more apparent in recent years, and many of them are related to occupation of ancestral grazing lands by other activities, especially crop cultivation and areas put under environmental protection. New pressure is added by the claim that drought-resistant agrofuel crops like jatropha should be grown on land that is 'not cultivated' - not acknowledging the fact that such land is often communal land used for grazing.

The environmental, social and economic benefits of smallholder livestock production should become part of national and international databases and be taken into account in policy decision-making processes. Livestock development policies and any other policies that affect the resources of smallholder livestock keepers must be addressed.

Rights of livestock keepers

Social movements have recognised the urgent need for pastoralists and other livestock keepers to reclaim their rights. Representatives of 30 organisations of pastoralists, indigenous peoples, smallholder farmers and NGOs from 26 countries in both the North and the South came together in the Swiss village of Wilderswil at the 'Livestock Diversity Forum: Defending Food Sovereignty and Livestock Keepers' Rights'. They met in parallel with the FAO's International Technical Conference on Animal Genetic Resources held in Interlaken in September 2007. They argued that not only livelihoods, but also food sovereignty are lost, and demanded a radical reorientation away from the risky and high-cost industrial livestock production system. They committed themselves to striving towards food sovereignty by defending the collective rights and interests of pastoralists and other small-scale livestock keepers. They demanded that:

* States should recognise the customary laws, territories, traditions, customs and institutions of local communities and indigenous peoples which constitute the recognition of the self-determination and autonomy of these peoples.

* Governments should accept and guarantee collective rights and community control over natural resources, including communal grazing lands and migration routes, water, and livestock breeds.

* Governments should engage in creating legally binding international instruments which would oblige states to guarantee the full respect of these rights.

* Community-based livestock keepers should participate in related policy decision-making, and effective ways need to be found for this.

Corporate market penetration and domination

The industrialisation of livestock production has reached most countries in the world. Three-quarters of the world's chicken, two-thirds of the milk, half of the eggs and one-third of the pigs are produced from industrial breeding lines, i.e. genetically very similar animals bred for high output. This occurs mostly using concentrate feed and frequent chemical veterinary treatments, often on large farms that are usually climate-controlled and have  increasingly heavy 'biosecurity' - measures controlling entrants to factory farms like personnel or visitors, feed, replacement animals - to prevent infections.

Over the past decades, high-bred cows, pigs and chicken have been introduced into developing countries, often aided by development cooperation programmes, and supported by measures such as subsidies, veterinary services, local research and animal health regulations. Where environmental conditions were too harsh for the exotic animals to produce or even survive, crossbreeding with local breeds was the approach advocated, as local breeds and production systems were usually considered unproductive and backward.

Poultry and pig factories integrated into corporate value chains are growing rapidly in Asia and Latin America, and poultry factories are sprouting up in many African countries. The four globally active poultry breeders - Erich Wesjohann Group (Germany), Hendrix Genetics (Netherlands), Groupe Grimaud (France) and Tyson (US) - have established multiplication and distribution systems for their hybrid lines in all these areas. Farmers cannot breed the hybrid lines, but need replacements for each production cycle, and this dependency - often contractually exclusive - has fostered an extreme concentration. With the help of hybrid pig lines, there is also a rapid concentration taking place in the pig-breeding industry, which is also spreading its - often exclusive - multiplication and distribution systems worldwide. The achievable rates of return have attracted seed corporations like Monsanto to invest in livestock genetics, including cattle and pig. Forward contracts and exclusive access to gene and information technologies, as well as patents, are also fostering further concentration.

Corporate market power exceptionally high in livestock genetics

The poultry genetics industry has concentrated from a dozen down to four globally active corporations within a few years. In recent years, multi-species livestock genetic corporations were formed, and, although they may be medium-sized with regard to turnover, their market power is exceptional (see box below). EW Group delivers 68% of the world's need for white egg layer genetics; Hendrix Genetics caters for around 60% of the brown egg layer genetics. Pig and cattle genetics market leaders, both belonging to the same corporation, Genus plc, are already holding large market shares. Large countries, like China and Russia, are developing their factory farms at high speed, using the same corporate genetics. More mergers and acquisitions are expected.

Market power of the food corporations remains a major problem which has not yet been properly addressed by mainstream organisations. The development of smallholder agriculture is often paralysed by their dependency on one product, on buyer monopoly, on a single source of input and credit, and on a market that is dominated by a few countries and corporations. Smallholders need alternatives to avoid such dependencies.

An independent multilateral anti-trust body, which would scrutinise mergers and acquisitions, and prevent corporations from abusing their market power, should be established. At the national and local level, policies are needed that regionalise production chains and favour rural economies over transnational commodity chains.

Genetic uniformity: Danger to world food security

The main industrial breeds of cattle, pig and poultry have been reduced to a very narrow genetic diversity. Although millions of animals of Holstein, Jersey and other dairy breeds exist, their genetics correspond to less than 100 animals, a gene pool size corresponding to endangered breeds. The same is true for major industrial pig breeds. In poultry, the breeding lines are kept within the few corporations as their trade secrets, and independent information on their genetic diversity is unavailable.

New reproduction and selection technologies are leading to:

* Higher selection intensity (e.g. DNA marker-assisted selection)

* Shorter generation intervals (e.g. embryo selection)

* More females than males in cattle and pig ('sexed semen')

* Replication of the same (clones)

i.e. a faster increase in genetic uniformity.

The new selection biotechnologies - often supported by public funding - are increasing uniformity within even shorter time periods. The animals bred for industrial farming are crippled with regard to vitality: their immune systems, fertility and mothering abilities have been opted out by breeders who focus on feed conversion rates - how quickly and efficiently the animals convert concentrate feed to meat, milk or eggs. Dairy cows are now discharged from herds and replaced after only two or three years of milk production, due to their lack of fitness. Scientists agree that keeping high densities of animals is a recipe for pests and diseases. High genetic similarity and decades of negative fitness selection are contributing to the perilous situation.

The livestock industry is facing substantial losses because of disease - for example, 10-15% of the potential profit in poultry production. Increasingly, the industry is demanding that the taxpayers should bear the cost of disease control. For example, in Germany, the cost of preventive culling is shared between farmers and taxpayers. Dutch farmers, who have to bear the full cost, are demanding that the EU harmonise the rules.

Agricultural genetic resources should be exempted from trade secret legislation, as well as from patenting. There should be public monitoring of agricultural genetic diversity including corporate holdings. Financial and regulatory support to local livestock breeds and extensive livestock keeping should receive high priority in agricultural policy decision making. Taxpayers should advocate against public bearing of the culling cost, and against public support to livestock biotechnology research.

Limiting environmental damage from factory farms

The enormous environmental damage caused by the livestock industry has hardly been assessed in economic terms. The FAO had alerted in a major study that industrial livestock production is at its environmental limits. It estimated that the production of nitrogen fertiliser just for growing the 33% of global crops that are fed to farm animals results in an annual carbon dioxide emission of more than 40 million tonnes. The livestock sector is the largest source of water pollution contributing to 'dead' zones in coastal areas, pollution of drinking water, human health problems, and emergence of antibiotic resistance. In addition, the genetic diversity of breeds has been replaced by a dangerously narrow genetic basis, which is kept in 'biosecure' farms in an attempt to prevent the increasing spread of diseases. Awareness of the lack of long-term ecological sustainability of these livestock production systems is growing, but alternative strategies still need to be developed.

There should be national and sectoral limits on nitrogen emissions as well as other pollutants. Importing countries should compensate producer countries for the ecological footprint of the products. 

No such thing as cheap meat

Increasingly, human diseases occur that are related to overconsumption of animal products, even in developing countries where average consumption has reached a critical level. With livestock industrialisation, more meat has become affordable to more consumers. A global meat consumption target of 90 g per person per day is considered adequate, an apparently small reduction from the current 101 g. In fact, a reallocation is due, since Northern countries are currently consuming 224 g on average. Chinese city dwellers have already reached the 90 g target.

Many consumers have started to realise, however, that they pay only part of the costs at the supermarket checkout. They are also paying for subsidies and grants at their tax offices - for livestock gene technology research, for preventing the spread of diseases, for dumping Northern products in the South, for conserving genetic resources in gene banks. Health and environmental damages take their toll as well. Consumer and animal welfare organisations all over the world concerned with the issue of industrial livestock production have been arguing that there is no such thing as cheap meat.

A German study showed that:

*          Conventional pork production is subsidised in Germany to the tune of billions of euros per year

*          External costs are 0.34 to 0.47 _/kg higher in conventional than in organic pork

*          The consumer price difference between organic and conventional pork stems largely from distribution and processing costs - economies of scale that would reverse if preferences shift to organic meat.

Support to consumer organisations and for cool climate food campaigns is needed. Eating more animal proteins than the recommended daily allowance should be discouraged as resource waste, since the body will burn excess proteins like any other energy resource, e.g. energy from plant foods. FAO member countries should take up the issue on their collaborative agenda.                                               

Dr Susanne Gura, a freelance consultant- and writer, has coordinated several international civil society and livestock-keeping community meetings, as well as the German NGO preparations for the 9th Conference of the Parties to the Convention on Biological Diversity in Bonn in 2008. Trained in human nutrition, rural sociology and economic development, she has worked for several civil society organisations and for the United Nations. She has advised the German government regarding its international agricultural research policy. The above article draws on her studies on livestock genetics companies and their impact on smallholders in developing countries.

References are available from:

*          Susanne Gura (2008): 'Industrial livestock production and its impact on smallholders in developing countries'.  Report to the League for Pastoral Peoples and Endogenous Livestock Development,

*          Susanne Gura (2008): 'Concentration in the livestock genetics industry. Presentation at NCCR Trade Regulation IP-9 Workshop 'Animal Breeding, Innovation, Trade and Proprietary Rights'. World Trade Institute, Berne, 27-28 November 2008

*          Susanne Gura (2008): 'Livestock: Contracted in Global Value Chains. Exploitation of producers instead of "win-win". In: World Economy and Development, Issue 3, 2008