There has been an explosive international growth in the extent of land allocated to the production of livestock feed. There have been changes in animal production techniques and a dynamic growth in consumer demand for safe, quality protein of animal origin. These changes mean that livestock production touches on a whole series of public policy issues as it directly affects smallholder farming, poverty, land tenure, equality, health, safety, the environment, to mention a few.
Externalities arise when in the course of producing or consuming a commodity, harmful or beneficial side effects arise that are not borne by the people who are directly involved in the production or consumption of the commodity. An example of a negative externality is the incorrect use of a chemical, which results in a mutation or counter-resistance to the targeted organism, which can ultimately threaten other populations. There are many other examples including the release of animal waste into natural waterways and the benefits gained by those who do not vaccinate against a disease from those who do vaccinate. A legalistic approach may be appropriate for specific problems due to externalities: however legal solutions consume time and economic resource hugely, and in some cases (for example in a developing country where the participants and/or non-participants have few resources) might not be practicable. Also legalisation that is unenforceable or not enforced can lead to well-developed corruption-driving mechanisms.
One approach to an externality problem would be for the parties to negotiate among themselves. In practice, the negotiated outcome might be difficult to achieve since it would in most situations require the agreement of many people. There may be a case, therefore, for the Government to legislate that all producers in the livestock industry participate in a specific program or for the Government to provide funding for the particular program.
A natural monopoly arises if a good or service can be provided at least cost by a single commercial entity. Under conditions of natural monopolies, unregulated markets are unlikely to yield satisfactory outcomes and governments often intervene. Entities may under-invest in certain areas and over-invest in other areas. Merger and acquisition activity in the USA and Europe has led to a relatively small number of large agricultural input and pharmaceutical firms coming to dominate research and technology in bio-technologies. On the one hand, this will allow huge expenditures on technology and its dissemination, but on the other hand it raises questions about access to the technology and the pricing practices used by the firms. Newly developed products such as vaccines can be protected from competition by patents, allowing the firms that produced the product to recoup its investment. The problem facing governments is how much to regulate the natural monopoly. The development of a new drug or vaccine may be highly risky and require a huge investment. Too much regulation will be a disincentive for firms to develop new drugs, while too little regulation could lead to a small number of firms (possibly colluding with one another) in the animal health industry charging prices that are too high. This latter trend is expected to increase as we move beyond 2000.
Economics classifies goods and services as being either public or private. A public good has two characteristics. First, the consumption of a good or service by one individual does not reduce the amount available for others to consume. Second, once the public good is provided, it is impossible or prohibitively expensive to exclude others from consuming the good. Agricultural extension services are viewed by some as public goods, but examples of pure public goods are not easy to find. A free-rider problem arises with public goods since individuals believe the good will be provided whether or not they contribute to the cost of providing the good. If sufficient people behave this way, less than the optimal amount of the public good will be provided.
Steane (per. com.) believes that the economic consequences of all aspects of animal production are not easily assessed. The long-term effect of the absence of animal fertiliser/humus on soil structure and soil fertility is not immediately obvious nor, indeed, are the effects of the use of farm mechanisation energy requirements or the environment. For example, the lack of animals to consume either waste products or by-products may well result in practices such as burning of rice straw, dumping of waste, or the use of costly waste disposal mechanisms. The reverse is also true. The feeding of waste to animals can and has caused problems. For example, feeding poultry manure to cattle has caused enormous losses due to botulism toxicity and feeding abattoir waste to cattle caused Bovine Spongiform Encephalopathy (BSE) or Mad Cow Disease. Very few studies have looked at the effects on health costs of changing agricultural practices.
Intensive livestock units can create major environmental and health problems. In a global context, the movement of feed for livestock is itself causing massive shifts in resources which, in the long-term, create serious problems in both areas i.e. the provider and the recipient suffering from nutrient deficit and surplus respectively. The producer fails to replenish land with manure while the recipient area suffers pollution problems seriously affecting crop production, water quality, etc. There is therefore a need to develop guidelines and legislation that aim to control the nutrient imbalances and the environmental consequences of industrial animal production (Sanchez 1998).
The generation of social inequities and marginalization of smallholders by large-scale producers may occur with industrial livestock production systems and governments need to address this problem.
Governments need also to be mindful of, and concerned about, and protect human health and be aware of the importance of livestock to food security and food production, particularly in low-income food-deficit countries where high land pressures emerge. Traditional livestock keeping is important as it forms the principle, and sometimes only, means for raising household level purchasing power.
Other concerns are the protection of the environment, locally, domestically, and internationally. This includes land/livestock relationships, environmental standards, policies and regulations and trade conflicts.
The concept of Area Wide Integration (AWI) i.e. governments controlling where industries develop, does afford the opportunity to not only consider equity issues but to also consider the epidemiology and economics of diseases when designing the system. This allows a Government to ensure the rural poor are not marginalised and to contribute to and benefit from the potential to increase the production of saleable animal products. AWI needs to be undertaken with a sound knowledge of disease control (among other disciplines). This knowledge will influence the preferred siting of livestock production systems not only globally but also regionally, within a country, within a catchment and even within a farm. It will influence the type of livestock facility (housing, etc.) and how it is constructed, where and how waste is treated and disposed, where and how inputs are purchased and delivered, and where and how products are processed. It will especially influence broad management decisions e.g. "the all-in all-out system" which has revolutionised disease control in intensive poultry units. In many ways the impact that can be made on disease control afforded by such a planned system is enormous. For example if abattoirs can be sited near the production facilities, animal movements across the countryside can be reduced substantially and thus disease control in general is made much easier. AWI offers another tremendous advantage in those disease free zones (DFZ) become a possibility within a country where it may have been impossible to achieve this across a country. Since the biggest constraint to the free movement of livestock is disease control the DFZ concept would free up trade particularly if the economic advantages were great.
Governments have a legitimate role, and many already play it, in insuring product safety. The control and monitoring of animal disease can move away from Government control when intensification increases and vertical integration occurs. The managers of very intensive systems often become secretive about diseases encountered and what measures are used to control them. One of the legitimate concerns of Government is to assure product quality and safety, and ways need to be developed to monitor food safety.
Applying concepts such as Hazard Analysis Critical Control Point (HACCP) may help as this is a structured attempt at quality control. However there is some debate about the appropriate type of legislation that can address some emerging quality control issues facing the livestock sector especially meat and milk production. For example the British Parliament is expected to approve a measure that would make British farmers directly liable for compensation for any illness caused by the food they produce. This means that a victim of food poisoning could sue a farmer if the source of the infection could be traced to a particular foodstuff and farm. A plaintiff would be required merely to establish a causal link but not to prove any fault or negligence on the part of the farmer. (Since the mid-1980s the principle of strict liability has applied to manufacturers but not to primary producers).
There are potentially serious difficulties in this decision, but nevertheless it shows a trend that will continue to grow up to and beyond 2000. Some of the difficulties are obvious when the produce of many different farmers is combined. It also does not seem reasonable to make farmers responsible for environmental hazards outside their control. It is perhaps unenforceable, and ignores that most food mishandling/poisoning comes from the consumer's home, not the producer. It also fails to account for the role of processing plants, such as butchers and restaurant establishments.