Thursday, 21 May 2009

A pig of a problem (updated x2)

Brad Taylor points out that pig farmers are using recent controversy in New Zealand over sow crates to argue for protection against international competition and I agree that these calls have little to do with animal welfare and a lot to do with rising prices.

I have two issues with the argument about banning imports.

First I don't see how this will help the welfare of the pigs at all. All it will do is help the profits of pig framers. Why? The argument seems to be that it is imports of pork that forced local farmers to use sow stalls to remain competitive. That is, the sow stalls are the least cost method of production and thus is used to maximise profits. Why would banning imports change this? If pig framers want to maximise profits after an import ban is imposed, as they seem to want to do now, then they would use the least cost method of production post-ban in exactly the same was as they do pre-ban. That is, they will use sow stalls. As a theory of the firm man I don't like arguments that seem to assume producers will change there objective function in the face of trade restrictions. The banning of imports will have no effect pig welfare.

Secondly would the ban really help the pork industry? The issue here is the elasticity of demand for pork and bacon type products. If this is high then a increased in price resulting from the banning of imports could lead to a large fall in quantity demanded. Is it likely that the elasticity is large? At a guess yes, there are many substitutes for pig meats: fish, chicken, lamb, beef etc. A ban may not help the industry as much as some pig framers seems to think.

A better approach, if farmers really do care about animal welfare, may be product differentiation. Much like free trade coffee, "high pig welfare pork". Farmers would need to set up a credible verification system that consumers can use to identify pork that comes from farms that use framing methods that don't mistreat their pigs. Then, as is the case for fair trade coffee, consumers will self identify as those who are willing to pay more for their pork products based on farming method.

Update: Matt Nolan posts on Cruelty to pigs, willingness to pay, and intrinsic animal rights.

Update 2: Eric Crampton has been thinking about Welfare and animal welfare: NZ pork edition.


Eric Crampton said...

1. There are plenty of places that sell free-range pork.
2. That doesn't solve the problem where there are vegetarians willing to pay to transfer animals from the barn sector to the free-range sector but can't express that preference through purchasing decisions.
3. It's unclear that a private charity that, supported by contributions from folks in 2, subsidizes the free-range sector to increase its market share solves the problem: if the vegetarians would worry that some welfare-conscious but price sensitive folks would be elastic on the extensive margin (move from no meat to free-range meat) because of the subsidy, then the vegetarians can be made worse off by their contributions if the disutility from increased overall meat consumption outweighs the utility from the contraction of the barn sector.

On distributional effects of a ban on imports: it has to help the local pork industry. I have a really hard time imagining a model where this isn't the case. Just think of your standard trade diagram where the local supply curve is upward sloping but foreign supply comes in at some price below that which would clear the market domestically. I'd even suggest that the fraction of eaten pork raised free-range would increase: the marginal domestic barn producer would have a higher cost product with the expansion of output, reducing the relative price difference between the barn raised and the free range pigs.

Paul Walker said...

How many vegetarians with such meddlesome preferences would you need for this to be a real problem?

I was just thinking that the drop in quantity demanded could be a lot larger than the framers may think it is.

homepaddock said...

Imports couldn't be banned on welfare grounds if domestic producers didn't meet the standards being required of overseas producers.

Even then there's a danger we'd be accused of erecting non-tariff barriers.

Anonymous said...

As a free range pig farmer who knows a pig farmer who grows pigs in an intensive indoor system, I have to say the only way to stop this type of farming is to ban imported pork. New Zealand pig farmers are often lucky to receive $20 per pig they grow - there is no way they would have the money to change systems even if they wanted to. It disgusts me that the farmer is blamed for trying to maximise profits - he farms like this because it has always been the accepted way of farming pigs and also because the returns are so low - he needs to be able to live. If imported pork was banned New Zealand pork would be worth more, therefore the farmer would get paid more and could afford to change methods of farming. There is only just over 100 commercial pig farms in the country, approx. 1% of which are "True Free Range" ie, born and grown outdoors not free farmed/barn raised. True Free Range pig farming is really only suited to small low intensity farms, so an increase in the price of pork meat would also possibly encourage more people into the industry. I could be wrong but to me this seems obvious!