THE World Bank Minding the Stock...The document was prepared by a team consisting of Jimmy Smith (Team Leader—Livestock, ARD, and coordinator of the study), Brian Bedard (Senior

Minding the StockBringing Public Policy to Bear on Livestock Sector Development

THE World Bank

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THE WORLD BANK

AGRICULTURE AND RURAL DEVELOPMENT DEPARTMENT

Minding the Stock:Bringing Public Policy to Bear onLivestock SectorDevelopment

Report No. 44010-GLB

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© 2009 The International Bank for Reconstruction and Development/The World Bank1818 H Street NWWashington, DC 20433

Telephone (202) 473-1000Internet www.worldbank.org/ruralEmail [email protected]

This volume is a product of the staff of the International Bank for Reconstruction andDevelopment/The World Bank. The findings, interpretations, and conclusions expressedin this paper do not necessarily reflect the views of the Executive Directors of the WorldBank or the governments they represent. The World Bank does not guarantee the accu-racy of the data included in this work. The boundaries, colors, denominations, and otherinformation shown on any map in this work do not imply any judgment on the part of theWorld Bank concerning the legal status of any territory or the endorsement or acceptanceof such boundaries.

The material in this publication is copyrighted. Copying and/or transmitting portionsor all of this work without permission may be a violation of applicable law. TheInternational Bank for Reconstruction and Development/The World Bank encouragesdissemination of its work and will normally grant permission to reproduce portions ofthis work promptly.

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All other queries on rights and licenses, including subsidiary rights, should be addressedto the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433,USA, fax 202-522-2422, e-mail [email protected].

Cover photos: Arne Hoel, Cattle grazing, Akagera National Park, RwandaSimone D. McCourtie: Poultry farmer has taken precautionary measures against avianflu. Ha Tay Province, Vietnam.Trinh Quang Vinh: Pig feeding in Son La province, Woman Union Microcredit ProgramVietnam

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F O R E W O R D vii

A C K N O W L E D G M E N T S ix

A C R O N Y M S A N D A B B R E V I AT I O N S xi

E X E C U T I V E S U M M A RY xiii

A Changing Livestock Sector in a Changing World 1The Opportunities 1The Challenges 2

Public Goods and the Scope for Intervention in the Livestock Sector 5Public Goods and Scope for Intervention in the Livestock Sector 6Public and Private Goods 6Global, National, and Local Public Goods 7Willingness to Fund Global Public Goods 10Collective Action 12

Livestock Externalities in Land and Water Use 15The Arid Tropics 16The Humid Tropics 20Water 25

Livestock Externalities, Crop–Livestock Interaction, and Nutrient Cycling 27

Nutrient Flows 28Collective Action 30Public Policies and Investments 31

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Table of Contents

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Livestock-Sector Externalities Relating to Greenhouse Gases and Global Climate Change 35

Livestock in the Carbon Cycle: Trends and Impacts 35Livestock in the Nitrogen Cycle 38Summary: Emissions 40Mitigation 42Policy and Investment Options 43

Livestock and Public Health Externalities 47Livestock–Public Health Interactions 48Livestock, Public Health, and Public Goods 50Defining the Institutional Architecture 50Collective Action in Managing Animal and Public Health 52Public Sector Interventions 53The Role of the Private Sector 54Policy and Investment Options 54

The Exclusion of Smallholders 57Equity 58Institutions, Policies, and Investments 59

Funding Implications 63The Road Ahead 65Funding Needs and Mechanisms 66Summary 67

Appendix:Overview of Main Policy Instruments 69

Bibliography 71

Tables1.1 Past and Projected Trends of Consumption and Production of Livestock

Products 22.1 Distribution of Responsibilities for Implementation, Funding, and Oversight

of Selected Key Services in the Livestock Sector 82.2 Indicators to Prioritize Measures Related to Global Livestock-related

Threats 112.3 Key Factors Affecting Priority of Global Threats 123.1 Technological Progress: Comparison of Key Technical Parameters in the Beef

Industry in the Amazon Area of Brazil, 1985–2003 23

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5.1 Global Methane Emissions from Enteric Fermentation in 2004 385.2 Summary of Current Impacts on the Carbon Cycle 415.3 Summary of Current Impacts on the Nitrogen Cycle 416.1 Examples of Outbreaks of Recent Highly Infectious Zoonotic Diseases of

International Significance 497.1 Net Margins (%) of Different Livestock Value Chains from North-Eastern

Kenya to Nairobi 58

Figures 2.1 Overview and Selected Illustrative Examples of the Main Categories

of Public and Private Goods in Livestock 74.1 Schematic Presentation of Development Pathways of Main Livestock

Production Systems and Selected Main Drivers 288.1 Average Annual Lending for Livestock Projects and Components Funded

by the World Bank, 1974–2000 64

Boxes2.1 Definitions of Public Goods 92.2 Institutions for Collective Action 133.1 Views and Perspectives on Degradation of Arid Rangelands 163.2 Managing Risk and Vulnerability in Pastoral Areas 203.3 Livestock, Aquaculture, Soybean Meal, and Deforestation in the Amazon 223.4 Payment for Environmental Services 244.1 Key Data on Nutrient Loading 306.1 Improving the Distribution of Private and Public Responsibilities in

Sub-Saharan Africa: Selected Results 528.1 New York Times Opinion 65

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After the considerable attention given to agricultural developmentduring the 1970s and early 1980s by both international donors and de-veloping countries, support precipitously declined during the 1990s.During the late 1970s, for example, the share of overseas developmentassistance (ODA) devoted to agriculture was between 12 and 15 per-cent, a proportion that fell to about 2.5 percent in 2000. Despite a smallincrease since then, this proportion was still only approximately 4 per-cent of ODA by 2004. It is hoped that the response by donors and de-veloping countries to the 2008 World Development Report Agriculturefor Development, coupled with the current global food crisis, willencourage them to make the necessary investments in agriculture.

The livestock sector in developing countries accounts for more thana third of the agricultural gross domestic product and is growing fasterthan most other agricultural subsectors. In many developing coun-tries, the sector had suffered benign neglect until the threat of highlypathogenic avian influenza (HPAI) propelled it onto the public devel-opment agenda. Driven by private investments, the sector has beenexperiencing what is termed the “Livestock Revolution.” Populationgrowth, urbanization, and most importantly, increasing income haveresulted in a rapid increase in demand for livestock products, whichis likely to continue well into the future. This growth of the livestocksector presents both enormous opportunities and challenges.

There is however a need to balance the strong privatesector–driven growth with substantially greater public support to putlivestock firmly on the path of sustainable growth. This report, there-fore, comes at an opportune time for policy makers and practitionersin developing countries and in the international community.Livestock is a major contributor to food and nutrition security forboth rural and urban people and it serves as an important source oflivelihood for nearly a billion poor people in developing countries. Itsimportance to attaining the Millennium Development Goals shouldnot be underestimated. Livestock policies and programs should aimto safeguard the enormous public goods that the sector provides,while addressing its adverse impacts on land, water, and the envi-ronment and the risks it poses to animal and human health.

We hope this report will help generate renewed interest in the live-stock sector and serve to promote the increased investment that isurgently needed.

Juergen Voegele

Director, Agriculture and Rural Development DepartmentThe World Bank

Foreword

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This document was prepared in its initial stage under the guidance ofMr. Mark Cackler, Acting Director of ARD of the World Bank, andwas completed under the leadership of Mr. Juergen Voegele (Director,ARD). The document was prepared by a team consisting of JimmySmith (Team Leader—Livestock, ARD, and coordinator of the study),Brian Bedard (Senior Livestock Specialist, Europe and CentralAsia Region, World Bank), Cornelis (Cees) de Haan (World BankConsultant), and Henning Steinfeld (FAO, Chief, LivestockInformation, Sector Analysis and Policy Branch). Special input ongreenhouse gas emissions was provided by Chris Delgado (LeadEconomist, ARD), Jock Anderson (World Bank, Consultant), and Tom Wassenaar (FAO, LEAD).

The team would like to thank the peer reviewers and other col-leagues who provided valuable comments on the initial concept noteand the resulting report: Dr. Harald Mooney (Stanford University),Dr. Joyce Turk (Senior Livestock Adviser, USAID), Eija Pehu(Agricultural Research Adviser, ARD, World Bank), StephaneForman (Livestock Specialist, Africa Region, World Bank), John Lamb(Agribusiness Adviser, ARD, World Bank), and Nwanze Okidegbe(World Bank Consultant).

The Team would also like to extend a special thanks to Dr. PeterBazeley for his contributions to the section on “Public Goods” in thelivestock sector.

Gunnar Larson and Diane Stamm edited the document. SoniaMadhvani and Lisa Li Xi Lau prepared the layout.

The Department for International Development of the UnitedKingdom provided additional support for the preparation of thisdocument.

Acknowledgments

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AI Artificial inseminationAIDS Acquired immunodeficiency syndromeAMA American Medical AssociationAVMA American Veterinary Medical AssociationARD Agriculture and Rural Development Department of the

World BankAU Animal UnitBOD Biochemical oxygen demand BSE Bovine spongiform encephalopathyCAHWs Community animal health workersCAPRi Collective Action and Property Rights (of the CGIAR)CDM Clean Development MechanismCERs Certified emission certificatesCGIAR Consultative Group on International Agricultural

ResearchCH4 MethaneCNA Brazilian National Agricultural ConfederationCO2 Carbon dioxideEU European UnionEU ETS European Emissions Trading SchemeFAO Food and Agriculture Organization of the United

NationsFMD Foot-and-mouth diseaseFNEC National Federation of Central African Livestock

OwnersFVE Federation of Veterinarians of EuropeGDP Gross domestic productGDS Groupements de Défense SanitaireGEF Global Environment FacilityGERFAE Global Emergency Response Fund for Animal

EpizooticsGHG Greenhouse gasGIS Geographic information systemGPS Global positioning systemHa HectareHIV/AIDS Human immunodeficiency virus/acquired

immunodeficiency syndromeHPAI Highly pathogenic avian influenzaI&R Identification and registrationIFA International Fertilizer Industry Association

Acronyms andAbbreviations

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Acronyms and Abbreviations

IFAD International Fund for Agricultural DevelopmentILRI International Livestock Research InstituteIPCC Intergovernmental Panel on Climate ChangeIUCN International Union for the Conservation of Naturekg Kilogramkm2 Square kilometersL LiterLEAD Livestock Environment and Development InitiativeLUAs Livestock users associationsMDGs Millennium Development GoalsN2 Diatomic nitrogenNDDB National Dairy Development BoardNGO Nongovernmental organizationNH3 AmmoniaNIs Nitrification inhibitorsNOAA National Oceanic and Atmospheric AdministrationN2O Nitrous oxideN2O-N Nitrogen content of nitrous oxideODA Official development assistanceOECD Organization for Economic Cooperation and DevelopmentOIE World Organization for Animal HealthPES Payment for environmental servicesPRSPs Poverty Reduction Strategy PapersPVS Performance of Veterinary ServicesP2O5 Phosphorus pentoxide RFID Radiofrequency identificationSARS Severe acute respiratory syndromeTKV Development Foundation of TurkeyUNEP United Nations Environment ProgrammeUNFCCC United Nations Framework Convention on Climate ChangeVS Veterinary servicesWHO World Health Organization

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Driven by population growth, urbanization, and increased in-come, the demand for animal-source food products in develop-ing countries is rapidly increasing. Livestock, which alreadyconstitutes 30 percent of the agricultural GDP in the developingworld, and about 40 percent of the global agricultural GDP, is one of the fastest-growing subsectors in agriculture. Growingdemand presents real opportunities for economic growth andpoverty reduction in rural areas. It could directly benefit the1 billion poor people who depend on livestock as a source ofincome and subsistence. Livestock also provides traction forabout 50 percent of the world’s farmers and is a source oforganic fertilizer for most of the world’s croplands, convertingwaste products into inputs in the production of high-valuefood. For these reasons, the sector has a critical role to play inmaking agriculture sustainable, in reducing poverty, and incontributing to economic growth.

Growth in the livestock sector is driven almost entirely byprivate investment. In terms of public sector investment andpolicy it has been the object of “benign neglect,” the results ofwhich are often anything but benign. Unregulated, livestockgenerates significant negative externalities. It contributes toland degradation and water pollution and to the erosion of biodiversity, and it is a major source of greenhouse gas emissions.It poses serious risks to public health, including diseases suchas highly pathogenic avian influenza (HPAI) and bovinespongiform encephalopathy (BSE). The neglect of livestock inpublic policy has also led to the exclusion of smallholders fromthe benefits of growth in this sector. These adverse impacts andmissed opportunities are likely to continue unless public policyand investment in the sector changes.

Left entirely to the market, incentives often lead producers tomake decisions contrary to larger social interests such as publichealth. Market failures can force competing small producers outof the market and make market entry difficult, if not impossi-ble, for many prospective producers. These market failuresneed to be rectified if the potential benefits of livestock-sectordevelopment are to be realized among smallholders and thecommunities to which they belong. Appropriate policies and ef-fectively enforced regulations are needed to mitigate the risksand negative impacts of the sector on public health and on the

Executive Summary

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environment. Active public sector engagement isgenerally required to bring about some level ofconvergence between the incentives of individualproducers and the interests of society.

A variety of factors led to public sector disen-gagement from the livestock sector and account forthe low levels of public funding for livestock de-velopment, both by national governments and in-ternational development agencies. Recognition ofthe fact that growth in the sector is led by privateinvestment, and the departure of global donorfunding for parastatal entities during the early1990s, contributed to a general neglect of the pub-lic goods quality of livestock production andconsumption—including some that are global pub-lic goods. Livestock is also notable for being an un-popular sector throughout much of the communityof nongovernmental and civil society organiza-tions, which gained considerable voice during thelatter 1990s when a number of international devel-opment agencies pursued broader engagementwith them. Anti-livestock advocacy by thesegroups and others was also effective in reachingpolicy makers, who became more reluctant to de-vote public resources to oversight of the sector.

The results of this disengagement by govern-ments and the international community have beenperverse. Owing to the lack of effective policies andregulatory frameworks, livestock remains both amajor contributor to pollution and greenhouse gasemissions and a major source of risk to publichealth.

This report presents an analysis of the issues re-lated to market failures in the livestock sector, andan examination of policy and investment optionsthat can be used to overcome them. Its principal in-tended audience includes policy makers and de-velopment practitioners. Much of the analysis willfocus on identifying the needs of the public sectoras it sets out to redress the imbalance between pub-lic and private investment and to begin establish-ing an enabling environment in which privatesector livestock development can take place in away that is consistent with public health, povertyreduction, and environmental sustainability. Whilethe report focuses on developing countries, muchof its treatment pertains to industrialized countriesas well, particularly with respect to issues of cross-cutting global significance, such as greenhouse gasemissions and emerging highly infectious diseases.

A number of prominent issues discussed in thisreport warrant a preliminary summary.

Public and private sector roles. There is a lack ofclear understanding among policy makers aboutthe distribution of public- and private sector rolesin providing livestock services and in the divisionof global, national, and local responsibilities inpublic policy relating to livestock. A clearer defini-tion and division of responsibilities would enablethe public sector to “do less but to do it better” onceit re-engages in the sector, in part by strengtheningpublic–private partnerships that are involved inthe public-goods facets of livestock production.Moreover, assigning a “global public good” char-acter to many livestock-related externalities iscounterproductive, and greater selectivity is rec-ommended based on economic principles. Amongthe issues that do warrant priority on the globalpublic-good agenda, the control of zoonoticdiseases and greenhouse gas emissions featureprominently.

Natural resource management. Grasslands covermore than one-fourth of the world’s terrestrial sur-face, and the livestock sector is the largest user ofagricultural land. The effects of livestock grazingon land are manifold, and depend mainly on theprevailing ecosystem. In the arid rangelands, the ex-tent of land degradation is subject to considerabledebate. Estimates vary, identifying between 20 and70 percent of arid rangelands as being degraded.What is clear is that arid ecosystems are being usedat full capacity and that they are highly resilient.Most arid rangelands are common property, andpublic policy and development programs can playa major role in their management. Developing al-ternative employment to stimulate outmigration is a priority. Programs that facilitate herd mobilitywould effectively increase the resilience of pastoralsystems. Insurance services and destocking and re-stocking facilities would help producers managerisk. Payment for environmental services (PES)would create alternative income sources and reori-ent pastoral production systems from their narrowemphasis on animal products to land management.In the humid tropics, livestock-induced deforesta-tion is driven by technological advances and thefast-growing demand for feed grains. The earlierdriving force of subsidization of cattle ranching has greatly diminished. The recommended policiesand investments require a combination of

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regulation (zoning), incentives (PES), and researchfor alternative feeding systems. While the share ofwater withdrawal (7 percent) and depletion (15 per-cent) by the livestock sector is still relatively small,the current and projected worldwide water short-ages also warrant more attention to reducing thesector’s water requirements. Policy and investmentshould prioritize increasing the efficiency of irriga-tion and reducing pollution from livestock waste.About three-quarters of the meat and milk pro-duced in the developing world come from mixedfarming systems, and a large part of the remaindercomes from fast-growing high-input–high-outputindustrial systems. Recycling of nutrient and live-stock waste is the chief environmental issue relatedto these production systems. In principle, they usethe livestock sector’s best system of recycling, withlivestock by-products (manure, traction) essentialfor crop farmers and crop residues critical for live-stock farmers as livestock feed. However, regionalimbalances are common, with excessive concentra-tion in some areas. The availability of infrastructuredefines the geographic location of production. Inearlier stages of development, processing tends toconcentrate around urban centers. As infrastruc-ture improves, processing shifts to feed-producingareas. A number of policy options are available topromote a more even geographic distribution oflivestock. These policies generally pursue a strat-egy of intensification without concentration, en-couraging more intensive forms of production, butpreventing the intensive production units fromconcentrating in one area. The negative environ-mental impact of the sector would be mitigated byimprovements in infrastructure, and a level play-ing field for waste recycling such as organic fertil-izer and biogas-generated power—including theuse of carbon trading schemes.

Global climate change. In light of the current de-bate on global climate change, greenhouse gasemissions from the livestock sector are a critical pri-ority. And the figures are staggering. Consideringemissions along the entire commodity chain, thelivestock sector currently contributes 18 percent oftotal human-induced greenhouse gas emissionequivalents, including about 9 percent of total car-bon dioxide (CO2), 37 percent of methane (CH4),and 65 percent of nitrous oxide (N2O) emissions.This exceeds the emissions of the global-transportsector. As a global public good, urgent action by the

global community is required. This should startwith creating awareness at the highest political lev-els because livestock emissions have not yet beenaddressed by global decision-making institutions.Raising high-level awareness should lead to an ac-tive participation of livestock sector stakeholdersin the post-Kyoto negotiations. Technical optionsinclude: (a) carbon sequestration on grazing land;(b) reduction of methane emissions from low-inputruminant production, in particular, dairy, throughimproved feeding; and (c) reduction of methaneand nitrous oxide emissions from animal waste,through energy recovery and improved wastemanagement.

Public health. While livestock products are criti-cal in the diet of vulnerable groups in the develop-ing world, the livestock sector also poses majorhealth risks. Over the past 15 years, 75 percent ofthe human diseases that have emerged have beenof animal origin. Livestock-induced foodborne dis-eases affect millions. Meat has also become an im-portant factor in the obesity crisis, which has begunto affect the developing world. In addition, the so-called diseases of trade, such as foot-and-mouthdisease and classical swine fever, cause billions ofdollars in economic losses. The recent emergence ofhighly pathogenic avian influenza has focused theworld’s attention on the need for efficient early-warning response and control systems. The inte-gration of human and animal health systems in anecosystems context, as pursued with the One World,One Health strategy, would be an important overar-ching organizing framework, but one that needs tobe made operational. At the global level, improvedcoordination and risk-management tools (compen-sation, communication) need to be developed andimplemented. Increased international support totechnology development for the control of the “dis-eases of the poor” is also needed. At the nationallevel, emphasis needs to be placed on strengthen-ing the public-good services of surveillance andearly warning and early response to diseaseoutbreaks.

Poverty. There is a significant risk that livestock-sector development will exclude smallholders.Access to the fast-growing and more sophisticatedmarket for meat and milk products is dependent onhigher quality and stricter safety standards, greateruniformity of the product, stricter reliability ofsupply, and verifiability of origin. Owing to the

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economies of scale enjoyed by large producers,practically all these standards carry higher costsper unit product for smallholders. Small producersand processors risk being crowded out of more re-munerative markets. Quality and safety standardsalso provide opportunities and can add value andgenerate employment along the supply chain.Capitalizing on these opportunities will requiresupport for collective action through cooperatives,associations, or contract farming and vertical inte-gration. For contract farming to function well inthis capacity, a sound legal framework is requiredto ensure the proper enforcement of contracts. Forcooperatives to develop properly, government in-terference should be avoided. Public-safety stan-dards should be set with careful attention to thegovernment’s capacity to enforce them, to the rele-vance of the public health risk they seek to address,and to the overall competitiveness of the market.Producers generally have little leverage in the set-ting of private sector standards. Finally, smallhold-ers should be assured of equal treatment in theincentives frameworks—for instance, in subsidies.

Investment needs. For these policies and pro-grams to work, the prevailing imbalance between

public and private investments in the livestocksector needs to be redressed; this will require majorinvestments by the public sector. While more pre-cise estimates will be needed, a preliminary assess-ment of the costs of increasing the preparedness to contain emerging zoonotic diseases amounts toabout US$300 million per year over the next threeyears, and a moderate reduction of greenhouse gas emission, based on carbon-emission trading,would require US$1.2 billion. These amounts aresignificantly lower than the several billions of dol-lars of economic losses incurred by emerging ani-mal diseases and are only 10 percent of the currenttrading volume in emission rights. Yet they are stillconsiderably higher than current investments.Investments at the national level would have to in-crease considerably as well. To arrive at those lev-els, it would be necessary to create a much greaterawareness of the potential and challenges of thelivestock sector and a broader consensus that busi-ness as usual is not enough. Concerted action inestablishing sound incentive frameworks and inproviding supporting investments is needed iflivestock is to make a significant contribution toeconomic development.

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1

THE OPPORTUNITIESSetting the scene. Livestock is the principal user of global land and asignificant source of livelihood for about 1 billion people, of who800 million are poor. It affects, positively or negatively, the natural-resource base, public health, social equity, and economic growth. Asexperience has shown in both industrialized and developing parts ofthe world, if the sector is left to the market, major negative effectsoccur. Public policy is therefore necessary. The purpose of this docu-ment is to inform policy makers in developing countries and practi-tioners working in development agencies about issues related tolivestock development and to recommend policies and investmentsthat can enhance the sector’s contribution to equitable economic de-velopment and mitigate its negative impacts on public health, socialequity, and the environment.

The trends. Livestock is one of the fastest-growing agricultural sub-sectors in developing countries. Its share of agricultural GDP is al-ready 33 percent and is quickly increasing. This growth is driven bythe rapidly increasing demand for livestock products. Populationgrowth, urbanization, and increasing income are driving demand foranimal-source foods in developing countries, a phenomenon de-scribed by Delgado et al. (1999) as the “Livestock Revolution.”Between 1975 and 2001, for example, annual per-capita consumptionof poultry, pork, beef, and milk grew by 5.9, 4.0, 3.2, and 1.7 percent,respectively. The share of world consumption of meat by developingcountries increased from 36 percent in 1983 to 57 percent in 2003 andof milk from 24 percent to 45 percent (Speedy 2003). However, de-spite this rapidly increasing share of global consumption in develop-ing countries, per-capita consumption is still comparatively low.Current meat consumption in the United States, for example, is ap-proximately 124 kilograms (kg) per capita per year, while the globalaverage is 38 kg. Per-capita consumption of milk in the United Statesis approximately 118 kg per year, as compared with 47.5 kg in India—the developing country with the highest consumption rate. Table 1.1contrasts the consumption of livestock products in developed anddeveloping countries.

As a result of the increased demand, total meat production in thedeveloping world tripled, from 45 million tons to 134 million tons,between 1980 and 2002. Developments have been most dynamicin countries that experienced rapid economic growth, notably in

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East Asia and led by China. China alone accountedfor 57 percent of the increase in total meat produc-tion in developing countries. Production was verylargely concentrated in monogastrics (animals witha single-chambered stomach)—notably, poultryand pigs, which together accounted for 77 percentof the increase in production. This was a fourfoldincrease as compared with the 111 percent increasein ruminant production (cattle, sheep, and goats)during the same period.

In developed parts of the world, commercializa-tion took place a long time ago, and the transitionfrom extensive to intensive production oftenentailed major negative environmental conse-quences. Livestock production and merchandizingin industrialized countries are big business, ac-counting for 53 percent of the agricultural GDP.However, production and consumption of live-stock products in the developed world are nowgrowing only slowly or stagnating. Health con-cerns, low or zero population growth, and satu-rated markets have resulted in a scant 0.5 percentannual increase in per-capita meat and milk con-sumption. Between 1980 and 2002, total meatproduction increased by just 22 percent. Poultryand pig production increased by only 1 percent

annually, while ruminant meat production actu-ally declined by 7 percent over the 22-year period.

The combination of strong growth in demand inthe developing world and limited to negativegrowth in demand in industrialized countries rep-resents a major opportunity for livestock keepers indeveloping countries, where most demand is metby local production, and will continue to be wellinto the foreseeable future. The opportunity carriesgreat significance for the Millennium DevelopmentGoals, particularly for those of reducing povertyand improving food security and nutrition.

THE CHALLENGESLivestock-sector development generates substan-tial risks and negative externalities as well as op-portunities, all of which must be addressed bypublic policy. These externalities spill over from in-dividual producers into society and become mani-fest in environmental impacts, in public healthrisks, and in the frequent inability of smallholderproducers to meet more exacting consumer andindustry standards.

• The production of greenhouse gases, land degra-dation, water pollution, and the destruction of

A Changing Livestock Sector in a Changing World

2

Table 1.1: Past and Projected Trends of Consumption and Production of Livestock Products

Developing Countries Developed Countries

1980 1990 2002 2015 2030 1980 1990 2002 2015 2030

ConsumptionAnnual per-capita meat 14 18 28 33 38 73 80 78 83 88

consumption (kg)Annual per-capita milk 34 38 46 57 67 195 200 202 204 211

consumption (kg)Total meat consumption 47 73 137 191 257 86 100 102 113 122

(million tons)Total milk consumption 114 152 222 330 449 228 251 265 278 292

(million tons)

ProductionAnnual per-capita meat 14 18 28 33 38 75 82 80 85 91

production (kg)Annual per-capita milk 35 40 50 62 73 300 301 266 270 280

production (kg)Total meat production 45 43 134 190 255 88 103 105 116 126

(million tons)Total milk production 112 159 244 359 491 352 378 349 369 387

(million tons)

Source: FAO 2006b, 2006c.


plant biodiversity. It is estimated that the live-stock sector produces 18 percent of anthro-pogenic carbon dioxide (CO2), and that,depending on the estimate about 20 to 70 per-cent of the world’s grasslands are degradedby overgrazing. For example, in the UnitedStates, the sector is responsible for about one-third of the nitrogen and phosphate loadingof freshwater resources (Steinfeld et al. 2006).The sector is also a major force behind the lossof biodiversity from some of the world’s mostdiverse ecosystems.

• The global public health risks from emerging andreemerging animal diseases, in particular thosetransmissible to humans (zoonoses) with pan-demic potential. Other diseases, though notthreatening to human health, are of extremeimportance to livestock health and representenormous barriers to trade. Total economiclosses resulting from recent disease scares runin the tens of billions of dollars.1

• The social exclusion of smallholder producers.Consumers are demanding better quality andsafer livestock products, and the expandingsupermarket sector is imposing increasinglystricter international standards. With signifi-cant economies of scale required to meetthose standards, smallholder producers runthe risk of not being able to compete, and arebeing crowded out of the sector.

Answering these challenges will involve selec-tive priority-setting by responsible public institu-tions. Mitigating the negative impacts of thelivestock sector in such a way that the positive con-tributions of the sector are allowed to materializewill entail substantive public policy and invest-ment. While capitalizing on positive externalitiesrelies principally on private investment, the effec-tiveness of that investment in producing positiveimpacts depends in large measure on the creationof a broader enabling environment. This enablingenvironment is very much the province of publicpolicy, and would address such matters as tenuresecurity, the provision of public infrastructure, andother factors that influence the investment climate.

While much of this policy is outside the scope ofthe livestock sector itself, and is therefore beyondthe scope of this paper, chapter 7 devotes much ofits treatment to promoting access to marketsamong smallholders and the potential this repre-sents in terms of poverty reduction.

Public sector responsibilities for livestock man-agement are the focus of this paper. While policymakers working in public institutions are thepaper’s principal intended audience, the interfacebetween policy and the private operators thatpolicy is directed toward is a central facet of theanalysis presented here. This introduction war-rants another important qualification. While live-stock issues in developing countries are the paper’sprincipal subject matter, the issues it addresses arefundamental to livestock in industrialized countriesas well. Issues such as carbon emissions trading,payment for environmental services, the expansionof cropland in the developing world to meet de-mand in industrialized societies, and a variety ofmitigation efforts clearly apply to both developingand industrialized countries, and in an interrelatedworld, should be of interest to policy makers inboth.

Chapter 2 presents the theoretical underpin-nings of the scope for public policy in the livestocksector by differentiating public goods and privategoods. It also defines global, national, and localpublic goods. These distinctions are at the heart of the question of appropriate public political involvement and funding.

The following chapters review the areas thatlivestock development affect, the scope of its im-pacts, and the institutions and policies that areneeded to mitigate or enhance those impacts.Chapter 3 focuses on land and water pollution inecosystems used for grazing. Chapter 4 addressesnutrient cycling and waste management in ecosys-tems used for crop and livestock production, andthose based mainly on feed-crop-based nutrientsystems. Chapter 5 treats livestock’s role in theglobal nitrogen (N) and carbon (C) cycles underly-ing climate change. Chapter 6 discusses the inter-face between livestock health and public health.Chapter 7 then provides a description of one of themost important strategies to ensure that the live-stock sector contributes to poverty reduction—helping smallholders to get access to markets.Chapter 8 concludes with an inventory of develop-ment implications.

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1 For example, foot-and-mouth disease (about US$30 billion inthe United Kingdom); bovine spongiform encephalopathy(BSE, about US$6.5 billion); and, more recently, highly patho-genic avian influenza (HPAI, more than US$1 billion).



5

The rationales for active public sector involvement in the livestocksector are straightforward given the externalities generated by live-stock. Inadequate disease protection of a herd on an individual farmcan put the health of animals on other farms at risk. That risk canextend to national or even global levels. Land degradation from over-grazing upstream in a watershed can affect water quality down-stream. Indiscriminate crossbreeding with exotic breeds can causefuture generations to forever lose invaluable genetic diversity.Greenhouse gas emissions from individual livestock herds contributeto global climate change and affect the well-being of societies glob-ally. All of these are issues in which short-term individual incentivesoften diverge from long-term societal interests. Cost saving on vacci-nations, using cheaper feeds that emit more greenhouse gases, and avariety of individual measures to achieve short-term gains in animalproduction can contribute to outcomes that conflict with long-termsocietal interests such as those relating to good health, clean water,stable climates, and genetic diversity.

The lack of alignment of individual incentives with the broader in-terests of society is problematic. Among its most instructive illustra-tions is that of vaccination. Vaccinating livestock reduces the overallburden of disease, and is an important element of livestock health.For the individual livestock producer however, vaccination is acost—one that many producers will seek to avoid. When a largeenough number of producers vaccinate their herds, disease pressureis reduced, and for the producer who avoids the cost, his or her deci-sion not to vaccinate affords a “free ride” that is effectively paid forby others.

Incentives in well-functioning markets can often lead individualsto seek a free ride in accessing free goods and services that are per-ceived as being useful. The value of public goods such as clean waterand vaccinated animals on the other hand is often not represented ormanifest in full market values. Market forces do not bring about theconvergence of short-term objectives of income maximization of theindividual farmer with the greater, longer-term interests of the envi-ronment, public health, or social equity.

The effects of market failures spill over as externalities onto thirdparties who are not directly involved in the livestock industry. Publicpolicy, such as regulations and taxes can be used to address these ex-ternalities and to secure public goods that are more in accordancewith the larger interests of society. In situations in which government

Public Goods and theScope for Intervention in

the Livestock Sector

2


institutions lack the capacity to support the provi-sion of public goods, certain forms of collective ac-tion may be used to fill the gap, and are examinednear the end of this chapter. With increasing glob-alization and the growing complexity of the globaleconomy, issues relating to the types of collectiveaction required to produce appropriate levels ofpublic goods are gaining attention at differentpolicy levels.

The public goods that relate to the livestock sec-tor are the subject of this chapter. Two issues inparticular pertain to public policy that addressesthe externalities and public goods that are gener-ated by livestock. These concern the division ofroles and responsibilities between the public andprivate sectors and between international, national,and local agents.

PUBLIC GOODS AND SCOPEFOR INTERVENTION IN THELIVESTOCK SECTORPure public goods share two qualities—nonexclud-ability and nonrivalry.

• Nonexcludability (or indivisibility of the bene-fits) means that when provided to one party,the public good is available to all.

• Nonrivalry means that the consumption of thepublic good by one party does not reduce theamount available to others.

There are a number of exceptions in which theseprinciples are not clear-cut, and in which privategoods and public goods overlap.

• Merit goods are goods that the governmentfeels that people, if left to their own decision,will under-consume. They ought, therefore,to be subsidized or provided free at the pointof use. Livestock extension and vaccinationsagainst contagious diseases may fall into thiscategory.

• Moral hazards occur when a party insulatedfrom a risk behaves differently from the waythat party would act if it were fully exposedto the risk. The typical example of a moralhazard occurs in the insurance sector, whenan insured person might be less vigilantagainst risk than an uninsured one.

• Asymmetry of information arises, for example,in the purchase of feed and drugs, when

smaller producers lack access to pertinent in-formation about the quality of the input orlack knowledge to assess the reliability of theinformation presented to them.

• Economies of scale occur when the costs of sup-plying certain goods decrease when they areproduced and supplied in large quantities.It is often used by international organizationsto justify, for example, their involvement indisease-control campaigns.

PUBLIC AND PRIVATE GOODSA number of public goods, such as national secu-rity, border protection, and quarantines to preventanimal epizootics,2 benefit the entire society. Theseare nonrival and nonexcludable public goods. Alllivestock keepers benefit from the freedom of dis-ease that is provided by these public goods, and thebenefit to any one livestock keeper does not dimin-ish the benefit to other livestock keepers. These,therefore, qualify as “pure” public goods, justify-ing full oversight and budgetary support from thepublic sector. Freedom from disease also benefitssociety at large in that it reduces the price of animalproducts and protects against the disruption oflocal and national economies that are associatedwith disease outbreaks.

However, in reality, most claimed public goodsare “impure” in that they only partially meet thecriteria of nonexcludability and nonrivalry. If theyhave a low rivalry but high excludability, the term“club goods” is often used. If they have a low ex-cludability, the term “common pool goods” isused. Figure 2.1 illustrates this terminology withexamples from the livestock sector.

The characteristic of the good determines to asignificant degree how it should be funded and im-plemented. For goods with both public and privategood features, joint oversight and cost sharing be-tween the public and private sectors is needed.Taking into account these characteristics, Table 2.1provides recommendations on how services re-lated to the livestock sector can best be overseen,funded, and implemented.

It warrants qualifying that Figure 2.1 andTable 2.1 are only indicative. Other factors in

Public Goods and the Scope for Intervention in the Livestock Sector

6

2 An outbreak of disease affecting many animals of one kind atthe same time (Webster’s Dictionary).


addition to government preferences will determinehow the supply of a public good is funded andmanaged. These include a variety of social andinstitutional factors, including the stage of thecountry’s economic development, and the humanresources that are available. In the poorest devel-oping countries for instance, and among the poor-est segments of the population, environmentalfactors such as air and water quality tend to be as-signed less value than in industrialized countriesor among wealthier segments of the population.Mitigating the negative effects of livestock on theenvironment therefore receives lower priority inthese conditions.

Genetic improvement is another case in point.Artificial insemination is normally considered apurely private good in that the farmer captures allof its benefits. However, insofar as it can be re-garded as a merit good, some level of governmentsupport may be warranted. Through membershipin livestock breed societies, artificial inseminationalso assumes the potential to be something of a clubgood. While government intervention to promotethe introduction of artificial insemination for a fi-nite initial period to familiarize farmers with thetechnology is sometimes justified using an “infantindustry” argument, in practice phasing out suchtemporary subsidies has proven difficult.

In farmer advisory services, cost sharing, oreven full cost recovery, is increasingly common inOrganization for Economic Cooperation andDevelopment (OECD) countries, but is not yet pos-sible in most of the developing world, and collec-tive action can be justified as a “merit good.”

With respect to animal health, the public sectorin meat-exporting countries will assign muchhigher priority to the control of animal diseasesthan will meat-importing countries.

With regard to food security, the supply of ade-quate and affordable food is perceived by manygovernments of developing countries as a publicgood, although this has led to inefficient policiespursuing self-sufficiency.

Adaptation of such considerations about thenature of goods and services to local conditionsis clearly of critical importance.

GLOBAL, NATIONAL, AND LOCALPUBLIC GOODSThe issue of the distribution of responsibilitiesbetween local, national, regional, and internationallevels raises similar concerns. In general, responsi-bility for oversight can best be allocated accordingto the principle of subsidiarity. This means that the

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Figure 2.1: Overview and Selected Illustrative Examples of the Main Categoriesof Public and Private Goods in Livestock

Common Pool GoodsCommunal rangelandsWater (volume and quality)Air quality (including protection against climate change)Animal genetic resources and other sources of biodiversity

Private GoodsOn-farm production, processing, and distribution (quality standards)Most clinical veterinary and breeding servicesMost input supplies (feed, seed, etc.)

High

Rivalry

High

ExcludabilityPure Public GoodsPoverty reductionBorder quarantine Food-safety inspectionProtection against contagious diseasesAnimal-health intelligence Disease-data systems

Club GoodsStandards and certification systemsFace-to-face advisory servicesCollective action in disease(e.g., tick dips) control



8

Table 2.1: Distribution of Responsibilities for Implementation, Funding, and Oversight of Selected Key Servicesin the Livestock Sector

Responsibility forFunding Implementation Oversight

Pure Public GoodsVeterinary healthBorder quarantine Public sector Public sector Mainly national Veterinary

services (VS)

Surveillance of main Public sector Preferably in subcontract Mainly district service, with clearcontagious diseases with private operators lines to national VS, with

international support in developingcountries and international coordination among all countries

Early alert and response for Public sector Preferably in subcontract Mainly national VS withmain contagious diseases with private operators international support

Vaccination Public/private partnership Mostly private sector Mainly national VS withinternational support

Vaccine development Public/private partnership Mostly private sector National or regional publicinstitutions

Disease data systems Public/private partnership Mainly public sector Mainly national VS withinternational support

Food safety and human Public/private partnership Preferably in subcontract Mainly local, within overallpublic health with private operators guidelines of national and,

eventually, international buyers

Research and education Public/private partnership Preferably private with Public/private at correspondingsubcontracts levels

Common Pool GoodsRange resourcesLegislative framework Public national sector Public/associative at National legislation, with

community level district-level oversight

Grazing and water Individual (fees) and Associative at community Mostly at community level, management associative sector level with district-level oversight

BiodiversityAnimal genetic resources National and international National associative National level

public sector and/or public sector

Club Goods Parasitic disease Mainly private; initial Community Community and local VScontrol (dips, etc.) subsidy possible

Standards and Mainly public Private Publiccertification systems

Advisory Services Private/Public Mainly Public Private/Public

Private GoodsFeed-supply services Private Private Public/private for quality control

Milk and meat processing Mostly private Mainly private; could be Private, with public oversightfunded through a local on food safetytax on milk

Milk and meat marketing Mainly private Public/private Private

Clinical veterinary services Private Private Veterinary associations/orders

Breeding services Private Private Public/private partnerships


supply and funding of the public goods should bemanaged and overseen at the lowest possible levelof government. The recommendations presentedin Table 2.1 suggest both the appropriate distribu-tion of responsibilities between the public andprivate sectors and the optimal levels at whichdifferent facets of oversight should be carried out.Again, however, the determination needs to beadapted to the specific social and economic contextwithin which a country’s livestock sector operates,an to the capacity of and resources available to theinstitutions concerned.

The question of how to appropriately apply theconcept of global public goods has assumed par-ticular importance in recent international develop-ment community debates about public sectorinterventions to control HPAI. The concept is alsoused in addressing the livestock sector’s environ-mental impacts, particularly its contributions togreenhouse gas emissions, climate change, and bio-diversity loss (Steinfeld et al. 2006). Internationalinstitutions such as the World Organization forAnimal Health (OIE) and the international agricul-tural research institutions of the ConsultativeGroup on International Agricultural Research(CGIAR) use the global public goods concept as arationale for engagement in a variety of areas.

There is, however, a danger that the term“global public good” is becoming overused, whichmay be an almost inevitable result of the variety ofdefinitions it is attributed in the literature.

• “. . . a good, which it is rational, from the per-spective of a group of nations collectively, to

produce for universal consumption, and forwhich it is irrational to exclude an individualcountry from consuming, irrespective ofwhether that nation contributes to its financ-ing” (Smith and MacKellar 2007).

• “. . . a good . . . with benefits or costs, that ex-tend across nations and regions, across richand poor population groups and even acrossgenerations” (Kaul et al. 2003).

• A good focused primarily on the geographicorigins and characteristics of the beneficiaries(International Task Force on Global PublicGoods 2006) (see Box 2.1).

Smith and MacKellar (2007) warn that the term’sfrequent use has led it to lose “some of its value asa general tool for resource mobilization, and is atrisk of being attached to almost anything promot-ing development” in the field of human health.“This” they continue “overstretches and devaluesthe validity and usefulness of the concept.” It is,therefore, important to clearly circumscribe what aglobal public good constitutes. With regard to live-stock, the concept’s application to poverty reduc-tion, enhancing public health, and protecting theenvironment is fairly straightforward. Somewhatless clearly, it is applied to livestock trade and itsrole in providing economic stability and fosteringeconomic growth. The differentiation betweenglobal and public goods at lower, more detailedlevels, is often less clear.

Inappropriate use of the concept of global pub-lic good also entails a moral hazard. National in-stitutions should properly maintain responsibility

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Box 2.1: Definitions of Public Goods

A local public good benefits all the members of alocal community, possibly to include the citizens ofmore than one country.

A national public good benefits all the citizens of astate.

A domestic public good benefits all members of acommunity situated within a single state. Nationalpublic goods are domestic public goods, but domesticpublic goods need not be national public goods.

A regional public good benefits countries belong-ing to a geographic territory.

A global public good benefits all countries and,therefore, all people.

An international public good benefits more thanone country. Global and regional public goods areboth international public goods.

Source: International Task force on Global Public Goods 2006.


governing the management of resources such aslivestock using funds from their national budgets.Some national institutions may however designatethat resource a “global public good” in order torationalize transferring that responsibility and thefinancial requirements it entails to international in-stitutions. For example, overstressing the globalbenefits of the conservation of particular animalbreeds, or the dangers of spillover of animaldiseases, might lead national animal production orveterinary services to neglect their own fundingand respective conservation and disease-controlresponsibility. This could endanger the long-termnational sustainability of that capacity. Nationalinstitutions are often better equipped thaninternational agencies to handle country-specificchallenges, and their budgetary support can beless fickle than that of international institutions.

Moreover, international interventions in the an-imal health area aimed at supporting global publicgoods are often “vertical” in orientation—focusingon one disease or a specific environmental issue. Inthis way, they also manage to attract the majorityof the local funding and relevant human resources.Such specificity can be at the cost of the more struc-tural broad-based needs related to general veteri-nary health issues. This is also evident in thehuman health sector, with global initiatives such asthose to combat human immunodeficiency virus/acquired immunodeficiency syndrome (HIV/AIDS), tuberculosis, and malaria, and, to asomewhat lesser extent, in the current and pastglobal veterinary health initiatives to control HPAI,foot-and-mouth disease (FMD), and rinderpest or“cattle plague.” For example, while rinderpest inAfrica has been successfully eradicated with fund-ing from the European Union, the capacity toeradicate a cattle disease has apparently notengendered an increase in the capacity for surveil-lance for HPAI. Following the recent outbreak inSub-Saharan Africa, it emerged that the surveil-lance and early warning capacity for HPAI waspractically nil. Extensive new inputs were requiredto enable the services to detect HPAI outbreaks atan early stage. Overreliance on international sup-port for global public goods can therefore backfireon long-term stability through service provision atnational and more local levels.

On the basis of these definitions and considera-tions, table 2.2 presents a simple classification ofvarious major global threats concerning livestock.

This classification is based on the share of thepopulation affected, the degree of public good(based on the definitions of nonexcludability andnonrivalry), and on the degree of “globalness,”which is the term used here to describe the featureof global public goods that are national and “cannotbe provided adequately through domestic policyaction alone but require international cooperationto be available locally” (Kaul et al. 2003).

WILLINGNESS TO FUND GLOBALPUBLIC GOODS Perceptions naturally play a major role in interna-tional decision making regarding support forglobal public goods. The World Bank’s 2007 GlobalEconomic Prospects report Managing the Next Waveof Globalization (World Bank 2007b) compared in-ternational efforts in mitigating global climatechange, overfishing, and human health risks (par-ticularly HPAI) and concluded that the speed of re-sponse of international support depends on: (a) thetime scale of the threat, (b) the degree of scientificconsensus on the severity and approach to mitigatethe threat, (c) the benefit to own country or region,(d) the number of countries involved, and (e) theeffectiveness of the institutions involved. Applyingthose conditions to the three global threats re-viewed in this report, HPAI clearly received thehighest priority, as also evidenced by the establish-ment of the Global HPAI Funds.

The World Bank Global Public Goods report(2007c) also presents criteria for Bank involvementin addressing global public goods. They are:

• There should be an emerging consensus in theinternational community that global action isrequired.

• There should be an institutional gap that theBank could help fill to encourage globalaction.

• The Bank should have the requisite capabilitiesand resources to be effective.

• The Bank’s engagement should be consistentwith its development mandate and relativestrengths.

• Global action by the Bank should support orcatalyze other resources.

If these criteria are applied to those factors withhigh global goods character from Table 2.3, the


10


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Table 2.2: Indicators to Prioritize Measures Related to Global Livestock-related Threats

Share of Global Degree of

Global Public Service to Population Degree of Non- Degree ofGood Produce Good Affected Nonrivalry excludability “Globalness”a Rationale and Comment

Protectionagainst highlycontagiouszoonoticdiseases

Livestock-relatedenvironmentalsustainability

Poverty reduc-tion throughlivestockdevelopment

Economicstability andgrowth

All aspectscombined

Vaccinedevelopment

Early-warningsystems

Early response

Food safety

All aspectscombined

Greenhousegas (GHG) mitigation

Conservation ofwild biodiversity

Conservation ofdomestic animalgeneticbiodiversity

Water-pollutioncontrol

All aspectscombined

Access naturalresources

Access totechnology andknowledge

Access to policyand appropriateinstitutions

All aspectscombined

Adherence tointernationalstandards

High

Mostlylimited,potentiallyhigh

High

Moderate

High

High

High

Moderate

Low

Low

1 billion(16 percentof globalpopulation)

Moderate

High

High

High

High

High

Moderate

High

Moderate

High

High

Absolute

Moderate

High

Low

Moderate

Low

High

Moderate

Moderateto low

Moderate

High

High ifdevelopedthroughprivatesector

High

Moderate

High

High

Absolute

Moderate

Moderate

Low

Moderate

Low

High

High

Moderateto low

Low

High

Moderateto high

High

Moderate

Low

Moderate

High

Moderate

Moderate

Low

High

Moderate

Moderateto high

Moderate

High

Moderate

Has potential rapid transboundaryspillover and, therefore, a highlevel of global public good.

Has increasingly become a privategood, but remains in the publicdomain for “orphan” diseases.Because it is linked to povertyreduction, there is some level ofjustification of global public good.

Surveillance and early-warningsystems have high returns.

Has much stronger nationalbenefits/characteristics.

Provides important national andlocal public and private benefits.

GHG emission by livestockaffects global climate.

Some of the benefits can becaptured by local and nationalauthorities.

Mostly local benefits.

Has been declared global publicgood by global community(Millennium DevelopmentGoals [MDGs]).

Mostly national, as manytrade-offs are involved.

Depends on geographicapplicability of technologyand knowledge.

Mostly national, as many trade-offs are involved.

In livestock, mostly trade-relatedissues.

Benefits mostly captured bynational actors.

a. A subjective indication of the extent to which international cooperation is required to deliver the particular global public good (followingKaul et al. 2003).


emerging picture points to early warning forhighly emerging infectious diseases (pandemics)and greenhouse gas emissions, as high priorityareas for investment.

There are, however, clearly synergies betweenthe different levels, and it is, therefore, neither ad-visable nor feasible to clearly distinguish betweenglobal, national, and local public goods. For exam-ple, one of the most important inputs in the controlof highly infectious emerging zoonotic diseases isthe availability of an efficient surveillance system.This increasingly is recognized as a global publicgood. Such an efficient system would also benefitthe detection of nonzoonotic and less-infectiousdiseases. The key differentiation here, however,would be that the follow-up to the early detection(culling, compensation, vaccination) for the infec-tious emerging zoonotic diseases would be a globalresponsibility, while these tasks for other diseaseswould be more a national responsibility.

COLLECTIVE ACTIONLaws and regulations issued and enforced by thepublic sector are the most common tools used tocorrect externalities, because funds to provide pos-itive incentives are often not available. But in mostdeveloping countries enforcement agencies are un-derfunded and underskilled and lack a strong in-stitutional base. More or stricter regulations couldthus lead to noncompliance, fraud, and corruptionamong the agencies responsible for enforcingthem. In those situations, alternative approaches,either market-led or based on collective action—ora combination of the two—can be a useful compo-nent in a package of measures to address marketfailures and externalities in the livestock sector.Collective action seeks to promote the self-regulatory capacity and negotiating power ofprivate agents to manage externalities. In this chap-ter some of the main principles of collective action


12

Table 2.3: Key Factors Affecting Priority of Global Threats

Number ofTime Scale of Degree of Benefit to Countries

Service to Control Threat Mitigation Scientific Country’s Own Involved in EffectivenessThreat Threat or Measure Consensus Mitigation Solution of Solution

Control of zoonotic All aspects Short High Moderate High Moderatediseases combined

Vaccine Medium High Moderate High Highdevelopment

Early warning Short High High High High

Early responses Short Moderate High High Moderate

Food safety Long High High High Moderate

Livestock-related All aspects Long Moderate High High Moderateenvironmental combinedsustainability GHG emission Long High Low High Low

reduction

Conservation of High High Moderate High Highdomestic animalgenetic biodiversity

Livestock-induced All aspects Long Medium High High Moderatepoverty reduction combined

Access to technology Long High High High Highand knowledge

Economic stability All aspects Long High High Medium Highand growth, combinedincluding trade


are reviewed. Specific examples regarding protec-tion of the environment and ensuring public healthand poverty reduction are provided in the chaptersthat follow.

Forms of Collective Action

Collective action can be organized in differentinstitutional models. The three most commonforms are associations, cooperatives, and commer-

cial vertical integration models. Their definitionsare provided in Box 2.2, although in the literaturethese sometimes overlap, and particularly in liter-ature on poverty reduction, all three forms areoften used.

Collective action, particularly by cooperatives,has been most successful in promoting marketaccess for smallholders. With minor exceptionshowever, cooperatives have not performed well inthe area of environmental management.

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Box 2.2: Institutions for Collective Action

Associations are defined as any group with a commonobjective that can pool part of its resources to achievethat objective. This is the most flexible form of collec-tive action in terms of the legal responsibilities of itsmembers.

Cooperatives are defined as user-owned, user-controlled businesses that distribute benefits on thebasis of use; they are generally legally and financiallymore tightly organized than associations.

Commercial vertical-integration models are definedas contractual arrangements led mostly by a processorcovering more than one component of the productionand processing/distribution chain, owning or havingcontracts with its upstream suppliers and its down-stream buyers. This is probably legally and financiallythe most binding type of collective action.



15

Livestock depends on land for grazing and for the production of feedgrains and oilseeds for supplementary feeding. Grasslands, used bylivestock, occupy about 34.8 million square kilometers, or 26 percentof the world’s land surface. Land for feed-crops occupies about 211million hectares, or about one-third of the total global area cropped.As such, the livestock sector is the world’s largest land user (Steinfeldet al. 2006).

Extensive grazing systems of the arid lands, generally known asrangelands, constitute the largest category area-wise (60 percent of allpastures). They are characterized by their low biomass production,and are located mostly in dry and/or cold climates. This category isparticularly dominant in developed countries, where it represents al-most 80 percent of grasslands. In developing countries, arid range-lands account for just below 50 percent of total pasture area. Theremaining grazing systems consist mostly of grasslands in higher-potential areas. In the humid and subtropical savannahs these grass-lands produce relatively more biomass while grasslands in temperateclimatic zones are characterized by lower biomass but higher qualitygrasses.

Livestock impacts land and water in many ways. On the negativeside, overgrazing by ruminant livestock leads to nutrient depletion,soil compaction, and ultimately to soil denudation and erosion. In ad-dition, livestock’s feed-grain and oilseed requirements lead to theexpansion of the arable agricultural frontier, in particular in subhu-mid and humid tropical forest areas, resulting in soil erosion and bio-diversity loss. On the positive side, livestock can enhance soil fertility,and, through animal traction, improve the soil’s physical qualities.Investment options for the arid and humid tropical grazing systemsare summarized below, together with a description of the forces thatdrive livestock development in these zones, and the impacts thisdevelopment has.

This chapter reviews the livestock sector externalities related toland and water use. Owing to the different nature of the issues thatprevail in arid and humid areas, they are treated separately. In aridzones, the prevailing pastoral systems are already producing at max-imum capacity, but their growing population is affected by a reduc-tion in grazing areas, leading to a downward cycle of landdegradation and poverty. There are too many people for the availableanimals. On the other hand, the annual vegetation of these ecosystems

Livestock Externalities inLand and Water Use3

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has proven to be remarkably resilient. A paradigmshift is needed in pastoral development by:

• Enhancing the resilience of pastoral systems,through more emphasis on alternativeemployment generation outside the sector,enabling herd mobility (rather than currentprevailing policies of “settling the pastoral-ists”), promoting collective action (pastoralassociations) and introducing risk manage-ment systems (destocking and restocking,insurance); and

• Developing systems for payment for environ-mental services (PES), to enable pastoralists toshift from being producers of meat and milkto being stewards of the landscape, conserv-ing land and biodiversity.

In humid zones, diminishing availability of fish-meal and recent sanitary restrictions on the use ofother sources of animal protein have increased thedemand for high quality protein feed from plantsources. Together with improved livestock tech-nologies, this has made ranching and soybean pro-duction financially viable without subsidies. It hasalso made livestock in humid zones a major forcein deforestation. Development inputs need to focuson the conservation of the most sensitive areas as aglobal public good. This means:

• Introduction and stricter enforcement of reg-ulatory instruments for zoning; and

• Intensification of production and payment forenvironmental services to reduce the pressureon highly biodiverse areas such as forests.

For water, the emphasis would have to be on in-creasing the efficiency of water use, in particular inthe production of feed-crops, and on the reductionof pollution. Water use efficiency can be increasedthrough investment in irrigation infrastructure andincreased cost recovery for water. Water pollutioncan be reduced through technology developmentin feeding (better balancing and reduction of phos-phorous content) and manure management andstorage. These matters are described in greaterdetail in chapter 4.

THE ARID TROPICSThe Footprint

Livestock contributes to soil degradation in thearid areas through overgrazing and soil compact-ing. However, there is still a strong debate on thedegree and reversibility of such livestock-inducedland degradation (Box 3.1). Current scientific evi-dence points to the strong resilience of the annualvegetation of these areas and the high level of effi-ciency with which the tropical arid rangelands areused. For example, sub-Saharan arid rangelandsannually produce from 0.6 to 3.2 kg of animal pro-tein per hectare (Breman and de Wit 1983). This is

Livestock Externalities in Land and Water Use

16

Box 3.1: Views and Perspectives on Degradation of Arid Rangelands

There are a number of views on the degradation ofarid lands. The more significant ones include thefollowing:

• The pessimistic views of, for example, theUnited Nations Environment Programme (UNEP)(Dregne and Chou 1994) and others, with 35million km2, or 70 percent, of the arid landsdegraded, the figure still often quoted in theinternational press;

• The “dynamic perspective” introduced byTucker and his colleagues from the NationalOceanic and Atmospheric Administration

(NOAA) (Tucker et al. 1985), who point to an“expanding and contracting Sahel”;

• The “nonequilibrium” school of rangeecologists, Roy Behnke and Ian Scoones (1993),which follows up on the earlier findings ofTucker and stresses rangeland dynamics and thestrong resilience of apparently degraded areas;and

• The “soil fertility” school, exemplified byBreman and de Wit (1983), which stresses thecurrent productivity of these rangelands and theimportance of the soil nutrient balances.


substantially higher than the average 0.4 kg ofanimal protein per hectare per year obtained inranches in the United States or Australia undersimilar rainfall conditions. While part of this higherproduction might arguably be due to overgrazing,long-term trends show rather stable production inareas such as the Sahelian rangelands (de Haanet al. 2001). This points to high productivity andresilience.

Moreover, livestock is only one of the manycauses of land degradation. Cropping in marginalareas and firewood cutting are also importantcauses (de Haan et al. 2001). Livestock-inducedland degradation occurs mostly around settlementareas, water points, and along livestock trek routes.In addition, livestock-related land degradation ismostly induced in times of drought, when theperennial vegetation of trees and shrubs is cut forfodder.

Environmental Impacts

Carbon emissions. Range degradation can cause therelease of large amounts of the greenhouse gas car-bon dioxide (CO2) into the atmosphere, aggravat-ing global climate change. Steinfeld et al. (2006)estimated an annual emission from grasslanddegradation of 0.1 billion tons CO2 equivalent,most of it coming from the arid rangelands.However, if properly managed, arid rangelandscan also be an important carbon sink. For example,the Australian Center for Research on ClimateChange estimates the total capacity for carbon stor-age of the Australian rangelands at 48 billion tonsCO2 equivalent,3 if the rangelands were restored intheir original, pre–livestock grazing, state.

Impacts on biodiversity. The world’s arid range-lands are among the richest depositories of biodi-versity, in particular of large mammals. Forexample, the species wealth in Sub-Saharan Africaapproaches the biodiversity of the tropical forests(Blench and Sommer 1999). Overgrazing by live-stock reduces plant biodiversity and puts other an-imal species that rely on this biodiversity, underpressure. So does the increased encroachment ofsites of high potential by arable farming. Whileexact data on an ecosystem-wide basis are notavailable, in Kenya, for example, a reduction in

large mammals in arid rangelands of 33 percentwas reported between the 1970s and the 1990s(Blench and Sommer 1999).

Social Impacts

The estimated pastoralist population4 occupyingthe arid rangelands is about 200 million.5 They areamong the poorest and most destitute agriculturalpeoples in the world. Environmental degradationand longer and more frequent droughts are forcingthem into a downward cycle of increased hungerand food-aid dependency. For example, the foodaid expended during the 2006 drought in Kenyahad an estimated cost of about US$150 million forapproximately 3.5 million people; the governmentof Kenya paid US$13.7 million, or about 50 percentof the total costs, from its own budget over the firsttwo months of the year.6 Moreover, because thenatural resources are used at maximum efficiency(Breman and de Wit 1983), the scarcity of land andwater are making conflicts over these resources in-creasingly common. Even more serious, these con-flicts are aggravated by the recent introduction ofautomatic weapons in these areas.

The Driving Forces

A good overview of the driving forces of arid landdegradation and the pastoral downward cycle ofpoverty and loss of livelihoods is provided in theALive Policy Notes on Drought and Mobility.7

These forces are summarized here.

• Population pressure. Population growth, lead-ing to competition between livestock keepersand farmers for resources that are alreadybeing used at maximum capacity, is one of theroot causes of the downward trends. Thiscompetition is particularly strong for the sitesof high potential (valley bottoms, oases) andwater. Encroachment of these areas by farm-ers can destabilize a well-functioning pastorallivestock system.

• Deteriorating internal social discipline. Aridrangelands are predominantly communally

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4 Peoples deriving their livelihood at least mostly from grazingdomestic livestock.

5 Based on the figure for 1993 of 180 million reported by Sereand Steinfeld (1996).

6 http://www.wfp.org/english/?ModuleID=137&Key=2031.7 www.alive-online.org.

3 http://www.greenhouse.crc.org.au/counting_carbon/rangelands.cfm.


owned, but grazed by individually owned an-imals. They are, therefore, typically commonpool goods. Under conditions of communalgrazing, the incremental feed required for anadditional animal is free to the individualherder, and the incremental labor requiredto herd that additional animal is practicallyzero. Keeping an animal until it reaches itsmaximum weight and therefore maximumprice is therefore fully rational from the fi-nancial perspective of the individual herder.This maximization of individual objectivesconflicts with society’s objective of maintain-ing high-yielding rangelands. Traditionally,this conflict between individual and societalobjectives was managed through resource-access discipline based on strong social cohe-sion. With such cohesion, social (community)goals could be enforced to prevail over indi-vidual objectives. However, the disintegrationof the social structures in pastoral societiescauses this access to shift into “free for all,”and the “tragedy of the commons” starts toapply. As a consequence, rangelands rules re-garding the use of fire, access to water, anddry-season grazing areas are being grosslydisregarded.

• Climate change has multiple effects. In arid re-gions these include greater weather variabil-ity, with more droughts and floods, reductionin overall biomass availability, and direct im-pacts on animal health, growth, and repro-duction. This might lead, on the herd side, tochanges in species composition, with a shift tosheep and goats, and its resulting effect on thevegetation. This in turn may lead to greatervulnerability of local people, and increasinglevels of conflict on resource access.

• Inappropriate government policies. Several poli-cies contribute to the current downwardtrends. Restrictions on herd mobility are animportant case in point. Herd mobility is crit-ical for the sustainable use of arid rangelandsbecause it enables herds to most efficientlygraze the fragmented vegetation patches re-sulting from the erratic rainfall in these areas.Government policies to encourage or force settlement—and encroachment by farmers ofdry-season grazing and watering resources—has greatly reduced herd mobility. This hasaccelerated degradation and increasedpoverty. Inappropriate policies limiting herdmobility are not the only policies that interfere

with sustainable range management. Othersuch policies serve to provide inappropriateincentives. Providing free inputs for privategoods, such as free water, grazing, and emer-gency feed supplies and free services, such asveterinary services are examples. Increasedcost recovery would cause pastoralists to needmore cash, and hence provide an incentive forthem to sell more animals than if they oper-ated in a purely nonmonetary environment.Finally, permitting the import of subsidizedmeat from the OECD (mainly European)countries, which, while providing urbaniteswith low-cost animal products, was threaten-ing the livelihood of the pastoralists. The in-crease in meat prices worldwide has, for now,eliminated this practice.

Collective Actions

Collective actions to manage land and water re-sources focus on upstream-downstream interac-tions within the context of a watershed, and ofteninvolve the management of common resources.User and producer associations and other types ofcollective organizations have been able to exertpressure on upstream users to correct environ-mentally inappropriate behavior such as excessivewater extraction and practices that lead to pollu-tion and erosion that reduce the availability andquality of water for downstream users. In SouthAsia in particular, wide experience has beenaccumulated by employing watershed-based ap-proaches to natural resources management (WorldBank 2001). A review (Kerr, Pangare, and Pangare2002) of these experiences reveals the main lessonsto be the following:

• Participation of all users is essential; the mostsuccessful operations consist of a combina-tion of good social organization and soundtechnical improvement.

• Short-term benefits are needed to gain partic-ipation of the beneficiaries for the long-termobjectives and benefits.

• Downstream users, while generally poorer,often carry a larger share of the costs than thewealthier upstream users, who often haveaccess to more irrigated land.

• Improvements in common lands (mostly usedfor livestock grazing) were least sustainable.

Relatively less evidence is available from watershedgroups in sub-Saharan Africa. The Consultative


18


Group on International Agricultural Research(CGIAR) System-wide Program on CollectiveAction and Property Rights (CAPRi) has developedresearch and pilot activities in the East AfricanHighlands that similarly underscore the need tocombine participation and technical innovation. InLatin America, watershed development is increas-ingly linked to the payment for environmental ser-vices, especially for water quality in water-scarceenvironments such as those in Mexico.

Because communal land access is a prominentfeature of arid pastoral systems, pastoral associa-tions that manage these common resources playedimportant roles in a number of World Bank–funded arid land projects in the 1990s. However,experiences with this form of collective action havebeen mixed at best, particularly in situations ofhigh population pressure, where social cohesionand internal discipline had often eroded (Pratt, deHaan, and le Gall 1997). A review of the perfor-mance of the World Bank–funded LivestockProject in Mauritania for example, found a dis-crepancy between the focus of the World Bank onsustainable range management, and the focus ofpastoralists, who were more interested in theupgrading of water and animal health services(World Bank 1999). Similarly, in Mongolia, the ini-tial reemergence of traditional communal manage-ment systems of family groups (khot-ail), after thetransition, now seems to have been replaced by in-tensive competition for grazing resources by indi-vidual families, with increasing gaps between poorand rich pastoral families (Franklin and Mearns2003).

Policies and Investments

Production systems in the areas described aboveare complex and the scope for maneuvering is lim-ited. However, key policy, institutional, invest-ment, and scientific interventions could include thefollowing8:

• Facilitating outmigration. Most regions, partic-ularly those with land degradation in Sub-Saharan Africa, have reached the limits oftheir human-carrying capacity, and popula-tion pressure needs to be reduced. Providingpastoral peoples with education and micro-credit services to enable them to find alterna-tive sources of livelihood is therefore an

important priority for policy and investment.Some populations will also require concertedand purposefully targeted food aid adminis-tered with policies that avoid cultivatingdependency on food aid.

• Managing climatic variability. Drought is prob-ably the main event that sets off irreversibleland degradation. Ameliorating this problemrequires developing early-warning and re-sponse systems at national and local levels,strengthening livestock market infrastructureto enable swift offtake of animals in times ofimminent drought, and swift restocking asrains return. This can include creatingtransport-subsidy schemes to facilitate earlydestocking; livestock-loss insurance schemes,such as those introduced in Mongolia(although there they were for losses thatoccurred as a result of ice storms, which are amore discreet event than drought, see Box 3.2);and establishment of fodder reserves.Because global climate change is a global pub-lic “bad,” this warrants global funding.

• Investing in infrastructure. When markets andinfrastructure improve, as they did in theMachakos region of Kenya, the downwardcycle of land degradation can be reversed(Tiffen and Bunch 2002). Improved marketinfrastructure encourages early offtake andmarketing of livestock and increases access toservices, which will increase the participationof the pastoralists in the cash economy.

• Changes in the incentive system with two majorcomponents.

° Developing systems of payment for environ-mental services (PES) in arid ecosystems. Thearid areas currently provide only a limitedcontribution to total animal production,and there is even less potential for produc-tivity to increase. However, there is potentialfor significant contributions to carbon-sequestration and biodiversity in aridrangelands. A paradigm shift in the waythe global community views and remuner-ates these rangelands is, therefore, needed.This implies a shift from “pastoralists asproducers of meat and milk” to “pastoral-ists as managers of landscapes.” It willimply the development of payment sys-tems that reward pastoralists for the provi-sion of services in carbon-sequestration,biodiversity conservation, and water-quality improvement. Incentives have to be

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198 See also Pratt, de Haan, and le Gall 1997; and ALive 2006.


performance-based and possess the correctbalance between individual and collectiveremuneration for the services provided.There is not much experience with thesesystems, but earlier PES systems includedsome revenue sharing for wildlife conser-vation. Because of the global public goodnature of the cause and the effects, thiswould be suitable for global funding.

° Increasing the level of cost recovery in veteri-nary services, water, and even grazing toreduce the marginal cost-benefit ratio of in-cremental growth of almost mature andhence slow-growing animals. This encour-ages earlier offtake. As this concerns mainlyprivate goods, cost recovery is justified. Bymaking the fee progressive (a higher fee peranimal for larger herds), such an incentivesystem would support an equitable use ofthe rangelands, although the politics of sucha system are sensitive. It would also requirethe establishment of a sharply targeted feed-aid policy. Feed aid ordinarily discouragesdestocking and therefore threatens the long-term sustainability of the rangelands.

• Enabling institution building, adapted to thespecial requirements of mobility and riskmanagement. This will include education,health, and animal health services that areadapted to the mobile nature of the pastoralsystems. There is good experience with mo-bile schools for nomadic children in Iran andother West Asian countries. Because govern-ment influence in those areas is normallyquite limited, the development of pastoral as-sociations is also critical, although experiencewith those groups is mixed.

THE HUMID TROPICSThe Footprint

Livestock ranching has for a long time been associ-ated with the deforestation of tropical rainforests.However, this connection has gained increasedsignificance in recent years, as the rate of defor-estation increased and the role of livestock in theprocess became more pronounced. In the Amazonarea, deforestation has accelerated from about18,000 km2 per year over the 1990–2000 decade, to


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Box 3.2: Managing Risk and Vulnerability in Pastoral Areas

Several World Bank–funded projects in pastoral areasapply the principles outlined in the text. The KenyaArid Lands Natural Resource Management Projectshave developed an efficient participatory early-warning system, based on simple anthropometric (skinand body) measures and livestock and grain priceratios. These objective indicators link into district andnational contingency plans with again clearly definedstages of alert. This has helped to get the decisions onthe allocation of food aid away from the politicians,where allocation was often based on party allegiance,rather than needs, into the hands of the community ofdirect stakeholders.

Two World Bank projects in Mongolia seek toprotect nomadic herders from major climatic risks,mainly ice storms, which in 1999–2000 caused thedeath of at least 10 percent of the national herd. The

Mongolia Sustainable Livelihoods project seeks toimprove marketing through improvement in feedreserves, and, to improve the resilience of the nomadsto drought and ice storms through agriculturaldiversification.

The Mongolia Livestock Insurance project is estab-lishing an index-based insurance scheme to compen-sate herders whenever the adult mortality rate exceedsa specific threshold for the district. The first layer oflosses would thus be for the herder, the second for pri-vate industry, and the third (disaster level) would becovered by the project. The focus on a district andindex-based system would reduce adjustment costsand the ex ante moral hazard of reduced care and theex post moral hazard of falsely declaring the death ofanimals.

Source: World Bank 2005. Index-based Livestock Insurance Project.


about 25,000 km2 per year in recent years, and grewat 0.6 percent during 2000–2005 (Margulis 2004).9 Itis estimated that in 2010, livestock in SouthAmerica will be grazing on 24 million hectares,which were still forests in 2000; 60 to 70 percent ofthe conversion in the Amazon area is for cattleranching or feed-grain production; the rest ismostly for small-scale subsistence farming. TheCentral American picture is more varied. CostaRica has an expanding forest area and Panama andColombia have a very slow deforestation rate of 0.1 percent per year, but countries such as ElSalvador and Guatemala have rates of more than 1percent per year. Dairy and crop farming seem tobe the driving forces. In Asia and Central Africa,legal and illegal timber extraction is the main dri-ving force and livestock development plays only aminor role in the deforestation of the tropical rain-forest. This chapter will, therefore, focus almost ex-clusively on the humid tropics of the Americas.

Environmental Impacts

Carbon emission. The conversion of tropical forestinto cropland causes the release of large quantitiesof CO2. Amazonian evergreen forests account forabout 10 percent of the world’s terrestrial primaryproductivity and 10 percent of the carbon stored. Itis estimated that the conversion of tropical rainfor-est to grassland for livestock ranching annuallyproduced about 1.7 billion tons of CO2 equivalentand 0.7 billion tons for the conversion of tropicalforest into cropland for livestock feed (corn andsoybean) (Steinfeld et al. 2006).

Biodiversity. The South American rainforest areais the largest rainforest biome in the world, withabout 2.5 million insect species, tens of thousandsof plants, and some 2,000 birds and mammals. Therate of loss of the biodiversity because of livestock-induced deforestation is a matter of discussion. Theofficial view is that about 400 species are at risk ofextinction, although some estimates are dramati-cally higher.10 The impact of the livestock sector onbiodiversity has different forms (Steinfeld et al.2006). Most of the biodiversity losses result fromhabitat destruction, as the natural forest vegetation

is replaced by ranching or soybean farming.However, habitat fragmentation and invasion ofalien species, when patches of native vegetation be-come isolated in the landscape and lose their con-nectivity because of erratic ranching settlementpatterns, is also an important cause.

Water quality. The Amazon region is one of theworld’s main freshwater reservoirs, holding aboutone-fifth of world’s volume of fresh water, and theconversion of tropical forest to grassland or crop-land, with its resulting increased erosion, is a majordanger to the quality of this resource. Already, theworld’s biggest silt accumulation is found at themouth of the Amazon River.

Social Impacts

There are an estimated half-million indigenouspeoples (down from 7 million to 10 million in the15th century), and they have a culture with uniquefeatures. They are in danger of losing this cultureand its unique knowledge of medicinal plants as aresult of deforestation. The preservation of thisknowledge can be of enormous benefit for the de-velopment of future medicines against a variety ofdiseases. The expansion of ranching and feed-cropproduction can cause this unique pool of knowl-edge to be lost. Most soils are exhausted after 10 to15 years, leaving many evolving farming systemsunsustainable and forcing local populations intohighly mobile livelihoods that lead to substantialdisplacement and social upheaval.

The Driving Forces

There are major forces pushing the increased rateof deforestation in the humid areas of the Amazonregion:

A strong increase in demand for soybean products forlivestock and aquaculture feed. Demand for pork andpoultry products has grown about 10 percent peryear in East Asia, causing a worldwide increase indemand for animal feed of about the same order.Fishmeal, once the predominant high-quality pro-tein source for pigs and poultry, is now facingincreased competition from the aquaculture sub-sector (Box 3.3), making soybean meal the mainprotein source in pig and poultry feed. Soybeanproduction in the Brazilian Amazon increased byabout 60 percent between 1998 and 2002. Brazil isnow the world’s second-largest soybean exporter.

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9 There was a decline to 13,000 km2 from August 2005 toAugust 2006 (http://news.mongabay.com/2006/1026-brazil.html).

10 www.rain-tree.com/facts.htm.


Increased competition for land for the production ofbiofuel. In addition to the competition from theaquaculture subsector, the growing use of land forthe production of biofuel has increased pressure ontropical savannahs and forest areas. Ethanol pro-duced from sugarcane already accounts for 40 per-cent of the fuel sold in Brazil, and occupies about3 million hectares (ha) of land,11 or about 5 percentof the total cultivated area. Land used for soybeancultivation (partly for biodiesel) has expanded atthe rate 16.8 percent annually since 2000, and nowcovers more than 8 million ha.12

Brazil’s veterinary health status. Brazil is free ofBSE and most of the Amazon area has been de-clared “Free with Vaccination” for foot-and-mouthdisease. This has opened access to markets inRussia and West Asia in particular. For example,during 2000–2004, the value of beef exports fromBrazil to Russia increased from zero to US$239 mil-lion, to Egypt from US$3 million to US$160 million,and to Iran from US$2 million to US$102 million.Between 1996 and 2004, the total export value ofbeef increased tenfold from US$190 million toUS$1.9 billion, making Brazil the world’s largestbeef exporter.

Greatly improved technical efficiency of Brazilianbeef production. In the 1980s and early 1990s cattleranching could be sustained only through subsi-dized interest rates and strongly rising land prices,and even then only as part of a land-use sequence.This also included cereal (corn) and subsistenceproduction (de Haan et al. 1997). Since then, a technological revolution, based on improved pas-ture management, mineral feeding, and better re-productive management (estrus synchronizationand artificial insemination) has made livestockranching highly profitable on its own, with a returnon capital exceeding 10 percent, although landspeculation is still a major driving force in the fron-tier areas. Table 3.1 compares some of the key pro-ductivity parameters reported in the literature inthe 1980s and the more recent work of Margulis(2004).

The policy framework. Although much haschanged from the strong government promotion oflivestock development in tropical forest areas inthe 1980s with subsidized credit, export subsidies,and perverse land tenure incentives (titles weregiven only to deforested land) (Faminov 1998), theoverall policy framework is still important regard-ing the following:

• The devaluation of the Brazilian real, for ex-ample, from 1.2 to 3.6 to the dollar during1998–2002, doubled the value of the beef in


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Box 3.3: Livestock, Aquaculture, Soybean Meal, and Deforestation in the Amazon

Shifting consumer demand, changing food safety stan-dards, and increasing inter-sectoral linkages madelivestock the driving force behind the expansion ofsoybean cultivation in the Amazon area. The prohibi-tion against using animal by-products in livestock feedbecause of bovine spongiform encephalopathy (BSE)led to increased demand for plant protein, and espe-cially for high-quality soybean meal. At the same time,the fast-expanding, high-value aquaculture subsector(shrimp and so forth), which is more dependent onfishmeal (and fish oil) than terrestrial animals, used anincreasing share of the rather inflexible supply offishmeal. For example, the share of fishmeal used byaquaculture grew from 8 percent in 1988 to about

35 percent in 2000 (Delgado et al. 2003) to 45 per-cent in 2005 (World Bank 2006a). So, both BSE andaquaculture forced the livestock subsector to look foralternative sources of plant protein, and drove thestrong expansion of soybean as one of the highest-yielding and best-quality sources of plant protein. Thisdemand was particularly strong from East Asia. This,combined with the development of new soybean vari-eties adapted to the humid tropical environment, ledto a rather spectacular growth of the areas under culti-vation. While this is mostly degraded cattle-ranchingland, soybean production pushes cattle ranching intodeforesting new areas.

Source: Steinfeld et al. 2006.

11 www.mstbrazil.org/?q=carlsenonagrofueltrap.12 http://news.mongabay.com/2007/0516-ethanol_amazon

.html.


the domestic market, while at the same timethe fall in US dollar value in the internationalmarket increased the competitiveness ofBrazilian beef in the international market; and

• Funding of infrastructure (roads and power),and the resulting reduction of beef transportcosts has been one of the key drivers of cattleranch expansion in the Amazon.

These factors together cause the deforestationprocess to have become basically endogenous (thatis, occurring without outside incentives, exceptroad development), and, therefore, more difficultto mitigate through public policy.

Public Policy and Investment Options

With many of the economic distortions of the 1970sand 1980s already phased out, and the deforestationprocess basically having evolved into an endoge-nous, private sector–driven process, the key strat-egy should be to acknowledge that cattle ranchingin the tropical rainforest is for the individualrancher a profitable activity (Margulis 2004).Sustainable forest management does not provide afinancially attractive alternative to cattle ranching,with cattle ranching investments having a presentnet value of about US$500 per hectare, against theUS$203 for sustainable extractable wood. With thecaveat of methodological gaps in the valuation offorest, the social value of forest was estimated to beabout US$100 per hectare per year, compared to acurrent income of US$75 per hectare per year forcattle ranching (Margulis 2004). Environmental ser-vices and their benefits would need to be includedto make it attractive. If the financial attractivenessof cattle ranching is the main driving force, the

approach should be to work with the ranchers andnot against them, and focus on sustainable devel-opment, rather than on unenforceable conservation.Some of the main instruments that can be appliedare zoning agreements, tradable development rights,and incentive frameworks.

Negotiating zoning agreements among ranchers,other stakeholders, and the government would lead tocattle ranching occupying areas that are less sensi-tive from a social and environmental point of view,and the protection of areas with high social or en-vironmental values. Because enforcement in suchareas is traditionally weak, zoning approachescould be supported with the allocation of creditdepending on ecological criteria.

Introducing tradable development rights would bea further and more sophisticated refinement of thezoning instrument. If combined with a classifica-tion and valuation of the ecological importance ofthe designed zones, the tradability would allow ahigher degree of deforestation in the potentiallymore productive areas, while facilitating the con-servation of the ecologically richer areas.

Providing an incentive framework that encouragesconservation of the socially and environmentallyvaluable areas at the same time promotes theintensification of areas that are of lesser concern inthese respects. These incentives could include:

• Taxation for deforestation integrating into theenvironmental externalities into the cost ofranching, although the work of Margulis(2004) suggests that high taxes would beneeded to significantly reduce ranching-induced deforestation. Model calculationsshow that a tax of US$15 to US$20 per hectarewould not be enough to stop deforestation.

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Table 3.1: Technological Progress: Comparison of Key Technical Parameters in the Beef Industryin the Amazon Area of Brazil, 1985–2003

1985 2003

Carrying capacity (AUa/ha) 0.2–1 0.91Fertility rate (%) 50–60 88Calf Mortality (%) 15–20 3Daily weight gain 0.30 kg 0.45 kg

a. AU stands for animal unit and is a standard measure to aggregate different classes of livestock, with adult bulls at 1 AU,cows at 0.7 AU, yearlings at 0.5 AU, and calves at 0.2 AU.Sources: 1985 data for North West Brazil in World Bank 1991; 2003 data for the Rodonia Region in Margulis 2004.


• Payment to ranchers for the environmentalservices provided by conservation of tropicalrainforest, or for the shift from the commonmonoculture pastures to more complex vege-tation. The latter, at the same time, wouldpromote the possibility of increasing thestocking rate, thus, reducing pressure on pri-mary forest. There have recently been a num-ber of interesting pilot operations in Payment

for Environmental Services, notably inCentral America (Box 3.4). The challenge nowis to amass the financial resources to scale upsuch pilots to the large rainforest areas cur-rently under threat of deforestation.

• Strengthening the governance of the institu-tions responsible for enforcement, and the al-location of property rights, which are stillfraught with fraud and corruption.


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Box 3.4: Payment for Environmental Services

The Global Environmental Facility (GEF) and theWorld Bank supported until early 2008 a regional project in Central America that used PES as a tool topromote the conversion of degraded pastures to morecomplex vegetations, which increases carbon sequestration and enhances biodiversity. The adoptedmethod was designed to reduce transaction costs asfollows.

• Different vegetation units were ranked by anexpert panel on their contribution to carbonsequestration and biodiversity.

• Using satellite and global positioning system(GPS) technology, an inventory of the main veg-etation units was made of each farm. On thebasis of this inventory a baseline wasestablished.

• Each year, using GPS technology, changes in thedifferent vegetation types were measured andused as a proxy for the payment. The level ofpayment was based on the equivalent of US$5per ton of carbon. In the absence of a function-ing market for biodiversity, about the same levelwas, rather arbitrarily, set for this service.

• The project design features supported the sim-plicity: Payment was on the basis of perfor-mance (ex post); the farmers had to obtain theirown sources of funding, thus avoiding compli-cated rural credit schemes; and all funding waschanneled through nongovernmental organiza-tions (NGOs).

About 270 farmers in six watersheds in three countries(Colombia, Costa Rica, and Nicaragua) participate inthis scheme. The results, after four years of operationare promising:

• The relationship among vegetation types andcarbon sequestration and biodiversity enhance-ment was strong, showing that vegetation typescan be used as a proxy for the measurement ofenvironmental services.

• Ranchers reacted very positively to the incen-tives provided. About 5,000 ha were establishedwith improved, deeper-rooting pastures andmore trees; more than 1,200 kilometers of livingfence was established, which significantly im-proved the connectivity of the different habitats;and about 40 ha in slopes were left fallow to re-generate to secondary forest. The average pay-ment per farm was about US$38 per hectare inthe second year of operation, and the averagemonitoring costs were about US$4 per hectare.

• Also, the poorer farmers found the resources forthe required investments. A survey found thatthe poorer farmers received higher payments perha than the larger ranches.

• The reaction of the public institutions was quitefavorable. In Costa Rica, the government de-cided to include agroforestry (and this scheme)in its forest PES scheme, which is fundedthrough gasoline taxes and water charges. InColombia the National Livestock Federation isnegotiating international and national fundingsources to scale-up this pilot operation.

The biggest challenges will be: (a) to simplify themethod even more; and (b) to find the internationalfunding sources, linked to carbon trading, that will en-able the application of such payment schemes for theareas such as the Amazon, to tip the balance fromcontinuing expansion to intensification of production.

a. See also: www.fao.org/AG/AGAINFO/resources/documents/pol-briefs/03/EN/AGA04_EN_05.pdf.


WATER The livestock sector withdraws (uses) an estimated7 percent of the total water withdrawals of agricul-ture, and depletes (consumes) through evapotran-spiration, integration into other products, andpollution about 17 percent of total agriculturalwater depletion (Steinfeld et al. 2006). The sharethat is used for direct drinking and servicing is lessthan 1 percent. Most water is used for the produc-tion of feed-crops, with 15 percent depletion/consumption. Pollution with nitrogen and phos-phorus is also an important cause of freshwater de-pletion. In the United States, for example anestimated 33 percent of nitrogen pollution and 32 percent from phosphorus pollution comes fromlivestock. These figures are much higher in EastAsia, with, for example, figures for Vietnam of38 and 92 percent for nitrogen and phosphorus, re-spectively. Other causes of water depletion are con-tamination with antibiotics, pesticides, and erosion.

There are various estimates on water use effi-ciency for meat and milk production. Very high fig-ures are estimated by Pimentel et al. (1997), whoreported an estimate of 100,000 liters (L) of waterper kilogram of beef, a figure still often found in theNGO literature. However, the extrapolation ofsuch figures to a worldwide scale would mean that

the sector would use more than all the world’swater resources. This estimate is apparently basedon the assumption that all feed used for beef pro-duction comes from irrigated land, which is clearlynot the case. Beckett and Oltjen (1993) estimatedthe total use of developed water for U.S. beef pro-duction, including water for irrigation, drinkingwater, and water used for animal processing atmarketing. They calculated that the total water re-quirement was 3,682 L/kg of beef (CAST 1999).

While the share of withdrawal and depletionfrom the livestock sector is still relatively small, thecurrent and projected worldwide water shortagesalso warrant more attention in the sector to reduc-ing water needs. With the large majority of waternow being used for the irrigation of feed-crops, in-creasing irrigation efficiency is the first priority.Promoting collective action through the establish-ment of water-user associations and introducingcost recovery for water used has a proven record inWorld Bank projects. On the investment side, im-provement in the irrigation infrastructure (canallining, land leveling and so forth) is also essential.

Stronger regulation of pesticides and antibioticsin the sector can reduce contamination. Manuremanagement to reduce nitrogen and phosphorus isdescribed in the next chapter.

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27

Mixed farming systems, in which livestock by-products such asmanure and traction, and crop residues are used as reciprocal inputs,are the most important production systems in the developing world.They produce about 80 percent of milk, 50 percent of pork, and35 percent of poultry in developing countries. Most are rain-fed,although in the tropics, milk and pork production comes largely fromirrigated mixed farming systems (Steinfeld et al. 2006).

This chapter focuses on mixed and so-called landless systems.Mixed farming systems are the best recycling systems in the livestocksector. Landless systems use the most external inputs, principallyfeed, from outside the farm. The flows and balances of nitrogen andphosphorus nutrients from manure vary substantially by region, andare heavily influenced by the extent of economic development. Atearlier stages of development, livestock producers tend to settle inproximity to consumers. Later, as transport infrastructure improves,they often move their operations to feed-producing areas. Policies canimprove the geographic distribution of livestock production wheninfrastructure development enables a strategy of intensification-without-concentration. Such strategy makes for a more level playingfield for biogas-generated power and organic fertilizer. Recyclingnutrients becomes increasingly important for the expanding organicmarket, whereas improved technology and carbon trading schemesopen new opportunities for biogas, which deserves internationalsupport.

Mixed farming is a production system that is particularly benignto the environment. The crop residues such as straw and milling by-products, which would otherwise be burned or allowed to decom-pose and convert into greenhouse gases, are instead recycled throughanimals. The use of manure reduces the need for inorganic fertilizersand causes less water pollution. Manure, or organic fertilizer, also in-creases the effectiveness of inorganic fertilizer and the water reten-tion of soils. The use of animal traction reduces the need for fossilfuels. Because mixed farming systems are diversified, they reduce cli-mate and price risk for smallholders, making them also attractivefrom a social perspective.

However, not all mixed farming systems have balanced nutrientand energy cycles. As, livestock systems evolve, this balance changessignificantly. Three principal factors define the systems’ evolution:market access, land pressure, and transport infrastructure. These

Livestock Externalities,Crop–Livestock Interaction,

and Nutrient Cycling

4


Livestock Externalities, Crop–Livestock Interaction, and Nutrient Cycling

28

Arable systems

Agropastoral Mixed crop/

livestock systemsExits

Extensive grazingsystems

Landlessintensive

Feed grain demand

Implodingsystems

Intensivegrazing

Land availability

Intensification

Fossil fuel prices

Food safety and quality

Figure 4.1: Schematic Presentation ofDevelopment Pathways of Main LivestockProduction Systems and Selected MainDrivers

factors determine livestock density and productionintensity. Livestock density is defined as livestockbiomass per unit of surface area. Production inten-sity is mainly a function of the system’s level of de-pendence on outside inputs. Density and intensitydetermine the spatial distribution of nutrients fromlivestock waste. As pressure on land increases andmarket access improves, mixed grazing and crop-ping systems become more intensive to capitalizeon the fertility and energy inputs of the livestocksubsystem and the feed inputs from the crop sub-system. The dynamic is depicted in Figure 4.1.

As incomes grow further however, food safetyand general quality standards become moreimportant. With concomitant economies of scale,the specialization of livestock into so-called land-less systems or other high-value crops will emerge.For these landless operations, inputs come fromoutside. These inputs of nutrients affect the nutri-ent balance. While future trends will vary by re-gion, it can be expected that mixed farming willremain globally important for decades to come,and particularly in Sub-Saharan Africa, a growingmixed farming sector is likely to develop. In EastAsia the main growth will probably be in special-ized pork, poultry, and beef production systems.

Transport costs for feed and livestock food prod-ucts also play an overriding role in the location ofproduction. Where transport infrastructure is poorand transport costs are high, livestock productiontends to concentrate in proximity to urban con-sumer markets and to ports where feed imports areavailable. This is particularly true of pig and poul-try production, which is strongly concentrated onChina’s heavily populated eastern seaboard, andaround Bangkok and Ho Chi Minh City. In Europe,production is concentrated in places near seaportssuch as the Netherlands, the Brittany region ofFrance, and around Barcelona (Gerber et al. 2005).In some instances, the industry locates itself nearfeed-producing areas, such as in the Corn Belt inthe United States and, now increasingly in Brazil,where, with improved road transport infrastruc-ture, the large meat producers and processors in-creasingly establish themselves in the Amazon areaof Mato Grosso. The number of processors in thearea has nearly tripled over the past decade (DeZen et al. 2005).

Finally, the stringency and level of enforcementof environmental (and increasingly animal welfare)regulations also play a significant role in the loca-tion of livestock production. This is one of the mainreasons for the stagnating production in WesternEurope. The differences in the stringency of envi-ronmental regulations and their enforcement is re-portedly also one of the reasons for the shift ofintensive pig operations to the Southern UnitedStates and Mexico, although other factors such asprices and the investment climate have also playeda significant role (Speir et al. 2003). In the Philippines,Delgado et al. (2006) noted that large productionunits near Manila have moved to Mindanao, whilemore difficult to regulate smaller units have prolif-erated around Manila.

NUTRIENT FLOWSTrends and Impacts

Nutrient flows range from extensive nutrient-deficient systems, where losses are higher than theinputs and soil fertility is depleted, to systemswhere inputs by far exceed those of the exports,and soil-nutrient loading, with groundwater cont-amination, surface-water eutrophication, and soilpollution occur. Nutrient loading in these condi-tions will lead to loss of biodiversity, and constitute


a major public health risk. Balancing nutrient in-puts and outputs is therefore of crucial importance.

Nutrient Cycling in Extensive Livestockand Cropping Systems

Extensive grazing and arable farming systems aregenerally exporters of nutrients. The rate of loss of nitrogen and phosphorus through the export of grain and meat products, combined withvolatilization and runoff, exceed the replenishmentof those nutrients from imported chemical fertiliz-ers and nitrogen fixation by leguminous crops.

In cultivated croplands in Niger, 10 to 15 kg ofnitrogen per hectare were reported lost annually(Powell and Williams 1990). In Mali, 15 kg of nitro-gen were lost per hectare annually (de Haan et al.1997). In many extensive systems these losses aremuch higher. In Ethiopia, for instance, they aver-age 100 kg (Breman and Debrah 2003).

Within those extensive systems, there is a signif-icant transfer from the grazing to the cropping sys-tems. Manure is hauled to the crop fields or animalsare corralled on the fields at night. The latter givesa higher return of nutrients because both urine andmanure are deposited in the fields. Migratory pas-toralists often contribute nutrient material as well,in a variety of exchange relationships.

The ratio of grazing to cropping area will thendefine the overall sustainability of the system, be-cause a much larger area for grazing is needed tosupply a reasonable level of nutrients to maintainsoil fertility on the croplands. In West Africa forexample, it was estimated that the ratio was about10 to 40 ha of dry-season grazing and 3 to 10 ha ofwet-season grazing to provide adequate nutrientsfor 1 ha of millet cropland (Williams et al. 1995).However, this ratio is declining fast, as shown inone Malian community, where between 1952 and1998, the ratio between crop and rangeland dwin-dled from 13:1 to 3:1—tremendously reducing thetransfer of fertility from rangelands to croppingareas. If most crop residues are used, but manure isdeposited elsewhere or subject to heavy losses, asoften occurs in the Sahel, negative nutrient bal-ances occur. This leads to a downward spiral, withthe depletion of soil fertility, loss of soil biodiver-sity, increased erosion, and growing vulnerabilityamong local populations.

Chemical fertilizers are therefore needed tostabilize these systems. They would also have a

synergistic effect when used in coordination withlivestock manure. Fertilizer use in the Sahel for in-stance remains very low, at about 5 kg per hectareeach year. Subsidizing chemical fertilizers has ledto disappointing results although the 2008 WorldDevelopment Report, Agriculture for Development(WDR, 2008), acknowledges that in certain condi-tions, subsidies might be recommended to kickstart use, correct market distortions, or providesome necessary environmental benefit. In otherconditions, alternatives to fertilizer subsidies areimportant to develop. A report published by theWorld Bank’s Agriculture and Rural Developmentdepartment examined a variety of these alternativesand recommended a broader focus on improvingthe investment climate, providing financial ser-vices, investing to improve infrastructure and re-duce transport costs as elements of a more enablingenvironment to encourage fertilizer use in Africa(World Bank 2006d).

Nutrient Loading from Intensive Systems

As livestock population density increases, negativeaspects also start to emerge. Livestock manure(especially from pigs) contains a high percentage(95 percent) of water. Per kilogram of nitrogen orphosphorus, therefore, it is costly to transport andapply on land in areas with low livestock density.Data from the French province of Brittany indicatethat transporting nitrogen and phosphorus frompig manure cannot compete with inorganic fertil-izer if the manure has to be transported more than5 km (de Haan et al. 1997). Inorganic fertilizer isalso often preferred because of the readily availablenutrients in exactly the required combination andits ease of transport.

Significant quantities of inorganic fertilizer areoften applied on top of already adequate amountsof nutrients from livestock manure. For example,Gerber et al. (2005) estimate excess phosphate ap-plications on 23.6 percent of East Asia’s agriculturalland, mainly located in eastern China, the Gangesbasin, and around urban centers such as Bangkok,Ho Chi Minh City, and Manila. Livestock manurein these areas is on average estimated to account for39.4 percent of the phosphate (phosphorus pentox-ide, or P2O5) supply (the remaining share being sup-plied by chemical fertilizers). Livestock are thedominant agricultural source of P2O5 around urbancenters and in livestock-specialized areas (southern

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and northeastern China), while chemical fertilizersare dominant in crop (rice)-intensive areas. Selectedglobal livestock-related soil and water pollutiondata are provided in Box 4.1.

Considerable progress has been made in recentyears in manure production, storage, and applica-tion techniques (World Bank 2005). Improvementshave included reducing manure output throughbetter feed composition, balancing manure appli-cation with crop-nutrient demand, and better tim-ing and method of application (nutrient injection)and the introduction of buffer zones and scavengercrops to reduce leakage.

This is particularly important under small-holder conditions near urban areas, where the frag-mented nature of smallholder farms makes thepollution non-point-source, and more difficult tocontrol, than the point-source discharge from largefarms. Delgado et al. (2006) found in Brazil, thePhilippines and Thailand that draining manureinto open water and depositing it on the open soilsurface, with the risk of runoff, was much morecommon among smallholders than among largerunits. The larger units in these countries also usedbetter methods of disposal of dead animals, froman environmental and public health perspective.Where large numbers of animals are kept in thesame area, smallholders are likely to pollute morethan large enterprises.

COLLECTIVE ACTIONVoluntary collective action in managing nutrientloading is limited, although in Europe recently, so-called environmental cooperatives are starting to playa role in promoting collaboration in environmentalmanagement. Environmental cooperatives consistof local farmers groups that promote activities re-lated to sustainable agriculture and rural develop-ment. They are an institutional innovation ofparticular importance in the Netherlands, where,since the foundation of the first cooperative in 1992,the numbers have rapidly grown to about 125, withan estimated 10,000 members, involving about10 percent of all farmers and 40 percent of all agri-cultural land. Farmers are paid (from national andEuropean Community funds) on an output basis(diversity of the botanical composition of the grass-land, and bird population). Collective action in-creases the overall impact, because the cooperationfacilitates the reduction of landscape fragmentationand therefore favors the expansion of bird popula-tions, and hence payment. There is, thus, a directbenefit to the individual farmer. Although cost-benefit analyses have not been conducted (Franksand McGlion 2007), there seems to be sufficientevidence to suggest that these innovations havebenefited all actors involved—farmers, the govern-ment, the environment, and the rural economy.


30

• About 46 percent of the cropped area in EastAsia is estimated to have an annual phosphatesurplus of more than 10 kg/ha, and 4 percent hasan estimated surplus of more than 40 kg/ha(Gerber et al. 2005) resulting from high livestockconcentration.

• Of the 3,141 counties in the United States,8 percent have an excess in nitrogen and 15 per-cent in phosphate from manure (USEPA 2005).

• In the Netherlands, 270,000 ha of the sandy soilsof the Eastern and Southern parts are saturatedwith phosphate (Hooda and Edwards 2002).

• Excessive algae and other plant growth resultingfrom direct discharge into open water or leakage

of nutrients into surface water is a major threat toaquatic biodiversity. For example, pig produc-tion accounts for an estimated 46 percent ofnitrogen, and 90 percent of the phosphate flowsinto the South China Sea, through the PearlRiver (Impact of Animal Production on WaterAvailability and Quality, FAO Policy Brief,FAO 2005).

• Leakage of nitrates from saturated soils intogroundwater constitutes a major cost in theproduction of drinking water, although thehealth consequences of higher nitrate levelsare now well documented.

Source: World Bank 2005.

Box 4.1: Key Data on Nutrient Loading


Collective use of a biogas facility is another activity under this category. There are strongeconomies of scale in the investment costs of biogasinstallations, but transport costs of manure arehigh compared to its value. Successful village as-sociations for the operation of biogas plants are re-portedly operating in Nepal (World Bank), andparticularly its collective action in benefiting fromthe Clean Development Mechanism, and for theirmaintenance in China (IFAD).13

PUBLIC POLICIES ANDINVESTMENTSThe case for major public policy involvement inmore or less balanced mixed farming systems isprobably less pronounced than in other productionsystems. Most synergies of mixed farming are con-fined within the farm and directly benefit the pro-ducer, and therefore do not require express policyinterventions. However, in contrast to the othersystems, assuming that the positive spillovers onthe environment and social equity through risk re-duction are more important than the negative ex-ternalities of nonpoint pollution, there is a case forpolicy intervention to enhance those positivespillovers. The sheer importance of the mixedfarming system would justify such interventions.

Public policy and investments are needed bothin conditions of fertility decline and land degrada-tion and in conditions of nutrient loading.

Reversing fertility decline and land degradationthrough policies and investments that encouragemixed farming will involve focusing on land andmarket access. Establishing an appropriate invest-ment climate will entail ensuring farmers’ secureaccess to land so that farmers who invest in crop ro-tation and manure recycling will capture the bene-fits of the resulting long-term improvements in soilquality. Building a more enabling investment cli-mate will also entail adequate savings and creditbanking systems.

The importance of infrastructure and market de-velopment is also well established by experience inthe Machakos region in Kenya. There, a fivefold in-crease in the local population could have led to en-vironmental degradation and declining income.However the proximity of the attractive Nairobimarket led to a major intensification of the farming

system, with a shift from cattle to small ruminantsand high-value plant products. It also resulted inan improved resource base (Tiffen and Bunch2002).

Research and development are necessary to ad-dress a number of technical issues that are unlikelyto attract substantial investment in private re-search. The integration of fodder crops into thecropping cycle has seen limited success owingmainly to labor constraints during the planting sea-son. Developing an effective technical or methodi-cal solution to this limitation could yield verysubstantial productive and social benefits, butwould not attract private research. With certain ex-ceptions such as the use of urea to treat straw, theimprovement of feeding value and fodder cerealproduction was largely neglected during the GreenRevolution and in breed improvement more gen-erally. Strategic supplementation of lactating andgrowing animals is one such area that warrants in-vestment in public research and development. Forthis type of technical research to have noticeableimpacts, however, the basics of markets and landscarcity will have to be recognized during the con-duct of the research.

Reduction in nutrient loading will require a com-bination of regulatory, financial, and communica-tion measures. New technologies offer significantpossibilities to reduce the quantity and facilitatethe management of the waste produced.14 Creatingpublic awareness of the long-term and global ef-fects of livestock waste on water and soil pollutioncan generate political demand, and can build ongeneral awareness of the more immediate, observ-able nuisance effects of odor and noise. This publicand political pressure can be important forces be-hind the passage and enforcement of regulations toimprove the handling and application of manureand to achieve a better spatial distribution betweenlivestock waste production and the absorptive ca-pacity of the surrounding areas. Such regulationsmay limit the number and density of farms andanimals, and stipulate the technologies that arerequired.

Acceptable livestock and farm density will de-pend largely on the cost of transport, the nutrientcontent of the waste, soil and arable farmingcharacteristics, and the price of alternative sourcesof fertilizer. Generally, pig waste, with high water

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13 www.ifad.org/newsletter/pi/15.htm#5. 14 See also World Bank 2005.


content, has the smallest area in which it can bespread on an economically and ecologically soundbasis. The instruments to be used include zoningregulations, which can be based on combining landcharacteristics (soil, water, and slope), biodiversityvalues, and market and human population densitycharacteristics. Geographic information systems(GIS) can be usefully applied in identifying areaswith potential for expansion or reduction of live-stock production.

The amount, timing, and technology of the ap-plication are also important in reducing leakageinto groundwater and surface water. This coversmaximum amounts to be applied, restrictions re-garding application during particular (high rainfalland/or cold) periods, and obligatory use of soil-injection technology to reduce runoff and emis-sions. It can also include the use of GPS andsatellite technology to identify areas with lower nu-trient levels, and thus provide a much more preciseapplication, according to the soil’s fertility needs.

Financial instruments are generally required tosupport and supplement regulatory instruments.Financial instruments include taxes and subsidiesand can eventually be supported by tradable rightsand quotas and tradable emission reduction credits.

• Subsidies are often provided to offset the in-vestment costs of equipment for manuremanagement and processing. For example, inmany countries, including developing coun-tries such as China, equipment for manurestorage and biodigestion is being subsidized,together with projects funded by the GlobalEnvironmental Facility and World Bank.Subsidies are also often provided to encour-age farmers to reduce livestock density or toexit the sector entirely, particularly in fragileareas. This has been successful in theNetherlands, where it has reduced phosphateand methane emission by about 7 percentagepoints (RIVM 2004). Subsidies in the form oftax breaks can also be provided to encouragesettlement in areas with low livestock density,an approach used with success in Thailand(Gerber et al. 2005). At the farm level, thenumber of animals per farm can also be re-stricted, as is being done in Germany for dairycattle and in Norway for pigs. On the otherhand, incentive systems in some countriesstill favor large units, for example, throughfavorable import tariffs for feed grain andother tax breaks.

• Taxes are often levied on inputs that are apotential source of nutrient loading, such ashigh-phosphate-content feed, or to discour-age the use of inorganic fertilizer. They canalso be used to support zoning policies by dis-couraging production in areas with an al-ready high livestock density, such as aroundurban centers, and could also include tax re-bates for shifting production to more distantareas that are less densely populated withlivestock.

These financial instruments can be made moreeffective by making zoning permits tradable andtransferable, whereby regulatory agencies assign amaximum discharge quota on livestock density toa farmer. This system was introduced in theNetherlands in the mid-1990s, and in order to re-duce nutrient loading, the government reduced thequota by 25 percent in each trade. While the systemdid reduce nutrient emission, its implementationwas found to be very complex, and in 2003 theNetherlands was forced to follow a more prescrip-tive imposition of limits on livestock numbers in aEuropean Union (EU) directive.

An interesting additional option to improvethe financial attractiveness of biogas, and thus re-duce the effluent and methane emission of ma-nure, is provided by the recent introduction ofcertified emission reductions (CERs) in Europe,and other opportunities for carbon trading underthe Bio-Carbon Fund, managed by the WorldBank. Successful examples of these are currentlyin place in Brazil and Nepal. Incentive systemscan be used to make the use of organic fertilizerand animal traction more attractive. This is animportant area for policy to establish a morelevel playing field with inorganic fertilizer andfuel.

Recycling through the use of livestock waste inanimal feed, through conversion into energy orthrough organic fertilizer are also effective waysto manage livestock waste, and can lead towin–win situations. Specific technologies in theseareas are:

• Poultry waste is one of the driest animalwastes, and has the highest protein contentof any animal waste. Properly treated, it canbe used in up to 20 percent of cattle and fishfeed. This is now practiced in many tropicalcountries and the United States and Canada,although, in Oceania and the EU it has been


32


banned as livestock feed because of thedanger of BSE when recycling animal mate-rials to other animals (Agriculture and Agri-Food Canada Poultry Section 1990).

• The use of animal waste as an energy sourcethrough the biogas process is now common inmany countries. The technology has made re-markable progress. New opportunities willarise by further promoting biogas throughcarbon-financing mechanisms, because theuse through biogas, even if flared, reducesgreenhouse gas emission. Biogas will reducethe biochemical oxygen demand (BOD) loadon surface water, but will not reduce theamount of nitrogen or phosphorus to be fur-ther processed. The World Bank has sup-ported biogas installations in several East andSouth Asian countries.

• Use as fertilizer, and in particular for organicproduction, although nutrient availability isnot as fast, and the possibility for exact dosageis less precise than with organic fertilizer.

Finally, public sector investment in promoting therecycling of livestock waste needs to devote partic-ular attention to capacity-building and publicawareness. Awareness of the need to make live-stock production more sustainable is particularlyimportant to cultivate among policy makers.Purposefully communicating practical informationthat can effectively inform policy formulation andlivestock zoning operations warrants clear priority.Capacity building of environmental cooperativesin managing common resources will be a highlyappropriate area for public investment in manydeveloping countries.

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35

Greenhouse gas emissions from livestock are closely connected to thesector’s impact on land use and land-use change. Livestock currentlycontributes a staggering 18 percent of total human-induced GHGemission equivalents. The livestock commodity chain contributesabout 9 percent of total carbon dioxide (CO2) emissions, but 37 per-cent of methane (CH4), and 65 percent of nitrous oxide (N2O). N2Oemissions will substantially increase over the coming decades, be-cause pastureland is currently at maximum expanse in most regions.Future expansion will therefore increasingly be fertilizer- and crop-based. A variety of options to reduce livestock emissions are avail-able, can be applied at reasonable costs, and would be suitable forinternational support. These options include: (a) carbon sequestrationon extensively used grazing land; (b) reduction of methane emissionsfrom low-input ruminant production, in particular, dairy; and (c) re-duction of methane and nitrous oxide emissions from animal wastethrough energy recovery and improved waste management.

At senior political levels, awareness of the magnitude of livestock’scontributions to GHG emissions and of the options available to re-duce them is low. It is necessary to raise awareness in order to moreclosely integrate the issue into the coming post-Kyoto discussions.

This chapter examines the role of livestock in GHG emissions froma global perspective and at the various stages of the commoditychain. It then reviews options for emission reductions and suggestslines of action for international engagement, as the pure public goodnature of GHG becomes more clearly established. It first assessesGHG emitted from the carbon cycle, and then the contribution of thenitrogen cycle to total GHG emissions. The chapter is based in largemeasure on Steinfeld and Wassenaar (2007).

LIVESTOCK IN THE CARBON CYCLE:TRENDS AND IMPACTSThe role of livestock in global carbon cycles is determined mainly bythe sector’s land use and the degradation of pasture lands and theirexpansion at the expense of forests. Intensive systems contribute byexpansion of area cropped for feed, their degradation, and fossil-fuel

Livestock-SectorExternalities Relating toGreenhouse Gases andGlobal Climate Change

5


use. Furthermore, livestock releases importantamounts of CH4 from enteric digestion, mainly inruminants and from manure.15

Desertification of grazing land. Desertification re-duces productivity and vegetation cover, andchanges carbon and nutrient cycles and stocks,causing a net loss of carbon into the atmosphere.Although changes in aboveground biomass andcarbon stocks are often small, total soil carbon usu-ally declines. Asner et al. (2003) found in Argentinathat desertification resulted in little change inwoody cover, but that soil organic carbon declinedby 25 to 80 percent in areas subject to long-termgrazing. Soil erosion accounts for part of this loss,but the majority stems from the nonrenewal of de-caying organic matter stocks. Assuming a loss of 8 to 12 tons of soil carbon per hectare (Swift et al.1994) on a desertified land area of 1 billion hectares(UNEP 1991), the total historic loss would amountto 8 billion to 12 billion tons of soil carbon.Similarly, degradation of aboveground vegetationhas led to a carbon loss of an estimated 10 to 16 tonsper hectare—a historic total of 10 billion to 16 bil-lion tons. Thus, the total carbon loss as a conse-quence of desertification may be 18 to 28 billiontons (FAO 2004).

Livestock occupies about two-thirds of theglobal dryland area, and the rate of desertificationhas been estimated to be higher for grazing landthan for other land uses—3.2 million hectares peryear, as compared with 2.5 million hectares forcropland (UNEP 1991). Considering only soil car-bon loss (that is, about 10 tons of carbon perhectare), CO2 emissions from the desertification ofpastures amounts to 100 million tons per year.

Pasture expansion into forest. The expansion ofpasture and arable land for feed-crops has beenthe most extensive in Latin America. Most of thisexpansion has been into previously forested areas,and most of the forests cleared in the region end upas pasture (Wassenaar et al. 2007). The conversionof forest into pasture releases considerableamounts of carbon into the atmosphere, particu-larly when the area is not logged but simplyburned. During the period from 2000 to 2010, pas-ture area in Latin America is projected to expandinto forest by an annual average of 2.4 million

hectares. This accounts for some 65 percent of thedeforestation expected.

Forest clearing produces a complex pattern ofnet carbon fluxes that change direction over time.The Intergovernmental Panel on Climate Change(IPCC 2001) estimated the average annual fluxowing to tropical deforestation for the decade 1980to 1989 at a mean (±SD) of 1.6±1.0 billion tons ofcarbon as CO2. Only about 50 to 60 percent of thecarbon released from forest conversion in any oneyear was a result of the conversion and subsequentbiomass burning in that year. The remainder wasdelayed emissions resulting from oxidation of bio-mass harvested in previous years (Houghton 1991).

Assuming that forests are completely convertedinto climatically equivalent grasslands and crop-lands (IPCC 2001), and combining changes in car-bon density of both vegetation and soil in the yearof change, emissions from the conversion of forestsinto pastures can be estimated at approximately1.7 billion tons of CO2 per year.

Cropland expansion into forest. The rise in the de-mand for feed is not only met by intensification,but also by expansion of the corresponding crop-land. Large losses of carbon to the atmosphereoccur where this expansion occurs at the expenseof forest. Wassenaar et al. (2007) showed that, al-though less than pasture, large areas of croplandtoo will replace forest in the Neotropics. Much ofthis land will produce soybean primarily destinedfor feed use (Morton et al. 2006; Nepstad et al.2006). Assuming that half of the projected croplandexpansion into tropical forests in Bolivia and Brazilcan be attributed to providing feed for livestock,then there is an additional annual deforestation forfeed of over 0.5 million hectares per year. This re-sults in an estimated corresponding emission of0.7 billion tons of CO2 per year.

Carbon loss from soils cultivated to produce feed.Soils are the largest reservoir of the terrestrial car-bon cycle and continue to release significantamounts of carbon for a very long time after con-version. Under appropriate management practices(such as zero tillage), agricultural soils can con-serve a large part of their original carbon content.Losses beyond this level can be considered a resultof management practices. Sauvé et al. (2000) foundannual loss rates of about 100 kg of CO2 per hectareon permanently cultivated temperate brown soilsunder conventional cultivation practices. The largearea in temperate regions that produces coarse

Livestock-Sector Externalities Relating to Greenhouse Gases and Global Climate Change

36

15 Enteric fermentation is the process of digestion of feed in thedigestive system, in cattle, in particular, in the rumen.


grains and oil crops for feed is under large-scale in-tensive management, which is still dominated byconventional tillage practices. It can therefore beestimated that the approximately 1.8 million km2 ofarable land cultivated with maize, wheat, andsoybean for feed adds an annual CO2 flux of about18 million tons.

In addition, practices such as soil liming16 con-tribute to net emissions. Soil liming is a commonpractice in more intensively cultivated tropicalareas because of soil acidity. Brazil, for example, estimated its CO2 emissions owing to soil liming at8.99 million tons in 1994 (MST 2004), and theseemissions have most probably increased sincethen. To the extent that these emissions concerncropland for feed production, they can be attrib-uted to the livestock sector, adding another 10 mil-lion tons of CO2.

Use of fossil fuel to manufacture fertilizer. About670 million tons of cereals and large amounts ofagroindustrial by-products, such as brans and oilcakes are fed to animals (FAO 2006a). Mineralnitrogen fertilizer is applied to much of the corre-sponding cropland, and about 97 percent of nitro-gen fertilizers are derived from syntheticallyproduced ammonia via the energy-intensiveHaber–Bosch process.

The production of feed-crops accounts for a verysubstantial share of fertilizer consumption basedon the use of fertilizer by different feed-crops andon the fraction of these crops used for feed in majornitrogen fertilizer-consuming countries (FAO 2002,2003). This is largely attributable to maize produc-tion, which not only covers large areas but also re-quires high doses of nitrogen fertilizer. More thanhalf of total maize production is used as feed. Otherfeed-crops, such as barley and sorghum, are alsoimportant consumers of chemical nitrogen fertil-izer. Energy requirements result in an estimatedannual emission of CO2 of more than 40 milliontons at this initial stage of the animal food chain.

On-farm fossil-fuel use. In intensive productionsystems, the bulk of the energy is used to producefeed. Like the energy used for fertilizer, importantamounts of energy are spent on seeds, herbicidesand pesticides, diesel for machinery, and electric-ity. Data suggest that CO2 emissions induced byon-farm fossil-fuel use for feed production amount

to some 60 million tons of CO2 globally (Ryan andTiffany 1998; UNFCCC 2005). An estimated 30 mil-lion tons of additional CO2 emissions are generatedby livestock rearing itself.

Fossil fuel for processing and transport. Severalstudies assess the energy expenditure for process-ing animals for meat and other products (Sainz2003). Among livestock products, large amounts ofenergy are used to pasteurize milk and transformit into cheese and dried milk. The largest emissionsresult from soybean processing, caused by energy-intensive physical and chemical oil extraction.Considering the value fractions (Chapagain andHoekstra 2004) of these two commodities, two-thirds of these soy-processing emissions can be at-tributed to the livestock sector. This would amountto several tens of million tons of CO2.

Although rough indications, these figures showthat emissions from energy use by processing aremuch higher than that from transport in the animalfood chain. Transport occurs mainly at two keystages: that of feed to animal production sites andthat of animal products to consumer markets.Large amounts of bulky raw ingredients for con-centrated feed are shipped around the world. Thetotal annual CO2 emissions induced by meat trans-port are estimated at between 800,000 and 850,000tons (Cederberg and Flysjö 2004; IPCC 1997).

Methane emissions from enteric fermentation. Thespecific characteristics of ruminant physiology leadto net gaseous emissions of carbon as CH4.Livestock is globally the largest source of anthro-pogenic CH4 emissions. CH4 emissions from en-teric fermentation varies greatly among countries.In Brazil, CH4 emissions from enteric fermentationtotaled 9.4 million tons during 1994—93 percent ofagricultural emissions and 72 percent of the coun-try’s total emissions of CH4. Over 80 percent of thisoriginated from beef cattle (MST 2002), and theBrazilian cattle population has increased by about25 percent since that time (FAO 2007). In the UnitedStates, CH4 from enteric fermentation totaled 5.5million tons in 2002, again overwhelmingly origi-nating from beef and dairy cattle. This was 71 per-cent of all agricultural emissions and 19 percent ofthe country’s total emissions (USEPA 2004).

Levels of CH4 emissions are affected by energyintake and several other animal and diet factors, in-cluding quantity and quality of feed, animal bodyweight, age, and amount of exercise. Because manycountries do not possess such detailed information,

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16 Adding calcium carbonate-containing fertilizers, such asground limestone.


an approach that is based on standard emissionfactors is generally used in emission reporting.

CH4 emissions from enteric fermentation changeas production systems intensify and move towardhigher feed use and increased productivity. Aglobal estimate of total CH4 emissions from entericfermentation in the livestock sector using regionaland production system-specific emission factorshas been provided by Steinfeld et al. (2006). Totalglobal emissions of CH4 from enteric fermentationare estimated at 86 million tons annually. The dis-tribution across regions, species, and productionsystems of such CH4 emission is given in Table 5.1.

Methane released from animal manure. Substantialamounts of CH4 are released from the anaerobicdecomposition of organic material in livestock ma-nure. This occurs mostly when manure is managedin liquid form, such as in lagoons or holding tanks.Lagoon systems are typical for the majority oflarge-scale pig operations in most of the world ex-cept Europe. These systems are also used in largedairy operations in North America and in some de-veloping countries, such as Brazil. CH4 emissionsfrom livestock manure are influenced by a number

of factors that affect the growth of the bacteria re-sponsible for CH4 formation, including ambienttemperature, moisture, storage time, and the en-ergy content of manure.

The default emission factors currently used incountry reporting to the United NationsFramework Convention on Climate Change(UNFCCC) do not reflect the strong changes in theglobal livestock sector. Steinfeld et al. (2006) re-assessed and applied emission factors to the animalpopulation figures specific to each production sys-tem. The total annual global emission of CH4 frommanure decomposition is estimated at 17.5 milliontons, which is substantially higher than previousestimates.

LIVESTOCK IN THENITROGEN CYCLELivestock’s role in the nitrogen cycle is strongly de-termined by its efficiency in assimilating nitrogenfrom feed, the emissions caused by feed-relatedfertilizer production and use, and the emissions


38

Table 5.1: Global Methane Emissions from Enteric Fermentation in 2004

Emissions (million tons of CH4 per year, by source)

Region/Country Dairy Cattle Other Cattle Buffalo Sheep and Goats Pigs Total

Sub-Saharan Africa 2.30 7.47 0.00 1.82 0.02 11.61Asiaa 0.84 3.83 2.40 0.88 0.07 8.02India 1.70 3.94 5.25 0.91 0.01 11.82China 0.49 5.12 1.25 1.51 0.48 8.85Central and South America 3.36 17.09 0.06 0.58 0.08 21.17West Asia and North Africa 0.98 1.16 0.24 1.20 0.00 3.58North America 1.02 3.85 0.00 0.06 0.11 5.05Western Europe 2.19 2.31 0.01 0.98 0.20 5.70Oceania and Japan 0.71 1.80 0.00 0.73 0.02 3.26Eastern Europe and the 1.99 2.96 0.02 0.59 0.10 5.66

Commonwealth ofIndependent States

Other developed countries 0.11 0.62 0.00 0.18 0.00 0.91Total 15.69 50.16 9.23 9.44 1.11 85.63

Livestock Production SystemGrazing 4.73 21.89 0.00 2.95 0.00 29.58Mixed 10.96 27.53 9.23 6.50 0.80 55.02Industrial 0.00 0.73 0.00 0.00 0.30 1.04

a. Excludes China and India.


from manure, either directly, from storage, or asapplied on land.

Assimilation from feed. Diatomic nitrogen (N2) inthe atmosphere is a large and stable pool of nitro-gen. In contrast, natural ecosystems have only amodest capability to drive the nitrogen cycle,which, prior to the advent of artifical nitrogen fer-tilizer, constituted a major hurdle in satisfying thefood needs of growing populations (Galloway et al.2004). Livestock has traditionally contributed to al-leviating this problem by making reactive nitrogenfixed in grass and other fodder available to humansthrough animal products. But in doing so, theyoften impoverish natural ecosystems because live-stock uses the scarce resource inefficiently.

The efficiency of nitrogen assimilation variesconsiderably among different animal species andproducts. van der Hoek (1998) estimates averagenitrogen assimilation efficiency to be around 20percent for pigs and 34 percent for poultry. Smil(2002) calculated the protein conversion efficiencyof intensively produced dairy products in theUnited States to be 40 percent, but only 5 percentfor beef cattle. The low nitrogen assimilation effi-ciency of extensively held ruminants, in particularcattle, is partly inherent to large animals with longgestation periods and a high basal metabolic rate.

Nitrogen emissions from feed-related fertilizer. It hasbeen estimated that humans have already doubledthe natural rate of nitrogen entering the land-basednitrogen cycle, and this rate is continuing to grow(Smil 2001). Synthetic fertilizers now provide about40 percent of all the nitrogen taken up by crops.Although more efficient than animal production,crop production also uses the additional resourceat a rather low efficiency—about 50 percent.Chemical processes involving nitrous oxides areparticularly complex (Mosier et al. 2004), and soilN2O emissions are determined, among otherthings, by temperature, soil moisture, and thechemical balance of the soil.

N2O emissions for major world regions can beestimated using the Food and AgricultureOrganization/International Fertilizer IndustryAssociation (FAO/IFA) (2001) model. N2O emis-sions amount to a mean (±SD) of 1.25±1 percent ofthe nitrogen applied. This estimate is the averagefor all fertilizer types, as proposed by Bouwman(1995) and adopted by the IPCC (1997). Livestockproduction can therefore be considered responsiblefor a global N2O emission from mineral fertilizer of

0.2 million tons of nitrogen content of nitrous oxide(N2O-N) per year.

Leguminous feed-crops also produce N2O emis-sions. Based on the total area devoted to soybeanand pulse production, and on the share of produc-tion used for feed, about 75 million hectares in 2002released 0.2 million tons of N2O-N (FAO 2007).Including alfalfa and clover probably doubles thisfigure. It is therefore plausible that intensive formsof livestock production are linked to more than0.5 million tons per year of total N2O-N emissionsfrom soils under leguminous crop cultivation.

Mineral fertilizer nitrogen loss to aquatic sources andsubsequent emissions. The nitrogen uptake rate inglobal crop production is estimated at about 50percent on average (van der Hoek 1998; Smil 1999).Smil (1999) estimates that globally, in the mid-1990s, about 27 million tons were exported fromcropland through nitrate leaching (17 million tons)and soil erosion (20 million tons). This nitrogen isgradually denitrified in subsequent reservoirs ofthe nitrogen cascade (Galloway et al. 2003). The re-sulting enrichment of aquatic ecosystems with re-active nitrogen causes emissions not only of N2,but also of N2O. Galloway et al. (2004) estimate thetotal anthropogenic N2O emission from aquaticreservoirs to be about 1.5 million tons of nitrogen,originating from a total of some 59 million tonstransported to inland waters and coastal areas.Feed and forage production induces a loss of nitro-gen to aquatic sources of some 8 to 10 million tonsper year, assuming that such losses are in line withnitrogen fertilization shares of feed and forage pro-duction (some 20 to 25 percent of the world total;see “Livestock in the Carbon Cycle,” above).Applying the overall rate of anthropogenic aquaticN2O emissions, induced mineral fertilizer nitrogenloss to aquatic reservoirs results in livestock-induced emissions from aquatic sources of around0.2 million tons of nitrogen from N2O.

Nitrogen lost to the atmosphere following direct de-posit of manure. A significant amount of nitrogen isreturned to the environment through animal excre-tions. When directly deposited on pasture or crop-fields, some of the reactive nitrogen reenters theplant production cycle. However, a large shareleaves the system through gaseous emission andvolatilization, and to a lesser extent through leach-ing and erosion. While N2O and ammonia (NH3)are the two dominant reactive forms in which ni-trogen is lost, this analysis focuses on N2O because

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ammonia does not contribute to global warming—its negative impacts on the environment lay else-where. Wide variations in the quality of foragesconsumed by ruminants and in environmentalconditions make nitrogen emissions from manuredirectly deposited on land difficult to quantify. TheFAO/IFA study (2001) estimates the nitrogen lossvia NH3 and volatilization from animal manureafter application, to be 23 percent worldwide.Smil (1999) estimates this loss to be at least 15 to20 percent.

Manure-induced soil emissions are clearly thelargest livestock source of N2O worldwide.Emission fluxes from animal grazing (unmanagedwaste, direct emission) and from the use of animalwaste as crop fertilizer are of a comparable magni-tude. The grazing-derived N2O emissions are in therange of 0.002 to 0.098 kg N2O-N/kg of nitrogen excreted, whereas the default emission factor usedfor fertilizer use is set at 0.0125 kg N2O-N/kg ofnitrogen.

Emissions from applied manure need to be cal-culated separately. The FAO/IFA study (2001)estimates the N2O loss rate from applied manureat 0.6 percent—that is, lower than most mineralnitrogen fertilizers, resulting in an animal manuresoil N2O loss of 0.2 million tons of nitrogen duringthe mid-1990s. Following the IPCC method wouldincrease this to 0.3 million tons.

In the mid-1990s, animal excreta directly de-posited on pastures loaded approximately 30 mil-lion tons of nitrogen on land in extensive systems.Applying the IPCC emission factor (0.02 kg N2O-N/kg of nitrogen excreted) to this total results in ananimal manure soil N2O loss of 0.6 million tons ofnitrogen. This gives a total N2O emission of about0.9 million tons in the mid-1990s. Applying theIPCC method to the current estimates of the live-stock production system and animal numbers(Steinfeld et al. 2006) results in an overall lossof 1.7 million tons per year in the form of directanimal manure soil N2O.

Nitrogen lost to the atmosphere from stored manure.Because of the low nitrogen assimilation efficiencyof livestock, large amounts of nitrogen are lost inintensive production units. The nitrogen harvestedin feed over a wide area is used and largely lost ina spatially highly concentrated manner by highlyintensive or industrial production units with verylarge animal numbers. This concentration is oftenaggravated by excessively nitrogen-rich diets.

Nitrogen is lost from stored manure, applied in ex-cess to nearby land or in a more balanced mannerover a wider area, sold as fertilizer, or simply dis-charged into surface waters.

Manure is stored in all industrial productionunits, although the duration and mode of storagevaries. For the most part, excreted nitrogen com-pounds mineralize rapidly during this first phase ofmanure management. In urine, typically over70 percent of nitrogen is present as urea (IPCC1997). Uric acid is the dominant nitrogen compoundin poultry excretions. When expressed in N2O N/kgof nitrogen in the waste (that is, the share of nitro-gen in waste emitted to the atmosphere as N2O),losses from animal waste during storage range fromless than 0.0001 kg N2O N/kg of nitrogen for slur-ries to more than 0.15 kg N2O N/kg of nitrogen inthe pig waste of deep-litter stables. Steinfeld et al.(2006) suggest N2O emissions from stored manureequivalent to 0.7 million tons per year.

Aquatic N2O emissions after manure nitrogen loss.In intensive systems, a very large amount of nitro-gen leaves the local system through surface-waterflows, either resulting from leaching of excessamounts applied to land or from direct discharge.In the mid-1990s, about 25 million tons of nitrogenfrom animal manure remained available per yearfor plant uptake in the world’s croplands and in in-tensively used grasslands after losses to the atmos-phere during storage and following applicationand direct deposition. Applying the crop nitrogen-use efficiency of 40 percent to the remainder of an-imal manure nitrogen applied to cropland, in themid-1990s about 9 million or 10 million tons ofnitrogen entered the nitrogen cascade mostlythrough water. Applying the N2O loss rate for sub-sequent N2O emission (see “Nitrogen lost to theatmosphere from stored manure,” above), anadditional 0.2 million tons of N2O are emittedthrough this channel. N2O emissions of similarmagnitude can be expected to have resulted fromthe redeposited fraction of the volatilized NH3

from manure that reached the aquatic reservoirsin the mid-1990s. Total N2O emissions followingnitrogen losses would, therefore, have been about0.4 million tons of N2O per year during that period.

SUMMARY: EMISSIONSTables 5.2 and 5.3 summarize the range of afore-mentioned livestock sector impacts on the carbon


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Table 5.2: Summary of Current Impacts on the Carbon Cycle

Contribution from Contribution fromProcess Impact on Carbon Cycle Extensive Systemsa Intensive Systemsa

Nitrogen fertilizer production Addition of atmospheric CO2 — 0.04

On-farm fuel use Addition of atmospheric CO2 — �0.09

Savannah burning Changing carbon distribution in vegetation Majority of burned area —

Contribution to climate change worldwide

Pasture desertification Soil carbon loss

Addition of atmospheric CO2 �0.1 —

Soil and vegetation carbon loss

Deforestation Addition of atmospheric CO2 �1.7 �0.7

Changing local carbon cycle

Soil tillage Soil carbon loss — �0.02

Addition of atmospheric CO2

Soil liming Addition of atmospheric CO2 — �0.01

Enteric fermentation Addition of atmospheric CH4 1.6 0.20

Methane from manure Addition of atmospheric CH4 0.17 0.20

Processing Addition of atmospheric CO2 — 0.01–0.05

Transport Addition of atmospheric CO2 — �0.001

a. Quantified contributions concern additions to and removals from the atmospheric pool and all are expressed in billion tons CO2 equivalent.

Table 5.3: Summary of Current Impacts on the Nitrogen Cycle

Estimated Contribution Estimated ContributionProcess Impact on Nitrogen Cycle from Extensive Systemsa from Intensive Systemsa

Mineral fertilizer application Eutrophication of aquatic systems — 8–10

Addition of atmospheric N2O — 0.4 (0.2)

Volatilization/deposition of NH3 — 3.1

Leguminous feed-cropping Addition of atmospheric N2O — 0.5 (0.2)

Nitrogen loss from local terrestrial pools 18 —

Extensive grazing Addition of atmospheric N2O 1.8 (0.8) —

Volatilization/deposition of NH3 6 —

Addition of atmospheric N2O 1.3 (0.6) 0.5 (0.2)

Manure management Volatilization/deposition of NH3 11 7

Eutrophication of aquatic systems More than 10b

a. Quantified contributions are expressed in million tons N per year, except for additions of atmospheric N2O, also expressed in billion tonsCO2 equivalent (in parentheses).

b. Overall estimate based on mid-1990s figures but lacks information on the importance of direct discharge of manure to water.


and nitrogen cycles. Not all impacts are quantifi-able. Figures corresponding to processes leading toN2O emissions comprise direct and indirect emis-sions. The figures should be considered as indica-tive values.

Livestock-related emissions of CO2 are a hugecomponent of the global carbon budget when de-forestation for pasture and feed cropland and pas-ture degradation are taken into account. Althoughsmall by comparison, the livestock food chain isbecoming more fossil-fuel–intensive, because theshift from traditional local feed-based ruminantproduction to intensive monogastrics fundamen-tally entails a concomitant shift away from solarenergy to fossil fuel.

The leading role of livestock in CH4 emissionshas long been well-established. With the decline ofruminant livestock in relative terms, and the over-all trends toward higher productivities also in ru-minant production, the importance of entericfermentation will likely not grow much more.While much lower in absolute terms, CH4 emis-sions from animal manure are growing rapidly.Together they represent some 80 percent ofagricultural emissions and about 35 to 40 percent oftotal anthropogenic CH4 emissions.

Livestock activities contribute in a major way tothe emission of nitrous oxides, the most aggressivegreenhouse gas. Their contribution to the globalbudget is as high as 65 percent, and as high as 75to 80 percent of agricultural emissions. Currenttrends suggest that these levels will substantiallyincrease over the coming decades.

MITIGATIONJust as the livestock sector has large and multipleimpacts on both carbon and nitrogen cycles, thereare multiple and effective options for mitigation.Much can be done, but strong involvement of pub-lic policy is required. Most of the options are notcost-neutral, and simply enhancing awareness willnot lead to widespread adoption.

Compared to the amounts of carbon releasedfrom changes in land use and land degradation,emissions from the food chain are small. Forcarbon, the environmental focus needs to be onaddressing issues of land-use change and landdegradation. Here, the livestock sector offerssignificant potential for carbon sequestration,particularly in the form of improved pasture. This

potential has been demonstrated by a number ofEuropean authors (Soussana 2008).

The challenge in addressing land-use change isto slow and eventually halt and reverse deforesta-tion. Vlek et al. (2004) demonstrate that the onlyavailable option to free up the land necessary forcarbon sequestration is to intensify agriculturalproduction on some of the better lands, for exam-ple, by increasing fertilizer inputs. The carbon thatis sequestered and the emissions of organic carbonthat are avoided as a result of foregoing deforesta-tion will far outweigh the increased CO2 emissionsthat result from extra fertilizer production. Apartfrom improved fertilizer use, other options for in-tensification include the use of higher-yielding,better-adapted varieties and improved land andwater management.

Cultivated soils have enormous potential for netcarbon sequestration as well. The carbon sinkcapacity of the world’s agricultural and degradedsoils is 50 to 66 percent of the historic loss from soilsof 42 to 78 gigatons of carbon (Lal 2004). There areproven new practices that can improve soil qualityand raise soil organic carbon levels for examplethrough conservation tillage and organic farming.These practices achieve yields comparable to con-ventional intensive systems.

Improved grassland management is anothermajor area in which soil carbon losses can be re-versed, leading to net sequestration, through theuse of trees, improved pasture species, fertilization,and a variety of other measures. Because pasture isthe largest anthropogenic land use, improved pas-ture management could potentially sequester morecarbon than any other terrestrial sink (IPCC 2000)(see Table 5.2).

In the humid tropics silvopastoral systems areused to sequester carbon sequestration and im-prove pastures. There were employed in theCentral American Silvopastoral Project (Pagiolaet al. 2004), sponsored by the Global EnvironmentalFacility (GEF) and the Livestock Environment andDevelopment Initiative (LEAD). In dryland pas-tures, dryland soils have characteristics that help incarbon sequestration. Dry soils are less likely tolose carbon than wet soils because the lack of waterlimits soil mineralization and therefore the flux ofcarbon into the atmosphere. As a result, carbonsometimes resides in dryland soils even longerthan it does in forest soils. Although the rate atwhich carbon can be sequestered in these regions is


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low, it can be cost-effective, particularly taking intoaccount all the side benefits for soil improvementand restoration (FAO 2004).

The most efficient approach for reducing CH4

emissions from livestock is by improving the pro-ductivity and efficiency of livestock productionthrough better nutrition, genetics, animal health,and general husbandry practices. Greater effi-ciency means that a larger portion of the energy inthe animals’ feed is directed toward the creationof useful products so that CH4 emissions per unitproduct are reduced. The trends toward high-performing animals and toward monogastrics andpoultry are particularly valuable in this contextbecause they reduce CH4 per unit of product.

A number of technologies exist to reduce CH4

release from enteric fermentation. The basic prin-ciple is to increase the digestibility of feedstuff,either by modifying feed or by manipulating thedigestive process. Examples of improvements infibrous diets are the use of feed additives or sup-plements and the increased level of starch orrapidly fermentable carbohydrates in the diet.These reduce excess hydrogen and, as a result,CH4 formation.

More advanced technologies that are beingstudied involve reducing hydrogen production bystimulating acetogenic bacteria, and through de-faunation (eliminating certain protozoa from therumen), and vaccination (to reduce methanogens).

CH4 emissions from anaerobic manure manage-ment can be readily reduced with existing tech-nologies. Such emissions originate from intensivemixed and industrial systems that usually havesufficient resources and capacity to invest in thesetechnologies. A first obvious option to consider isbalanced feeding (increased carbon-to-nitrogenratios). Additional measures include anaerobicdigestion (producing biogas as an extra benefit),flaring or burning (chemical oxidation, burning),special biofilters (biological oxidation) (Montenyet al. 2006; Melse and van der Werf 2005), com-posting, and aerobic treatment. Biogas may achievea 50 percent reduction in emissions in cool climates,and higher in warmer climates, for manures thatotherwise would be stored as liquid slurry.

An important mitigation pathway for nitrogenloss lies in raising low animal nitrogen assimilationefficiency through more balanced feeding by opti-mizing proteins or amino acids. Improved feedingpractices also include phased feeding and improving

the feed conversion ratio through tailoring feed tophysiological requirements. Even with these mea-sures however, manure still contains large quantitiesof nitrogen. The use of an enclosed tank can nearlyeliminate nitrogen loss during storage and offers animportant synergy with respect to mitigating CH4

emissions and production of biogas. N2O emissionsfrom the subsequent spread of digested slurry canalso be reduced.

The key to reducing nitrogen loss resulting fromthe application of manure is to fine-tune waste ap-plication to accommodate specific environmentalconditions, including timing and amounts andform of application in response to crop physiologyand climate. Another technological option is the useof nitrification inhibitors (NIs) that can be added tourea or ammonium compounds (Monteny et al.2006). Some of these substances can potentially beused on pastures, where they act on urinary nitro-gen, an approach being adopted in New Zealand(Di and Cameron 2003).

In conclusion, livestock plays an important rolein both the global carbon and nitrogen cycles. Thecontribution to the carbon cycle mainly stems fromlivestock’s land use and role in land-use change, inparticular deforestation and pasture degradation.Livestock’s role in the nitrogen cycle is mainly de-termined by their demand for concentrate feed andby livestock waste storage and disposal. Becausethe scope for pasture expansion and intensifica-tion is limited, extensive livestock is stagnating,but industrial livestock is growing rapidly.Consequently, there is an ongoing shift toward agrowing role of livestock in the nitrogen cycle anda stagnating or declining role in the carbon cycle,albeit from a very high level.

POLICY AND INVESTMENTOPTIONSWhile important strides have been made in the re-cent past, the impact of livestock production on cli-mate change is still not well understood. Moredetailed analysis is required to shape policies thatcan effectively mitigate environmental impactsat every relevant step of the various commoditychains. Mitigation of and adaptation to climatechange are both priorities. The international com-munity should facilitate the generation of substan-tial additional knowledge and the enhancement of

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professional and institutional capacity, increaseawareness, and develop, test, and replicate innov-ative approaches.

The publication of Livestock’s Long Shadow(Steinfeld et al. 2006) helped to focus attention onthe role of livestock in GHG emissions. Most of theattention the publication raised, however, wasamong animal welfare activists and vegetarians. Itwent less far in reaching policy makers, amongwhom emissions reductions in the global transportsector remain the focus of public discourse. Morework on the economics of GHG reductions, and onthe relative contributions of the livestock and trans-port sectors to emissions is needed to more effec-tively reach this important, and arguably decisive,audience. Raising political awareness of the vitalimportance of the livestock sector to climatechange is an urgent priority for international dia-logue in the Post-Kyoto era.

Equity issues and environmental concerns in thelivestock sector form a nexus that is both a daunt-ing intellectual challenge and a large yet unex-ploited development opportunity. Importantenvironmental gains can be made by obliginglarge-scale commercial livestock producers to com-ply with heightened regulatory standards thatserve to reduce GHG emissions. The energy andnutrients contained in animal waste can be re-covered. The total nutrients contained in animalmanure exceed those contained in commercialinorganic fertilizer. Yet most of these nutrients arewasted, and the waste poses a massive and grow-ing threat to the environment. Wasting these nutri-ents represents a likewise massive opportunity costto development.

Recycling rather than wasting the energy andnutrient content of animal waste carries win–winopportunities for both the environment and for de-velopment. Capitalizing on these opportunitiesentails challenges that are familiar to developmentpractitioners and environmentalists. For instance,livestock production among poor herders andfarmers in extensive systems throughout most ofthe developing world probably faces higher re-source costs and imposes greater environmentalimpacts on a per-unit basis than anywhere else. Yetit is in these areas and among these producers thatintroducing better practices is most difficult andexpensive.

Given the vast area that livestock occupies andthe growth and structural changes the sector is

experiencing, animal agriculture offers greatpotential for high-return investments that can si-multaneously achieve substantial environmentaland social benefits. In intensive systems, the recov-ery of energy and nutrients from industrial live-stock production yields environmental and socialgains at the same time that it increases financialreturns to producers—once economic distortionsand information bottlenecks are removed.Extensive grazing systems on the other hand affordopportunities to provide environmental servicesover vast areas (e.g., carbon sequestration, water,biodiversity conservation) while diversifying theincome sources of poor holders through paymentschemes. Through relatively simple measures,methane emissions per liter of milk can be cut byhalf in traditional dairy systems.

World Bank policy dialogue and investmentmay be catalytic in a number of areas including thefollowing.

• Addressing pastoral systems in drylands, includ-ing adaptation to climate change, and incomediversification through the provision of envi-ronmental services, in particular carbon se-questration in arid rangelands, with specificattention to drought management.

• Addressing grazing systems in the humid tropics,with a focus on mitigation and especially onthe reduction of livestock’s contribution to thedeforestation process. This would need to in-clude the assessment and certification of thecarbon sequestration capacity of grazing landunder different forms of management; the re-duction of methane emissions from entericfermentation through different approaches,such as improved diets; feed additives; andincreased intensification of production.

• Addressing mixed systems in sub-Saharan Africaand South Asia, with a focus on reducingmethane emissions from dairy cows in low-productivity production. This would includean assessment of methane emissions from en-teric fermentation in different dairy produc-tion systems, and the use of suitable technicalpackages for intensification and productivitygrowth while significantly reducing methaneemissions per liter of milk produced. An im-portant component would be the develop-ment of suitable institutional arrangements,in particular carbon trading schemes and the


44


Clean Development Mechanism (CDM), toprovide a changed incentive framework.

• Addressing intensive monogastric production(worldwide), with a direct focus on recoveryand recycling of energy and nutrients.Requiring large-scale commercial producersto comply with stringent environmental reg-ulations has created a more level playingfield, in which different types of producerscompete. Pushing industrial producers intorural areas has the advantage of creating eco-nomic stimuli, and leads to income and em-ployment in forward and backward linkages.In addition, it will improve the peri-urban

environment, where currently many poorpeople live.

• Promoting knowledge exchange in raising aware-ness and transferring technology, particularlyin the areas of rehabilitation of degradedgrazing land for poverty reduction and theprovision of global and local environmentalservices (carbon sequestration, biodiversityprotection, water); reduction of methaneemissions from extensive ruminant produc-tion and supporting CDM-like mechanisms;and recovery and recycling of energy andnutrients from industrial livestock produc-tion in developing countries.

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47

While livestock products are critical in the diet of vulnerable groupsin the developing world, the livestock sector also poses major healthrisks. Over the past decade, 75 percent of the human diseases thathave emerged as epidemics have been of animal origin. Livestock-induced foodborne diarrheal diseases affect millions. Meat is also animportant factor in the obesity crisis that populations in developingcountries are increasingly sharing with those in industrialized coun-tries. Infectious diseases, such as foot-and-mouth disease and classi-cal swine fever, cause billions of dollars of economic losses. Therecent emergence of highly pathogenic avian influenza has focusedthe world’s attention on the need for efficient early-warning responseand control systems. At the global level, the integration of human andanimal health systems in an ecosystems context, as pursued with theOne World, One Health strategy, will provide an important overarch-ing organizing framework. Making that framework operational willbe a pressing challenge.

At the global level, improved coordination and risk-managementtools such as compensation mechanisms and communicationsinitiatives need to be developed and implemented by the interna-tional community. Emerging infectious diseases at the human–animal–ecosystems interface will be an enduring priority, and in-creased international support to technology development for thecontrol of the “diseases of the poor” is clearly justified. Strengtheningdeveloping countries’ national capacity to implement and adminis-ter efficient surveillance and early warning systems is a natural pri-ority for the international community, for such systems arenecessarily local. This support must also extend to the formulationof national contingency plans to direct the control of outbreaks of con-tagious diseases through combinations of culling, movementcontrols, and ring vaccinations supported by market-price–basedcompensation schemes. The national level is also where the divisionsand distributions of public and private sector roles have to be de-fined, and where in most instances, strategies that entails the publicsector “doing less, but better” need to be played out.

The contribution of livestock and livestock products to povertyreduction, dietary impacts, and the enhancement of livelihoods ofthe poor are well-recognized benefits. The analysis of sustainablelivelihood strategies, for example, indicates that more positive live-stock impacts are woven into the complex fabric of householdproduction and consumption decisions. Livestock provide essential

Livestock and PublicHealth Externalities6


food, income, organic fertilizer, draft power, finan-cial assets, and social status. There is, however, anincreasing concern for the public health externali-ties associated with the livestock sector related toinfectious diseases that originate with animals, in-cluding zoonoses. These pose an immediate andobvious risk to human populations such as rabies,avian influenza, brucellosis, and many other dis-eases. There are also a number of less obviousfacets of the human–animal interface that signifi-cantly impact the lives of people who tend live-stock, live near animals, and who consumelivestock products (Randolph et al. 2007).

LIVESTOCK–PUBLIC HEALTHINTERACTIONSLivestock and its products provide a substantiallivelihood and essential nutrients for the physicalwell-being and development of innumerablevulnerable groups, particularly in developingcountries. Undernutrition and micronutrient mal-nutrition have deleterious effects on cognitivedevelopment, school performance, and individualachievement, and these effects are further exacer-bated by the generational impacts of the increasedlikelihood of low-birth-weight infants (Randolphet al. 2007). Livestock products are high in di-gestible energy for dietary requirements, and areoften preferred in communities with critically lowlevels of readily digestible energy in their diets,such as those based on tubers. Meat, eggs, anddairy products also contain many of the essentialamino acids in a form that can readily assimilatedby the human body, and their consumption en-hances the absorption of iron and zinc from plantfood Red meat is high in very-long-chain omega-3fatty acids, although not as high as in fish. It istherefore not surprising that in areas with proteindeficiency and energy malnutrition, the consump-tion of small amounts of livestock products has avery positive effect on nutritional well-being andhealth. In Kenyan schools, for example, childrenprovided with small amounts of meat did signifi-cantly better in overall development and academictesting (Whaely et al. 2003).

The livestock sector and its products, however,pose significant risks by harboring humanpathogens and providing a reservoir for zoonoticdiseases. Many of these diseases can be foundin the livestock-keeping communities of the

developing world, and the impact in terms ofhuman mortality, morbidity, and livestock lossesusually falls most heavily on poorer societies.Historically, goats have transmitted tuberculosisto humans; cattle have been the origin of majormeasles epidemics; and rabies, bovine tuberculo-sis, and human infections of brucellosis from live-stock remain major problems in the developingworld. Accelerated globalization, the increaseddensity of both human and animal populations,and the facilitation of contacts at the human–animal interface have precipitated an upsurge inanimal diseases that spills over into humans. Overthe previous 15 years, 75 percent of the human dis-eases that have emerged as epidemics have beenof animal origin and, overall, 60 percent of humanpathogens are considered to be zoonotic(WHO/FAO/OIE 2006; Brown and King 2004)(Table 6.1). A growing number of these pathogensare developing antibiotic resistance, and many ofthese animal pathogens have potential as bioter-rorist weapons and pose the risk of intentional in-troduction into human populations. New zoonoticdisease appears every second year or so, and pre-viously apparently dormant but endemic zoonoseshave begun to reemerge.

The range and distribution of these microbeshave been accelerated with the expansion of globaltrade, population growth of both people andanimals, and changes in human behavior andlifestyles. The situation is further compromisedby excessive concentration of livestock productionunits, changing weather patterns, and changes inthe human condition including aging, urbaniza-tion, social disruption, poverty, and immunocom-promised individuals as a result of acquiredimmunodeficiency syndrome (AIDS) as well asother health risk factors. The public health signifi-cance of the zoonotic diseases becomes most im-portant in those, mainly developing, countries witha relatively high incidence of AIDS. There, patientstend to be more susceptible in general to zoonoticdiseases, including tuberculosis, other relatedmycobacterial infections, and a variety of otherpathogens of animal origin (i.e., toxoplasmosis,cryptosporidial enteritis, foodborne salmonella in-fections, other enteric organisms, Campylobacter,Listeria, and Yersinia). It is also possible that otherzoonotic diseases that are dormant or occur infre-quently (e.g., leptospirosis, plague, glanders, me-lioidosis, and pseudoglanders) may emerge in

Livestock and Public Health Externalities

48


individuals with AIDS or other immunocompro-mising conditions (Brown and King 2004).

A significant number of foodborne diseasesoriginate from animal products, and contamina-tion of surface water and groundwater caused bylivestock waste has proven to be problematic inmany countries. Pathogens such as Escherichia coli,Campylobacter, Salmonella, Leptospirosis, andhepatitis A virus, which are subclinical or asymp-tomatic in livestock, are estimated to cause at least6,000 human deaths per day worldwide. The poorin developing countries bear a disproportionateburden of these diseases. While a number of factorscontribute to increased risk among the poor, theirrelatively close proximity to the animals that arereservoirs for these diseases is probably the mostimportant. Bovine tuberculosis, anthrax, and bru-cellosis are examples of primarily occupational dis-eases of livestock keepers, although poor ruralconsumers of unprocessed meat or unpasteurizeddairy products are equally at risk. In addition, theyare less likely to seek or be able to afford medicalcare once infected, and whatever care they manageto obtain is very often inadequate. The most dev-astating impact felt by vulnerable households is theloss through illness or death of the principal bread-winner. The loss of valuable livestock assets fromdisease or compulsory removal or culling is inmany cases disastrous as well (WHO 2006).

Consumers in developing countries are increas-ing the consumption of high-energy livestock prod-ucts as their disposable incomes increase. This isleading to serious health problems similar to thosealready experienced in industrialized countries, in-cluding obesity, cardiovascular disease, and dia-betes. The resulting diseases become a serious cost

burden to the public health system, the nationaleconomy, and society at large. Worldwide, thenumber of obese people (1 billion) has now sur-passed the number of malnourished people (800million). A significant part of the growth in obesitystatistics has occurred in the developing world, andthe World Health Organization estimates that thisincludes 300 million obese adults and 115 millionpeople who suffer from obesity-related diseases.In China, for example, the number of overweightpeople has increased from less than 10 percent to15 percent in just three years. In Brazil andColumbia, the figure hovers around 40 percent, alevel comparable to that in many European coun-tries.17 While a variety of factors such as urbaniza-tion and lack of physical activity contribute to thetrend, increased consumption of animal productsplays the most significant role.

Experience in a number of World Bank projectsin Europe and Central Asia and elsewhere hasidentified some of the less obvious social aspects ofanimal ownership and the important role that free-range backyard livestock and poultry fill in thesocial fabric of the community. Drastic culling andthe loss of familiar animals and their presence andsounds are extremely disturbing and discomfort-ing for some villagers, especially the elderly. Whilethis subjective psychological effect is of course notcaptured by the calculus used by public health of-ficials responding to serious zoonotic outbreaks, itneeds to be recognized and accounted for in thedesign of effective disease control and cullingprograms. Sensitivity to these emotional reactions

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17 http://www.fao.org/FOCUS/E/obesity/obes1.htm.

Table 6.1: Examples of Outbreaks of Recent Highly Infectious Zoonotic Diseases of International Significance

Disease Date Animal Human Fatalities/Cases Animal/Economic Impact

Nipah virus 1994 Swine, dogs, fruit bats 112/257 1.2 million pigs

Bovine spongiform 1986 Cattle 149 cases of Creutzfeldt– 200,000 cattleencephalopathy (BSE) Jakob disease US$20 billion

Severe acute respiratory 2003 Civet cats 774/8101 Not applicablesyndrome (SARS)

Highly pathogenic avian 2003–present Poultry, wild fowl, 240/381 Over 200 million poultryinfluenza (HPAI) and mammals with costs of more than

US$10 billion


is important in addressing and minimizing thetrauma and mistrust that are likely to result frominterventions that require lethal means.

LIVESTOCK, PUBLIC HEALTH,AND PUBLIC GOODSThe many externalities of livestock production atthe global, national, and local levels present a vari-ety of rationales for public sector engagement inthe sector. Whether this engagement is direct orindirect varies by issue. In the case of zoonoses andfood safety, more direct engagement is warranted.The most fundamental practical concern regardingpublic intervention in the livestock sector is deter-mining which agency or institution bears respon-sibility for the particular issue, and at whatgeographic order of magnitude. The parallel ques-tion often applies at the national level, where thedivision of roles and responsibilities between theprivate and public sector also has to be defined inorder to avoid the perils of leaving vacuums of re-sponsibility between the two.

At the global level, the human risks and eco-nomic losses related to animal diseases are clearlydemonstrated by recent outbreaks of severe acuterespiratory syndrome (SARS) and highly patho-genic avian influenza (HPAI). In these instances,the effects of poor sanitary conditions and weaksurveillance and monitoring in a number of devel-oping countries led to disease outbreaks and eco-nomic losses that quickly spread to other countries,including more industrialized parts of the world.The transboundary nature of diseases such asHPAI and foot-and-mouth disease (FMD) canoften justify direct intervention at the internationallevel. It is clearly in the interest of the developedcountries to reduce the risk of emerging diseasesfrom less-developed countries and to protect theirown livestock and populations. For example, the2001 FMD outbreak in the United Kingdom, whichoriginated in South Asia, caused more than US$5billion in direct losses to agriculture. Losses inother sectors of the British economy, includingtourism, were similar as the result of spillover andripple effects (Thompson et al. 2001). Comparableimpacts and economic losses have been experi-enced in countries recently reporting outbreaks ofHPAI and incidents of bovine spongiformencephalopathy (BSE).

While controlling these outbreaks at their pointsof origin in developing countries is clearly in the

interests of industrialized countries, increasedsupport to surveillance, early-warning, and early-response systems has not materialized. For theHPAI epidemics, for example, significant interna-tional support and funding were not really mobi-lized until two years after the first risks of a globalpandemic were identified. This trend may bechanging as the global community recognizesthat the risks associated with animal diseases,zoonoses, and potential panzootics and pandemicsextend beyond HPAI, and should be considered inthe context of a more meaningful and integratedOne World, One Health approach that encompassesboth animal and human health issues at theanimal–human–ecosystems interface.

Although the emerging veterinary public healthrisks related to zoonoses are important, the exter-nalities associated with the food safety risks of live-stock products and the regulatory frameworks thatseek to minimize those risks also fall within the cat-egory of public goods. This is especially so in thecontext of trade access for emerging economies.The livestock supply chain issues, per se, mainlyinvolve commercial or private sector activities, butthe facilitation and regulation (incentives, stan-dards, certification, and so forth) and related food-safety risks do have public good implications. Inaddition to the more obvious disease preventionand control responsibilities, the monitoring of ani-mal feeds and additives, meat inspection, and li-censing of the use of animal remedies are someexamples of veterinary public good functions thatare essential to ensure a safe and reliable valuechain for animal and livestock products and to pro-tect public health. Chapter 8 provides more detailson the equity constraints and opportunities ofsmallholder integration into the livestock valuechain.

DEFINING THE INSTITUTIONALARCHITECTUREThe emergence and reemergence of zoonotic dis-eases, food safety issues, and other related live-stock externalities present challenges not only toveterinarians, but also to all medical doctors andparaprofessionals concerned with public health.The increased emphasis on food safety and theneed to reassure consumers and trade partnershave significantly increased the profile of veteri-nary public health and the delivery of related ser-vices as a public good. Although the veterinary


50


profession has traditionally been at the forefront ofcontrol and eradication of animal diseases, earlycooperation of veterinarians and public healthphysicians led to a more holistic partnership for theeradication of bovine tuberculosis first in theNordic countries and then in the United States andCanada.

This and subsequent experiences has clearlyindicated the need for close cooperation betweenveterinarians and medical professionals in the pro-vision of public good services to prevent, control,and eradicate zoonotic diseases. This partnership,in line with the One World, One Health concepthas, however, proven to be problematic in manycountries where it is needed the most. There, socialpractices, tradition, competition for limited re-sources, economic constraints, and a fundamentalresistance to interdisciplinary cooperation limit theadoption of this approach. More recently, someprogress has been made in HPAI-related activities,such as the preparation of Integrated NationalAction Plans, and at the international level in thepreparation of joint OIE/FAO/WHO strategies forthe control of HPAI. The question of how to makethe One World, One Health concept operationalin terms of incentives and mandates, and how tointegrate environmental health risks into the con-cept, remains largely unresolved and continues torequire considerable effort from all concerned.

Successful delivery of veterinary services hasevolved in many countries to include five essentialcomponents: (a) livestock producers and their or-ganizations, (b) a national public veterinary service,(c) a private veterinary sector, (d) a legislativeframework and statutory regulatory body, and(e) a veterinary professional association. Each com-ponent has different responsibilities and may rep-resent different stakeholders. Ideally, the fivecomponents interact with checks and balances sothat all clients are fairly represented. The logic andrationale for the creation of each component, andfor assigning specific tasks and responsibilities, arebased on economic, biological, and social princi-ples. Unfortunately, many of these basic elementsfor an effective veterinary service are lacking in thedeveloping countries, which are at the greatest risk.

The international donor community, includingthe World Bank, has played an important role inthe development of a better division of responsi-bilities between the public and private sectors inthe provision of veterinary services, particularly insub-Saharan Africa (see Box 6.1).

The improved division of function betweenpublic and private responsibilities has increasedthe quality of on-farm clinical services in manycases. However, it has had a nominal impact onpublic or regulatory veterinary services, as wasclearly illustrated with the spread of HPAI. Therehave been a number of fundamental shortcomingsin the public veterinary service, including but notlimited to:

• Increases in staffing have not been accompa-nied by funding allocations for adequatesalaries and operational costs.

• Resource capacity has been overwhelmed bythe increased number of tasks; especiallyas food safety and transboundary diseasesbecome more important.

• Public veterinary services have continued toperform private good services (i.e., clinicaltreatments, drug sales, and so forth), therebycompeting with fledgling private veterinaryservices and compromising the delivery oftheir regulatory public good tasks, such asdisease surveillance.

• Decentralization and wholesale or drastic pri-vatization of veterinary services, such as therecent reforms in Georgia, has compromisedthe surveillance, early-warning systems, andeffective disease control.

• Critical public/private partnerships have notbeen established and have been compromisedby a lack of mutual trust.

• Legislative frameworks for food safety,animal health, and designation of responsi-bilities between public and private serviceproviders have been weak and poorlyenforced.

• Plans and programs for initial capacity-building, professional development, andlong-term improvement in veterinary educa-tion have been inadequate.

• Development initiatives, in particular in sub-Saharan Africa, have tended to incorporateveterinary services with extension and animalhusbandry programs, thereby diluting theireffectiveness and priorities.

• In previously planned economies, the decol-lectivization of state farms has resulted inlarge numbers of fragmented holdings thathave proven difficult to control and monitor.

The results of the use of the Performance ofVeterinary Services (PVS) toolkit recently

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developed by the World Organization for AnimalHealth (OIE),18 although not yet consolidated fordifferent countries in a summary form, seem toconfirm these shortcomings.

COLLECTIVE ACTION INMANAGING ANIMAL ANDPUBLIC HEALTHDisease control traditionally has been managedthrough the public sector, which sought more or lesssuccessfully to impose strict sanitary rules, includingcentrally directed, public-sector–funded, obligatoryvaccination campaigns, directives on the handling ofpharmaceutical products, and government-enforcedcontrol of movement in the case of a disease out-break. The enforcement of compliance with food-safety standards has similarly been attemptedthrough public agents. However, with declining

budgets and expanding mandates, there has beena trend to share public sector responsibilities withthe private sector through the establishment ofpublic–private partnerships, subcontracting of ser-vices to the private sector, and collective action in thesupply of veterinary services. A number of examplesprovide useful illustration of collective action in thesupply of animal health services.

In disease control, the Brazilian NationalAgricultural Confederation (CNA) with the Foot-and-Mouth Disease Fund, provides an innovativeapproach to bridging the difference in the incen-tives for disease control between the rich and thepoor. The CNA supports education and awarenesscreation at the national level for FMD control, andsubsidizes FMD vaccination in marginal areas,particularly in areas with many smallholders, suchas Indian reserves, North Brazil, and the borderareas with Bolivia. To maintain export marketaccess from FMD freedom, the large ranchers thussubsidize the protection from FMD for the smallproducers, for which FMD freedom is much less


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Box 6.1: Improving the Distribution of Private and Public Responsibilities in Sub-Saharan Africa: Selected Results

In recent decades, public policy intervention in animalhealth in sub-Saharan Africa has focused on reachinga better distribution of responsibilities between (a) thepublic and the private sector and (b) professional andparaprofessional staff. These developments have beenaccelerated, at least in part, by structural adjustmentprograms that presumably reduced funding for

veterinary departments. They have led to the emer-gence of private professional and paraprofessionalveterinary service providers, although as shown by thenumbers from 15 important sub-Saharan livestockcountriesa presented in the table below, the number ofpublic veterinarians has also increased.

high level of accuracy in disease diagnosis, and theparaprofessionals exceeded government staff inapplying the correct doses of antibiotics and othercompounds, which could pose a danger for publichealth.

A number of surveys conducted over the pastcouple of years also show that the quality of theclinical services has also improved. For example,comparing areas without and with paraveterinariansin Kenya and Tanzania, Peeling and Holden (2004)found that mortality was halved; the benefits accruedwere, respectively, US$87 to $100 per year, with a

a. Benin, Botswana, Burkina Faso, Cameroon, Central African Republic, Chad, Ethiopia, Ghana, Kenya, Madagascar, Mali, Níger, Senegal,Tanzania, and Zimbabwe.Sources: 1986–1989 data: Anteneh 1984; 1997–2004 data: OIE Handistat.

18 http://www.oie.int/downld/Vet_serv/PVS_IICA_en.pdf.

1986–1989 1997–2001 2004

Public veterinarians (service) 2,410 2,429Public veterinarians (laboratories and universities) 355 654Total public sector veterinarians 2,271 2,765 3,083Total private sector veterinarians 69 1,343 1,780


important, because the quality of their cattle wouldnot allow them access to export markets anyway(Dubois and Moura, 2004).

The payment of compensation to eradicateepizootic disease outbreaks exists, for example, inthe Netherlands (World Bank 2006a), through anational public–private partnership. This is a cost-sharing scheme, whereby the three commodityboards (livestock and meat, poultry and eggs, anddairy products), which represent the entire foodchain for these respective commodities, and thegovernment, agree on the relative shares of com-pensation for emerging actions in the case of acontagious disease outbreak (culling, vaccination,disinfection, and so forth). The commodity boardsfund these operations through product levies.

Animal health and production services, includ-ing those considered a public good in France, aresupplied through a network of Sanitary DefenseGroups (Groupements de Défense Sanitaire, GDS),which covers about 90 percent of the national cattleherd, with somewhat lower coverage in the otherspecies. A GDS consists of a partnership betweenproducers and the public veterinary services, tosupport the latter in regulatory prophylaxes, suchas vaccination, animal identification, and supple-mental compensation, and even in breeding andenvironmental services. A GDS on average consistsof about 236,000 cattle distributed over about 4,000farms, and is funded partly by its own membersand partly from local and national public sources(le Brun 2004).

Several efforts have also been mounted in sub-Saharan Africa to link community animal healthworkers (CAHWs) to livestock users associations(LUAs) (Cadley et al. 2004). Such LUAs often hadmultiple objectives in providing services in animalhealth, resource access, and livestock marketing; itwas thought that the pooling of resources wouldenable economies of scale in the purchase of inputs,and allow better supervision of the CAHWs.However, in practice the LUAs have had a mixedperformance and poor sustainability. In animalhealth the National Federation of Central AfricanLivestock Owners (FNEC) demonstrates thesepoints. While quite successful in the initial phase(1985–1995) of its operation, distributing about60 percent of all veterinary pharmaceuticals in thatcountry, government interference and governanceissues within the association caused a virtual col-lapse of the organization in the late 1990s (de Haanet al. 2001).

PUBLIC SECTOR INTERVENTIONSA recent study commissioned by the WorldOrganization for Animal Health (OIE) indicatedthat when a comparison is made of preventioncompared to outbreak costs for HPAI, the majorityof the reviewed studies and country cases foundthat the benefits that accrue from improved pre-vention and control measures significantly out-weigh the costs of the investment. The control toolsto respond to the most challenging of the trans-boundary animal diseases and zoonoses should befunded as a public good, particularly in developingcountries, including good governance of veterinaryservices, animal health legislation, disease surveil-lance and information systems, compliance withinternational standards, research and develop-ment, and veterinary education.

At the national level there is a strong case forpublic intervention and investment (Le Gall 2006).The assessment of the current status of the veteri-nary services for a given country should be under-taken using the OIE’s Performance of VeterinaryServices (PVS) toolkit.19 This process evaluates thekey components of an effective veterinary servicein accordance with international standards andpractices and identifies the gaps and focus for in-terventions and priorities for investments. The keyelements for the evaluation include: (a) human,physical, and financial resources; (b) technicalauthority and capability; (c) interaction with stake-holders; and (d) access to markets.

Potential public sector functions of the veteri-nary services might include:

• Disease exclusion, quarantine, and early warn-ing, because these systems benefit the entiresociety, and transfer of such responsibilities toprivate individuals would be prone to free-riding and nondisclosure of information.20

• Food safety, in particular regarding control offoodborne disease pathogens, residues, orcontaminants (antibiotics, heavy metals, andso forth), because the consumer is unable tomonitor these risks and the State should beresponsible for protecting the population.

• Disease prevention for the main transbound-ary and highly contagious diseases such as

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19 Performance, Vision and Strategy for National VeterinaryServices. www.oie.int/downld/Vet_serv/PVS_IICA_en.pdf.

20 See also Umali et al. (1992).


FMD, classical swine fever, HPAI, rabies, andothers.21 Vaccination, culling, and movementcontrol for such diseases has a significantpublic-good element. Vaccination and othercontrol strategies allocated to private opera-tors may be subject to cost-cutting decisions,reduced preventive measures, and increasedrisks of exposure to introduction of disease toindividual herds or countries. In some cases,where a vaccination program protects both thepublic risk and the assets of the individualwhose animals are being vaccinated, theintervention could be considered a mixedpublic/private good, and costs sharedaccordingly.

• Communication and public awareness,because the HPAI prevention and controlprograms have shown their fundamentalimportance to the control of zoonoses, foodsafety, and other public health risks associ-ated with the externalities of the livestocksector.

THE ROLE OF THE PRIVATESECTORThe benefits of other animal disease control inter-ventions, such as clinical treatment of individuallivestock for production-related health problemsaccrue to the individual producer, and thereforemay be considered a private good. The produc-tion of vaccines and other pharmaceuticals totreat conditions such as mastitis, endoparasites,ectoparasites, and lameness belong within thiscategory. On the other hand, quality control, mon-itoring, and licensing to ensure safe production,sale, and application of these vaccines and ani-mal remedies is more properly the province of thepublic sector owing to moral hazards and tounequal access to information, which generallyadds to the disadvantage of groups with fewerresources.

The benefits of most production-related live-stock services such as breeding and feeding accrueto the private investor in the service and are there-fore generally not considered to be a public good,with the possible exception of some club goodssuch as extension and training, and some services

that seek to benefit the poor, such as subsidies andsafety nets.22

POLICY AND INVESTMENTOPTIONSThe designation of a public good related to live-stock is seldom absolute. There is usually a contin-uum between private and public investments andthe direct and indirect costs associated with the in-vestment. The relative stage of development of aparticular country will also play an important rolein assigning the services to the private or publicsector. In countries with a poorly developed pri-vate sector, there may be a stronger case for publicsector involvement and vice versa. Yet using acountry’s stage of development to determinewhich roles should be public and which private canalso be problematic. In the case of public animalhealth services, for example, it has been demon-strated that if the government veterinary service in-cludes official or informal remuneration for aprimarily private good (i.e., clinical treatments),there will be reluctance on the part of the govern-ment veterinarians to eventually give up this work,and the revenue it generates, to the private sector.

Legal, administrative, and operational frame-works and guidelines are required for governmentfunding and implementation of clearly definedpublic goods that can be delivered by the privatesector operators on a fee-for-service basis. Thispartnership also requires that the appropriate reg-ulations, procedures, and penalties be put in placeand enforced to ensure the quality of service andthe compliance of veterinarians (public and pri-vate) and producers alike. Subcontracting of pub-lic sector tasks such as blood testing, vaccination,and meat inspection, can be a powerful tool topromote the emergence of a vibrant private veteri-nary service. Such private–public partnerships arethe cornerstone of the more effective animal healthsystems found in many countries.

Some specific policy investments might includethe following:

At the global level:

• Development of a program to improve coor-dination, compensation, and insurance forthe livestock sector, which acknowledges the


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21 See a complete list of notifiable diseases at: www.oie.int/eng/maladies/en_classification.htm. 22 See also IFAD (2002).


global-public-good character of emergingand reemerging animal diseases, in particu-lar concerning the risks for disease outbreakin the developed world that might originatein developing countries. Because of theirglobal nature and the fundability, priorityshould be given to those diseases at the ani-mal–human interface. However, it is ac-knowledged that some activities, inparticular in the development of efficient sur-veillance systems, should be addressedacross diseases, and here the global supportshould not be restricted to highly infectiousdiseases at the human–animal interface.Global support, for the control of other infec-tious diseases is considered a national or pri-vate responsibility. Several internationalagencies are currently developing a proposalto create such a mechanism.

• Support for the research on “pro-poor” animaldisease control and focusing on infectious dis-eases and zoonoses that are of particular im-portance to the poor even though they may beof limited economic importance and, there-fore, of limited market potential. Since someindividual benefits would accrue for these dis-eases, a mixed private/public good approachwould be justified. Examples of such diseasesmight include the Peste de Petit Ruminantsand African swine fever. A more extensive listis provided by the International LivestockResearch Institute (ILRI), which is taking thelead in this regard in collaboration with otherdonors.23

• Promotion and support of the global commu-nity and more developed countries for long-term commitment to veterinary education,professional development, and training indeveloping countries at greatest risk and theestablishment of effective local training insti-tutions. The approach should include short-term interventions to address immediateneeds and more long-term development oftrainers focusing on a few key disciplinessuch as veterinary public health, pathology,diagnostic skills, applied epidemiology,surveillance, and information systems.

• Development and implementation of the OneWorld, One Health concept, and its eventual

implications for the future institutional archi-tecture of the organizations concerned withzoonotic diseases.

• Enhancement of the understanding of the re-spective responsibilities at the global, na-tional, and local levels and among the public,private, and associative sectors.

At the national level:

• Development of national animal disease sur-veillance systems for the prevention, control,and ultimate eradication of disease, but withappropriate resources (staff, transportation,hardware, software), and that includes theparticipation of all key stakeholders, includ-ing farmers, processors, and consumers. Thesystem should be appropriate for the currentcountry’s needs and capacity linked to foodsafety and public health information systems,and to evolve as the needs and capacity of thecountry grow. Such a modular system couldinitially focus on transboundary diseases(border inspection, animal-movement con-trols, and so forth) and diseases of domesticconcern (i.e., zoonoses), and evolve with timeand improvements in capacity to a greaterlevel of complexity and sophistication toaddress issues such as food safety and trace-ability, individual animal identification, andgeographic information systems (GIS).

• Development of national contingency plans todirect the control of outbreaks of maincontagious diseases through combinations ofculling, movement controls, and ring vaccina-tions supported by market-price–based com-pensation schemes to avoid spread frominfected areas. Typical weak elements in suchschemes are inadequate compensation forculled animals leading to underreporting ofdisease incidents, clandestine sales of dis-eased animals, and inadequate resources andincentives for field-based monitors. The na-ture of the disease defines the level of publicsector support, with the highest priority beinggiven to the OIE-listed diseases, those of majorimportance for trade. For other non-conta-gious diseases that carry less risk of infectingother animals but for which the benefits fromcontrol are directly captured by the owner, theowner must bear the responsibility and costsfor prevention, control, and treatment of thesediseases or conditions (Umali et al. 1992).

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23 www.ilri.cgiar.org/InfoServ/Webpub/Fulldocs/InvestAnim/Book1/media/26_34.htm.


• Development of a food-safety regulatorysystem that acknowledges the special foodpreparation and consumption habits of spe-cific cultures and ensures safe food for theconsumer. Such a system would be designedto consider the implications of the tradeoffbetween increased costs of safer food andreduced disease risk. A classic example of thistradeoff involves the need for pasteurizationof milk in some areas. This is justified in areaswhere milk is consumed without further

processing but is redundant in cultures thatroutinely boil milk directly, for example, incombination with tea for home consumption.

• Inclusion of communication and publicawareness campaigns as essential tools inthe veterinary public health arsenal andprograms to integrate both veterinary andmedical heath professional services in theprevention, control, and eradication of thosepublic health risks of livestock sectorexternalities.


56


57

Livestock comprises or contributes to the livelihoods of about70 percent of the rural poor worldwide, or, according to Livestock inDevelopment (1999), 987 million people. Superimposing poverty andlivestock distribution data, the International Livestock ResearchInstitute (ILRI)24 estimates that about 35 percent of poor livestockkeepers live in South Asia, about 30 percent in Sub-Saharan Africa,about 15 percent in East and South East Asia, and the remainder aredistributed over Latin America, West Asia and North Africa, andEurope and Central Asia. While livestock will not be the pathway outof poverty for all of them, and outmigration will be an imperative formany, the sector’s growth clearly represents significant opportunitiesfor poverty reduction and economic growth.

Smallholders are often excluded from livestock sector develop-ment. Access to the fast-growing and more sophisticated markets formeat and milk products is dependent on a number of factors:

• Quality and safety standards, which often requires investmentsin on-farm hygiene (cooling, tiling, etc);

• Uniformity of the product, requiring investments in breeding,feeding, and veterinary health;

• Reliability of supply, which requires product specializationand/or higher level of production; and

• Verifiability of origin, which requires traceability systems.

Owing to the economies of scale enjoyed by larger producers, satis-fying these standards imposes higher costs per unit product forsmallholders. They therefore pose a threat to small producers andprocessors, who risk being crowded out of these more remunerativemarkets. However, compliance with higher standards serves to addvalue to livestock products and can generate employment through-out the supply chain. To capitalize on these opportunities, thefollowing actions are required:

• Political and investment support for collective action, either inthe form of cooperatives and associations, or under contractfarming and vertical-integration models. The development ofcooperatives relies on the absence of government interference,while contract farming benefits from an effective legal frame-work that ensures that the terms of contract are enforceable.

The Exclusion ofSmallholders7

24 www.ilri.org/InfoServ/Webpub/Fulldocs/Mappoverty/media/index.htm.


• Setting appropriate levels of public safetystandards, with due regard for the state of themarket, overall competitiveness, and enforce-ability. Producers generally have little lever-age in the setting of private sector standards;and

• Ensuring equal treatment of smallholders inthe incentive (subsidies, etc.) framework.

EQUITY As markets move from local to rural to national,and further to regional and international markets,standards become more exacting, and the costs ofmeeting them become higher. Currently, the infor-mal, traditional markets for livestock products arestill dominant in most developing countries. Forexample, figures from recent World Bank food-safety action plans show that 85 percent ofVietnam’s pork supply and 90 percent of Ghana’sbeef supply are channeled through the informalmarkets. Smallholders can compete in these infor-mal markets in which quality standards and relia-bility of supply are still relatively unimportant.These standards and reliability become key deter-minants of access to more sophisticated formalmarkets, including those in which a modern retailsector is emerging.

Modern retail sectors are in fact emergingrapidly throughout most of the developing world,and the costs of meeting its quality and supply de-mands represent a major challenge to smallhold-ers. In 2000, supermarkets had 50 to 60 percent ofthe market in Latin America, 10 to 30 percent in

South East Asia (about 15 percent in Asia), andwere emerging in sub-Saharan Africa. In Kenya,for instance, supermarkets have a 20 percent shareof the processed food market (Reardon et al. 2004).For these more sophisticated retail markets, themargins are higher, as shown in an example ofthe Kenya livestock and meat trade in Table 7.1, butthe cost of compliance with the safety, quality, andsupply reliability becomes much more important.Increasingly, in those modern supermarket sectors,“the farm-to-table” concept, supported by therisk-analysis approach, is becoming the domi-nant quality-related driving force.

The main requirements for entry into the modernnational markets and, in even stricter form, theinternational markets, and their consequences forsmallholders are the following:

Uniformity of product requires consistency in:(a) breeding, and therefore the use of improvedbreeds, which have much less genetic heterogene-ity than the traditional breeds. Because these im-proved breeds also need better care, for thesmallholder, this means the need for a higher skilllevel, and higher veterinary and feeding costs;(b) feeding, which requires purchase of feeds fromthe larger feed mills, because they have adequatestocks of basic ingredients and proper quality con-trol, to avoid fluctuations in feed composition.There are strong economies of scale in feed deliv-ery, leading to a lower feed price for larger opera-tions. In addition, the feed-quality requirementsimply that the smallholder can use less on-farm–produced feed; and (c) veterinary health sys-tems, to avoid differences in growth rates because

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Table 7.1: Net Margins (%) of Different Livestock Value Chains fromNorth-Eastern Kenyaa to Nairobi

Traditional Market Improved Markets

Initial transport 7–22 Small market to Garissa 15–34 Small markets to fatteningranches in Lakipia

Market to slaughterhouse 7–9 Garissa to Nairobi 23–47 Fattened steers from Voislaughterhouses to Nairobi

Slaughterhouse to the butcher 9 Middlemen to butcheries 31 Slaughterhouse own purchaseto larger retailers

Butcher to consumers 53 Low-class butcheries 100–249 High-class butcheries forboneless beef

a. Adapted from AU-IBAR 2006.


of differences in health status. In veterinary healthdelivery, there are also significant economies ofscale.

Reliability of timing of the supply requires repro-ductive management of the breeding stock orplanning for the purchase of young stock, to ensurethat adequate numbers are available at the con-tracted time. Only by collective action can small-holders guarantee such a regular supply of adequatenumbers.

Reliability of the origin of the supplies requirestraceability systems to trace back the products tofarms (in the case of pigs and poultry) or animals(in the case of cattle). It also establishes liability foreventual deficiencies in quality or safety. This willinclude investments in animal identification tech-nology (electronic or conventional, such as eartags) means of identification, and the supportingcomputer and physical control systems. Such trace-ability systems (or identification and registration[I&R] systems) are expensive, and have highertransaction costs for the smallholder. For example,Blasi et al. (2003) calculated the costs of radiofre-quency identification (RFID) at US$4 per head forherds over 1,000 heads and over US$20 per headfor herds of less than 100 cattle.

Meeting sanitary standards depends for the inter-national market on the disease status of the coun-try (or region) where the farm is located, and, whenthose are met for any given market, on the sanitarystatus of the value chain. In general, standards be-come more stringent as markets get more sophisti-cated, and the decision on the level of standards topursue is an important policy issue. Governmentofficials often argue for full adoption of the inter-national Codex25 and World Organization forAnimal Health (OIE) standards. However, careshould be taken that these standards are in the in-terest of the producer and consumer. For example,in situations in which the large majority of milk isboiled for consumption, but where home refriger-ation is poor, as is the case in many developingcountries, mandatory pasteurization is counter-productive, because it increases the price to theconsumer, whereas with some training, raw milk

might present a lower health risk than pasteurizedmilk, as shown by ILRI research in Nairobi.26

Requiring smallholders to meet those standardscan cause their exclusion. For example, the re-quirement for full pasteurization of milk, withobligatory on-farm cooling of milk, caused thenumber of milk suppliers in the milk-collectionareas of metropolitan Brazil to decrease in threeyears from 175,000 to 115,000 (Farina 2002), be-cause only those with more than 200 L per daycould economically install cooling equipment.

These requirements can therefore be a threat, be-cause they drive up the costs of compliance,squeeze margins, make market access more diffi-cult, and ultimately crowd smallholders out ofproduction altogether. While in rapidly growingeconomies there are often adequate employmentopportunities in other sectors, in stagnating eco-nomic conditions, they can cause social depriva-tion. For example, while the fate of the exiting dairyfarmers from the Rio milk shed is not known, quitelikely some will have wound up in urban slums.However, it could also be an opportunity if theyare seen as part of broader process of developmentbecause it adds value and generates employmentin the processing and retailing sector.

INSTITUTIONS, POLICIES,AND INVESTMENTS Policies

Collective action, the establishment of appropriatestandards, and a level playing field for the pricingof inputs are three main policy instruments tofacilitate equitable livestock sector development.

Encouraging collective action. Collective action isespecially important in gaining market access inthe livestock sector, because: (a) the sector’s prod-ucts (milk and meat) are highly perishable, and in-dividual producers, particularly if they are small,have little leverage; and (b) there are majoreconomies of scale in meeting food safety and otheranimal health standards. Collective action dealingwith market access in the livestock sector involves:(a) procurement and processing cooperatives andassociations, particularly in dairy and live animals;(b) contract farming and vertical integration; and

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25 The Codex Alimentarius, commonly referred to as the Codex,is the product of the Codex Alimentarius Commission,which, together with the Food and Agriculture Organizationand World Health Organization, sets scientifically basedstandards and guidelines for all aspects of world foodproduction. They are considered the gold standard for allaspects of food production.

26 www.ilri.org/Link/Publications/Publications/SDP%20Brief%204%20FINAL.pdf.


(c) representation at the national level of producerinterest.

There are good experiences with livestock coop-eratives in the processing sector. For example, inIndia, the well-known cooperative movement(“Operation Flood”) under the National DairyDevelopment Board (NDDB), supported over 15years by the international community includingthe World Bank, serves about 13 million families bybuying and processing about 90 million kg of milkper year, with major poverty-reducing impacts.Another successful example of World Bank–-supported collective action in the livestock sector isthe Development Foundation of Turkey (TKV),which developed a fully integrated poultry chainfrom breeding to marketing, which in the 1990s in-tegrated about 2,500 farmers, with about 4,000broilers per cycle, and captured about 30 percent ofthe broiler market in Turkey.

The main lessons that emerge from the Indianand Turkish experience concern the importance of(World Bank 1998):

• Combining different levels of technology inthe value chain. The Indian cooperativemodel combines low levels of technology atthe farm level with sophisticated technologyat the processing and distribution levels.

• Freedom from government interference, par-ticularly in setting producer and consumerprices. Differences in the level of governmentinterference in the different Operation Floodstates showed how the financial viability andoverall sustainability of the cooperatives wasaffected by the government.

• Development of a stepwise approach, withinitial collection and processing at the locallevel, and further processing and marketingat the regional or state level, benefiting fromeconomies of scale.

• Charismatic leadership; both the NDDB andthe TKV benefited from strong and commit-ted leaders with strong political ties.

Staal et al. (2006), however, compared dairy sub-sector growth in Pakistan and India and arguedthat there is no empirical evidence that dairy coop-eratives are more effective than other market chan-nels in linking poor farmers to output markets.

Vertical-integration models can also link small-holder farmers to formal markets. In the livestocksector, vertical integration is quite common in meatproduction, especially in the pig and poultry

subsector. Combining the procurement of inputsand the marketing of outputs does yield a reduc-tion in transaction costs and increases the revenuewithin the chain. Moreover, because the integratorcan supply uniform breeding material, feed, andtechnical assistance, this model enables the pro-duction of a uniform product at the smallholderlevel, which the processing and distribution sub-sector increasingly demands. In many developedcountries, vertical integration, whether throughpure commercial or cooperative enterprises, hasbeen the engine of technological change of thefamily farm.

The effect on farmers’ income of joining avertical integrator is not considered universallypositive. The detailed studies by Delgado et al.(2006) covering smallholders in Brazil, India, thePhilippines, and Thailand show that both small-holder and large contract farmers are more profit-efficient than independent farmers. The studyshows that smallholders, in particular, benefit fromthe reduction in transaction cost. However, somereports are less positive. For example, in China’sbeef industry, many households do not feed to thespecification of the integrators and readily renegeon contracts by, for example, selling cattle throughother channels before they reach the required fin-ished weight. On the other hand, households oftencomplain about integrators discounting purchaseprices when cattle are bought on the basis of sub-jective assessment of live weight, carcass weight,fat score, hide size, and condition, especially wheninput–output price alignments are not favorable tothe integrator (Waldron 2007).

Finally, collective action in representing theinterest of the producers exists in both the developingand the developed world. In industrialized coun-tries, farmers associations such as the NationalCattlemen’s Beef Association, the Pork Council,and the National Milk Producers Associations inthe United States, and the Dairy Board in variousEuropean Union (EU) countries, are quite power-ful. The associations have succeeded in makingbeef and dairy products some of the most protectedagricultural commodities. In the developing world,associations have less influence because they lack astrong organizational structure, and many govern-ments seek to control their activities. Some havebeen able to bring the needs of their members intothe public eye, as for instance, federations of pas-toralists in East and West Africa (these were de-scribed in chapter 3). Strong organization, the

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ability to champion the interests of their members,and freedom from government dominance appearto have been critical elements of their effectiveness.

Setting appropriate standards. The need for acertain caution in applying Codex standards indeveloping countries, with due regard to foodpreparation habits and the type of markets tar-geted, makes the question of how standards are sethighly significant. Three principal factors affect thisdetermination:

• The state of the markets. In many developingcountries the urban markets are in transition,and, as distances between farm and table getlonger, health risks increase, and tradi-tional food preparation might no longer beadequate.

• Overall competitiveness. For example, seekingto meet EU standards that are in place toprevent most contagious diseases is not rec-ommended if the product would not becompetitive quality-wise.

• Enforceability. Excessive stringency in regula-tion leads to clandestine, often riskier, prac-tices and opens opportunities for rent-seekingby the enforcers. Enforceability has been par-ticularly relevant in the case of food-safetystandards in small, locally producing slaugh-terhouses, where any stricter enforcementleads to uncontrolled backyard slaughtering.

Ensuring a level playing field. Financial advantagessuch as subsidies, and differential import and ex-port incentives, are often enjoyed by many largeoperators. For example, Delgado et al. (2006)showed that the large feed mills enjoy preferen-tial import tariffs for feed grains, which putsthem into a comparative advantage vis-à-vis the

smallholder, who does not have that opportunity.Such differential treatments would need to beeliminated.

Investments

A variety of support and investments are needed tobring about enhanced access of smallholders tomarkets, and in particular to arrive at successfulcollective action in the livestock value chain.

• Investment in rural infrastructure is particu-larly important for smallholder dairy produc-ers, and can consist of communal refrigeratedmilk-collection centers, livestock markets,and roads.

• Support for institution-building, producer or-ganizations, dispute-resolution mechanisms,and eventually, milk and meat commodityexchanges.

• Support, on a matching-grant basis, for in-vestments in innovation or public health andenvironmental improvement in the valuechains, for example, for the development ofnew products, the incremental improvementof municipal slaughterhouses, waste manage-ment, and so forth.

• Support for training of the different stake-holders in the value chain on good hus-bandry, manufacturing practices, and foodsafety, with particular attention to raisingconsumer awareness.

• Support to research and advisory serviceswith a focus on those aspects important to thesmallholder and the poor; that is, use of localbreeds, local by-products, more attention tothe diseases of the poor, standards setting,and so forth.

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63

Livestock has attracted little public investment over the past decade,either by developing countries or by the international developmentcommunity. World Bank support for instance fell from total projectcosts of about US$2 billion annually in the late 1970s and early 1980s,to about $200 million in the late 1990s (in constant 1998 US dollars)(figure 8.1). Funding from other donors followed a similar trend(Blackburn and de Haan 1993). This chapter provides an account oftrends within public policy and investment in livestock, and of the fi-nancial implications of engagement focusing on a number of entrypoints that address the sector’s most critical externalities.

The focus of investments in the late 1990s and early 2000s was stillrather traditional, as exemplified by the analysis of the 2001 portfo-lio, which focused mainly on cattle (46 percent of the total projectcosts) and East Asia (40 percent of project costs) and which coveredthe entire food chain. The portfolio’s focus on cattle indicates a rela-tive neglect of poor smallholders, who raise mostly smaller stock. Italso reflects relative inattention to the environmental and publichealth effects of the fast-growing industrial pig and poultry systems.

A more recent livestock portfolio review (Agwe and Smith 2008),showed that World Bank support for livestock development fell fur-ther in 2002 and 2003, but increased to about US$200 million in 2006.Funding continued to focus disproportionately on East Asia (44 per-cent); cattle (35 percent); and research, extension, and financial ser-vices (40 percent). Support to range management and environmentalmanagement, unfortunately, remained low.

The 2008 portfolio review did not include the increase in fundingfor HPAI, for which World Bank commitments amounted to US$317million in credit and grants by March 31, 2008. 40 percent of thesecredits and grants were used for human public health. The remain-ing 60 percent of HPAI funding went to agriculture, and this wasprincipally directed to strengthening veterinary services and to de-veloping surveillance and early-response capacities. Bank fundingfor HPAI thus remained consistent with that of its broader livestockportfolio, targeting specific areas with relatively little attention tolarger issues of sustainability and equity.

A variety of reasons explain the low levels of public funding forlivestock development, both by national governments and interna-tional development agencies.

• Agriculture as a whole was severely underfunded. Invest-ments in agriculture declined from over 12 percent of donor

Funding Implications8


Funding Implications

64

Con

stan

t 199

8 U

S$

0

200

400

600

800

1,000

1,200

1,400

1974–79 1980–85 1986–92 1993–98 1999–2000Year

Livestock Only Livestock Component

Figure 8.1: Average Annual Lending forLivestock Projects and Components Fundedby the World Bank, 1974–2000

Note: Amounts are based on Total Project Costs.

Source: de Haan et al. 2001.

investments in the 1980s to about 4 percent inthe 2000s, even though 75 percent of the poorlive in rural areas and depend on agriculturefor at least part of their livelihood (WDR2008). (Just one-eighth of the 4 percent of offi-cial development assistance that was investedin the agriculture sector went to the livestocksubsector.)

• Livestock projects continue to have a poorimage, largely owing to the sector’s poor per-formance during the 1980s, when the WorldBank’s Operation Evaluation Department at-tributed them a 43 percent success rate—thiscompared to the 70 percent success rate at-tributed to agriculture sector projects overall(Blackburn and de Haan 1993). Since then, theperformance of livestock projects is at least ona par with the rest of the sector, at 65 to 70 per-cent, with a positive end-of-project rating.

• This negative image was exacerbated by thenegative externalities that livestock produc-tion involved and that led major internationalNGOs to argue against international supportfor the sector. Those organizations acquiredsignificant political influence during the late1990s and early 2000s, making many policymakers more reluctant still to commit publicresources to the sector. (The professionalanimal science community and commercialinterests on the other hand have resisted

acknowledging the negative externalities ofthe sector.)

• Recognizing that livestock sector develop-ment and production growth is chiefly a func-tion of private sector investment, the WorldBank and other donors moved away fromfunding production by parastatals during theearly 1990s. Productivity increase remainedthe primary objective. With this narrow ob-jective, the wider social need for public goodswas neglected.

The acknowledgement that the rapid growthand transformation of livestock—”the LivestockRevolution”—is mainly driven by the private sec-tor, led to an imbalance between public and privategoods within the livestock sector. Anti-livestockadvocacy by international and national civil societyand the reluctance of policy makers to devote pub-lic resources to the governance of the sector has ledto a perverse outcome, in which livestock remainsboth a major contributor to pollution and a majorrisk to global public health. This stagnation of pub-lic funding needs to be reversed at the individual,national, and international levels if:

• major environmental and public health risksare to be averted;

• livestock development is to be made moresustainable and equitable; and

• the livestock sector is to produce safe andhealthy products.

Advocacy for lowering meat and milk consump-tion as an alternative to reducing the environmen-tal and public health risks posed by the sectorcannot realistically be expected to lead to a signif-icant reduction in consumption. This is not onlyextraordinarily unlikely, but from the perspectiveof consumers in developing countries whoseconsumption of livestock products is still limited,the irony of calls to reduce that consumption com-ing from industrialized countries where con-sumption levels are so much higher, may seemalmost offensive. Nor would informing those con-sumers that the appeals are coming from largelyvegetarian quarters of industrialized societieslikely make the appeals any more acceptable.Answering those who advocate reduced con-sumption by pointing to the inevitability of in-creased consumption in developing countries isnot tantamount to advocating for the livestock sec-tor, but is, rather, an appeal for realism. Indeed,


falling into the pattern of rivalry that has charac-terized controversy about the sector would be se-rious a tactical mistake on the part of those whoseek to raise awareness about the sector. Thisawareness-raising is the first matter to address inconsidering the road ahead.

THE ROAD AHEADAwareness-raising

A concerted effort combining major investments inawareness-raising at the international, national,and local levels, with policy changes and invest-ment, are clearly required. Awareness-raisingneeds to cover both the positive and negative ef-fects of the livestock sector. If it overemphasizesthe sector’s negative effects, it will likely discour-age the public investments that are necessary. If itoveremphasizes the sector’s positive effects, it islikely to be ineffective and perceived as advocacyby parties with interests within the sector. Bothdangers are clear based on past experience.Responsible awareness-raising must also point to

the reality of increasing demand in the developingworld without expressing contempt toward theoften laudable and rational pleas of those advocat-ing reduced consumption.

A number of directions warrant high priority:

• Increase, through the international and na-tional press, general awareness for the needfor action. The publication of Livestock’s LongShadow (Steinfeld et al. 2006) and the emer-gence of HPAI have led to an increase ininterest at the international level. Box 8.1 con-tains an excellent example of the type of mes-sage in the international press that needs to beencouraged.

• Integrate, through active lobbying, environ-mental and public health issues (and inparticular the global public goods of emerg-ing infectious zoonotic diseases and GHGemission) into the international dialogue onenvironment and health issues and upcomingnegotiations. This would include active par-ticipation in the discussion the post-Kyotoagreements, which are now still dominated by

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Box 8.1: New York Times Opinion

Meat and the Planet When you think about the growth of human popula-tion over the last century or so, it is all too easy toimagine it merely as an increase in the number of hu-mans. But as we multiply, so do all the things associ-ated with us, including our livestock. At present, thereare about 1.5 billion cattle and domestic buffalo andabout 1.7 billion sheep and goats. With pigs andpoultry, they form a critical part of our enormousbiological footprint upon this planet. Just how enor-mous was not really apparent until the publication ofLivestock’s Long Shadow by the Food and AgricultureOrganization of the United Nations.

Consider these numbers. Global livestock grazingand feed production use “30 percent of the land sur-face of the planet.” Livestock—which consume morefood than they yield—also compete directly with

humans for water. And the drive to expand grazingland destroys more biologically sensitive terrain, rainforests especially, than anything else.

But what is even more striking, and alarming, is thatlivestock are responsible for about 18 percent of theglobal warming effect, more than transportation’s con-tribution. The culprits are methane—the natural resultof bovine digestion—and the nitrogen emitted bymanure. Deforestation of grazing land adds to theeffect.

There are no easy trade-offs when it comes toglobal warming—such as cutting back on cattle tomake room for cars. The human passion for meat iscertainly not about to end anytime soon. As“Livestock’s Long Shadow” makes clear, our healthand the health of the planet depend on pushinglivestock production in more sustainable directions.

Source: The New York Times, “Meat and the Planet,” Opinion Editorial, December 27, 2006.


the transport sector, and active participationin the One World, One Health discussion nowbeing launched from various sides.27

• Seek to integrate the livestock sector, and inparticular the fate of poor livestock keepers,into developing country policy documents,such as the Poverty Reduction StrategyPapers (PRSPs). Creating tools to enable thesector stakeholders to make the case moreeffectively to policymakers, such as preparedby the African Livestock Platform (ALive)28

for pro-poor livestock development, and bythe World Organization for Animal Health(OIE) for Performance of Veterinary Services(PVS), can be a major help.

FUNDING NEEDS ANDMECHANISMSCorrecting the imbalance between public andprivate goods in the livestock sector will requireadditional funding. Combinations of the followingsources should be envisioned.

• Producers and consumers. Generally, thereshould be a stricter application of the“Polluter Pays” principle, internalizing thecosts of the environmental externalities intothe price of the products. A greater cost shar-ing of environmental mitigation of the live-stock sector might be feasible, because thegrowing middle-income class in developingcountries is becoming increasingly environ-mentally conscious (Steinfeld et al. 2006). Thesize of the incremental costs differs accordingto the situation, but the calculations done inMalaysia and Australia yield a modest 6 to 10percent cost increase.29 On the other hand,those producers that provide servicesthrough carbon sequestration in their pas-tures, energy conversion of livestock waste,

and the enhancement of biodiversity shouldbe compensated.

• The Global Community, in particular, for thehigh-priority goods of public health andglobal climate change.

For emerging diseases, considerable workhas been done by OIE and the World Bank toprepare the establishment of a global fund,the Global Emergency Response Fund forAnimal Epizootics (GERFAE),30 althoughquestions regarding the proper source offunding, country, type of disease, and eligi-bility remain. For example, depending on thechoice of countries, the annual budget ofGERFAE in the case of outbreaks of HPAIvaries from US$73 million a year under a sce-nario of four least developed countries af-fected, to nearly US$600 million if the fundingcovering culling and control costs of all 50least developed countries were to be covered.FAO has estimated the total needs for the con-trol of HPAI (but would also be for the en-hanced preparedness for the containment ofother diseases) at US$882 million for2006–2008, excluding eventual compensation.Choices are, therefore, needed, and morework is required on the actual costs of settingup efficient surveillance and on early-report-ing and early-response systems.

For global climate change, existing carbon-trading mechanisms will have to be used.Under rough estimates of the lower-levelglobal emission due to the livestock sector of4.6 billion tons CO2 equivalent (Steinfeld et al.2006), a reduction of 1.2 percent (as per theKyoto agreement) and a price of US$30 perton CO2

31 would already imply an annual costof about US$1.5 billion, or about one-tenth ofthe current trading volume of the EuropeanEmissions Trading Scheme (EU ETS).32

• National governments would finance the na-tional public goods (chapter 2). Exact data arescarce, but one comparison done in the mid-1990s shows that the budget for animal healthranged from 3 percent of the agricultural

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66

30 AGRA-CEAS-CIVIC consulting (2007) www.oie.int/eng/OIE-WB_Conference_1007/OIE%20Economic%20Studies/OIE%20-%20Global%20Fund%20(Part%20II).pdf.

31 Estimated lower than the current global market, because ofpresumably higher transaction costs.

32 www.eex.com/en/about%20EEX/Cooperation%20EEX%20and%20Eurex/Background.

27 For example, FAO, OIE, and WHO, the American MedicalAssociation (AMA), the American Veterinary MedicalAssociation, (AMVA), the U.S. National Academy of Sciencesand the Institute of Medicine, and the Federation ofVeterinarians of Europe (FVE) have all called for a closer inte-gration of human and veterinary medicine, and/or have es-tablished task forces to promote the One World, One Healthconcept. On the wildlife side, the International Union for theConservation of Nature (IUCN) and the Wildlife ConservationSociety have also established a close cooperation.

28 www.alive-online.org.29 www.fao.org/docrep/x5303e/x5303e0d.htm.


budget in Morocco to 9 percent in NewZealand, clearly out of line with the contribu-tion of the sector to GDP. Greater advocacyand closer integration of the sector stake-holders into the national policy dialogue aretherefore needed.

SUMMARYClearly, business as usual without strengtheningthe ability to impose corrective measures will leadto mounting problems. Concerted action to createawareness, and to establish the correct incentiveframeworks as outlined in this document, sup-ported by investments, are needed if the livestocksector is to make a significant, positive contributionto the future and well-being of humankind.

This report analyzes the issues involved in themanagement of market failures in the livestock sec-tor and provides policy makers and practitionerswith viable policy and investment options to ad-dress these issues. It finds that the recent growth in

the livestock sector has been almost entirely drivenby private sector investments, with little or nosupporting public sector involvement. Thisphenomenon has exacerbating significant negativeexternalities, such as major land degradation,biodiversity erosion, water pollution, and green-house gas emission. In addition, as shown in recentyears, the sector is also a major source of publichealth risks. There is, therefore, a need for urgentmitigating public policies and investments to re-dress the above adverse impacts of developingcountries governments’ benign neglect of the sector.

The report concentrates on: (a) the public sectorneeds, because of the target audience, and the needto start addressing the imbalance between private-and public sector investments; and (b) the negativeeffects of the sector, because of the priority now tobe given to provide the appropriate enabling envi-ronmental, social, and public health framework inwhich the private sector can develop. The report’smain conclusions and policy recommendations aresummarized in matrix form in the appendix.

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Appendix: Overviewof Main Policy

Instruments

Policy Issue/Public Good to beInstrument Specific Measure Addressed/Comment

Motivationand generalawarenessinstruments

Institutionalinstruments

Financialinstruments

Promoting awareness at the international, national, and local levelsregarding the need to make the livestock sector more sustainable.

Developing a better understanding and seeking a common agreementamong all stakeholders on which “goods and bads” produced by thelivestock sector are respectively of a global, national, local public, orprivate nature.

Promoting improved institutional architecture, arrangements, andprocesses at the national and international levels, which seek tooperationalize the One World, One Health concept, and bringtogether human, animal, and ecosystems health institutions.

Developing a global support mechanism for capacity-building on earlydetection and response to emerging and reemerging infectious zoonoticdiseases.

Strengthen national veterinary services in surveillance, early-warning,and early-response capacity.

Introducing and enforcing a stricter application of the “polluter paysand provider gets” principle for the environmental impacts of thelivestock sector, including:

• Introducing gradually a greenhouse gas-emission tax on livestockproducts, which could be offset by payment through carbonsequestration in grassland or emission reduction through biogas;

• Introducing payment for the environmental services that the sectorcan provide, for example, in addition to carbon sequestration andenergy, for landscape management.

• Increasing cost recovery for the non-public-good services inanimal health at the local and farm level, to increasingly enablethe funding of public goods to be destined to public funds. Theemphasis in the public sector should be on doing “less but better.”

Establishing equitable treatment for smallholders:

• Eliminating financial advantages (subsidies, differential import andexport incentives), which large operators often enjoy.

• Supporting (in the form of matching grants, other incentives)activities and capacity-building that encourage collective action(input and marketing cooperatives).

Skewed Information: To coverboth the positive and negativeeffects of the sector. Highlightingonly the negative effects might dis-courage investments, whereas em-phasizing only the positive effectswill be ineffective as it is viewedas sector-interested advocacy.

Addressing overlappingresponsibilities.

Addressing disease spillover fromone sector to another.

Addressing global public good inmajor diseases.

Addressing national public goods.

Internalizing environmentalexternalities in product.

Unclear distribution ofresponsibilities between thepublic and private sectors.

Promoting social equity andpoverty reduction as a publicgood.

(Table continued on following page.)

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Policy Issue/Public Good to beInstrument Specific Measure Addressed/Comment

Regulatoryinstruments

Propertyinstruments

Establishing environmental, food safety, and health standards, whichare appropriate to the local conditions and are enforceable.

Establishing and enforcing stricter antipollution of “end-of-the-pipe”discharge of intensive livestock farms and processing operations.

Developing the capacity to define and implement zoning policies:

• In the industrial systems, bringing livestock waste production in linewith the absorptive capacity of the surrounding land (“intensify, butdon’t concentrate”), i.e., shift to more intensive systems of produc-tion, but promote a wide spatial distribution of those units;

• In the grazing systems, negotiating land use agreements, which sparethe sensitive areas, eventually with tradable rights.

Ensuring access to land and water with laws and institutionsappropriate for the prevailing production system—for example, withadequate opportunity for pastoralists to move and use the differentecological niches of their lands efficiently, and for smallholders inland-constrained situations to consolidate into larger units.

Avoiding unenforceablestandards.

Spillover effects of individual live-stock husbandry and processingpractices on common sources,such as land and water.

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THE World Bank Minding the Stock...The document was prepared by a team consisting of Jimmy Smith (Team Leader—Livestock, ARD, and coordinator of the study), Brian Bedard (Senior