Animal welfare is continuing to be an important dynamic in contemporary food systems. In 2012, the United Kingdom’s government abolished the use of confinement systems such as battery cages for chicken. Similar initiatives have been implemented in some states of the United States while the banning of cage systems in Australia has yet to occur, but producers are increasingly aligning their production systems with consumer demands. However, what is best for the chicken might not be the best for the environment.
Why is that?
Research from the Journal of Poultry Science suggests there is a larger environmental cost associated with free-range systems compared to caged systems (Taylor, et al., 2014). The incremental increase in emissions produced from free-range systems are derived from less efficient utilisation of land, feed, and energy. Xin, et al., (2011) estimated that free-range systems accommodate less than 25% of hens housed in cage systems, implying that free-range systems need circa 4 times the land area compared to that of caged systems. Moreover, free-range systems tend to use more feed and energy to regulate the temperatures to maintain optimal bird comfort, whereas caged systems tend to be more efficient due to the higher population density that naturally insulates the birds via their metobolic body temperatures (reduced need for external energy sources) accompanied by appropriate building design and ventilation systems.
Furthermore, hen manure can be used as an effective organic fertilizer. However, it has a nitrogen to phosphorus ratio circa 2, whereas crops typically require circa 8x more nitrogen than phosphorus (Xin, et al., 2011). This suggests that when hen manure is used as a fertilizer for crops, its application may lead to an excessive amount of phosphorus and nitrogen runoff, which can cause water eutrophication. Water eutrophication can cause quality issues such as oxygen deprivation and poisonous algal bloom’s that threaten the aquatic life in fresh water systems (Chislock, M. 2013). To this end it is hypothesised that free-range systems may contribute more to these phosphorus and nitrogen runoffs into river streams than caged systems from rainfall events (Xin, et al., 2011).
Why should you care?
Environmental, Social, and Governance (ESG) factors have been a hot topic among investors and the wider public, particularly in light of the COVID-19 pandemic. Common agricultural practices have been a specific target by the media for their contribution to global emissions. So how can the poultry industry improve its emission footprint while maintaining ethical treatement of their flock? Fortunately, research has statistically proven a simple solution that begins to address the emissions issue and hence, support the use of free-range systems.
Proper nutrition planning and dietary adjustments such as increasing the proportion of high-fibre feed ingrediants, phytase enzymes, and a lower crude protein diet observed a decrease in phosphorus content in manure and a reduction in annual amonia emissions by 10% (Taylor, et al., 2014; Xin, et al., 2011). This reduces the adverse impact on water eutrophication from phosphorus/nitrogen runoff and amonia emissions from manure, supporting the use of free-range systems and overall reduction of poultry emissions.
Additionally, the cost of renewable energy sources such as solar and wind are now less than that of coal in Australia (Graham, 2020). This makes renewable sources an attractive investment proposition for poultry producers to address their emission footprint, particularly as the storage capacity of renewable energy is improving with time. Moreover, if renewable energy sources are integrated into free-range systems, this may enhance the producers ability to sustain suitable climate conditions that will indirectly asssist in reducing the need for additional feed for their flock.
How has AgFood Opportunities Fund taken action?
Our largest investment is a 9.52% holding in TasFoods (TFL.AX, Market Capital A$40m). We contributed to a $3m equity placement in November 2020 for the expansion of poultry, distribution, on-line capabilities and dairy; and have added to our position since. TFL meets our potential champion criteria with: highly valued protein; proven production managers and brand developers; and, opportunity to scale-up through taken differentiated food to Tasmania and East Coast of Australia.
TFL is a Tasmanian based branded food producer with three divisions: “Nichols” poultry (started 1916); “Betta” milk (established 1956); and specialty foods (such at “Meander Valley” and “Pyengana” dairy (1890)). We visited the Nichols poultry facilities in Sassafras last month and were delighted to meet Tristan Nichols. Tristan is the fourth generation of Nichols, and is the Agricultural Manager. He left the family business to study and work overseas in poultry and animal farming production, and returned in 2017 to his current role. One of his first initiatives was to start Nichols Ethical Free Range Chickens with small relocatable sheds in the field with 24 hour access to outside world. Tasmania was the perfect place to do this with temperatures below 30degC all year round, and no foxes (just a few wild cats, and sadly no Tasmanian Tigers).
We asked Tristan which chicken he prefers. He replied that he liked providing customers the choice of ethical free range and barned chickens, and has worked hard to optimise the 40,000 bird barns and smaller ethical sheds for the chickens and environment (which includes adding a wind power generator for more than 30% of power use). When pushed a little more, he suggested that his personal eating preference was barn raised chickens because they have a smaller carbon and sustainability footprint through feed, energy and land use. This led us to ask Patrick Harris to write his first blog on the “Ethical Chicken Dilemma”, and prompt discussion among our investors, companies and industries.
Please contribute to our dialogue on producing sustainable food and other agricultural products. We would also welcome investment ideas that satisfy our key criteria of: sustainable & scalable niche; dependable management; and capital preservation.
Bibliography
Chislock, M. F., Doster, E., Zitomer, R. A. & Wilson, A. E. (2013) Eutrophication: Causes, Consequences, and Controls in Aquatic Ecosystems. Nature Education Knowledge 4(4):10
Graham, P., 2020. Up to 90% of electricity from solar and wind the cheapest option by 2030: CSIRO analysis. [Online]
Available at: https://theconversation.com/up-to-90-of-electricity-from-solar-and-wind-the-cheapest-option-by-2030-csiro-analysis-151831
[Accessed 04 03 2021].
Taylor, RC, Omed, H, and Edwards-Jones, G. "The Greenhouse Emissions Footprint of Free-range Eggs." Poultry Science. 93.1 (2014): 231-37. Web.
Xin, H. et al., 2011. Environmental impacts and sustainability of egg production systems. Poultry Science, pp. 263-274.
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