The societal demand for good farm animal welfare (FAW) has increased over time. Yet, very little is known about the economic consequences of improvements in FAW in cow-calf operations. This study investigates on-farm economic consequences of improved FAW measures in cow-calf operations. It uses a stochastic partial budgeting approach to examine the relationship between contribution margins and improvements in FAW in terms of increased space allowance for a typical Swedish cow-calf operation, as compared to current practices. In the current practice, a cow should be given at least 5 m2 and the calf 2.2 m2. We found that a 0.5 m2 increase in space allowance per calf (achieved by a corresponding reduction of herd size) was associated with a 6.9 to 18.7% reduction in contribution margins in the short term. Our analysis does not include possible indirect gains like decrease in disease incidence and enhanced non-use or 'soft' values associated with increased FAW. However, our analysis indicates that high FAW standards can be costly and careful cost-benefit analysis should be a part of decision-making processes regarding FAW standards. Our results also suggest a need for government support payments and/or the development of market mechanisms to stimulate farmers to continue producing livestock-based foods with high FAW.
Keywords: Sweden; beef production; cow-calf operations; farm animal welfare; profitability; stochastic partial budgeting analysis; suckler beef.