Animal Welfare

The treatment of animals bred, raised, and slaughtered inside factory farming operations expose food producers and their investors to marked financial risks.

Animal welfare-related financial risks include increased regulation, reputational damage, and product recalls. Despite the continued passage of so-called ag-gag laws in Australia, Canada, the United States, and elsewhere, no factory farming operation is immune from revelations of animal abuse and cruelty within it or the relevant financial risks that may accrue to the operation or its investors.

Animal welfare-related regulation poses a significant financial risk to factory farming operations

Regulation is the most prominent financial risk associated with the treatment of animals on factory farms. And in the United States and elsewhere, the industry is already grappling with it. Increasing consumer awareness and concern regarding standard factory-farming practices such as extreme confinement and routine mutilations without anesthetic among other common procedures are driving bans on such practices. As the nonprofit ratings agency Sustainability Accounting Standards Board (SASB), has put it, “There is increasing public and regulatory scrutiny of meat, poultry, and dairy companies and their suppliers’ treatment of animals…[a] Consumer demand has driven shifts in industry practices such as eliminating the use of gestation crates in hog production and eliminating caged enclosures for poultry.”[1] Since the late 1990s, the EU has enacted bans on various factory farming confinement systems, including veal crates, gestation crates, and battery cages. In the U.S., twelve states have banned the use of intensive confinement systems and the in-state sale of animals kept in such systems in other states.[2]

To date, the factory farming industry’s efforts to overturn U.S. laws based on claims they violate the Constitution’s Commerce and Due Process clause have been unsuccessful, including in early 2019, when the Supreme Court declined to hear challenges to animal welfare laws passed by ballot in California and Massachusetts.[3] The industry’s efforts to overturn the laws are likely to continue, however, given that these significantly burden factory farming operations by requiring they make costly adjustments to their operations or cease selling products across certain state lines.

Industry representatives warn of animal welfare-related financial risks to factory farming operations

As Oklahoma Attorney General Mike Hunter explained his decision to join the National Pork Producers Council in challenging California’s 2018 Proposition 12, which requires producers’ compliance with certain confinement-related requirements and prohibits the sale of meat or egg products from animals confined in non-complying manner, “For farmers and ranchers to comply would be a major financial burden for Oklahoma producers… I understand the extremely difficult conditions our farmers and ranchers already face. Adding more red tape, like California’s Proposition 12, would make this way of life next to impossible.”[4] Fifteen other states containing, collectively, hundreds of thousands of factory farms have joined Oklahoma’s opposition to Proposition 12. Calling on the court to “reign in the emerging Balkanization of the American agricultural market,” representatives from these states highlight the enactment of similar legislation in Massachusetts, Maine, Michigan, and Rhode Island, claiming, “Now that these States have enacted sales bans on agricultural products that do not comply with their animal-confinement rules, other States may soon follow suit.”[5] 

Since Cal-Maine Foods, the largest egg producer in the United States: consider discussing costs associated with cage-free. Use this: and p. 13.

Exposés of animal cruelty can result in direct losses to factory farming operations and irreparable brand damage

A January 2008 exposé of animal cruelty at a California factory farming operation instigated both the largest meat recall in U.S. history and increased industry regulation.[b] Released by the Humane Society of the United States (HSUS), video footage from the Chino-based Hallmark Meatpacking Company featured cows too ill or injured to walk to slaughter being “tortured” by workers trying to “force ‘downed’ animals onto their feet and into the human food chain.”[6] At the time, Hallmark’s packaging unit Westland Meat was the second-largest supplier of beef to USDA's Commodity Procurement Branch, a distributor of beef to needy families, the elderly and schools via the National School Lunch Program. In 2005, the National School Lunch Program had named Hallmark/Westland Supplier of the Year.[7]

In February 2008, a month after the footage was released, Hallmark/Westland recalled a record 143 million pounds of beef, the majority of which had already been consumed.[8] In May of that year, Congress banned the entry of “downer” cows into the food supply. In early 2012, Hallmark/Westland was forced into bankruptcy. In November of that year, the federal government issued a $497M judgment against the defunct company after HSUS sued Hallmark/Westland for having breached its contract with the USDA.[9]

In June 2019, the Florida-based Animal Recovery Mission (ARM) released undercover video footage of animals being beaten, burned, punched, dragged, and left to die in extreme temperatures at Fair Oaks Farms. A working dairy of 35,000 cows that had been compared to a “Disneyland theme park,” Fair Oaks offered tours for families and school groups who could witness the “fun-filled life of a cow.”[10] The factory farm was also the flagship supplier for Fairlife Milk. A joint venture with Coca-Cola, Fairlife had claimed its cows were treated with “the utmost care” and “extraordinary care and comfort.”[11] 

Fallout for the high-end brand came quickly. Retailers including Jewel-Osco pulled Fairlife from their shelves. Kroger did not, but the chain issued a statement regarding its concerns about the abuse. Ten days after the footage was released, consumers filed a class action lawsuit alleging Fairlife had “fraudulently advertised and profited from the claim that its milk products are derived from cows that are treated with the highest degrees of care.”[12] In June 2020, consumers filed a second class action suit, claiming they purchased Fairlife products “partly because the defendant made representations about how cows were treated in a farm collective.”[13] 

Footnotes and Sources

[1] Sustainability Accounting Standards Board, “Meat, Poultry & Dairy Sustainability Accounting Standard,” October 2018, accessed September 15, 2019,

[2] ASPCA, “Farm Animal Confinement Bans by State,” accessed October 6, 2020,

[3] Joe Fassler, “Supreme Court declines to hear challenges to animal welfare laws, upholding caged hen and foie gras bans,” The Counter, January 7, 2019, accessed July 20, 2020,

[4] “Attorney General Hunter Files Brief Opposing California’s Restrictive Livestock Regulations,” March 10, 2020, accessed July 20, 2020,,anyone%20in%20the%20United%20States.

[5] National Pork Producers Council and American Farm Federation v. Karen Ross and The Humane Society of the United States, U.S. District Court, Southern District of California, 2020.

[6] Press Release, Humane Society of the United States, “Rampant animal cruelty at California slaughter plant,” January 30, 2008, accessed July 28, 2020,

[7] Joe Roybal, “Hallmark Gives Industry A California Nightmare,”, February 22, 2008, accessed August 15, 2020,

[8] Helena Bottemiller, “Landmark Settlement Reached in Westland-Hallmark Meat Case,” Food Safety News, November 18, 2012, accessed July 28, 2020,

[9] Food Safety News, “Landmark Settlement Reached in Westland-Hallmark Meat Case,” November 18, 2012, accessed October 6, 2020,

[10] Alexia Elejalde Ruiz, “7 things to know about alleged animal abuse at Fair Oaks Farms,” Chicago Tribune, June 12, 2019, accessed July 29, 2020,

[11] Corrado Rizzi, “Milk Producer Fairlife Hit with Class Action Lawsuit Following Reports of Animal Cruelty at Fair Oaks Farm,” June 14, 2019,, accessed July 29, 2020,

[12] Corrado Rizzi, “Milk Producer Fairlife Hit with Class Action Lawsuit Following Reports of Animal Cruelty at Fair Oaks Farm,” June 14, 2019,, accessed July 29, 2020,

[13] John O’Brien, “Coca-Cola hit with class action over treatment of cows at Fair Oaks,” Legal Newsline, June 29, 2020, accessed July 29, 2020,