As the old business school adage says, you can’t manage what you can’t measure. But the U.S. agriculture industry isn’t just failing to evaluate one of its biggest risk factors — it’s actively working to avoid doing so. And that’s storing up huge problems for farmers, investors and the environment.
U.S. meat firms are uniquely exposed to the impacts of climate change, from rising temperatures to soaring feed costs, with new analysis suggesting they will see profit margins fall by an average of 11 percent between 2020 and 2030. This could cost the likes of Tyson Foods over $4.3 billion by 2030 and McDonald’s supplier JBS up to $5 billion, yet U.S. livestock producers are generally doing less than many of their international counterparts when it comes to measuring and reporting climate risks.
EPA rider becoming a problem
A powerful example of the obstacles to progress in the U.S. is the rider added to the Environmental Protection Agency’s (EPA) funding bill every year since 2009. Heavily lobbied for by the U.S. agriculture industry and voted through regardless of which party controls Congress, this small amount of fine print severely hampers the ability of the EPA to monitor and regulate emissions from food animal operations.
In the same vein, nearly every year efforts are made by members of Congress to pass the Livestock Regulatory Protection Act. This bill aims to turn the annual spending bill rider into a permanent exemption for the food animal sector. The exemption would free the sector from the Clean Air Act regulation, ensuring its emissions — including methane, carbon dioxide and nitrogen oxide — are forever immune from EPA oversight.
Supporters say that if the livestock sector were subject to the Clean Air Act, companies would be forced to pass on additional costs to consumers, raising food prices. But this ignores the growing body of evidence that cutting emissions and diversifying into alternative forms of protein can lower prices.
There are similar battles going on across the U.S. regulatory landscape. The farm bill, currently under hot debate in Congress, will have a huge impact on the climate, either for the good or bad, by influencing which crops farmers might choose to grow and how livestock are raised. The Securities and Exchange Commission is due to rule on its requirements for emissions disclosures to cover the whole supply chain (Scope 3), under intense pressure for them to be watered down in the form of the newly introduced The Protect Farmers from the SEC Act. Last year’s Inflation Reduction Act, which provides financial incentives to farmers and ranchers who engage in “climate smart agriculture,” is under attack by those in Congress who oppose tying funding to emissions reduction.
Livestock’s large climate hoofprint
The U.S. government has made clear it is serious about reducing greenhouse gas emissions. At the 2021 United Nations Climate Change Conference (COP26), the Biden administration launched a global campaign to reduce methane emissions, and published a report showing agriculture is the single biggest source of methane in the U.S. — greater than landfill, coal mining and petroleum systems combined. Just last month, analysis found that in the environmentally conscious state of California, the single largest methane emitter is a giant feedlot, home to almost 140,000 beef cattle. Yet large emitters such as these remain absent from both state and federal databases, because while the EPA is already moving on fossil fuels, its hands are tied when it comes to animal agriculture.
Alongside emissions, the figures for manure management are staggering. At any given moment in time, roughly 90 million cattle are living on farms and feedlots in the U.S. A farm consisting of 140,000 cattle could produce the same amount of sanitary waste as the 2.3 million residents of Houston. The state of Iowa is home to just 3 million people, but the 24.5 million pigs bred there each year create as much effluent as 88 million humans.
The crisis is exacerbated by the intensive farming of animals. The number of animals on the average U.S. hog farm grew by more than 3,200 percent between 1987 and 2012. Manure is typically stored in vast lagoons where it slowly releases methane, ammonia and other pollutants, before being spread on the land. Humans have been using animal waste as fertilizer for millennia, but not in the quantities used by industrial farms. Dumping it in such high concentrations dramatically increases the release of methane — where it contributes to global warming up to 80 times the rate of carbon dioxide — and leads to pollution of rivers and groundwater.
With ammonia and other pollutants increasing the risk of chronic asthma, respiratory irritation and immune suppression for those living nearby, air pollution from industrial farms is responsible for the deaths of 12,700 Americans each year. The industry has already been forced to pay out multimillion-dollar settlements, and similar class actions remain an ongoing threat to investors.
Some protein producers have started to act, making the commitment to reduce their climate impact by measuring and mitigating their emissions, both direct and throughout their value chains. Tyson, Hormel and Marfrig are leading the way, alongside large retailers including General Mills, Conagra Brands and Ahold Delhaize. Both General Mills and Conagra Brands have set Scope 3 targets that encompass animal agriculture, and report on the breakdown of this.
While it is encouraging to see these companies taking unilateral action, it would be greatly enhanced if there were a standardized system of data collection that regulators, consumers and investors could use to assess progress. It’s just the sort of service the EPA could provide if it was permitted to regulate livestock emissions.
Around the world, investors are watching closely, and the people who hold the purse strings are more aware than ever of the risk that “business as usual” poses to their capital.
U.S. lobbyists may well be tucking into a steak dinner as they congratulate themselves on keeping the EPA at bay for another year. But what international investors see isn’t cause for celebration: they see an industry lagging ever further behind the rest of the world, failing to measure the risks it faces, and failing to manage them in a way that will stop capital going elsewhere. For the sake of U.S. farmers now and in the future, it’s time for that to change.
Helena Wright, MA, Msc, Ph.D., is policy director and Megan Waters, BA, Msc, is U.S. policy adviser at the $70-trillion-backed FAIRR investor network.