The VFD is a blessing in disguise

The FDA’s Veterinary Feed Directive might be costly at first, but it will ultimately create a healthier, more efficient livestock industry – while aligning investors with consumer and shareholder trends.

It was 1951 when the FDA approved the first antibiotics for use in animal feed, basing the move on studies showing that it helped chickens, pigs and livestock put on extra weight. For producers the advantages were clear: bigger animals = more meat = faster slaughter times = more profit. The practice would become widespread.

In The Use of Drugs in Food Animals, published in 1999, the US non-profit National Research Council noted that approximately 100 percent of chickens and turkeys, 90 percent of swine and veal calves, and 60 percent of beef cattle received diets containing antibiotic drugs during some part of their lives, making it “obvious that most producers find these products useful.”

However, effective 1 Jan, 2017, the FDA passed the Veterinary Feed Directive, which prohibits the use of antibiotics to fatten livestock. The VFD rules allows antibiotic use only to promote the health and welfare of animals.

Naturally, profits could decline – at first. But the measure would ultimately force farms to become more efficient, in addition to creating the intended societal and public health benefits.

What’s more, the new rules also respond to growing institutional investor demand. In April, 54 institutional investors including Aviva, the Strathclyde Pension Fund, Christian Super, NorthStar, Mirova and Natixis came together under a UK directive to urge 10 food companies to cut out non-therapeutic use of antibiotics in their meat supply chains.

“The world is changing, regulation on antibiotic use is set to tighten and consumer preferences are shifting away from factory-farmed food,” Coller Capital chief investment officer Jeremy Coller wrote in a letter to McDonalds, JD Wetherspoon, pub chain Mitchells & Butlers, KFC-owner Yum! Brands and the Domino’s Pizza Group.

Tyson, McDonald’s, Wendy’s and Burger King have all since pledged to source animal products free of antibiotics deemed important for human medicine.

Research shows that the greatest cost burdens of reducing or eliminating antibiotic use would mostly fall on farms that are poorly run, and thus “changes in production costs would not necessarily translate directly into lower profits,” the National Research Council report noted. And since antibiotics are most effective in animals “under the stress of inadequate nutrition and sub-optimal sanitation,” the incentive to use them decreases as management practices improve.

“This raises the interesting possibility that a ban on subtherapeutic drug use would actually result in an economic incentive to improve animal care and could result in a more efficient industry in the long term,” they wrote.

Another obvious benefit of curbing antibiotic use would be the elimination of the drugs’ costs,they noted. For average producers, that amounts to about 3.75 percent of total ration costs, or about 50 percent of the value of the compounds to animal producers. For the poultry industry specifically, medications and vaccinations make up 2.16 percent of total production costs, the report noted.

So reducing antibiotic use would carry upfront costs for the industry on the whole, but phasing them out would ultimately lead to more efficient and humane farms, arguably better-tasting and healthier meat, and could have the VFD’s intended result of curbing antibiotic resistance in humans.

The VFD rules require that licensed veterinarians (often circumvented in the past) direct antibiotic use, and only when necessary for animal health. By following the new measures, producers and their financial backers can comply with consumer demand, shareholder directives and WHO recommendations, while making the industry more efficient and healthier in the long run.