''Factory farms are breaking the cycle between small farmers, their animals, and the environment, with collateral damage to human health and local communities,'' says the Washington, D.C.-based Worldwatch Institute.

''Mitigating the fallout will require a new approach to the way the animals are raised.''

In the report, 'Happier Meals: Rethinking the Global Meat Industry,' author Danielle Nierenberg says companies including McDonald's and upscale food retailer Whole Foods Market have begun to improve animal welfare standards in their supply chains.

Consumers can help by buying meat that is organic or from grass-fed livestock or that comes from smaller producers and by embracing vegetarianism, she says.

Nierenberg salutes the World Bank for backing away from funding large-scale livestock projects in the developing world and adds that in June, 167 governments belonging to the World Organization for Animal Health agreed new voluntary standards for the humane transportation and slaughter of animals.

Even so, industrial systems generate 74 percent of the world's poultry products, 50 percent of all pork, 43 percent of beef, and 68 percent of eggs.

Feed lots--''concentrated animal feeding operations,'' in the jargon--account for more than 40 percent of world meat production, up from 30 percent in 1990.

Industrial countries dominate production but factory farming is expanding rapidly near the major cities of Asia, Africa, and Latin America. Here, ''high population densities and weak public health, occupational, and environmental standards are exacerbating the impacts of these farms.''

''As environmental and labor regulations in the European Union and the United States become stronger and more prohibitive, large agribusinesses are moving their animal production operations overseas, primarily to countries with less stringent enforcement,'' says Nierenberg.

''Factory farms were designed to bring animals to market as quickly and cheaply as possible. Yet they invite a host of environmental, animal welfare, and public health problems,'' she says.

Crowded, inhumane, and unhygienic conditions on factory farms can sicken animals and create ''the perfect environment for the spread of diseases including avian flu, bovine spongiform encephalopathy (BSE, or mad cow disease), and foot-and-mouth disease,'' according to Nierenberg.

Additionally, factory farmed meat and fish contain ''an arsenal of unnatural ingredients'' including chemical and other pollutants, arsenic, and hormones.

World beef prices have fallen roughly 25 percent over the past 30 years, Nierenberg says, and meat consumption is rising fastest not in the West but in the developing world.

From the early 1970s to the mid-90s, meat consumption in developing countries grew by 70 million tons, nearly triple the rise in industrial nations.

Some might see that as good news, an indication that people in poor countries are eating more protein. Nierenberg, however, says that ''as developing countries continue their climb up the protein ladder, the genetic stock of their livestock is eroding as higher-producing industrial breeds crowd out indigenous varieties.''

The less diverse the herds, the more susceptible they are to the diseases that stalk the feed lots, scientists have said.

In any case, Nierenberg adds, ''the true costs of factory farming are not reflected in the low price consumers currently pay for meat. Environmental and health effects--such as rising antibiotic resistance and cardiovascular disease--are absent from most assessments of the costs and benefits of this growing trend.''

Many agribusiness firms have turned to irradiation and genetic engineering in a bid to ensure the safety of their products.

''These end-of-the-pipe remedies are certainly innovative but they don't address the real problem: factory farming is an inefficient, ecologically disruptive, dangerous, and inhumane way of making meat,'' Nierenberg says.

''Overuse of antibiotics and other antimicrobials in livestock and poultry operations, meanwhile, is undermining the toolbox of effective medicines for human use.''