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(Extracted from my book Man & Beast, and re-posted from two years ago. Sorry for the absence of original posts; I've been busy with hyrax, ibex, oryx, addax, and aurochs.)
On the days preceding Yom Kippur, some have a custom to designate a chicken as a scapegoat for their own sins. They recite a statement designating it as such while passing it around their head, and the bird is then slaughtered. Many have the custom of then giving the chicken to the poor. (Some have the custom to use money for the procedure instead.)
Two of the early authorities, Rashba and Ramban, strongly protest against this custom, considering it to fall under the prohibition of “following the ways of the Emorites.” The Shulchan Aruch likewise disapproves of this custom. However, Rabbi Moshe Isserliss, in his glosses to the Shulchan Aruch, notes that since this is an ancient custom that has widespread support, one should not dissuade people from it.
But what of the aspect of causing suffering to the birds? There is no real reason why it should be any different to any case of slaughtering a chicken to eat. Passing a bird around one’s head can certainly be done in a way that does not cause undue distress, although unfortunately inexperienced people may not know how to handle it in such a way.
The bigger problem lies in how the entire process is commonly facilitated nowadays. In pre-war Europe, a person would simply take a chicken from his yard, or from the local farmer. Today, the chickens are packed en masse into crates and shipped to city centers where they wait for people to take their turn in performing the kapparos process. This commonly results in the birds being kept in horrifically cramped conditions without food, water or shade.
While it is permitted to cause suffering to animals for material or spiritual benefit, the suffering in this case is quite needless. It would seem that causing needless suffering to animals is a Biblical prohibition that far outweighs the value of a custom. Furthermore, it would seem to fundamentally negate much of the significance of the kapparos ritual. The Tur states that after slaughtering the chicken, there is a custom to throw its innards on the roof for birds to eat. Taz and Aruch haShulchan state that the reason for this is to show compassion for other creatures and thereby to earn Divine compassion. On the eve of the Day of Judgment, when there is a special need to earn Divine mercy, it is surely counterproductive to inflict needless suffering upon creatures.
Fortunately, in recent years, people have gradually become sensitive to this issue, and positive steps are slowly being taken to rectify this situation.
 Shailos U’Teshuvos HaRashba 1:395.
 Cited in Orchos Chaim, hilchos erev yom hakipurim 1.
 Orach Chaim 605:1. Several other objections to this custom are given in other works, such as that the great volume of birds being slaughtered under rushed conditions is likely to lead in disqualifications in the slaughtering process.
 Orach Chaim 605:4.
 Orach Chaim 605:4.
 Others say that it is because the chicken may have benefited from stolen foods and therefore we must limit our benefit from it.