Question: Regarding the custom of Kapparot (swinging a chicken around one's head before Yom Kippur, symbolically transferring one's sins to the chicken; the chicken is then slaughtered and given to the poor): large quantities of chickens are often held for hours, or even days, in tightly packed cages, where they wait without water or food. They are then removed from the cages and slaughtered. In light of this fact, and the obvious suffering caused to the chickens, is it not preferable to perform Kapparot with money?
Answer: The custom of Kapparot has been rooted among the Nation of Israel for a long time, and no one has the power to prohibit it. It is, however, written in the Shulchan Aruch: "The custom that people have of Kapparah on Erev Yom Kippur, of slaughtering a rooster for each male and saying verses over it, we should stop this custom" (Shulchan Aruch, Orach Chaim 605:1 in the name of the Ramban and Rashba), and the Mishnah Berurah explains (ibid. #1): "because it resembles the ways of the Emorites" (Darkei Ha-Emori – black magic). But the Rama writes: "But some of the Geonim mentioned this custom, many later authorities mentioned it, and people have this custom in all of these countries, and one may not change it, since it is an ancient custom" (ibid.). The Rama testifies that people acted this way in all of the Ashkenazic countries, and the Sefardic Jews did as well. Furthermore, there is no problem of "Darkei Ha-Emori" in this custom, as the Mishnah Berurah explains: "And he thinks that whatever they do to this chicken should have been done to him, but it is acted out on this chicken, and the early authorities (Rishonim) explained that it is similar to a sacrifice brought for an inadvertent sin" (Mishnah Berurah ibid.). The Chayei Adam, however, already wrote: "And even though some of the Geonim mentioned this custom, what is ingrained in the heart of the masses is that all of the atonement of Yom Kippur depends on it, and it is almost as if Kapparot and eating Matzah are considered of equal weight by them. They think that they will not attain atonement on Yom Kippur without a rooster, but by acting in this way, they encounter the prohibition of eating a Neveilah (an animal which died without proper slaughtering), G-d forbid, since the chickens push each other in large groups and the slaughterers are awake all night with grimaced faces and are so tired they do not even feel the knife (to make certain it is sharp). If people would listen to me…it is better for them to swing money around their heads. This in fact was the custom of the earlier ones who would swing seeds (as the Magen Avraham 81:2 writes in the name of Rashi). They consider the seeds to be Tzedakah, and did not stumble in the prohibition of eating Neveilah, G-d forbid” (Chayei Adam klal 144 #4 and brought in the Mishnah Berurah 605:2 and Kaf Ha-Chaim #11).
The Chayei Adam thus teaches us that it is preferable to perform Kapparot with money when the chickens are in cramped conditions, and there is a question about the Kashrut of the slaughtering. It is also possible to add the concern of "Tza'ar Ba'alei Chaim" (causing distress to animals), since the distress that the chickens experience during their upbringing is compounded by their great distress before Kapparot. This is based on the insight of Ha-Gaon Rav Chaim David Ha-Levy: "And why particularly on the eve of the holy day do we need to be cruel to animals, without any need, and slaughter them without any mercy, at the time when we stand to request life for ourselves from the Living G-d" (Shut Aseh Lecha Rav vol 3, p. 67). In truth, however, there is no prohibition of "Tza'ar Ba'alei Chaim" when a person uses an animal for a vital need, and a fixed custom of Israel is considered a vital need. Nevertheless, since there is the possibility for us to use money instead, and such a substitute is, as the Chayei Adam wrote preferable when there is a huge quantity of chickens to slaughter, it can be argued that performing Kapparot with a chicken is not a vital necessity and there is an actual a problem of "Tza'ar Ba'alei Chaim."
To summarize: It is better to fulfill the custom of Kapparot with money.