“This is a bitter defeat for animal rights in Germany,” said North Rhine-Westphalia's environment minister Johannes Remmel.
“It's clear that today's decision only has purely formal legal grounds and isn't a free pass for the practices of the poultry industry,” the Green Party politician went on.
Judges in Münster found that German animal protection law allows animals to be killed if there is a reasonable reason to do so.
That meant they accepted poultry farmers' arguments that raising male chicks was a disproportionate burden on their businesses as the birds are not profitable to keep.
“Animal protection is being subordinated to economic interests,” said Thomas Schröder, head of the German Animal Rights Federation. “This is unacceptable given the government's aim of protecting animals.”
Interior minister Remmel had sought to ban the practice of shredding chicks with a new regulation in 2013.
But 11 hatcheries took the North Rhine-Westphalia government to court over the move.
Meanwhile at the national level, the federal government has refused to consider a legal ban on shredding male chicks and instead is seeking a technical solution.
Federal Agriculture Minister Christian Schmidt is betting on a technology that will allow male chicks to be identified before they hatch, allowing them to be destroyed without inflicting unnecessary suffering.
The government hopes to implement the technology in hatcheries sometime in 2017.