2120 final report.pdf - Agra CEAS Consulting

THE SOCIO-ECONOMIC IMPLICATIONS OF THE VARIOUS SYSTEMS TO KEEP LAYING HENSThe first thing to note about the results presented in Table 7.1 and Table 7.2 is that, as would beanticipated a priori, both producers and consumers experience a reduction in surplus as a result ofprice increases to each input. As would be expected these differences are relatively larger for theEU-25 because of the larger volume of eggs produced.The relative differences in the scale of the impact between feed, labour and other costs is a reflectionof the relative cost share of each of these inputs. Of perhaps most significance, given the focus onanimal welfare, are the results for other costs that include items such as bird depreciation and layingfacility depreciation. We can see that for a 20% increase in such costs, which is the type ofpercentage increase in terms of variable cost producers are likely to face as a result ofswitching to free range production (slightly more than half this (12%) for barnproduction), the industry will potentially suffer a loss of producer surplus of €315 million(EU-15) and €354 million (EU-25). However, many producers are likely to switch toenriched cage production which will entail a smaller increase in production costs andwill therefore mitigate this loss to some extent.As would be expected the results for the EU-15 and EU-25 behave in the same manner.In particular as costs increase quantities imported increase (by up to between 3-4% for a20% increase in feed costs). This does not, however, significantly affect the overallscenario results because the rise in imports is from a very low base or, to put thisdifferently, because the quantity of eggs currently traded is very small in relation to thesize of the overall egg market 37 . At the same time domestic production of alternativelyproduced eggs and eggs for processing goes down (by 7.2% and 0.43% respectively for a 20% rise infeed costs). The logic of this is that producers of alternative eggs have little scope to shift intoprofitable production of eggs for processing or conventionally produced shell eggs and therefore acost rise of this nature would have a bigger impact on this market.7.2.2. Demand structureFour scenarios were developed addressing potential changes in demand for eggs produced underdifferent systems (e.g. as a result of changes in retailers’ and consumers’ requirements). Thescenarios examined follow from the market trends observed and discussed in Chapter 3 and involvea reduction in demand for caged shell eggs (of 1%, 5%, 10% and 20% respectively) and an increase inthe demand for processed (of 1%, 5%, 10% and 20% respectively) and alternatively produced shelleggs (of 1%, 5%, 10% and 20% respectively).37 It should be noted that for this scenario tariff levels have been maintained at current levels.94