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 from the estimation of the demand scenarios (EU-15 andEU-25), is the way in which the scenario envisaging a reduction in demand for caged shell eggproduction yields very different results compared to the scenarios envisaging increases in demand forprocessed and alternatively produced shell eggs.The model results indicate that under the scenario envisaging a reduction in demand for caged eggproduction producers still gain because they are in principle able to switch into production ofprocessed and shell eggs from alternative systems. This means that even with a 20% reduction indemand for caged shell eggs producer surplus rises by some €20 million in EU-15 and €27 million inthe EU-25. At the same time the modelling results demonstrate that as demand for shell eggs isreduced domestically there is a compensating increase in imports of 4.47% and 5.11% respectively forthe EU-15 and EU-25 in the case of a 20% reduction in caged shell demand.These results are of course predicated on the ability of egg producers to adjust their productionmix 38 and clearly this will not happen immediately. There will be an adjustment period. The speed ofadjustment will, for example, depend on the availability of capital. However, it is clear from theseresults that a reduction in demand for one product will force producers to look at alternative formsof production and within our model these are other types of egg production.Consumers, on the other hand, potentially face a negative impact because of the increase in pricebeing paid for eggs such that the net overall economic effect is a reduction in surplus. Thus for a20% reduction in demand for caged shell eggs consumer surplus declines by €651 million and €724million respectively in the EU-15 and EU-25 as a result of the higher price being paid for alternativelyproduced eggs.Conversely under the scenario envisaging an increase in demand for alternativelyproduced eggs both producers and consumers show a gain in surplus, the latter partly asa result of an increase in utility from increased consumption of alternatively producedeggs (with more desirable characteristics). This amounts to some €77 million forproducers and €19 million for consumers in the case of a 20% increase in demand in theEU-15 (and respectively €65 million for producers and €15 million for consumers for theEU-25). Under this scenario there are minimal trade effects but a significant increase in price(17.2% in EU-15 and 17.6% in EU-25) for alternatively produced eggs assuming a 20% increase indemand.It is interesting to note that, for the reasons discussed above, the impact on consumers of thevarious cost increases being examined is significantly larger than the impact on producers. However,this assumes that premium is payable on eggs from alternative systems remains at current levels andthis may not be the case as production from alternative systems increases. The impact of decreases38 There may of course be constraints to producers’ ability to achieve this in particular locations due to planning and/or environmentallegislation.97