2120 final report.pdf - Agra CEAS Consulting

THE SOCIO-ECONOMIC IMPLICATIONS OF THE VARIOUS SYSTEMS TO KEEP LAYING HENSmodel used provides a coherent and explicit analysis framework although it inevitably relies onparsimonious assumptions and does not indicate what adjustment path will be taken to arrive at theequilibrium point outlined above. In reality, as a result of the multiple factors which influence anyeconomic sector and specifically the laying hen sector, whatever adjustment processes take place willnot be uniform across the EU 41 .Overall the results we present are as would be expected a priori. In other words, the changes toconsumer and producer surplus from the various exogenous shocks considered do not yield anyunusual or unexpected outcomes. The magnitude of the changes, especially for the 20% scenariosare relatively large (for example up to a €743 million reduction in consumer surplus resulting from a20% reduction in demand for caged shell eggs or a consumer gain of some €574 million from a 50%tariff reduction), but this is to be expected.Specifically as regards the assessment of the likely impact of an increase in costs asmight occur if there were to be a shift into alternative egg production systems as aresult of the implementation of the battery cage ban mandated for 2012 underRegulation 1999/74, the model indicates that for a 20% increase in such costs, which isthe type of percentage increase in terms of variable cost producers are likely to face asa result of switching to free range production, (slightly more than half this (12%) forbarn production), the industry will potentially suffer a loss of producer surplus of €315million (EU-15) and €354 million (EU-25). However, many producers are likely toswitch to enriched cage production which will entail a smaller increase in productioncosts and will therefore mitigate this loss to some extent.It should also be noted that under this scenario as costs increase quantities importedincrease (by up to between 3-4% for a 20% increase in feed costs). This does not,however, significantly affect the overall scenario results because the rise in imports isfrom a very low base or, to put this differently, because the quantity of eggs currentlytraded is very small in relation to the size of the overall egg market.In this context it should be noted that while the model results presented here provide no indicationof the distribution of losses or gains for producers and consumers between Member States, thesewill not ultimately be distributed evenly. In practice, outcomes in this regard will depend on thecurrent structure and cost of production, consumption and trade in each Member State as well asthe nature of the change taking place. Thus, for example, the effect of a reduction in import tariffswill depend on the competitiveness of the sector in each Member State as well as the structure ofdemand.Finally, we note that the magnitude of the results, especially the estimates of change in surplus, needto be considered relative to the potential non-market benefits from changes in animal welfarelegislation. There is a limited literature available on this subject, but estimates to date suggest that41This is evident from the model construction which aggregates Member State detail.105