2120 final report.pdf - Agra CEAS Consulting

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THE SOCIO-ECONOMIC IMPLICATIONS OF THE VARIOUS SYSTEMS TO KEEP LAYING HENSA1.4.4.3. Demand and supply elasticitiesEggs are considered to be a staple product in Finland and the annual fluctuation in consumption ofshell eggs is small at +/-2% (there was a more significant increase in consumption in 2001/02 whichwas thought to result from a successful advertising campaign, although consumption has sincereturned to more typical levels). Cholesterol remains a concern for most consumers in Finland.There is no concern about salmonella because Finland has salmonella-free status.Processed egg consumption in Finland is below the EU average, although is trending upwards and it isconsidered likely by the industry that if there is to be any appreciable growth in egg consumption inFinland it will come from processed products.A1.4.5. The impact of Directive 1999/74/ECA1.4.5.1. Implementation to dateThere has been little investment in enriched cages to date with just 6 producers, accounting for lessthan 1% of production, having established new systems. However, some producers are <strong>report</strong>ed tohave invested in ‘enrichable’ cages which will comply with the Directive on removal of partitions andaddition of cage furniture.A1.4.5.2. Expected implementationThe Finnish government, in collaboration with the egg industry, has produced a strategy forimplementing the ban on unenriched cages in line with Chapter II, Article 5.2 of Directive1999/74/EC. This includes consideration of a range of scenarios. Finland has a particular concern inthat due to its salmonella-free status, any shortage in shell eggs as a result of the Directive can not bemet through imports 72 . It is therefore clearly in the national interest to ensure that there is noshortfall in supply (given that the demand for eggs in Finland is fairly inelastic, there is less concernabout reduced demand should prices increase). The Finnish government has ratified the Directiveand producers are therefore aware that from 2012 production in traditional cages will no longer bepossible.That said, producers are delaying the decision to invest and the egg industry states that there is stillsome uncertainty amongst producers as to whether the ban on traditional cages will in fact takeplace in 2012. Most producers are therefore adopting a wait and see approach. In the meantimemany producers have purchased decommissioned traditional cages (with a capacity of around300,000 hen places) from Sweden where the government has banned this type of production fromthe beginning of 2003. This represented good business for the Swedish producers who wouldotherwise probably have had to pay to have these cages disposed of and good business for Finnishproducers who needed to invest in replacement cages, but did not want to move to enriched cagesbefore they absolutely have to. Around 100,000 laying hens have apparently also been procured72 Sweden is the only other Member State with salmonella-free status and is therefore the only other Member State who can export shelleggs to Finland.158
THE SOCIO-ECONOMIC IMPLICATIONS OF THE VARIOUS SYSTEMS TO KEEP LAYING HENSfrom Sweden as a result of their early implementation. The use of Swedish cages is not consideredhelpful in terms of implementing the Directive by the industry and is not a strategy, rather simply theindividual decisions of certain producers.A1.4.5.3. Impact on the industryOne of the most likely impacts of the Directive is expected to be further pressure to continue therestructuring that is already taking place. A significant reduction in the number of egg producers (to300 to 350 from more than a thousand) and an increase in the average number of laying hens perflock is expected. This process will be assisted through Article 141 and Article 142 of Finland’s EUAccession Treaty which allows some national aid 73 . Whilst Article 142, concerning Nordic regions, isconsidered to be a permanent fixture by both the Finnish government and the EU Commission,Article 141 is not and is renegotiated periodically. The latest incarnation is implemented from thebeginning of 2004 to the end of 2007 (aid will be available from Spring 2004 assuming that the EUgives its approval). Under Article 141 the Finnish government pays both investment aid (50% of totalinvestment cost, 60% for young farmers and more where the investment is to improve animalwelfare) and aid on a per hen basis to producers. This has been a very useful mechanism for assistingthe restructuring in the sector.Under the latest incarnation of Article 141 a greater emphasis has been placed on the investmentcomponent of the support and less on the support per hen. Support per hen is currently decliningyear on year and is not in any case sufficient to compensate for the higher production costsexperienced under alternative systems. It may be the case in future that the support per hen will bedifferentiated according to production system to assist the transition from traditional cages. Thesituation will be assessed in a few years time to see if such a change is necessary.There is thought to be considerable interest in aviary systems 74 amongst producers using traditionalcages, but little investment to date. However, some respondents felt that there is currently lessinterest in enriched cages (although others disagreed). This might be the result of the investments inSwedish traditional cages which has allowed some producers to defer further investment decisionsuntil nearer 2012. Despite the producer interest in aviary systems from a technical point of view, itis not felt that there is sufficient consumer demand for eggs from alternative systems to prompt anysignificant expansion of this sector, not least because of the current level of premium (around 50% ofcaged egg prices).As long as Finland maintains salmonella-free status there is little concern that imports of shell eggswill threaten the domestic industry (only Sweden is currently able to export shell eggs to Finland).However, as far as the processing sector is concerned, any increase in egg production cost resultingfrom the implementation of the Directive is likely to have an impact on the price of second quality73Further details on national aid can be found in Työryhmämuistio MMM 2003:14 Kananmunien tuotantostrategia: Uusiintuotantomuotoihin siirtyminen vuonna 2012 Loppuraportti Helsinki 2003.74 A barn or perchery system that is sold under the deep litter marketing label.159
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