2120 final report.pdf - Agra CEAS Consulting

APPENDIX 2: THIRD COUNTRIESThe Iowa State analysis provides a useful comparison of the relative cost of major inputs among thekey egg producing states. As indicated in Table A2.43, Iowa has a cost advantage over the otherproduction regions with regard to most inputs. The one exception is the cost of labour, thoughlabour accounts for a relatively small share of total cost.Table A2.43: Input cost index comparison of leading egg producing states 2000Iowa California Pennsylvania Ohio GeorgiaFeed Cost 1.00 1.22 1.07 1.06 1.07Electricity Rate 1.00 1.39 1.00 1.12 1.15Wage Rate 1.00 1.06 0.86 0.81 0.96Total Cost 1.00 1.11 1.03 1.02 1.03Source: John Lawrence, et al, Economic Importance of the Iowa Egg Industry, Iowa State University, March 2003.The cost estimates appearing in Table A2.44 below are based on several different sources includingthe USDA and Land Grant University poultry specialists at the University of California, PennsylvaniaState University, and Iowa State University. The estimates for the free-range and organic productionsystems are based on recommended production practices for very small-scale (1,000 hen)operations.As can be seen, production costs for the one-, two-, and three-cycle systems are very similar. Thefacilities and methods used in these systems are all essentially the same. Thus, it is not surprising thatmany of their costs are similar. The principal differences are in the cost of feed and pullets. Feedcosts are higher for those systems that engage in molting because older birds are less efficient atconverting feed into eggs. As a result, feed costs per dozen eggs under the three-cycle system areabout 16% higher than under the one-cycle system. Almost exactly offsetting this is the higher costof pullet depreciation for producers using the one-cycle approach. By recycling their flocks once ortwice, the two- and three-cycle systems are able to spread the cost of their pullets over greateroutput.The only available budgets for free-range and organically produced eggs represent the combined costof production and marketing. As indicated above, these are very small operations that market theireggs and spent hens locally. They are highly labour intensive with the imputed cost of labour (US$13.24/hour) accounting for 30% or more of total cost. Of course eggs from these flocks commonlycommand a substantially higher price than undifferentiated commodity eggs. In their budgets forthese flocks, Pennsylvania State University economists assume a price for free-range eggsapproximately double the price of conventional eggs and for organic eggs they assume a price aboutfour times the price of conventional eggs.382