2120 final report.pdf - Agra CEAS Consulting

APPENDIX 2: THIRD COUNTRIESIn slowing production and allowing demand to catch up with supply, the industry returned toprofitability. The question now is, will the industry overreact to the recent high prices with a newwave of expansion? While there is some concern in the trade that this will happen, USDA is guessingthat the industry will pursue a more measured pace of expansion. Compared to an average annualrate of growth in output of 2.7% in the last expansion, the USDA is projecting a rate of growth abouthalf that level over the next four years see Table A2.47.Table A2.47: Long-term projections of the U.S. egg industry 2002 – 2013Production % change Exports Retail price Total cost2002 86.652 0.9% 2.088 1.23 0.742003 86.436 -0.2% 1.860 1.43 0.832004 87.120 0.8% 2.076 1.45 0.862005 88.596 1.7% 2.100 1.39 0.842006 89.928 1.5% 2.136 1.30 0.832007 91.008 1.2% 2.184 1.29 0.852008 92.100 1.2% 2.232 1.34 0.882009 93.120 1.1% 2.280 1.37 0.902010 94.140 1.1% 2.316 1.41 0.922011 95.172 1.1% 2.364 1.44 0.952012 96.216 1.1% 2.412 1.48 0.962013 97.188 1.0% 2.460 1.51 0.97Source: USDA, Baseline Projections, February 2004.U.S. egg producers already face a considerable investment challenge just to maintain the presentsupply/demand balance. Don Bell at the University of California estimates that the combination ofreplacing obsolete houses, reducing cage density in conformance with the new welfare guidelines, andincreasing production in line with population growth will require an additional 200 (100,000 hencapacity) houses each year for the next 5 years. At an estimated cost per house of US $0.7 to US$1.5 million, this will require an annual investment of US $140 to US $300 million. Should someproducers decide to reduce their use of molting, additional grow-out housing would also berequired.A2.4.4.2. Environmental issuesFederal regulations requiring the development and implementation of nutrient management plans forlarge confined livestock enterprises have recently been adopted. Although livestock production inthe Midwestern U.S. (where much of the egg industry is located) is relatively well positioned toaccommodate these regulations, their adoption will still result in added cost, inconvenience, andsome dislocation. A recent survey of leading egg producers found that environmental issues were atthe top of their list of concerns.A2.4.4.3. Animal welfareAs noted earlier, the U.S. industry has developed and is in the process of adopting a set of AnimalCertified Care Guidelines. While these guidelines have been widely adopted within the industry386