2120 final report.pdf - Agra CEAS Consulting

APPENDIX 2: THIRD COUNTRIESAppendix 3: Technical description of the modelThis Appendix develops a generic Equilibrium Displacement Model (EDM) to examine animal welfareand other policy impacts on caged egg production and demand in the EU (15 and 25 member states).The objective of the EDM is to examine EU animal welfare legislation that will require the withdrawalof traditional cages (i.e., with a space allowance of 550cm 2 per bird) by 2012 and the introduction ofan enriched caged system with a space allowance per bird of 750 cm 2 and the provision of cagefurniture to allow the expression of natural behaviour. The importance of the changes to eggproduction as a result of this legislation is widely acknowledged by the egg industry in the EU. Forexample, Russell and Zhuang (2003) in a survey of egg producers in England found that many largeproducers are very concerned about the likely impacts of welfare legislation.To illustrate how EDM data and parameter values are determined we focus in this technicalAppendix on the UK. Having provided detailed information on the UK (data construction, modelperformance, interpretation of results) we then present results for the EU (15 and 25). Wherepossible all model estimates are placed in context with respect to existing research on the likelyimpact of animal welfare policy impacts.The use of EDMs to examine EU agriculture is limited. A previous and related piece of research isAlston (1986) who considered the impact of the CAP on international poultry markets. There is,however, a growing use of EDMs to examine important agricultural issues at the sector level (e.g.,Piggott, Piggott and Wright, 1995, Zhao et al., 2000a, Cranfield, 2002, Kinnucan and Myrland, 2003,and Wohlgenant and Piggott, 2003).The EDM that has been developed for this research draws on the work of Alston and Mullen (1992),Kinnucan (1999), Zhao et al., (2000a) and Kinnucan and Myrland (2003). The EDM captures thedemand and supply of caged shell eggs, shell eggs produced in alternative systems and processed eggsdomestically and internationally. The model is designed to allow examination of results in terms ofchanges in consumer and producer surplus.The model developed is parsimonious. By employing an EDM it is possible to characterise the eggsector in a relatively disaggregated manner. This model not only provides useful information(theoretical and quantitative), but it provides important insights into requirements for furthermodelling of the egg sector in light of possible future adjustments to legislation in order to furtherincrease animal welfare. Specifically the model is employed to undertake a quantitative analysis of theimpact of Directive 1999/74/EC on egg production and demand.The structure of this Appendix is as follows. In Section A3.1 we review the existing egg modellingliterature. Then in Section A3.2 we describe the egg model and develop the structural model that inturn yields the EDM. In Section A3.3 primary data needs and data sources are identified andreviewed. In Section A3.4 the various producer and consumer surplus measures we estimate to399