2120 final report.pdf - Agra CEAS Consulting

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THE SOCIO-ECONOMIC IMPLICATIONS OF THE VARIOUS SYSTEMS TO KEEP LAYING HENSFinally, even when the above issues have been worked through, the economically rationalproducer will not invest in new equipment until absolutely necessary to avoid being placed at adisadvantage in comparison to those producers continuing to produce with traditional cages.The consequence of this is that, apart from the experimental use of enriched cages in a number ofMember States (Germany, Belgium, Netherlands, Denmark, France, Portugal and the UK), there hasbeen a marked lack of investment in anticipation of the 2012 ban (with the obvious exception ofSweden and limited investments in the UK). However, a number of producers in a limited number ofMember States (e.g. Finland and the UK) have invested in what are known as ‘enrichable’ cages.These are currently operated as traditional cages, but can be adapted and furniture added in order tocomply with the Directive at a relatively low cost.Producer organisations have noted that with respect to future implementation, if the Directive is tobe adopted successfully it is essential that producers across the EU feel that the Directive is beingimplemented uniformly since the real or perceived absence of a level playing field is likely to severelyhamper implementation.6.3. Impact on the industryThere are only detailed estimates as to the cost of implementing the Directive in the UK where theGovernment has produced a Regulatory Impact Assessment which estimated that the cost ofcompliance will be around €247,758 20 for holdings with 12,000 birds, €2,062,176 for those with100,000 birds and €8,263,541 for large holdings with 400,000 birds. These costs equate to a totalnet present value 21 of €606.78 million from 2000 to 2011, €68.24 million per year from 2000 intoperpetuity 22 .There are no other detailed cost estimates 23 , but our research can be summarised as follows:The industry in most countries expects that demand for cheap eggs will remain and that the bestway to service this demand will be through enriched cage production (where this is allowed bynational legislation).It is noted that change will be very much market driven and that in particular the attitude ofretailers and consumers could be highly important in that (potentially consumer led) moves awayfrom caged eggs by retailers with a substantial market share would have a significant impact onthe sector. The experience in Switzerland in this regard is highlighted in Box 6.1 at the end of20 £ = €1.48358.21 Including capital/investment and running costs and discounted at 6%.22 Assumptions used in these calculations include a large switch into free-range production not envisaged by the industry. Caution shouldbe exercised when using these figures.23 <strong>Agra</strong> <strong>CEAS</strong> estimates of the consumer costs and benefits of various scenarios relating to animal welfare in the egg sector are containedin Section 7.3. Estimates of the potential benefits of improved animal welfare in general are contained in Bennett, R.M. and R.J.P. Blaney(2003). Estimating the Benefits of Farm Animal Welfare Legislation Using the Contingent Valuation Method, Agricultural Economics, 29: 85-98.82
THE SOCIO-ECONOMIC IMPLICATIONS OF THE VARIOUS SYSTEMS TO KEEP LAYING HENSthis Section and this indicates that retailers (as well as government support) were instrumental inensuring that the Swiss transition to a system which has no caged production progressed asplanned. On the basis of interviews with retailers and NGOs in the EU it would, however, atpresent appear highly unlikely that food retailers in general will cease stocking eggs fromtraditionally caged hens prior to the introduction of the ban on the use of such cages in 2012.While retailers interviewed noted that they took animal welfare into account in their supplierspecifications, they considered it unlikely that moves to stock only alternatively produced eggswould go significantly beyond those companies serving the minority needs of specific populationgroups (e.g. with higher incomes, higher levels of environmental/welfare consciousness, etc.).The general view taken was that, unless there was a sharp shift in consumer requirements, thenumber of retailers selling only alternative egg products would probably not go significantlybeyond the current levels where, in a number of countries and particularly at the premium endof the market, some retailers have taken such action (for example, Marks & Spencer in the UK,Spar and Billa in Austria, Albert Hein in Belgium and the Netherlands, health food shops(‘Reformhäuser’) in Germany) 24 . In this context it should, however, also be noted that consumersurveys have shown there to be hitherto untapped potential demand for alternatively produced‘welfare friendly’ eggs even in markets such as Spain with relatively low apparent demand 25 .It is expected by the industry in the EU that a significant number of caged egg producers(variously estimated at between 20% and 60%) will choose to leave the sector rather than makethe necessary investments. Inevitably there will be some increase in the number of producers inalternative systems but in much of the northern half of the EU-15, where demand for such eggs isstrongest, planning and environmental constraints will limit the scope for such an increase. Thepercentage of producers likely to leave the sector in each country and across the EU-15 as awhole will vary according to how recently investments have been made and whether they havebeen made with a view to adjusting to an enriched cage system. This will also depend on the agestructure of existing producers, level of sector indebtedness, etc.In view of relatively inelastic demand for eggs any additional production costs incurred are likelyto be passed on to consumers in the form of higher prices if there is sufficient border protectionto stop imported third country shell eggs undercutting those produced in the EU-15. In theabsence of such protection, producers/packers would have to absorb some of the additionalcosts or face being undercut by eggs produced to lower welfare standards. The industry in theEU-15 does not expect retailers to commit to buying domestically produced eggs if cheaperproducts are available from elsewhere whether from within the EU-25 or from third countries.24 Strictly speaking the ‘Reformhäuser’ do not have a formal ban on caged production, but only stock organically produced eggs whichwould not be derived from traditional caged production.25 See for example: Public perception of farm animal welfare in Spain, Gustavo A. Marin, Animal Welfare and Food Quality Group, Facultyof Veterinary Medicine, University of Zaragoza, Spain.83
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