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2120 final report.pdf - Agra CEAS Consulting

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THE SOCIO-ECONOMIC IMPLICATIONS OF THE VARIOUS SYSTEMS TO KEEP LAYING HENS7. Economic impact of potential changes affecting the egg sectorFollowing on from the data collection exercise undertaken in Stage 1 of this research, in line with theTerms of Reference for this study, <strong>Agra</strong> <strong>CEAS</strong>, in conjunction with Imperial College, London,constructed a model of the EU-25 egg sector in order to test a range of scenarios agreed with theSteering Group for the study. These scenarios have been designed to examine the potential socioeconomicimpact of the implementation of the 2012 battery cage ban in line with Directive1999/74/EC and other potential changes (e.g. to border protection, input costs) for the futureevolution of the sector.This Chapter therefore sets out and <strong>report</strong>s results for the scenarios investigated under Stage 2 ofthis research. These results have been produced by employing an Equilibrium Displacement Model(EDM) of EU egg production and market demand that includes trade with third countries. A fulltechnical description of the model used and our bibliography is presented in Appendix 3.Four sets of scenarios are considered as follows:1. increase in production costs;2. changes in demand;3. changes in import tariffs; and,4. joint policy scenarios.The socio-economic results presented for each scenario consist of producer, consumer and totalsurplus changes measured in Euros (at 2003 prices to be consistent with the collected data) as wellas percentage changes in egg production (shell caged, shell alternative and processed). In terms ofdefinitions, shell caged describes production in all caged systems (traditional and enriched), shellalternative embraces all non-caged forms of production (i.e., barn, free range and organic) andprocessed is that fraction of egg production, from all forms of production, used by the food industry.The following sub-section contains a brief overview of the EDM, key data and terminology employed.Section 7.2 presents results for the EU-15 and EU-25 and Section 7.2 concludes.7.1. Equilibrium Displacement Models: an overviewThere are a number of alternative modelling approaches that could be used to undertake the analysisrequired here. However, EDMs have proven a popular choice in agricultural policy analysis in the USand Australia when considering individual agricultural industries (e.g., Alston, 1986, Cranfield, 2002and Zhao, et al., 2000, 2002). According to Piggott (1992) the term EDM has arisen in contexts inwhich the analysis focuses on a specific market that can be characterised by a set of supply anddemand functions where no functional form is assumed; and where:1. the market is ‘shocked’ as the result of a change in some exogenous variable; and,2. the effect of the shock on the market is approximated by functions that are linear in elasticities.87

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