When economists want to give an example of price inelasticity, eggs are frequently the commodity chosen to demonstrate how changes in price for eggs, either up or down, have relatively little impact on demand for eggs from consumers. The ban on conventional cages for housing layers in the EU that went into affect in January of this year will provide an interesting test case to see just how inelastic demand for eggs really is.
An analysis of egg production costs in the EU presented by Peter van Horne at the International Egg Commission’s Conference in Venice, Italy, demonstrated that the costs of producing eggs in alternative housing systems in the EU will really test the price elasticity theory for eggs. The total cost of producing a kilogram of eggs was found to be significantly higher in all of the alternative housing systems surveyed in the EU when compared to conventional cages. Using a conventional cage with 70 square inches provided per hen as the baseline for production costs, enriched cages, barn systems, and free-range systems were found to have 11, 27, and 46 percent higher costs, respectively.
There are still some eggs still being produced in conventional cages in the EU, and eggs are still being imported into the EU from hens housed in conventional cages, so the movement to all conventional cage-free eggs is not yet complete. But when the transition is complete and egg prices are reasonably profitable at the new higher production costs, it will be interesting to see where the price for eggs settles out and how much consumption of eggs has fallen.
