In the International Egg Commission International Egg Market Annual Review a distinguished economist and consultant to the IEC Professor Hans-Wilhelm Windhorst documents the effect of a ban on cages in the EU. What has occurred is an obvious application of The Law of Unintentional Consequences. During the period 2002 through 2007, egg production in the EU fell by 2.5%. This aggregate figure disguises the fact that the loss in domestic output was considerably higher in countries that followed directive 1999/74/EC in advance of the 2012 implementation date.
According to Dr. Windhorst the problem has been exacerbated by a number of prominent supermarket chains in Germany refusing to stock eggs derived from caged flocks. In Germany and Austria all cages will be banned from 2010, hastening the demise of conventional flocks. The German Bundesrat (legislature) has waivered over whether to allow or ban colony cages. Farmers who invested in this system in anticipation of the ban on conventional cages are now faced with being excluded from major markets and will not in any event recover a premium for their additional costs. It is anticipated that by the end of 2009 the total number of hens in Germany will be reduced by 6 to 7 million.
The cost of replacing conventional cages with non-confined systems in the EU is estimated to be $10 billion. Raising capital to replace egg production facilities is regarded as unlikely given the current restrictions on loan capital to agricultural enterprises. The longer the delay in deciding on alternative systems, the greater will be the escalation in cost and the eventual impact on profitability.
Estimates of the differential in production cost between eggs derived from conventional cages and a non-confined barn system depends on individual perspective or bias. Figures ranging from 5% to 20% in incremental costs have been published. There is little substantiation of either the direct production costs (including fixed and variable components) or the indirect costs involved in purchase of additional land and environmental impact of less sustainable systems. It is axiomatic that if the cost of a commodity increases demand will be reduced, especially if substitute products are available.
Are EU consumers to be deprived of eggs based on the misplaced perceptions of flock wellbeing by extremists intent on destroying established intensive livestock production? Will EU consumers be supplied with eggs from countries with a lower cost of production from cages or cage free systems or even eggs labeled as "cage free or free range" but derived from conventional cages? Either way consumers will be deprived of the nutritional value of eggs or will be required to pay more for their purchases.
We should carefully monitor events in the "old world" and be careful not to emulate the folly of the EU in our industry.