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animal welfare-friendly egg
EUROGROUP
production in a global market for animal welfare
2001-2012 – a dozen years crucial to agriculture and trade reform.
● Production system of EC table eggs to be labelled from 2004
Because of animal welfare concerns, ● Minimal imports, but 25 per cent of total world exports
the European Community (EC) has ● No direct EC financial support to producers
agreed to phase out the conventional ● Subsidies available for exports
battery cage by 2012. Eggs will be ● Potential to finance some welfare improvements from
more expensive to produce in the national/EC funds
higher welfare systems. In a competitive
Swiss egg production
global market, cheaper eggs and egg ● Just over 2 million laying hens.
products can be imported from less ● 70 per cent are kept in barn systems.
humane systems. To ensure countries ● 30 per cent are kept in free-range systems.
can improve welfare standards ● The egg sector is supported by various payments to
without undermining their producers’ producers, and were partly financed through import duties.
competitiveness, governments need to ● Imported eggs that do not conform to Swiss standards must
consider new approaches and agree be labelled ‘eggs produced in battery cages, which are not
acceptable solutions within the World permitted in Switzerland’.
Trade Organization (WTO).
US egg production
● Approx. 243 million laying hens.
● 99 per cent are kept in battery cages.
EC, US and Swiss
● The number of hens kept commercially in alternative systems
egg production
is considered to be marginal.
EC commercial egg production is mainly in battery cages. EC ● No official welfare standard - the typical space per caged bird
legislation establishing minimum standards for laying hens was is 348cm2.
first adopted in 1986. Criticism on welfare grounds was supported ● Egg producers have access to both State and Federal
by scientific studies and the EC Directive was amended in 1999. support measures.
The new law will increase the minimum space allowed for each ● Tariffs applied to imports and producers can also receive
hen from 450cm to 550 cm from 2003, and then phase out the
2 2
export support.
conventional battery cage by 2012. After that, EC producers still
using cages must provide at least 750cm2 per bird and cages will A principal concern for countries wanting to adopt more humane
have to include nests and perches. Alternatively, they can switch to egg production systems is that their domestic producers will not
barn systems, which can have comparable production costs. be able to compete with producers in third countries with lower
welfare standards. Trade in agricultural products is also being
By 2012, the minimum space allowance per bird will be
liberalised in accordance with the agreements and rules of the
approximately double that currently typically provided in many
WTO. The WTO regime not only exposes domestic producers to
third countries, including the USA. The space allocated to each
increased international competition, but also places constraints on
hen is also the factor that has most influence on production costs –
the kind of support their governments can give them.
it is used in this report as a measure of national welfare standards.
Because differences between conventional cages and alternative
EC egg production systems will increase production costs. It may be necessary in
● Approx. 305 million laying hens. some cases to apply counterbalancing measures to prevent the
● 91 per cent are kept in battery cages. objective of improving animal welfare being undermined. To do
● 4 per cent are kept in barn systems. this fairly, effectively, and be able to justify the adopted measures
RSPCA PHOTOLIBRARY
● 5 per cent are kept in free-range or other systems with to trading partners, it is essential to understand precisely what
outdoor access. additional costs can be attributed to welfare standards.
2
Counting the cost
A range of input costs, common to all production systems, has ● now, before increased space allowances are introduced
been considered. These include feed, housing, labour, land, ● after the 2003 increase in space allowance
animal health care, electricity and water. The cost of replacing ● when EC battery cages are finally phased out in 2012.
birds is also important. Costs are also influenced by the
Table 1 summarizes the current differences in base
mortality and productivity associated with each system and the
production costs in the EC, Switzerland and the USA.
laying cycle operated.
Table 2 is standardized to take account of
An evaluation can be made by examining at three stages the national differences, such as feed and labour costs. It
differences in production costs attributable to welfare standards. suggests that it currently costs 6 cents more to produce a dozen
Table 1: Comparison between egg production costs in the USA, EC and Switzerland (US $)
USA European Community Switzerland
Caged per dozen eggs Caged per dozen eggs Barn per dozen eggs
Variable costs
Food 0.24 0.29 0.79
Health care -- 0.01 0.02
Miscellaneous 0.03 0.02 0.03
Bird depreciation 0.05 0.11 0.45
Total variable costs 0.33 0.44 1.28
Overheads
Labour 0.04 0.04 0.28
Electricity -- 0.01 0.03
Water -- 0.00 0.01
Total overheads 0.04 0.06 0.31
Total cash cost 0.37 0.49 1.60
Housing and equipment 0.05 0.09 0.35
Total cost 0.42 0.58 1.95
Source: CEAS Promar international
Note: Some figures may not add due to rounding
3
Table 2: Standardized production costs in the USA, EC and Switzerland (US$)
USA per dozen ECper dozen Switzerland per dozen
Variable costs
Food 0.24 0.26 0.29
Health care 0.01 0.01 0.02
Miscellaneous 0.03 0.02 0.07
Bird depreciation 0.05 0.05 0.06
Total variable costs 0.33 0.34 0.43
Overheads
Labour 0.04 0.04 0.15
Electricity - 0.01 0.03
Water - 0.00 0.01
Total overheads 0.04 0.06 0.18
Total cash cost 0.37 0.40 0.62
Housing and equipment 0.05 0.09 0.37
Total cost 0.42 0.48 0.99
Source: CEAS Promar international
Note: Some figures may not add due to rounding
eggs in the EC, nearly all of which can be attributed to cents per dozen). However, because the assumptions used by the
welfare factors. EC were not fully reflected in the final outcome, it is reasonable
to conclude that the EC projection underestimates the additional
Industry projections suggest that when the EC space allowance is
costs associated with the standard actually adopted.
raised in 2003 to 550cm2, production costs will increase by
approx. 8 per cent (5 cents per dozen), and that the full Therefore, by 2012, assuming no welfare improvements in the
transition to either modified cages or barn systems will increase US, the total cost of caged production in the USA will be
costs by a further 16 per cent (approximately 10 cents per dozen similar to EC production systems, even after the inclusion of
by 2012 (see table 3). The European Commission’s transportation and the full tariff rate. Battery eggs from
original estimate of the total additional production cost was lower, countries geographically closer could potentially be more
with a maximum predicted increase of 15 per cent (approx. 9 capable of entering the EC fresh egg market at an earlier date.
4
Table 3: Competitiveness of USA shell egg production in the EC market (in US dollars)
Production cost Full tariff Total cost per dozen
per dozen per dozen3 Transport4
US caged production1 $0.42 $0.21 $0.14 $0.77
EC caged production2 $0.58 - $0.03 $0.61
EC caged production – 2003 $0.63 - $0.03 $0.66
EC caged production – 2012 $0.73 - $0.03 $0.76
EC barn production $0.72 - $0.03 $0.75
EC free-range production $0.92 - $0.03 $0.95
Source: CEAS Promar international
The equivalent tariff per dozen is the same as for shell eggs,
Egg products
but it is cheaper to transport egg products. Table 4
An increasing proportion of eggs is consumed in processed foods, summarises the effect of tariffs, welfare improvements and
where products like dried or liquid egg often replace shell eggs. transport costs on the competitiveness of EC producers
Currently as much as 25 per cent of EC egg production is processed. compared to the USA. It is evident that EC producers could
potentially become vulnerable to competition in dried egg
Most eggs used in processing are not of inferior quality, but products after 2003. By 2012 it could also be viable for US
producers receive a lower price for them, mainly due to seasonal producers to export liquid egg products to the EC at the full
variations in demand. There is an interrelation between the price of rate of tariff, while EC producers would by then be
table and processed eggs. If producers have to lower the price of uncompetitive in dried egg products. Therefore, without
eggs for processing to compete with world prices, the price of table additional measures, 15 per cent or more of EC production
eggs will have to rise to maintain the same level of overall profit. could be displaced by lower-welfare imports.
Table 4: Competitiveness of the US in the EC market for selected egg products (US $)
Production Full tariff Transport Total cost per dozen
cost per dozen equivalent
shell eggs per dozen (2001)
US caged shell eggs: $0.42 0.21 0.14 $0.77
Liquid whole egg: $0.42 0.21 0.12 $0.75
ANGELA HAMPTON/RSPCA PHOTOLIBRARY
Dried whole egg: $0.42 0.21 0.02 $0.65
EC caged eggs $0.58 - - $0.58
EC caged eggs - 2003 $0.63 - - $0.63
EC eggs - 2012 $0.73 - - $0.73
5
send positive market signals to producers and investors in third
Advancing animal welfare
countries who may then opt for alternative systems of
Various mechanisms can offset the burden imposed by higher production instead of maximizing intensity in order to compete
welfare standards. Providing that they are accepted by the WTO, in a price-oriented global market.
several could be combined to produce a satisfactory result.
Conversion of export subsidies
Compensation payments Subsidies and other forms of support for exports are often
Making compensation payments to farmers is potentially an justified as a way to offset extra costs faced by domestic
effective policy mechanism. When an welfare standard is producers. It is generally better to convert export subsidies into
introduced, it is relatively straightforward to calculate the extra direct payments that support non-trade objectives such as
costs of new housing and equipment. Such capital payments do animal welfare. However, even if EC export subsidies for eggs
not affect production and could meet the ‘green box’ criteria of were fully converted for this purpose they would not be
the WTO Agreement on Agriculture (AoA). Non-capital costs sufficient to offset the extra welfare costs.
attributable to welfare standards could be offset by premium
payments and classified as ‘Blue box’ under the AoA if Consumer demand and product
they were decoupled from production, eg, by basing them on labelling
historic flock sizes. Used in isolation, labelling will only produce limited results. It
can help consumers to identify higher welfare products, but to
Reducing feed costs be of optimal effect such schemes need to be mandatory. A large
Feed is by far the biggest input cost for egg producers. Closing proportion of consumption consists of eggs used for processing
the gap between US and EC feed prices would reduce the threat and in catering, which is typically unlabelled or limited to a list
to EC producers’ competitiveness and the consequent need for of ingredients. Labelling egg products is therefore unlikely to be
domestic support. fully effective.
Border adjustments International standards
The current cost difference between EC and US producers is There is currently no international welfare standard for laying
approximately 16 cents per dozen. The current tariff is 21 cents hens. If agreed, such a standard should be based on scientific
per dozen and therefore insufficient to cover new additional evidence and practical experience – it must provide a floor, not
welfare costs. a ceiling for animal welfare. Trade rules would still need to
accommodate national standards above the agreed
Special Safeguard Clause for eggs international minimum.
A Special Safeguard Clause (SSC) under the AoA prevents
domestic producers being overwhelmed by a sudden influx of Developing countries
cheaper imports. The SSC can be triggered by an increase in the Many developing countries have a comparative advantage in
volume of imports and could therefore be of particular use to alternative production systems. But until improved market
offset loss of competitiveness in the short term. opportunities can be created for these eggs, success on the
|world market will be closely linked to intensification. At
Market incentives to promote present, those operating battery systems are most likely to
trade in better welfare eggs benefit from any loss of competitiveness by the EC. Elimination
Tariffs, quotas and other border measures are typically applied of export subsidies for eggs could directly benefit those
to whole categories of products, like eggs. Differential reduced developing country producers who have to compete with
tariff rates for high welfare products could enhance trade and EC producers.
6
Conclusions
The EC egg production reforms provide a clear example of why Without the introduction of such policies in the EC and their
animal welfare concerns need to be addressed as part of the acceptance at the WTO:
WTO negotiations on agriculture.
● Implementation of the agreed welfare reforms could
Higher welfare means higher production costs. By 2012 there be undermined
will be a substantial difference between the EC and the US to ● A substantial proportion of EC production could be displaced
the extent that US producers could potentially export fresh by imports from low-welfare sources
battery eggs to the EC even with the full import duties and ● WTO rules could be seen as encouraging low-welfare price
additional transport costs. They would be even more competition, or as frustrating countries’ attempts to improve
competitive in egg products. animal welfare.
Switzerland – which phased out battery cages by 1992 – has This summary is available in English, French and Spanish. It is
managed to sustain its national production. This has been a short and simplified version of a fully referenced report,
achieved mainly by means of support payments combined with available in English only. For more information or to obtain
labelling, quota schemes and voluntary promotional and copies please contact:
purchasing initiatives to produce an apparently satisfactory
outcome.
The major financial advantages of the low-welfare battery
system make it the international norm for commercial egg
Royal Society for the Prevention of
production. Action is needed to ensure that producers are not put
Cruelty to Animals
at a disadvantage in the market place when they adopt
International Dept.
higher-welfare, higher-cost systems. Otherwise, trade
Wilberforce Way
liberalisation will effectively encourage a ‘race to the bottom’ in
Southwater
terms of welfare.
Horsham
W.Sussex
The RSPCA and Eurogroup for Animal Welfare believe that a
UK
package of policies is needed to satisfactorily implement the
Tel: 0870 010 1181
planned EC animal welfare reforms for laying hens:
(44) 1403 793 272
● Direct compensation for EC producers to offset the costs of www.rspca.org.uk
higher welfare standards.
● No or minimal reductions in the basic level of EC tariff for
eggs and egg products.
● Introduction of preferential tariffs and import quotas for
EUROGROUP
high-welfare eggs and egg products.
for animal welfare
● Reallocate EC export subsidies for eggs and egg products in
Eurogroup for Animal Welfare
support of welfare objectives.
6 rue de Patriotes
● Further reductions in animal feed costs.
B-1000
● Mandatory labelling to indicate the method of production for
Brussels
both eggs and egg products, including imports.
Belgium
● Public information campaigns to increase awareness of egg
Tel: +32 2 740 0820
production methods.
www.eurogroupanimalwelfare.org
7
Designed and
produced by
EUROGROUP
for animal welfare
Wilberforce Way
Southwater, Horsham 6 Rue des Patriotes
West Sussex RH13 7WN 1000 Brussels
Tel: 0870 010 1181 Belgium
www.rspca.org.uk Tel: + 32 2 740 08 20
Registered charity no. 219099 Fax: + 32 2 740 08 29
We receive no government funding E-mail: info@eurogroupanimalwelfare.org
9.01 www.eurogroupanimalwelfare.org
COVER PHOTO: E A JANES/RSPCA PHOTOLIBRARY
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