Abstract:Animal welfare is a major concern for consumers. This concern has not gone unnoticed by sector stakeholders, especially egg producers. One of the fundamental changes likely to affect egg producers regards modes of production, specifically changes in housing systems, ranging from conventional cages to free range. From farmers' perspective, changing their mode of production generates a technological and economic/marketing risk. This study documents the level of risk in the Canadian egg sector (conventional and specialty eggs) using data from 2009 to 2011. Our results indicate multiple uncertainty sources (technological, cost of production, price of eggs) that vary according to the types of eggs. We use a quadratic programming approach applied to expected mean-variance models to analyze the impact of risk on decision to invest when the resources must be allocated to different types of production that have different risk levels. Overall our results show how, given risk aversion parameters, producers minimize their risk levels by devoting their resources to the least risky type of eggs. An important result of our study is that supply management, by reducing the perceived risk level, has favored the development of specialty eggs, for the benefit of consumers.Keywords: Eggs production, Risk aversion, Uncertainty, Expected mean-variance model, Prices and cost volatility Résumé:Des modes de production respectueux de l'environnement et du bien-être animal sont de plus en plus au centre des préoccupations des consommateurs d'oeufs. La tendance actuelle dans la filière québécoise de la production d'oeufs est donc à l'adoption de production dans des cages offrant plus d'espaces aux poules, d'élevages sans cages (poules en liberté), à la production biologique,... Et, à chaque type de production correspond des risques liés à la biosécurité, à la qualité des oeufs, et aux normes de production qui sont différents. Les producteurs feront également face à des risques financiers différents, la variabilité des coûts de production et des prix des oeufs n'étant pas la même pour tous les types d'oeufs. À l'aide d'une approche de programmation quadratique appliquée au modèle moyenne-variance espérée, nous analysons le comportement d'investissement des producteurs d'oeufs en tenant compte de plusieurs sources d'incertitudes. Les résultats révèlent que le comportement optimal des producteurs impliquerait qu'ils consacrent leur ressource à la production d'oeufs conventionnels et réduisent celle des oeufs de spécialité qui s'avère être plus risquée. Le système de gestion de l'offre contribuerait donc, en réduisant l'aversion au risque des producteurs, à assurer un développement de la production canadienne d'oeufs de spécialité.

Purpose The purpose of this paper is to document the level of risk in the Québec egg sector (conventional and specialty eggs) and analyze the optimal choices of Québec egg producers that must allocate limited resources to production of different types of eggs. Design/methodology/approach A quadratic programming approach applied to expected mean-variance models is used to analyze the impact of risk on decision to invest when the resources must be allocated to different type of production that have different risk levels. The model is calibrated using monthly data from 2009 to 2016. Findings Results indicated multiple uncertainty sources (technological, cost of production, price of eggs) that vary according to the types of eggs. Given risk aversion parameters, producer would favor production modes with the lowest producers’ price variance, which correspond to free-run eggs. Results also indicated that in response to a greater intensity of risk aversion, the course of action producers may choose is to increase the relative production of free-run eggs. Research limitations/implications The empirical limits of this research are found in the lack of quality data on producer prices and costs for specialty eggs. Future research could explore the relationship between the growing impact of egg for processing, which price is based on the US price, and its relationship with specialty eggs. Practical implications The findings of the study will be useful for policy makers and managers of eggs supply chain. This is important, given the recent announcement by Canadian’s large retailers and fast food companies to increase cage free eggs offering and, in some cases, eventually only selling these types of eggs. Originality/value This study adds to the understanding of the role of risk and uncertainty in the investment decision of egg producers and different mode of production, as well as in the development of the growing production of specialty eggs in Canada. It fills a gap in the literature regarding the impact of risk in Canadian egg production. This gap is likely explained by the perception of a lack of risk in this supply managed sector in Canada and its small size relative to other supply managed sector.

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