An economic analysis of the competitive position of the Hawaii egg industry

Abstract

The many changes taking place in the economy of Hawaii as well as in the industry itself lead to a questioning of the future of the industry in Hawaii. The major objective of the study was to evaluate the competitive position of the Hawaii egg industry with respect to California. A survey of 14 egg ranches on Oahu was conducted from which the cost of producing eggs in Honolulu county was determined. The information gathered provided the basis for studying production factors affecting the competitive position of the Hawaii industry. Four production factors were investigated in depth~ feed cost, flock replacement cost, labor cost, and the effect of increased flock size. Some of the facts uncovered by the study were: Feed and flock replacement costs are higher in Hawaii. Most of the differences in cost were due to transportation. Labor cost in Honolulu was significantly higher than the three California counties used for comparison. However, since local producers received higher prices for eggs and poultry meat, net farm income per layer was higher in Hawaii. Increased flock size could reduce production cost per layer, while the attrition of ranches with small flocks could add to the industry's competitive strength. Marketing factors affecting the competitive position of the egg industry were categorized under two groups~ the length and complexity of the marketing channel, and the competitive marketing actions of producers. It was found that transfer cost, which raises the price of production inputs, also raises the price of mainland eggs in Hawaii. The longer, more complex marketing channel of mainland eggs further increases the price of imported eggs. However, in spite of the higher marketing costs, mainland eggs can be sold at lower prices because of the lower cost of production. Current freight rates prohibit the importation of table eggs by air. While it may be physically possible to fly eggs in the cargo holds of the jumbo jets, it is doubtful that untreated shell eggs will be flown to Hawaii. The principal conclusion drawn from the available data is that competitive action by ranchers, advertising laws in Hawaii, and consumers' preferences for local eggs are factors which combine to maintain current competitive strength. Hawaii poultry ranchers will be able to maintain the 95 percent of the fresh egg market in Hawaii.