EU egg producers coping with cage ban
Reduced supply, higher egg prices and a transition to new housing systems have resulted from the EU’s cage ban going into effect January of 2012.
Excessive New Year’s Eve revelry sometimes leads to a New Year’s Day hangover, but January 1, 2012, brought on a headache of another sort for many egg producers in the EU. The ban on conventional cages took effect as the New Year dawned, but by March, 13 EU member states were still not fully compliant with the ban, according to Herman Versteijlen, director agricultural markets for the European Commission.
Versteijlen told the audience at the International Egg Commission’s conference in Venice, Italy, that, “Brussels has the responsibility to put in the legislation; member states are responsible for enforcing the legislation.” He stated that the EU Commission would issue infringement procedures against EU member state governments that did not comply with the ban. He expects all EU members to be fully compliant by the summer of 2012, as an unofficial grace period would finish at the end of July.
Eggs in short supply
Versteijlen said that there has been a significant increase in shell egg prices in the EU since the first of the year. During the first quarter of 2012, egg prices within the breaking market were also at a high, double what is normal. Versteijlen expects prices for shell eggs and eggs for breaking to decrease by summer.
The EU is not able to prevent egg imports for reasons related to animal welfare or system of production. Under World Trade Organization rules, differing animal welfare standards or production systems are not valid reasons to ban imports. But, table eggs for human consumption can only be imported into the EU from countries with Salmonella control systems equivalent to EU standards because, under World Trade Organization rules, imports can be banned for phytosanitary reasons. Currently, the EU only recognizes the Salmonella control schemes in Norway and Switzerland as being equivalent to the EU.
Under World Trade Organization rules, eggs for breaking (and pasteurization) can be imported into the EU from any country—regardless of their method of production—even if the there was no EU equivalent Salmonella control system in place, although other phytosanitary conditions have to be met.
Versteijlen said that although the EU can demand its member states comply with its legislation, if it tried to restrict imports from non-EU countries on the basis of non-compliance, it would be in breach of the World Trade Organization agreement.
Versteijlen strongly believes that EU consumers will pay a premium for products that can market the fact that they are made with eggs that comply with the European Animal Welfare Directive; EU studies show that European consumers demand respect be given to animals in the food production process.
Economics of layer housing systems
Peter van Horne, economic analyst, International Egg Commission, presented a study comparing the production costs and product revenues associated with cage and non-cage systems within Europe. Prior to 2012, the conventional cages used in Europe provided 85 square inches (550 square centimeters) per bird; enriched cages, in compliance with the EU’s Directive, provide 116 square inches (750 square centimeters) per bird. However, the egg industries in Germany and the Netherlands opted for a larger enriched system, referred to as a colony cage, which provides 138 square inches (890 square centimeters) per bird.
The study used data from all three of the cage systems and compared egg production, feed intake, mortality, investments for housing and equipment and labor. There were only minor differences between the enriched and conventional cage systems in terms of egg production. Most countries are reporting a lower rate of mortality in enriched cages. The French industry has reported experiencing a lower rate of mortality since using enriched cages, compared to conventional cages, and figures from the UK also show good liveability results since moving to enriched cages, according to van Horne. The Netherlands is also reporting low mortality rates in its colony systems.
When evaluating feed intake in enriched housing systems, van Horne said that it is important to remember to add in the additional feed used for the scratching areas. Taking this into account, he suggests that feed intake can be 2-3 grams higher in these systems.
Capital cost and labor
Enriched cage and colony systems both require some additional labor per bird in comparison to conventional cages. The equipment cost for enriched systems is, on average, 10 Euros (approximately $12.50) per hen higher than for conventional cages. According to van Horne, the capital cost is expected to be 50 percent higher for enriched cages and approximately 70 percent higher for colony systems.
Overall, when compared to Europe’s pre-2012 85 square inch per hen cages, eggs produced in enriched cage systems cost, on average, 7 percent more per pound to produce. In comparison, producing eggs in colony systems, as used in Germany and the Netherlands, increases the cost by, on average, 9 percent per pound.
The production costs associated with barn/deep litter systems, free-range and organic egg farming were gathered as well. “It is very important to note that in alternative systems you cannot take the figures you are used to from the traditional cages,” van Horne said. “We clearly see shorter laying periods in barns, and especially in free-range; we see lower egg production in those systems; we see a higher mortality, and we also see, very clearly, a higher feed intake.” Each of these factors increases the cost of producing eggs in these alternative systems. He also said that it is important to take into consideration the fact that floor system pullets cost an extra 10-15 percent to raise.
The study showed that the cost of egg production in barn systems is at least 20 percent higher than those of the previous conventional cages, and 15 percent higher than the cost of production using enriched cages. Free-range egg production costs are, on average, 40 percent more per pound of eggs than in conventional cages, and 33 percent more than in enriched cages.
The data supplied for van Horne’s study for the International Egg Commission was provided by European family farms, and the numbers might be somewhat different for larger scale international egg farming businesses.
EU egg market segmentation
As part of this study, van Horne presented data showing the variations in market demand for shell eggs produced in different housing systems in France, the UK, Germany, the Netherlands and Denmark. Over 60 percent of the shell eggs purchased in France are produced in enriched cages. Free-range eggs account for over 20 percent of the market, while organic eggs make up less than 10 percent. In the UK, the shell egg market is split roughly in half between enriched cages and free-range.
Both the German and Dutch markets are dominated by eggs produced in barn systems. In Germany, less that 5 percent of the eggs are produced in cages. Over 60 percent are from barn systems, over 20 percent are free-range and almost 10 percent come from organic farms.
The Netherlands is slightly different than Germany, with just under 10 percent of its eggs coming from cage systems and approximately 80 percent from barn production. The Netherlands has a very small demand for free-range eggs; this sector accounts for just 8 percent of the market, and organic demand is even lower, at just 2 percent.
Denmark has the largest market for organic eggs at 20 percent of the total. About half of Denmark’s eggs are cage produced, with 15 percent from barns and approximately 5 percent free-range.
Demand for eggs from these various housing systems fluctuates greatly, according to van Horne. He said that this creates a constantly changing market; one that can be very difficult to predict. He told the International Egg Commission audience that he believes that it will be very difficult to predict what consumers will demand in the future.
EU feed and pullet prices were used in van Horne’s analysis, so egg producers in other countries with different feed and pullet costs may see some changes in the relative operating costs of the different housing systems.