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News and analysis on the global poultry
and animal feed industries.
on September 24, 2008

UK egg production threatened by imports

It's buffeted by uncertainty as rising imports increasingly threaten all types of production.

Organic (free range) production experiences acute feed cost problems, availability of specialist high-spec feeds, and most recently, consumer belt tightening. The cage egg sector has uncertainties associated with the European Union (EU) Council Directive 1999/74EC (Welfare of Laying Hens Directive) hanging over its head. Rising imports increasingly threaten all types of production.

According to figures released by Poultry World, feed costs started to rise in early 2007. The price of a basic layers ration stood at US$247/t in January 2007 but reached $427/t by April 2008. There was some succour when feed prices fell from their peak in summer 2008. Feed wheat price dropped by a welcome $40/t during August 2008 to stand $46/t less than it was in August 2007. Soya fell by $51/t and basic layers ration dropped to $346/t.

The UK egg industry’s attempt to pry price increases from the super strong UK retail sector to offset rising grower’s costs met with limited success. Dutch producers received a 24 percent increase from their retail sector, over double the 11 percent secured by UK producers.

Overall egg consumption in the UK continues to fall and retailers have no compunction over switching to imports when it suits them. UK cage egg production is overwhelmed by cheap imports of dubious quality and increasingly threatened at the top end as UK supermarkets continue to source free range eggs from other west European producers.

Total UK egg consumption fell from its peak 10.97 billion eggs in 2004 to 10.63 billion eggs in 2007. Demand and consumption had recovered from the late 1990’s low point and rose quite healthily from 2002 to 2004, alongside home production and a corresponding fall in imports. This was assisted by the British Lion Egg campaign to promote the all round benefits of UK produced eggs, but after 2004 consumption fell away.

UK egg production fell even faster with shortfalls made up with imported eggs. In the four years between January 2004 and December 2007, UK egg production fell by 8 percent while imports rose from 16.4 percent to 21.1 percent of all eggs consumed.

UK reports often convey mixed messages and create confusion because they focus on different things. For instance, a recent report by Mintel claimed UK egg sales had recovered in 2007 and were set to expand rapidly to 2013 (at least). But the small print reveals Mintel’s focus on supermarket sales of shell eggs that account for less than half of the 10+ billion eggs consumed every year. According to the Department of Environment, Food and Rural Affairs (Defra), sales of UK-produced shell eggs stand at 6.4 billion added to which are imported eggs mostly used in the catering sector.

Mintel predicts supermarket egg sales to rise from $1.2bn (2008) to $1.6bn (2013) but alongside an actual drop in the number of eggs sold (4.91 billion down from 5.06 billion). This implies consumers switching from cheaper cage eggs to more expensive free range and organic free range eggs, but with the current economic downturn and a recent crash in organic egg sales their predictions look precarious. UK production and consumption of free range eggs continues to increase but even now almost twice as many cage eggs as free range eggs (59 percent to 32 percent of total) are produced in the UK.

All types of UK shell eggs have their own problems depending on whether cage, barn, free range, or organic free range, leading to no one single trend. UK organic egg sales are being crushed by feed costs and consumer belt tightening while UK free range eggs, unable to always meet rising demand, are undermined by equivalent quality imports from countries like the Netherlands. Cage eggs are under a cloud as the EU Council Directive 1999/74EC (Welfare of Laying Hens Directive) looms large. Barn eggs, despite the attractive sounding name, continue to suffer from a lack of consumer recognition and understanding and therefore differentiation from cage eggs. 

Organic free range and free range 

Unrealistically high feed prices coinciding with consumer belt tightening appears to have seriously impacted on the consumption of premium priced organic eggs in the UK. Recent decision by UK egg packer Noble Foods to reduce prices paid to organic egg producers, because the market has collapsed, could send the sector into a tail spin.

UK free range egg production failed to meet demand in late 2006 causing UK supermarkets to source free range eggs from other accredited EU producers, including the Netherlands and France. UK supply has increased but some supermarkets continue to import free range eggs, much to the anger of the UK industry and its free range producers.

British Free Range Egg Producers Association (BFREPA) recently condemned Morrisons Supermarket for continuing to sell Dutch free range eggs when supplies of UK eggs are now plentiful. While acknowledging the supermarket had cause to look elsewhere at the end of 2006 when there was a shortfall, Tom Vesey, chairman of BFREPA, said that situation no longer exists. "Our members, along with the packers, have worked very hard over the last 18 months to ensure that retailers in the UK can be supplied with British [free range] eggs all year round. Morrisons is the only major retailer failing to show 100 percent support for British egg producers and the 'British Lion Egg' scheme," Vesey said.

With what sounded like a limp excuse, Morrisons told BFREPA, "As part of our commitment to selling own label cage-free shell eggs by 2010, we have introduced a small proportion of Dutch free range eggs into a limited number of stores as a trial to encourage customers to move to free range." The industry has achieved more success with other retailers. In spite of being the first supermarket chain to import free range eggs in 2006, Somerfield says it is now committed to the exclusive retailing of UK produced free range eggs.

Cage and barn system eggs 

Feed, fuel and energy costs, and falling market problems faced by UK cage egg producers are set to be compounded by arrival of the EU Council Directive 1999/74EC (Welfare of Laying Hens Directive). Effective January 1, 2012, it requires all EU cage-egg producers to abandon traditional barren cages for enriched cages, also called "colony systems."  The enriched cage system, providing more space per bird and enhanced cage furnishings, applies to every country in the EU. There have been many calls for derogation, but the UK government says it will stick to the December 31, 2011, deadline for its own industry, irrespective of what happens elsewhere in the EU.

The UK egg industry has told producers to get on with the change-over now, but the costs are high and there are fears that many farmers will simply abandon poultry farming altogether. Yorkshire Post quoted Phil Mason, who operates two farms in the York City and Ripon areas of the County of Yorkshire in northern England, "It is going to cost farmers around $11,000 to $13,000 to invest in the new technology and if you cannot afford to do this, you may have to shut down. We are just breaking even on a quarter of a million birds — it is a lot of hard work for not a lot of reward."

UK industry watchers say some other EU countries with virtually all production still in barren cages will be unable to meet the deadline, and individual governments may therefore not enforce the EU ruling as will the UK government. Spain, now the EU’s top egg producer and with a very high proportion of birds in barren cages, is quoted as the classic example. Faced with the prospect of an acute egg shortage, the European Commission may be forced to allow derogation for the directive. This will effectively allow countries like Spain to continue supplying barren cage eggs at cut-prices, to further undercut UK producers and undermine the UK industry.

Stewart Elliott, who farms near Hornsea in East Yorkshire, said, "In the UK, we have quite a good system in place for making sure we are doing everything correctly, they do not have quite the same infrastructure in some of the Mediterranean countries. There has been a big increase in costs for the price of cereals, as well as increases in electricity and labour costs. Some people may have to move away from the industry."

UK animal welfare lobbies say cheaper, lower welfare cage eggs are a thing of the past, but others are not so sure. Current cutbacks in consumer spending on food alongside cheaper cage eggs still available from southern and eastern EU countries would mean supply and demand still in place. Cage eggs from these countries will be produced under much poorer welfare conditions than were UK barren cage eggs. These are the very countries showing high and unacceptable levels of Salmonella infection in layer flocks during EU-wide surveys.

The biggest question mark hovers over "barn" eggs mainly because UK consumers do not understand what they are. "Barn" eggs are produced by hens kept in loose flocks confined within a shed. They are not caged. According to Poultry World, Defra’s break-down of UK packing station throughput (2006 to 2007) showed free range eggs rising 2.3 percent, cage eggs falling 3.4 percent, but barn eggs falling by 24 percent from an already low base of less than 5 percent of all eggs produced in the UK. Low interest and poor uptake of barn eggs is surprising. The "barn" system appears to offer a reasonable compromise for producers, animal welfare lobbies, and consumers alike. This is certainly the view in the Netherlands where an equivalent grade of egg called "scratching" eggs monopolise the market.

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