News and analysis on the global poultry
and animal feed industries.
Morten Ernst
on November 14, 2008

IEC 2008: Egg processing worldwide faces challenges

While there are no official statistics on the profitability of the processing business, econometric models have shown that on average the business has had a zero sum profit.

Industry in its infancy–Asia, Morten Ernst

Asia has a population of more than 3 billion people in about 15 countries, each with different languages, cultures, religions, wealth status, infrastructure, and egg consumption, said Morten Ernst.

By 2015, world egg consumption is expected to increase from the present 60 million metric tons to 70 million metric tons. Almost 70% of this increase is expected in Asia. Today, more than two-thirds of global egg production occurs Asia, with per capita consumption swinging wildly from less than 50 in India to well over 300 in China.

The egg processing industry in Asia is still in its infancy. There are about 110 egg product factories in the region, most of them in Japan. Many are small liquid plants servicing the local food industry accessible by the region’s infrastructure.

Farm-gate egg prices vary widely, with India and China being the lowest; Singapore and Taiwan the highest.

South Korea– There are 14 liquid egg product factories in South Korea with a combined breaking capacity of 100,000 metric tons per year.

Korea imported 800 to 900 metric tons of egg powder in 2007. Egg white powder accounted for about half. Imports were down during the first six months of 2008 primarily due to higher product prices.

Phillippines– 2008 has been difficult for Philippine egg producers. Farmers have been losing money since January because of over supply and high production costs. Feed has gone up like everywhere else, resulting in farm-gate prices that are lower than production costs.

To ease the situation, producers agreed to cull old layers and a quota was implemented to cut imports of breeding stock. This is resulting in a price increase expected to ease the burden on the farmers in 2009. There is no egg product industry in the Philippines, and little importation.

Thailand– Thailand’s egg producers are also suffering from an oversupply situation that resulted in selling prices below production costs. It did not help that the Thai Animal Feed Meal Committee allowed feed prices to rise 10% to 20% following pressure from the feed mills, complaining about the higher costs of raw materials.

More than 90% of Thai fresh-egg exports went to Hong Kong. With just one egg product plant in the country, this industry has yet to develop. About 1,000 metric tons of egg powder was imported in 2007 while 800 metric tons of frozen whole eggs were exported to Japan.

India– Indian is experiencing unusually high egg prices. Lower production, higher costs and increased demand are blamed. The laying flock is significantly smaller than a year ago. A doubling of feed prices in the past twelve months combined with the weather caused most of the increase. Continuous heavy rains in the southern egg producing states devastated egg production. But India has also been hard hit by bans caused by bird flu in West Bengal in January, impacting their important Middle Eastern markets

India’s egg product industry relies almost completely on exports of egg powder, with the main markets being Europe and Japan. This industry is about 10 years old and dominated by three processing companies. Their combined powder output per annum is about 10,000 metric tons.

Japan– Shell egg prices in Japan are quite high compared to last year. Egg production took off in March and April creating the interesting scenario of record-high egg production and prices.

Japan continues to be the dominant egg products importer, and despite higher import prices this year the 7,760 metric tons imported during the first six months was on a par with the same period in 2007.

India and China supply egg powder exports to Japan. Their combined exports in 2007 were close to 3,000 metric tons or 20% of the total powder imports. Egg products from China are gaining acceptance in Japan. China’s shipments of 800 metric tons of powder and 1,000 metric tons of frozen egg products were the highest tonnage ever exported to Japan in a single year.

Thailand and China dominated frozen exports to Japan. The 2,000 metric tons of frozen whole egg came from these two countries. China’s share this year already matched the total for 2007 so a further increase is imminent.

Overall, the Netherlands is the leading exporter of egg white powder to Japan, while the United States is the dominant exporter of whole egg and yolk powder.

The total consumption of egg powder in the Asia-Pacific region is believed to be around 21,000 to 22,000 metric tons, with Japan by far the dominant country with a consumption of about 16,000 metric tons.

Japan dominates Asia in the number of egg breaking facilities. Between 60 and 65 of the 110 estimated plants are in Japan.

China– Food safety in China is at the top of the government’s priority list. Stricter food processing regulations are required across the board and will benefit the Chinese egg processing industry.

The egg product industry in China consists of about 16 plants, with five or six of international standard. They have a combined capacity to process about 100,000 metric tons of eggs per year. The actual output of egg products, however, is believed to be much lower.

“In order for the industry to grow, individual processors must be more disciplined and impose strict processing techniques and control over the raw materials,” Ernst added.

The price of fresh shell eggs was at its highest level for the past five years. Even so, producers are losing money due to the higher cost of energy, labor and feed.

Malaysia/Taiwan/Vietnam– Malaysia has three liquid egg plants, while in Taiwan there are more than 10. Taiwan imports egg powder, mostly egg white, for their veggie industry.

Vietnam is a fairly new market for egg products, but as this country develops, so will the demand for safe and convenient egg products.

Lower feed prices, lower oil prices and lower speculator interest in food commodities should lower the cost of production. This is good news for egg producers in Asia. The bioethanol industry is causing food prices to soar. Political prudence might lead to a shift to organic waste or other alternatives, diminishing the benefits for farmers to grow grains for this purpose.

“This would be a welcome development for the Asian egg industry,” Ernst concluded.

Limited growth-Oceania, James Kellaway

The mix of product in the Australian market is extensive and tailored to meet the requirements of its customers, mainly the domestic catering and food manufacturing sectors, said James Kellaway.

The total value of sales is stable at AUD$58 million a year.

There is limited growth potential among food processors, but greater potential to develop new products for in-home use. They are seeking niche export opportunities from currently low base.

Australia’s egg product market was approximately 250-300 metric tons a week, representing around 12% of total egg production.

The market encompasses 55% liquid/frozen egg products, 23% separated egg variants, 20% powdered products and 2% specialized products. Apart from the basic range of chilled, frozen and spray-dried products, Kellaway highlighted the speciality items of scrambled egg mix, peeled boiled eggs, Pavlova and meringue dry mix, and low-cholesterol scrambled egg mix.

While there is potential growth for retail products this would take considerable marketing effort and might only displace shell egg sales. Currently, egg supplies are “tight” and a number of plants are not operating.

There are seven major egg processors, two in New South Wales, and one each in South Australia, Victoria, Western Australia, Tasmania and Queensland.

In 2007-08 Australia imported 1,663 metric tons of egg products, mainly whole egg powder and dried egg white, from 14 different countries - a 28% increase over last year. The main suppliers were China, Denmark and Thailand.

Product exports were small in 2007-08, at 367 metric tons. Main buyers were Hong Kong, Singapore and Brunei.

Future growth might stem from the high expectations of Australian consumers for processed egg products, boosting retail and food service markets for value-added and convenient egg items, such as fully-cooked omelettes, poached and fried eggs, chopped boiled egg with mayonnaise as a sandwich spread, chilled long-life liquid egg in a Tetra pack, and extended shelf-life on chilled egg products.

More eggs processed in-line North America, Chad Gregory

There are about 200 egg farms in the United States with about 281 million layers. The average flock size is around a million birds. Ninety-five per cent of all eggs are from caged hens. In contrast, Canada has around 1,200 egg farms with a total of 23 million layers. The average Canadian flock is less than 20,000.

While the U.S. data presented for 2008 showed an increase on the year, Chad Gregory emphasized that virtually all the figures for 2007 were at an historical low.

Dried egg inventory is up by 5% while the number of eggs processed increased by 3%. Urner Barry price quotations increased by more than third on the year.

The proportion of eggs going for breaking has not changed much in the past five years, though the figure for the first half of 2008 reached a high of 32.1%. However, the percentage of eggs broken at in-line facilities rose from 39% in 2004 to 48% last year, while to August 2008 it hit a record high of 50%.

Gregory added, “This trend is likely to continue because the egg product industry needs a very consistent high quality product on a daily basis.”

Animal welfare continued to be a major challenge facing the U.S. egg industry, though high feed and fuel costs are also critical. In 2006 the feed cost averaged just 22 cents per dozen, while now this figure stands around 44 cents per dozen.

Further processors are demanding less expensive and consistent egg products for new in-line breaking facilities. This need has affected shell egg producers who have been supplying off-line breaking plants, leading to an imbalance in the market. Gregory was concerned that the current high prices could lead to a greater use of egg substitutes.

Food safety continues to feature in all discussions about shell eggs and egg products.

Equivalency standards are continually monitored so the United States can continue to export eggs. The U.S. industry continues to watch developing markets for export opportunities, as there is a world demand for North American eggs. With the current high grain prices it is cheaper for some countries to import eggs rather than feed. Animal welfare regulations could lead to a shortage of eggs in certain countries, which could offer additional export opportunities for the United States.

Safe Quality Food (SQF) is becoming increasingly important and the egg industry is gearing up to meet the SQF demand in the coming years.

Still a volume, cost business Europe, Ton van Dijk

With a human population of 492 million the European Union (EU)-27 is the third largest market in the world after China and India, said Ton van Dijk.

Egg production is levelling out at around 6.6 million metric tons or 108 billion eggs a year. Some 1.78 million metric tons, equivalent to 26.8% of production, was processed into egg products by just over 100 processing plants.

In total, the EU produced about 2% more eggs than it needs, while in the processing sector overproduction was around 4%.
Average consumption per person per year was 13.21kg, equivalent to 213 eggs, of which 3.46kg or 56 eggs were consumed as egg products.

The EU is a net exporter of eggs. Imports of eggs and products, mainly on the basis of price, amounted to 46,000 metric tons as shell egg equivalent of which products accounted for 33,566 metric tons. The main suppliers were the United States, India and Argentina.

Main importing member states are Germany, the Netherlands, Denmark, Austria and Italy.

Exports totalled 188,000 metric tons of which almost 110,000 metric tons were products, mainly comprising albumin. The main buyers are Switzerland for eggs and Japan for egg white.

The largest exporter by far was the Netherlands with shipments of almost 100,000 metric tons, followed by Germany, France and Italy. A significant part of Germany’s exports of around 40,000 metric tons originated in the Netherlands.

There is a close correlation between shell egg prices and those for egg products, he explained, which indicates that the industry is still a volume and price driven business.

While there are no official statistics on the profitability of the processing business, econometric models have shown that while some companies are doing well, on average the business has had a zero sum profit.

James Kellaway
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