The outlook for the European egg industry is broadly flat this year, with production forecast to increase by a mere 0.2 percent to 7.3 million tons, according to the European Commission.
European egg producers entered 2018 buoyed by a favorable macro-economic outlook and high prices. Although off their 2017 high, egg prices at the end of the year were 47 percent higher than 12 months previously. But high prices are unlikely to be sustained throughout the remainder of the year.
Price increases during the second half of 2017 were driven by difficulties in the supply chain at the very time that European demand for eggs was increasing and, by the end of the year, pricing had started to decline toward more normal levels.
Upward price pressure started in late July, when news of eggs contaminated with fipronil resulted in significant production decreases in Belgium and, more significantly, in the Netherlands, by far and away the largest supplier of eggs to other European Union Member States.
Concerns over fipronil may have dented consumer confidence in the short term, but demand quickly recovered and, with several producers suspended from the market, this represented opportunities for others.
In France, the EU’s largest egg producer, for example, during August and September, saw demand for locally produced eggs rise by 25 percent at the retail level and by 49 percent from the food industry. Whether a preference for locally produced eggs will be sustained throughout 2018 remains to be seen.
Despite these difficulties, when the EU is considered as a whole, egg production is still thought to have been slightly higher in 2017 than in 2016.
The European egg sector may have largely recovered from the contamination scare, ending 2017 with total output slightly higher. Prices can be expected to return to more normal levels, but other challenges may affect producers as the year unfolds.
Disease challenge
The threat of avian influenza remains. Between September 1 and November 15, 2017, Europe recorded 48 outbreaks of highly pathogenic H5N8 in poultry flocks, and nine outbreaks of highly pathogenic avian influenza were found in wild birds.
Additionally, over the same period, several outbreaks were ongoing, reports the European Food Safety Authority. Worryingly, it notes that the disease had, in some countries, been spread through a lack of adherence to biosecurity protocols, suggesting that some producers will need to invest in upgrading their procedures to minimize exposure to risk.
Healthy environment?
The European economy enters 2018 in a healthy position, with growth forecasts for the Euro area, which comprises 19 of the European Union’s 28 member states, ranging from 2.1 to 2.4 percent, and inflation forecast to fall to 1.4 percent. Employment is also improving, which should boost consumer confidence.
However, against this positive backdrop, and in addition to potential disease challenges, European producers are facing other challenges and obstacles.
The tortuous road to Brexit may delay investment decisions and an eventual agreement may see trade flows disrupted.
Despite the U.K. being one of Europe’s larger egg producers, the country is only 85 percent self-sufficient in eggs and egg products. In 2016, for example, the U.K. imported in excess of 2 billion eggs. The Brexit horizon remains particularly murky, but few are expecting trade to continue in the same way as at present.
But Brexit is not the only difficulty on the horizon; European egg producers are facing challenges in how they trade, and also in how they produce.
In the run up to the 2012 cage ban, Europe’s egg producers invested heavily in a variety of alternative systems.
While enriched cages were not adopted across all member states, figures for 2016 reveal that 55.9 percent of the European flock was housed in enriched cages, with 25.6 percent in barn production, 12.9 percent free range, and 17.8 percent in organic systems.
2017 saw a slew of supermarket chains and food producers announce that they would phase out the purchase of eggs from enriched cages, joining those already rejecting cage-produced eggs.
Although this sourcing change is being phased, producers that chose to invest in enriched cages at the start of the decade will increasingly have to re-invest, and for those producers that have followed alternative systems, downward price pressure can be expected as cage producers enter their market segments. It is also worth remembering that, with the switch out of battery cages, some egg producers chose to exit the market altogether, and this option may well be chosen by those that no longer have a market for eggs from enriched cages.
