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News and analysis on the global poultry
and animal feed industries.
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on January 10, 2007

What 2007 has in store: no shortage of challenges and opportunities

The New Year of 2006 was ushered in again with low egg prices and predictions that said they were going to remain this way all year.

The various committees of the United Egg Producers (UEP) and the American Egg Board (AEB) addressed the issue of low egg prices continually, asking producers to cut back with production and hatching of new production.

The UEP’s Nov. 17 United Voices, however, told the good news story that a major export order had been obtained and approved by the Board of Directors of the U.S. Egg Marketers, and this changed the complexion of the market in a matter of days. When producers started to fill the order of 90 container loads of eggs, prices went from 74 cents to over $1.05 per dozen and the entire industry got a big smile on its face.

As an example of the change that took place, a producer with 1 million layers enjoyed an $18,000 per day raise by Nov. 15 over the same number of birds on Oct. 20. Put another way, shell egg producers realized a $44,000,000 pay hike. The entire industry, including those selling eggs to breakers, benefited from the timely export order. Excellent prices were holding through November and should do well into 2007. According to a memo from Don Bell, University of California-Riverside, the sudden spike in egg prices tended to offset the bad losses of the first three quarters of the year and could, in fact, reduce the losses to 2 to 3 cents per dozen for the year. Bell estimates the good times should continue into 2007 and hopefully, keep the year in the black.

News not so good on costs

On the cost side, however, there could be a real increase in the cost of feed as the New Year progresses due to the increase of corn used for the rapidly growing ethanol industry. Unfortunately, if there is a sizable cost increase in feed due to the corn situation, any predicted increased egg price could be wiped out.

Two other factors could also become part of the equation. First, egg consumption in this country is not going up as in the immediate past. This obviously needs to be kept in mind and considered during the planning process. Second concerns the breaking end of the business. As reported in the Bell memo, egg breakers have leveled off and only processed the same numbers in 2006 as in 2005. Challenges and opportunities again are there for 2007.

While a big export order for shell eggs created a wonderful price increase towards the end of 2006, other export efforts continued through USDA Poultry & Egg Export Council (USAPEEC). The egg section of USAPEEC is funded by producers through the American Egg Board. Although shell egg sales by USAPEEC remain about the same as in prior years, the growth is in egg products sales to foreign countries. The organization has been very active in the promotion of both shell eggs and egg products from the U.S. and it is proving successful. Promotional activities include seminars, workshops, advertising, and food related trade shows.

Avian influenza

Egg producers continue to be alert to the challenge of Avian Influenza that has hit hard in some Asian markets and has even been fatal to a number of people. Since the news was announced in foreign places, the American egg industry has taken steps to prevent, warn, anticipate an outbreak and make plans should a disaster hit in the U.S.

Unlike the Asian poultry raising practices, the U.S. industry can certainly control the bio-security of farms in a much better way using enclosed housing and basic policing of the facilities from outside influences. In Asia and other areas overseas, birds are much closer to the environments and are susceptible to wild bird contact.

A very proactive plan has been established by the Egg Safety Center to establish rules and regulations pertaining to this issue. In addition, the egg industry is working with other poultry industries to attack this potential problem. The industry also is working on communication and advertising programs to inform the public should a need arise. Recently, the USDA published a ruling which, among other positive parts, provided for a 100% indemnification to producers should an outbreak occur. All producers are encouraged to participate in the control programs.

Animal welfare

Perhaps the most complicated and potentially dangerous challenge for the industry remains the animal welfare issue. This has been reported on over the years and has caused great changes in the past and will continue to affect everyone associated with animal agriculture. It is almost inconceivable to think that there are groups of individuals that want to discontinue any form of animal use in agriculture. Some groups want meat, milk products and of course, eggs eliminated from the American diet.

Groups well funded

The groups behind the movement are very well funded. One recent example is the banning of the use of sow gestation in the hog business through voter referendum that recently passed in Arizona. This was passed in Florida, which virtually stopped the hog business in that state.

The elimination of cages for layers is part of the agenda of some groups for the future. Through their vast resources, the animal rights activists have changed the European industry greatly and are proceeding to try it here. Through AEB and UEP, the U.S. industry is fighting this battle with public relations efforts, advertising and scientific committees working on educating the public of the advantages of producing eggs the way it currently is being done. Scientific guidelines have been established to create better conditions for the birds to help alleviate the pressure from activists.

Specialty eggs continue to grow

As the industry goes into a new year, a new set of opportunities bears some discussion. For many reasons, including pressure to change the basic raising of poultry, trends in egg marketing have also been changing. The sale of specialty eggs is becoming a growing factor. According to a report from Gill Dedrick, President of the Broiler and Egg Association of Minnesota, organic and cage free suppliers are finding they are in short supply and growers are sending them greater distances just to satisfy the market. It is expected these shortages will last for six months or more while the industry gears up production for these type eggs.

Recent trends point to the growth in organic and natural food items in the store. Specialty eggs are priced between $1.50 and $3/dozen more than conventional white eggs. According to the Bell memo, it is believed that more and more production will be placed in the alternative systems with the hope of capturing more profits. One egg company’s ad in a newspaper, for example, claimed that “Our Eggs Contain: No Hormones, No Carbohydrates, No Antibiotics, No Animal Byproducts”. Specialty eggs include: vegetarian, cage-free, Omega 3, all-natural and organic. Another ad shows a child sampling cookie dough using eggs pasteurized in the shell. Although the total percentage of eggs sold as “specialty” remains relatively low, the climate is there to see this trend increasing and becoming a major factor in the marketing of shell eggs.

Changes at UEP

In November it was announced that Al Pope, President of the United Egg Producers, will be retiring. Al has led UEP for over 30 years through many trying years of challenges and opportunities. Through his guidance, UEP has faced, just to mention two, the threats of animal welfare activists and also the environmental concerns of the industry. Much headway has been made using the scientific approach to these issues. Al has also been very active with the International Egg Commission and has carried many of the positive results from the U.S. industry to foreign producers. Many of the initiatives instituted by UEP and AEB have been used to great success overseas and the U.S. industry has been thanked for these contributions.

Thanks and congratulations to both Al Pope and to Lou Raffel, the retiring president of the United Egg Board, for a wonderful job well done. The insights and wisdom from these two icons in the U.S. egg industry will be sought after and used in the years to come.

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