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Urbanisation Drives Asian Egg Demand

29 October 2014

The growth of the middle classes and urbanisation of the population in Asia is radically changing the economy in Asian countries as well as the egg industries, reports poultry industry analyst, Terry Evans, for 5m Publishing.

Quoting a DBS Bank Ltd (formerly the Development Bank of Singapore) report, Morten Ernst, Managing Director Sanovo Asia Pacific, told delegates at the International Egg Commission’s conference in Edinburgh: “Urbanisation has changed the balance of economic power towards Asia. Bigger cities have created unprecedented opportunities for jobs and wealth, building middle classes that were transforming economies.”

Asian Urbanisation Raises Incomes and Drives Market Changes

Some 525 million people in Asia could be considered to be middle class, which was more than the total population of North America! Mega-cities like Tokyo, Beijing, Shanghai and Seoul were at a mature stage while other cities were just starting to grow.

“Although these mega-cities tend to command the attention of marketers, the lesser known newly urbanised cities might be the quicker and easier way to grow one’s business,” he asserted.

Asian countries were home to some 4.3 billion people, a figure which was expected to grow by 300 million in just five years.

Egg output in Asia was considered to be in excess of 40 million tonnes a year, or about 60 per cent of world production. Egg consumption in the region ranged widely from as little as 2.4kg in India to almost 21kg in Japan and China.

“Economic improvement will bring unprecedented prosperity in the region, though urbanisation will continue to be the main driver of rising incomes,” Mr Ernst added.

There were some 139 egg processing plants – of which 23 also produced egg powder – whose combined western-style egg processing capacity was estimated at the egg equivalent of one million tonnes.

Producing almost four million tonnes of eggs in 2013 and maintaining an annual growth of at least five per cent, India was the second largest producer in the region behind China. In 1995, consumption at 35 eggs per person rose to 51 by 2009, and was currently considered to be around 63.

“Bearing in mind India’s human population of 1.2 billion, raising consumption by just one egg per person has a massive impact on egg production” he added. However, producers there were concerned about the pressure being put on courts by the Humane Society (India) to ban production in traditional cages.

The country had four egg processing plants operating close to capacity, with a combined annual output of some 10,000 tonnes. Expansion was certain as India had the lowest egg production cost in Asia, while the demand for its egg powders was increasing in South-East Asia where there was a free trade zone.

A weakening Indian currency had also boosted trade, while high egg white prices in the US and Europe had been a plus factor helping to make India a strong player in the Asian market. Close on 100 per cent of Indian egg products were exported. This year, trade with Japan was expected to increase dramatically.

Singapore imported some two-thirds of its egg requirements from Malaysia. However, only some 21 farms had been approved by the Singapore Agri-Food and Vet Authority (AVA) to send eggs to Singapore. When two of these farms were quarantined, Singapore had to look to Thailand and Indonesia to make up for the shortfall but the high prices being realised in these markets had brought resistance from Singapore consumers.

The population of Malaysia will rise by 10 per cent to reach 33 million by 2020. An increasing number of consumers were becoming more aware of living a healthy lifestyle.

Similarly, food consumption patterns in Thailand were changing as quality and health benefits rather than just price were becoming key factors. This country was only just entering the egg processing field with a few liquid egg plants. The market for value-added products for the food service sector was promising. Bangkok was the most visited city in Asia with 16.5 million visitors in 2013. This surge in visitors would continue along with the need for safe ready-to-use egg products and the derivatives thereof.

Although the majority of Thai consumers preferred fresh products, many new supermarkets and convenience stores were emerging offering ready-to-eat food items, which were slowly replacing traditional wet markets and home cooking. Although eggs were popular, the uptake was only 165 per person, primarily because of price.

Indonesia, according to a McKinsey report, was riding a wave of strong economic growth and was expected to become the world’s seventh largest economy by 2030 from the 16th position today. Between 2000 and 2030, the middle class population would have increased by some 90 million to 294 million.

“This would be the largest increase of any country in the world with the exceptions of China and India. The strong economy and growing middle class is changing the structure of the food chain, evident in the growing importation of mostly whole egg powder mainly from India, which was used for biscuits,” Mr Ernst observed.

South Korea had lost about eight per cent of its layer population as a result of avian influenza earlier this year. This produced a sharp increase in egg prices which, in turn, resulted in a high level of chick placings that could produce an egg price slump in 2015. Per-capita egg consumption was expected to rise.

There were possibly 12 liquid egg plants supplying products for the domestic food industry. Nevertheless, imports of products in both frozen and powdered forms continued to grow.

Egg Industry in China: Food Safety Focus

Presenting the situation in China, Wayne Liu of Ovodan Food (China) said that a major trend was an increase in the size of layer farms. The largest now had three million layers and five more operations with more than one million birds had been built, while at least 10 more were under construction. In Jiangsu Province, for example, only one farm had more than 200,000 birds in 2005, while today there were more than 15 such operations.

Consolidation in the sector has been evident there. The total number of hens in Jiangsu actually fell over the last decade from 150 million to 120 million despite the growth in large egg operations.

While four of the top five processing operations had nearly doubled or trebled their capacity in the past year, some new plants were struggling. These were small or middle-sized with a daily output of 10 to 20 tonnes serving a limited regional market.

Production of liquid egg products started in 2005. However, in 2008, a melamine scandal halted the production of egg powder for some time, This business was now starting to recover.

Total volume of eggs broken out in 2013 was around 200,000 tonnes, split roughly equally between liquid and powder. The top six egg processors accounted for more than 80 per cent of total output. The four biggest liquid egg plants accounted for over 80 per cent of total production, while the leading four powdered egg processors produced more than 84 per cent.

Competition was primarily based on price.

“Sometimes the whole liquid egg price was less than that for shell eggs,” Mr Liu said.

Having a brand was not worth much as there was little product differentiation.

Increasing attention was being paid to food safety which was good for the industry as it would help get rid of hand-breaking operations. However, he highlighted the problem of tracing back the origin of shell eggs containing medical residues. This was the current challenge for the industry.

Looking ahead to 2024, Mr Liu expected there might be a few new players in the sector although fierce price competition would persist, which could result in some mergers.

He considered that there should be compulsory regulation on food manufacturers to use egg products. Currently some 19 per cent of shell eggs were used by this sector.

And finally, he considered that there was a need to establish a strong egg industry organisation or association.

October 2014

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