ANALYSIS – EU regulations banning battery cages for laying hens and sow stalls have much to commend them but the impacts on the market may have been overlooked or underestimated, writes senior editor, Jackie Linden.
Just three months after the battery cage ban, EU egg production is reported to be down by between 10 and 15 per cent and there has been much disruption in the market, including in some unexpected areas. A partial ban on sow stalls is due to come into force in January 2013 so what can we expect for the pig sector?
At a meeting on the new EU animal welfare strategy in Brussels at the end of February, jointly organised by the European Commission and the Danish Presidency of the EU, the stated aim was to drive forward an integrated approach to animal welfare.
Health and Consumer Policy Commissioner, John Dalli, said: “Ethical issues surrounding animal welfare are becoming an integral part of food quality. Consumers are increasingly factoring in welfare considerations into their purchases. Giving consumers access to the right information so that they can make informed choices will help drive our animal welfare policies forward. Informed consumers are empowered consumers. Dedicating resources to education and training as well as strengthening enforcement will deliver both in economic and in welfare terms.”
These goals are commendable and are certainly supported by a vocal sector of the general public. And very few producers would not oppose them in principle if they were to receive appropriate reward for their efforts.
Three months on from the introduction of the Welfare of Laying Hen directive in the EU, what has been the experience of the egg industry? And what can the pig industry expect after January 2013, when a partial sow stall ban comes into effect?
Experience from EU Egg Sector
Since the beginning of this year, conventional battery cages have been illegal for laying hens throughout the European Union. Despite many years of advanced warning, many egg producers – mainly in eastern and southern European member states – failed to replace in time their old cages with the so-called enriched or colony cages, which are acceptable under the new directive.
It was expected that some farmers always intended to leave egg production rather than update their housing systems and so EU output was expected to drop after the ban came into place. With the EU authorities refusing to give ground over derogation and giving national authorities the responsibility to prevent the now illegal battery eggs coming onto the market in compliant states, the egg supply situation in the Community has come under greater pressure than many foresaw.
The Commission had estimated 2.5 per cent drop in egg production across the EU due to a cut-back in chick placings following a period of over–supply, according to the English NFU poultry board vice chairman, Duncan Priestner. In fact, he reported that the Welfare of Laying Hens Directive has had a much bigger impact, with total EU production estimated to be down by 10 to 15 per cent, and a 20 per cent drop in Spain.
As a result, wholesale rates in the UK have increased substantially, ending 18 months of extremely low prices. However, the free-range sector continues to have a tough time due to over-supply as so many new free-range units have been built recently.
Bearing in mind that the whole UK egg industry was largely compliant with the directive well in advance of the battery cage ban, the plight of its free-range producers seems unfair, if not entirely unexpected.
From Member States less well prepared for the changes, there have been reports of substantial increases in egg prices. Farm–gate prices for eggs increased 72 per cent between 2011 and the end of February in Spain, for example. In the Czech Republic, one egg cost 2.50 crowns in December and 7.00 crowns in the run-up to Easter, according to The Guardian.
The situation in the Czech Republic highlights another problem: that country was heavily reliant on imports of eggs from Poland, which was only minimally prepared for the ban on battery cages. Supplies from there to the Republic dried up almost overnight as the EU authorities have made it clear they will come down hard on any national governments allowing trade between Member States in ‘illegal' battery eggs.
Until all producers have replaced their battery cages, it is permitted for eggs from such systems to be broken, processed and traded across borders in food products. The proportion of egg consumption in the form of egg products is much higher in the EU than the word average. Italy leads the rankings with an annual per–capita figure of 75 eggs in processed form or 36 per cent of the national consumption on average. Eggs are an ingredient in most forms of the national staple food, pasta, which is also widely exported.
Pig Industry: Looking to the Future
From January 2013, sow stalls will be outlawed in the EU and, with some limited exceptions, all breeding pigs must be group-housed for most of their lives.
There are parallels here with the experience of the egg sector: a Directive with much to commend it, announced years ahead of it coming into force and requests for derogation in certain countries refused while producers in other countries invest heavily to comply with the regulation in time.
In a report published in the last few days entitled Market Impact of EU Regulations on Group Housing of Sows, it is stated that fewer than half EU Member States are expected to be fully compliant with the EU Directive, according to the British Pig Executive (BPEX), part of the AHDB.
This is expected to result in market disruptions, says the report. Pig production in the EU could to fall by between five and 10 per cent as ‘significant numbers’ of producers quit the industry because they will be unable or unwilling to comply with the new sow stall ban. Pig meat processors and retailers are expected to face substantial price increases.
The European Commission has made it clear that it expects the new rules to be rigorously enforced and will initiate infraction proceedings against Member States which are not fully compliant, just as for the egg industry.
AHDB Senior Analyst, Stephen Howarth, said: “Historically, even small changes in pig production have led to significant shifts in price. With production likely to fall by five per cent or more, prices could be at least 10 per cent higher, possibly more.”
BPEX Chairman, Stewart Houston, said: “It is imperative for retailers and processors to ensure contract arrangements that guarantee the supply of pig meat under terms that allow sensible business decisions to be made and for everyone in the supply chain to work towards a sustainable, profitable sector.”
The report envisages three possible scenarios.
The most likely scenario, suggest the authors, is that total EU pig meat production in 2013 would be around five per cent lower than in 2011.
A second scenario, which would result if enforcement of the new rules were to be rigorous, would lead to a 10 per cent cut in pig meat output in 2013 compared to 2011.
The third scenario presented considers the possibility that the regulations would be a catalyst for a realignment of production in the form of integration across much of the EU, with breeders in North West Europe supplying piglets to finishers in Eastern and Southern Europe. This situation would have significant impacts on the environment, welfare and the processing sector but it may reduce production costs, suggests the report.
Whilst it is to be hoped that the pig industry will benefit from the lessons learned the hard way by the egg sector as the new welfare directive comes into force, disruption of the market looks likely, at the very least in first few months of 2013.
It would be the ultimate irony if regulations introduced to improve the welfare of farm animals in the EU resulted in the collapse of the industry there, only for food prices to rise and imports from countries where welfare takes a lower priority than currently in the EU as well as adverse impacts on the environment and global food security.