UK - A speaker at the British Pig & Poultry Fair on Tuesday said that egg producers would have to manage the transition in demand to free-range very carefully to avoid oversupply.
Consultant Tom Willings, formerly of Noble Foods, discussed the challenges and opportunities facing the egg sector.
Mr Willings said there are challenges to be negotiated in the industry wherever you look, including bridging the gulf between perceptions and reality of egg farming, the threat of avian influenza and the potential for Brexit.
However, he said the two key areas to negotiate are supermarket price wars, and changing production methods to keep up with consumer demand.
Egg price deflation a concern
Mr Willings described supermarkets as a force for good, given that they pay a relatively stable price and are key to getting eggs out to consumers. They also specify their own high standards, which helps improve the British egg industry and keeps out competition from abroad.
But retailer price wars have meant the typical price of six eggs has been slashed from £1.40 two years ago to 79p now, he said.
“At the same time volume sales have grown at an unprecedented rate,” Mr Willings said. He highlighted the work of the British Egg Information Service and others in promoting eggs as a healthy option for any diet, which has resulted in per capita consumption growth of six eggs last year.
Mr Willings said the supermarket price reductions had resulted mainly from investment of retailer margins, and that this healthy competition has been helping improve volume sales.
However, he listed potential change in this area as a cause for concern. “I suspect that tougher times lie ahead, and the problem comes in the longer term, when feed costs rise… When they do, I would imagine that recovering the price increase from downstream would be close to impossible for many months, or even several years.”
Mr Willings said the large investments farmers had put into facilities during the transition away from caged hens would make it more difficult for businesses to react to such situations, and buyers would need to act responsibly.
Changes in demand will drive switch to free range
UK egg producers should take note of the growing pattern of American companies switching to cage-free systems, Mr Willings said.
UK organisations are now calling for British companies to review their own policies for egg production methods, and similar trends may be seen here in future.
“It’s not just cage egg demand declining – barn, one potential alternative value egg, shows a similar trajectory. Since 2009, cage and barn demand combined has fallen from 50 per cent of retail trade to less than 37 per cent. Meanwhile, free range has grown from 45 per cent to 59 per cent.”
Extrapolating the trend forward, Mr Willings suggested there would be no more eggs sold from cages in the next 15 years.
How can egg producers adapt to this? Mr Willings said that replacing colony cages with barn egg production would be unsustainable. Barn egg production costs are very close to the costs of running free range units, and costs of barn conversion would be high.
In addition, Mr Willings questioned whether shoppers would perceive a difference between colony and barn units, and suggested that supermarket competition would drive ever-increasing moves towards free range.
He said that a move towards free range must be steady and structured to avoid the oversupply seen on the market during the transition away from battery cages, when both old and new systems were operational at the same time.
“I fear that production method may dominate our agenda in the near future – we’d do well to make sure our voice is heard, but also be prepared to listen. After all, the customer is king.”