Chinese cage-free egg industry in early stages but advancing with standardization

China cage-free sector is in its infancy but has demonstrated progress in standardizing cage-free egg production
calendar icon 5 July 2022
clock icon 6 minute read

Editor’s note: Overview and excerpts from an FAI Farms webinar on the Chinese cage-free egg sector.

China is the largest egg producing country in the world, and the cage-free sector is in its infancy but has demonstrated progress in standardizing and developing cage-free egg production.

Globally, more than 2,000 companies have pledged to transition to 100% purchase of cage-free eggs by 2025, including more than 50 companies in China. Due to this commitment, the annual demand for cage-free eggs in China is expected to increase by 1.15 billion eggs, according to a 2021 Lever study.

Congcong Li, PhD, is the animal welfare program manager for IQC in China. According to FAO data, China produces the most eggs in the world, with egg production and consumption representing more than 40% of the world's total production today and representing consumption of almost one egg per person per day in China, she said.

However, more than 70% of egg producers are small farmers with less than 10,000 birds per farm. Cage systems are the most used systems in China, said Li.

Only 10% of all eggs produced in China are cage-free eggs, and 90% of those are from smaller free-range producers, she noted.

Surveys done in 2020 and 2021 show that a very high percentage of Chinese consumers are aware of the cage-free eggs concept, and most of them have a high willingness to buy the cage-free eggs with a certain amount of premium, Li said.

Regulating the cage-free market

The biggest issue is that the vast majority of retailers, food service companies and multinationals in China are skeptical about the authenticity of their cage-free eggs suppliers, she said. To build a reliable market chain, the cage-free egg market needs to be better regulated, Li noted.

In 2020 the government gave the authorization to start a program for Certified Humane eggs in China. In 2021, with the authorization and support of HFAC, IQC started development of the certification program of Certified Humane in China, based on existing international standards, she said.

The China Chain Store Franchise Association is also working to establish standards for certifying cage-free egg production. A manual is being created that includes checklists for on-site inspection (see below). Besides that, China will also have other certification bodies, Li noted. Third party auditing is already taking place for cage-free producers.

Currently, Li said, six egg laying farms are already certified, producing a total of 19 million certified eggs in 201. In 2022 that number is expected to double or triple, she said. The pandemic has slowed progress.

For retailers, it is still very difficult to get a steady supply of cage-free eggs, as the majority of the free-range producers have smaller farms in rural areas, which are consumed locally, said Li.

For near future, she emphasized, there doesn’t look to be much retailer demand for cage-free eggs but in the longer term that demand will eventually grow, she said.

Producer and market hesitation

The majority of egg producers in China is hesitating to enter the cage-free market due to a lack of reliable market data and concrete cost analysis, Li mentioned. There is limited technical support and a limited investment in the market. More efforts need to be made in consumer education, she added.

By working on all the previously mentioned issues, China can hopefully shorten the transition period from caged to cage-free eggs, she said.

Because of the limited demand for certified eggs in the market, some certified eggs are still selling as regular egg, she said. More channels are needed to connect the buyers and the producers. More communication is needed between al the links in the cage-free egg market chain, Li concluded.

Benchmarking the first national CCFA Group Standards in China

Murilo Quintiliano, animal scientist and director at FAI Farms, highlighted the importance of reaching a consensus for the definition of cage-free production practices. FAI, IQC, CCFA and other partners jointly established the first national Group Standards for Cage-free egg production in China in 2021. This set of standards will provide guidance and monitor progress for farms to be certified, as well as help consumers differentiate egg products on the market.

Quintiliano also showed a benchmarking table where the recent Chinese Group Standards was compared with international standards, including USDA Organic and RSPCA UK, for cage-free production. Around 50% of the requirements in the Group Standards are equivalent to those in the international standards. 35% and 10% of the requirements in the Group Standards are higher and lower, respectively, than those in the international standards.

To review the benchmarking table, click here.

What the survey said

Oistein Thorsen, CEO of FAI Farms in the UK, shared insights from surveys and interviews done about the cage-free egg market in China.

In China there is no legislation restricting particular farming practices such as cage production, although there are new standards emerging for alternative systems, he said.

In FAI’s 2020 market survey, publicly available information showed that 31 companies claim to use cage-free eggs in China. Of the top Chinese egg production companies, almost half were in the process of supplying cage-free eggs to the market.

The 2022 survey was conducted using an in depth interviews with four Certified Humane cage-free producers, which together, are expected to raise 123,600 layers producing 38 million eggs. They also represent 3.3% of the number of cage-free eggs required by 2025.

One of the key concerns coming out of the survey, even amongst Certified Humane producers, is that large numbers of eggs are not finding a specialized market and are being sold as normal eggs.

The costs of producing cage-free eggs vary according to different producers, but they are higher than producing egg in cages, said Thorson. One producer reported cage-free costs 20% to 25% above their own caged production costs, he added.

Key challenges faced by all cage-free egg producers:

  1. Lack of availability of differentiated markets especially for newly transitioned producers
  2. Low consumer recognition of welfare labels and claims
  3. Not seeing an immediate return on investment
  4. Spent hens are being wasted

Interestingly, the 2020 survey that was conducted by IQC and FAI queried the supply chain side of the market (not producers) asking their top challenges with cage-free eggs:

  • Nearly 70% ranked the lack of standards and labels as the main challenge for cage-free eggs in China.
  • 64% claimed high cost
  • 49% noted non-transparent supply chain
  • 32% said consumers do not recognize value of cage-free

The survey producers remain cautious, not necessarily convinced there'll be big differences in the immediate future but hopeful that changes are on their way and the market will be more secure and more mature within the next five years, Thorson said.

Producers need support with marketing as well as finding new buyers and connecting producers with the brands that are making commitments to cage-free eggs, he said. Producers are interested in exploring alternative marketing in the Hong Kong and Singapore markets.

Click here to watch the webinar in its entirety.

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