Import threat to UK egg market grows

Imports pose a growing threat to the UK egg industry, with domestic producers facing stiffer competition both from Continental Europe and from the wider, global market.

The immediate challenge comes from the ban on conventional cages being introduced under the EU’s Welfare of Laying Hens Directive, says Nick Chippindale of Chippindale Foods in a report for the Nuffield Farming Scholarships Trust.

“The more space per hen, the higher the cost,” he says. For example, eggs from enriched cages are 8% more expensive to produce, from barn systems, 22%, and from free-range systems, 25%.

But, following visits to a number of European countries, Mr Chippindale concludes that many are unlikely to be fully compliant with the new legislation from 1 January 2012, and eggs from these countries may well enter the UK market illegally.

“In Poland there appears very little incentive or pressure on producers to change, because consumers generally buy on price,” he says.

Egg shortage

But, in time, the Directive will take effect and many smaller producers will quit the industry, leading to a potential shortage of eggs. “This shortage can’t physically be filled by other European producers, potentially resulting in imports of eggs produced in lower welfare systems from outside the EU,” Mr Chippindale suggests.

He notes that feed costs in the EU are generally up to 30% higher than in the US, Brazil, Argentina and India, giving non-EU countries a significant advantage.

“Although imports from non-EU countries are currently less than 1%, when the (conventional cage ban) comes into full force in 2012, the situation may well change.

“All these countries have little welfare legislation, and lower production costs than the EU. Combined with further trade liberalisation effectively reducing import tariffs, the EU will suffer an increased loss of competitiveness.”

Mega farming: Scale gives China and US edge

As part of his study, Mr Chippindale visited production sites in both China and the US, where massive economies of scale are leading to cheap eggs.

In China, which already accounts for 40% of world egg production, he visited Hanwei Foods in the north-west, which has the biggest egg processing factory in Asia.

Bio-security was strict and production was similar to current EU systems, except for higher stocking rates. The main brand was Gedada eggs, which had golden yolks as a main selling point. But most eggs were for processing into bespoke liquid and powder for food manufacturers.

Mr Chippindale also visited the DQY Ecological Farm, outside Beijing, which “aims to be the most influential egg product company in the world”. All pullets are reared on-site, and there are 2 million layers in conventional cages, producing eggs for packing and processing. All conveyors are located underground, and the site includes accommodation for over 400 employees. An on-site biogas plant provides up to 14m kWh of electricity a year from poultry manure.

Although commercial egg production is relatively new to China, the country already exports egg powder and egg products in volume to Japan and the Middle East and has other markets in its sights.

In the US, Mr Chippindale visited large-scale operators in California, Iowa and Washington, including Rembrandt Foods’ “mega farm”.

The largest vertically integrated operator in the US, the company has more than 5 million layers on one site. Every egg is conveyed directly to a breaking plant, which can dry most of the liquid it produces. “The capacity of the dryers is huge,” says Mr Chippindale. “They were built in part with exports in mind.”

Bio-security is paramount, with a “shower-in, shower-out” policy. A bespoke building is used for composting any dead birds.

The company has recently formed a partnership with Swedish company, Kallbergs. “Together they intend to contribute to the development, profitability and competitiveness of their customers by introducing functional egg ingredients to the food industry in Europe.”