International Egg Market Annual Review

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1 Artwork2010_Layout 1 25/08/ :46 Page 2 International Egg Market Annual Review 10

2 A N A LY S I SONE Banning of cages in Germany and after First results of the largest economic field experiment in the egg industry. By Hans-Wilhelm Windhorst Hans-Wilhelm Windhorst is a retired Professor for comparative spatial analysis and planning at the Institute of Spatial Analysis and Planning in Areas of Intensive Agriculture (ISPA), University of Vechta, Germany. He is also Statistical Analyst of the International Egg Commission (IEC). From December 31st, 2009 on it was prohibited in Germany to keep laying hens in conventional cages, but they could still be kept in so called Kleingruppenhaltungen (German form of the enriched cage). Even though the transformation of cages into alternative housing systems started as early as 2007, the majority of cages were not replaced before Even in December 2009 the German Statistical Office still counted 14.1 mill. places for laying hens in cages in Germany, this number, however, included Kleingruppenhaltungen. Even though this was 37.6 % of all layer places in Germany, only 7.6 mill. layers or 28.2 % of the total layer flock were still kept in cages. The impacts the transformation process between 2008 and 2009 has had on egg production and trade with shell eggs for consumption will be dealt with in the following analysis. 2 2 Only the dynamics in layer farms with 3,000 and more places will be analysed. 1 The transformation process and its impacts on capacity utilisation Between December 2008 and March 2010, the number of layer farms with 3,000 and more places decreased by 8.5 %, the number of installed places by 10.5 % and that of layers by 19.8 % (table 1). This shows that many egg farmers used the conventional cages as long as possible. When, however, this was no longer permitted, many farms remained empty. The capacity utilisation decreased from 79.4 % in December 2008 to 71.9 % in December 2009 and 67.7 % in March It can be expected that in the second half of 2010 when most of the farms will be transferred into alternative housing systems, the number of layers and capacity utilisation will increase again. The fact that the number of layers decreased faster than that of the installed places is a result of the dynamics in housing systems (table 2). Whereas in the analysed time period the number of installed places in cages decreased by 10.7 mill. or 43.2 % the places in barn or floor management systems increased by 10 mill. or %. So far, free range systems have not profited from the transformation process, the number of installed places even decreased by 155,000 or 3.5 %. In biological (organic) production, 300,000 new places were installed. 4 INTERNATIONAL EGG COMMISSION ANNUAL REVIEW 2010

3 The first part of the analysis showed that: egg farmers used their cages as long as possible to profit from lower production costs, when the transformation of housing systems could no longer be postponed, the capacity utilisation fell to 68 %, many egg farmers obviously calculated that the economic losses by using cages as long as possible would be lower than the losses resulting from a phase of low capacity utilisation. TABLE 1 Development of the number of layer farms, installed places and laying hens in Germany between December 2008 and March 2010 (Source: Statistisches Bundesamt, EMA 2010) 12/ /2009 3/2010 CHANGE (%) Farms 1,189 1,111 1, Places (1,000) 39,930 37,344 35, Layers (1,000) 31,706 26,846 25, TABLE 2 Development of the share of housing systems for laying hens in Germany between December 2008 and December 2009 (Source: Statistisches Bundesamt) HOUSING SYSTEM CHANGE (%) Cages* Number (1.000) 24, , Share (%) Barn Number (1.000) 8, , Share (%) Free range Number (1.000) 4, , Share (%) Biolog. Production Number (1.000) 2, , Share (%) Total Number (1.000) 39, , Share (%) * the figure includes Kleingruppenhaltungen INTERNATIONAL EGG COMMISSION ANNUAL REVIEW

4 Banning of cages in Germany and after A N A LY S I SONE 2 3 Wide differences in the dynamics in German states Because of the decreasing number of laying hens at hand, egg production in farms with 3,000 and more places in Germany fell by almost 1.1 billion eggs or 11.4 %. As can be seen from the data in table 3, the dynamics in the single states differed considerably. The main steering factors behind the dynamics were the status of the transformation process and the share of the housing systems. As was to be expected, the highest absolute decrease in the production volume with almost 681 mill. eggs occurred in Lower Saxony, the centre of German egg production (see also Windhorst 2009a, p. 7). The highest relative decrease, however, showed Hesse and Schleswig-Holstein. It is worth mentioning that in Mecklenburg-Western Pomerania and in Bavaria egg production increased in the analysed time period. This is mainly due to the fact that egg farmers in these states started the transformation process earlier so that the number of layers as well as egg production stabilised much earlier than in other states. The main results of the second step of the analysis can be summarised as follows: The dynamics of the transformation process and of egg production showed wide differences between the single states. In the centres of egg production the production volume decreased dramatically, because here cages were used as long as possible and the transformation process in many farms began as late as In states in which egg farmers started the transformation process earlier, the number of layers as well as egg production already stabilised in 2009, here, mainly medium-sized new farms (30,000 to 50,000 places) with floor management systems were built. Egg farmers with floor management systems could profit from the decision of several food retailers to no longer list eggs from cage systems as well as from Kleingruppenhaltungen. On the other hand, farmers who used their cages as long as possible, profited from lower production costs and the fact that, because of the egg shortage, they had no problems in selling their eggs on the domestic market or in other EU member countries, at least not until the second quarter of Far reaching impacts on foreign trade with shell eggs for consumption The sharp reduction of egg production (see table 1) had far reaching impacts on German foreign trade with shell eggs for consumption. Between December 2008 and December 2009 imports grew by another 840 mill. eggs or by 13.9 % after an increase of 1.2 billion eggs between December 2007 and 2008 (see Windhorst 2009 b). The self sufficiency rate fell to about 54 %. The Netherlands, Poland and Belgium profited most from the high egg deficit in Germany (table 4). In 2009, Germany imported 5.3 billion eggs or 77.1 % of the overall import volume from the Netherlands. Poland ranked in second place with 492 mill. eggs and in third place Belgium with mill. eggs. On the other hand, imports from Spain, France, the Czech Republic and Lithuania decreased. As expected, the exports of shell eggs for consumption decreased in the analysed time period. The data in table 5 shows that the export volume fell by 159 mill. eggs or 9.1 %. The highest absolute decrease was in exports to the United Kingdom and the Netherlands. Nevertheless the Netherlands remained the most important country of destination for German exports followed by the United Kingdom, Poland and Austria. Exports to several other countries could be expanded, such as to Poland, the Czech Republic, 6 INTERNATIONAL EGG COMMISSION ANNUAL REVIEW 2010

5 billion eggs The decrease in production from farms with more than 3000 places 2 billion eggs The increase in imports between December 2007 and December 2009 Switzerland and Hong Kong. Exports to non-eu countries slightly decreased. Besides shell eggs for consumption large amounts of eggs for further processing were exported, mainly to the Netherlands. Important results of the third step of the analysis: The sharp decrease of egg production resulting from the transformation process led to a fast growing import volume of shell eggs for consumption. Between 2007 and 2009, it increased by about 2 billion eggs. The Netherlands, Poland and Belgium profited most from the growing egg deficit in Germany. Because of the egg shortage, egg prices increased constantly for about two years and it was not before the second quarter of 2010 that prices began to stabilise on a lower level which, however, still allowed a profitable production. The self sufficiency rate for shell eggs reached an all-time low in the first quarter of 2010 with only 54 % and it will take years until a rate between 60 % and 70 % will be reached again. TABLE 3 Development of egg production in the German states between December 2008 and 2009 in farms with 3,000 and more places (Source: Statistisches Bundesamt, EMA 2010) TABLE 4 Development of German imports of shell eggs for consumption between December 2008 and December 2009, data in mill. pieces (Source: Statistisches Bundesamt, EMA 2010) TABLE 5 Development of German exports of shell eggs for consumption between December 2008 and December 2009, data in mill. pieces (Source: Statistisches Bundesamt) STATE* CHANGE ABSOLUTE % Lower Saxony 3, , Saxony 1, Bavaria North Rhine-Westphalia Brandenburg Saxony-Anhalt Thuringia Mecklenburg-West Pom Baden-Wurttemberg Hesse Schleswig-Holstein Rhineland-Palatinate Germany 9, , , * no data for Saarland COUNTRY OF ORIGIN CHANGE ABSOLUTE % Netherlands 4, , Poland Belgium/Luxembourg Spain France Czech Republic Lithuania Total 6, , COUNTRY OF CHANGE DESTINATION ABSOLUTE % Netherlands United Kingdom Poland Austria France Czech Republic EU (27) 1, , Switzerland Hong Kong Non-EU countries Total 1, , INTERNATIONAL EGG COMMISSION ANNUAL REVIEW

6 Banning of cages in Germany and after A N A LY S I SONE Summary and lessons to be learned The definite banning of conventional cages in Germany from January 1st 2010 on, two years earlier than in most of the other EU member countries, led to a reduction of the number of egg farms with 3,000 and more places by 8.5 %. Parallel to these dynamics the number of layers decreased by 19.8 %. Domestic egg production fell by almost 1.1 billion eggs or 11.4 %. This had far reaching impacts on the German foreign trade with shell eggs. Imports increased by another 840 mill. eggs and reached an all-time maximum of 6.9 billion eggs in If imports of egg products are calculated in egg equivalents, Germany imported almost 9 billion eggs and thus dominated global egg imports. Egg exports decreased by 159 mill. eggs or 9.1 %. It can be expected that in the second half of 2010, when the transformation process to alternative housing systems should be completed, the number of laying hens and egg production will increase again. Nevertheless it will take several years until a self sufficiency rate between 60 % and 70 % can be reached again. This will also result from the fact that the laying rate of hens in alternative housing systems is considerably lower than in cage systems. What are the main lessons to be learned from this field experiment in the EU? If a change in housing systems is enforced by a legislative process in a country or in a common market without trade barriers, because of animal welfare aspects or other reasons it should become compulsory in all states or provinces of a country or in all countries of a common market at the same time. The German example shows that the earlier banning of cages compared to most other EU member countries had the effect that many egg farmers used the conventional cages as long as possible because of lower production costs, and the economic disadvantages compared to countries in which cages were still permitted. 8 INTERNATIONAL EGG COMMISSION ANNUAL REVIEW 2010

7 The definite end of this housing Rising consumer prices will be The results of the earlier banning of References system by December 31st, 2009 led to a low capacity utilisation and a sharp reduction of egg production in the last quarter of 2009 and the first quarter of 2010, and a drastic increase of egg imports to meet the domestic demand. Similar dynamics can be expected in the EU in the last quarter of 2011 and the first quarter (if not longer) of The request of Poland to postpone the final date for the use of conventional cages until 2015 indicates that the transformation process in the EU will not be completed by the end of 2012 and that this will elongate the disadvantage for the German egg and egg products industries because of higher production costs. inevitable, at least during the first phase of the transformation process. Whereas the egg deficit in Germany could be compensated for by imports from other EU member countries, this will not be possible after 2012 in the EU as the production volume will not be sufficient to meet the demand. Imports from non-eu countries may not meet the quality and safety standards of the EU as well as the valid animal welfare regulations and may thus lead to a higher risk for the consumers and a lower level of animal protection. cages in Germany show that legislators at the EU and at country level did not fully consider what impacts their decision would have on the dynamics of egg production and egg trade. The resulting problems were intensified by the long time span between the passing of directive 1999/74/EC and the final decision in 2008 on how an enriched cage would have to be equipped, respectively, which housing systems would be permitted in future in Germany. The legal uncertainty postponed necessary investments and thus squeezed the transformation process into a comparatively short time span. EMA (Europäische Marketing Agentur; ed.): Eier. Marktübersicht Mai Bonn Statistisches Bundesamt: Windhorst, H.-W.: Impacts of the banning of conventional cages on the egg industry of the European Union. In: IEC (ed.): International Egg Market Annual Review London (2009a). Windhorst, H.-W.: Anhaltende Eierverknappung zeichnet sich ab. In: Deutsche The German example also reveals that during the transformation process market turbulences can be expected, Geflügelwirtschaft und Schweineproduktion 61 (2009b), no. 43, p because of the inevitable egg shortage which will result from the low capacity utilisation and the lower laying rates of hens in alternative housing systems. INTERNATIONAL EGG COMMISSION ANNUAL REVIEW

8 Comparison of international country data. By Peter van Horne A N A LY S I STWO C mparison Every year we analyse the data provided by the IEC rapporteurs. For most countries the data for 2009 was available in June In this article we focus on four indicators: 1. Development of consumption (eggs per person per year), 2. Housing systems for layers: cage, barn and free range (%), 3. Layer feed prices ($ per 100kg), 4. Farm and retail prices ($ per dozen eggs). These indicators are compared for most countries. However, 2009 data was not available for all countries at the time of analysing the data. Peter van Horne is IEC s Economic Analyst and is a senior economist at the LEI Institute of Wageningen University and Research Centre in the Netherlands. He is Europe s premier Poultry Economist and specialises in poultry research projects for government and industry with particular focus on the economics of animal welfare, environmental protection, animal health and international competition. Peter has had a longstanding involvement with the IEC and together with Professor Windhorst is developing the Economic and Statistical service that Egg consumption per person per year The IEC database provides historical data from It is interesting to take a look at the development of egg consumption per person per year in every country. Figure 1 gives an overview of the development in egg consumption between 2003 and 2009 in 9 European countries. For France, Spain and the UK 2008 consumption were the most recent information. The countries are ranked by their consumption level starting with the countries with the highest consumption level of eggs per person per year. Egg consumption is relatively high in France, Austria and Italy and relatively low in Switzerland, the UK and the Netherlands. There is a difference in development in egg consumption between the countries. In the UK egg consumption per person per year clearly increased from 167 eggs in 2003 to 183 eggs in Egg consumption showed just a small increase between 2003 and 2009 in Austria, Sweden and the Netherlands. Egg consumption showed a minor development in France, Italy, Germany and Switzerland. In Spain there was a dramatic decrease in consumption from 217 eggs in 2003 towards 189 eggs in In figure 2 the development of egg consumption between 2003 and 2009 is given for 9 IEC countries outside Europe consumption figures were only missing for Japan. Figure 2 shows that egg consumption is high in Mexico and Japan (more than 300 egg per person per year) and relatively low in South Africa and Brazil (less than 150 eggs per person per year). In almost all countries egg consumption increased between 2003 and Only the USA and Brazil are the exception with a decrease of respectively 8 and 2 eggs per person per year. The increase in consumption in Argentina is especially notable with 144 eggs in 2003 towards 210 eggs in 2009 (+ 66 eggs in 7 years). The increase in Mexico (+31 eggs) and South Africa (+30 eggs between 2003 and 2009) should also be noted. the IEC provides to members. 10 INTERNATIONAL EGG COMMISSION ANNUAL REVIEW 2010

9 Consumption Europe France Austria Italy Germany Sweden Spain Switzerland UK Netherlands Eggs/person/year Figure 1. Development of egg consumption (eggs/person/year) between 2003 and 2009 in 9 European countries Consumption World selected Mexico Japan USA New Zealand Argentina Australia Canada South Africa Brazil Eggs/person/year Figure 2. Development of egg consumption (eggs/person/year) between 2003 and 2009 in 9 IEC countries INTERNATIONAL EGG COMMISSION ANNUAL REVIEW

10 Comparison of international country data A N A LY S I STWO Housing systems There are many different systems for housing hens. All systems can be divided into three groups: cage systems (including enriched cage and colony systems), barn systems (floor and aviary systems) and free range systems (with an outdoor run including organic). Legislation in the EU will force farmers to ban traditional cage housing in As a result of this legislation and changes in market needs, many hens in the EU are already kept in alternative (non cage) systems. Figure 3 gives an overview of the situation in 2009 in Europe. Data is from 2009 with the exception of the UK, Hungary, Denmark and Spain giving only 2008 data. In Europe Switzerland has no cage systems at all. Alternative systems in the following EU countries have a share of 40% or more: Austria, Sweden, Germany, the Netherlands, Ireland, Denmark and the UK. Of these countries the share of free range systems is high in Switzerland, Ireland, UK and Austria. Countries with a high share of alternative housing systems are all situated in the north western part of Europe. In the south and the east of Europe, cage systems are still the main housing systems. Figure 4 gives the share of housing systems in 10 IEC countries outside Europe. The data is from 2009 with the exception of Japan providing only 2008 data. In all these countries cages are the dominant housing system. There are some barn or free range housing systems in Australia (23%), South Africa (14%), New Zealand (12%), Japan (9%) and the USA (5% of the hens in alternative housing). In countries such as Argentina, Brazil, India and Mexico 99 to 100% of commercial kept layers are housed in cages. 12 INTERNATIONAL EGG COMMISSION ANNUAL REVIEW 2010

11 Housing Europe Free Range Barn Cages 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Switzerland Austria Sweden Germany Netherlands Ireland Denmark UK Finland Slovakia France Hungary Italy Greece Czech Rep Spain Figure 3. Share of housing systems for layers in 16 European countries in Housing World selected Free Range Barn Cages 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Australia S Africa New Zealand Japan USA Canada Argentina Brazil India Mexico Figure 4. Share of housing systems for layers in 10 IEC countries in INTERNATIONAL EGG COMMISSION ANNUAL REVIEW

12 Comparison of international country data A N A LY S I STWO Price of layer feed The price of layer feed has a large impact on the production cost of eggs. In recent years there has been some large changes in feed prices. As a result of high prices for feed ingredients, like corn and soybeans, the price of layer feed increased sharply in Figure 5 gives an overview of the development of the layer feed price between 2005 and 2009 in selected IEC countries. For Hungary, the UK and Japan the 2009 data was missing. Countries are ranked by level of feed price. Layer feed is relatively low in India, Argentina and the USA. Japan and Switzerland have the highest feed price. Figure 5 shows that in all countries the price of layer feed increased from 2006 to 2007 and again from 2007 to Especially in the EU countries (Hungary, Netherlands, UK and Germany) there was a relatively large increase between 2007 and It should be noted that the feed prices are calculated in US$. A change in exchange rate of the local currency to the USdollar of the mentioned countries could have an impact on the calculated price in US$. However, for the euro countries Germany and the Netherlands there was not a large change in exchange rate which could explain the large difference. In 2009 the price of layer feed decreased in all countries, except for India with a small increase. The decrease in feed price was relatively large in Germany and the Netherlands and also in Argentina and Mexico. Farm and retail prices of eggs IEC rapporteurs were also asked to report on the average price of eggs at farm level and the average price at consumer level. In general the consumer price is the price of eggs in the supermarket. The prices are given excluding any tax (such as sales tax and/or value added tax). Figure 6 gives an overview of both the farm gate price and consumer price of eggs in 2008 in some countries (in US dollars per dozen eggs). Unfortunately there were not enough prices available for 2009 at the moment of writing this article. From figure 6 it can be concluded that consumer prices are very high in Denmark, Italy and the UK; in Belgium, Finland and Ireland the consumer prices are also fairly high. It is striking that in other European countries, such as Germany, the Netherlands, Hungary and Spain, the consumer price of eggs is at a much more moderate level. We do not have any clear explanation for these differences between the European countries. There is no clear relation with prices paid at farm level (also shown in figure 6). There is also no relation with the type of eggs. In the Netherlands, with a relatively low consumer price, the share of alternative eggs is more than 90%. At the same time in Italy, with a high consumer price, the share of alternative eggs sold at retail level is very low. Figure 6 shows that in some non western countries both the price at farm level and retail level are low. Especially in Colombia, India, Iran and Mexico the ratio between farm level and consumer price is very small. 14 INTERNATIONAL EGG COMMISSION ANNUAL REVIEW 2010

13 Artwork2010_Layout 1 25/08/ :47 Page 16 Feed price World selected India Argentina USA S Africa Canada Hungary Netherl ds UK Germany Mexico Japan Switzer d US $/Tonne layer feed Figure 5. Development of price of layer feed (US$ per Tonne) between 2005 and 2009 in selected IEC member countries Egg prices World selected farm retail Ira n M ex ic So o ut h Af ric a In di a Br az il Co lo m bia Ita ly Sp ai n Ki ng do m Ne th er la nd s Un i te d Ire lan d Be lg iu m Cz ec h Re De p nm ar k Fin la nd Ge rm an y Hu ng ar y US A Ja pa n Ze al an d Ne w Au st ra li a Ca na da 0.00 Figure 6. Farm and retail prices of eggs (US$ per dozen) in 2008 in selected IEC member countries. A US $ per dozen eggs 1.50 INTERNATIONAL EGG COMMISSION ANNUAL REVIEW

14 Norbert Papranec Ovotherm Slovakia s.r.o. Biskupa Kondeho 4577/18 Dunajska Streda SK Slovakia Phone Fax: Maria Jamborova VUEPP (Public Research House of Food and Agricultural Economy) Slovakia Magda Prinsloo Southern African Poultry Association PO Box 1202 Honeydew 2040 South Africa Phone Fax Maria del Mar Fernandez Poza INPROVO Juan Montalvo 5 I D Madrid E Spain Phone Fax aseprhu@aseprhu.com Therese Schultz Managing Director Swedish Egg & Poultry Association SFS - Svenska Agg Franzengatan 6 Stockholm S Sweden Phone Fax therese.schultz@svenskaagg.se Alois Mettler National Poultry Centre Lindachstr. 24 PO Box 81 Kirchlindach CH-3038 Switzerland Phone Fax alois.mettler@bluewin.ch Derya Pala Chairman Yum-Bir-Turkish Egg Producers Association Cetin Emec Bulvari 8 Cadde No: 4/6 Ovecler Ankara Turkey Phone: Fax: dpala@yum-bir.org Iryna Portechyn Agroholding Avangard 7/9 Schchorsa Street Kiev Ukraine Phone Fax stk.iryna@yahoo.com Firas Rabah Al Ghurair Foods PO Box 780 Dubai United Arab Emirates Phone Fax firasr@alghurairgroup.com Mark Williams British Egg Industry Council 2nd Floor 89 Charterhouse Street London EC1M 6HR UK Phone Fax mark.williams@ britisheggindustrycouncil.com Maro Ibarburu Business Analyst Egg Industry Center IOWA State University 201 C Kildee Hall Ames IA USA Phone: Fax: maro@iastate.edu IEC countries Argentina Armenia Australia Austria Barbados Belarus Belgium Brazil Bulgaria Canada China China (Taiwan) Colombia Cyprus Czech Rep Denmark Finland France Germany Greece Guatemala Hungary India Iran Ireland Italy Japan South Korea Latvia Mauritius Mexico Mongolia Netherlands New Zealand Nigeria Norway Philippines Poland Portugal Rep Ireland Russia Singapore Slovakia South Africa Spain Sweden Switzerland Thailand Trinidad and Tobago Turkey Ukraine United Kingdom United Arab Emirates USA Venezuela Annual Review 2010 editorial team Director General Julian Madeley julian@internationalegg.com Statistical Analyst Professor Hans-Wilhelm Windhorst economics@internationalegg.com Economic Analyst Peter van Horne economics@internationalegg.com Business and Event Manager Mrs Philippa Hillier philippa@internationalegg.com Office and Events Administrator Miss Cassy Madeley cassy@internationalegg.com Designed and produced by Lighthouse design for business info@lighthouseuk.net INTERNATIONAL EGG COMMISSION ANNUAL REVIEW

15 The International Egg Commission 89 Charterhouse Street London EC1M 6HR United Kingdom Phone: +44 (0) Fax: +44 (0) Web: The IEC support group Interested in joining the IEC support group? The IEC support group provides a unique opportunity to promote your company through IEC publications, the IEC website and through our annual conferences. If you are interested in joining, please contact Cassy Madeley on +44 (0)