Free range set to grow it alone?
www.theranger.co.uk
The growth of free range is set to continue into the next decade but it will be the only sector of the egg industry to flourish.
Because as cage eggs slowly decline the development of organic will be stopped in its tracks and barn may disappear altogether. That is the prediction of three of the egg industry's leading figures in a major overview of future development.
Andrew Joret, David Tromans and Peter Challands made their forecasts in a joint presentation called "The Challenges Facing the UK Egg Industry" which constituted this year's Temperton Fellowship Report.
The trio, formerly senior executives with Deans Foods and now with the newly formed Noble Foods, say: "The swing from cage to non-cage production systems has been the single most consistent feature of the egg market over the last 20 years.
But the big questions are will the swing continue? At what rate? And for how long?"
In the year's from 1998-2005 the shift has averaged 2.2 per cent. But in the past three years the rate has increased to 2.9 per cent.
"While it is possibly unreasonable to assume this rate of change will be maintained in the long run a forward rate of change of 2.5 per cent per year looks reasonable," says their report. "On this basis a 50:50 balance between cage and non cage production will be reached by 2010. Thereafter cage could well be the minority system of production, irrespective of legislation."
At the 2.5 per cent rate of change the number of birds in cages will decline from 19 million to 14.5 million by the end of 2011. Non cage will rise from 11.5 million to 16 million and the vast majority of this increase will be free range.
Inside Deans, the report reveals, the balance of first line sales to key customers tipped in favour of free range in the last quarter of 2005. The company's own projections showed cage sales falling to 40 per cent by 2009 and approaching just 30 per cent by 2012.
"The majority of this erosion will be accounted for by free range growth," says the report.
But organic growth is projected to slow and then stop as the added cost burden of legislation pushes the premium over free range ever higher.
In 2010 the maximum organic flock size for all existing units drops to 3,000 birds and the stocking rate to 6 birds per square metre. The 100 per cent organic diet becomes mandatory from 2011. The requirement that pullets need to be organically fed came into operation this year.
"It has been calculated that the full impact of these measures adds 35p per dozen to the production costs of organic eggs," says the report. "When allowance is made for 20 per cent non-marketable product (seconds and undersize eggs) and retailers' margins this will translate to 70p on the supermarket shelf. Added to the existing price it will push the organic premium over standard free range retail price from £1.00 to £1.70p per dozen, or from 55 per cent to 93 per cent."
"The increased prices will almost certainly halt if not reverse growth in the market."
Changes to free range and barn internal stocking rates of 9 birds per square metre will apply to all units from 2012. This means that output from farms still on 11.7 birds per sq. metre will drop by 25 per cent and approximately 6p per dozen will be added to production costs.
"The buoyant market for free range will at least mean that the production cost increase should be recoverable," says the report.
But the future is nothing like so clear cut for barn. "Barn share is the most difficult to forecast because the eggs have never offered the consumer a clear proposition," says the report. "Sales exist because some multiples have chosen to stock them and price them as the most affordable alternative to cage eggs. Once established in a supermarket's egg range sales have always trended down as customers ultimately went all the way to free range. It may be that their continued presence through to 2012 represents an over-rosy view of the barn egg future."
Ironically the one factor that could save barn is avian influenza, if birds were forced indoors for a protracted period on an annual basis. Joret, Tromans and Challands believe the more likely outcome would be free range birds outdoors and protected by vaccination.
The report fully backs the BEIC campaign to get a five year extension to the lives of conventional cages. It warns that a 2012 deadline for a switch to enriched cages would add 5p per dozen to production costs which together with changes in World Trade Organisation tariff levels for imported egg products could have a "devastating" impact on the EU egg industry.
While the changes should not impact on the fresh shell egg sector they could open the door for massive imports of low price egg powder from third countries.
"The worst case scenario," says the report, "projects a loss of 30 per cent of the EU market to imported egg powder. This could be a devastating result for the EU industry and would in effect transfer 100 million laying hens to countries where welfare standards are well below current EU levels. With them would go 30,000 jobs and the annual market for 2.5 million tonnes of wheat."
*The Temperton Fellowship Report commemorates the work of Dr Harold Temperton, Director of the National Institute of Poultry Husbandry at Harper Adams Agricultural College from 1951-74.
